Q3
2019

Munters Group AB (publ)

Stable demand, strong organic net sales growth and improved profitability

In September 2019, the closure of the Data Center Factory in Dison, Belgium, was decided. This business is reported as discontinued operations in this interim report and the income statement for 2019 and 2018 has been restated toreflect this change. The CEO comments and business comments in this report focus on the continuing operations, unless otherwise stated.

CEO COMMENTS

Market conditions stable

Overall, markets in the third quarter were characterized by stable demand. Demand remained strong in some areas of the industrial market, Services as well
as for Data Centers and Mist Elimination solutions. We also saw increased demand for digitalized solutions for the food industry. Order intake in Asia improved driven by high demand from the poultry industry and investments in swine production, coming back from low levels due to the African Swine Fever.
The order intake was solid in the US due to strong order intake from Data Centers in the US and a few orders from the lithium battery industry, despite acontinued weak commercial market. In the third quarter, selected parts of the European industrial market saw lower demand, impacted by a weakereconomic climate and lower investment rate in the region. We still anticipate softer Group order intake development during the second half of the year
versus the first half year 2019.

Continued strong organic sales growthMunters net sales grew 11% organically in the quarter, resulting in an organic growth of 8% for the first nine months. Growth was partly driven by the strong
growth in the Data Centers business in the US, where the business delivered on the strategic direction set last year. We also saw good net sales increase in
several sub-segments in the industrial areas. Our focus on growing the area of Services is continuing to deliver strong increase in net sales.

Adjusted EBITA-improved

Early 2019 Munters launched a three-phase program, the Munters Full Potential Program, FPP, to reach our mid-term financial targets. The total run-rate
overhead cost savings from the FPP are estimated to SEKm 160, of which savings of SEKm 155, on an annual basis, have been achieved at the end of
September, in line with the targeted level. We are confident we will reach targeted run-rate savings for 2019 and onwards. Since I joined as CEO, a review
has been made of the initiatives in the FPP program. This has resulted in a change in the estimate for non-recurring costs for the full year 2019 from, aspreviously communicated SEKm 350 to SEKm 375, due to depreciation of assets related to the closure of the Data Center factory in Dison, Belgium. The
closure of this factory was decided in the third quarter and this operation is now reported as discountinued operations. At September 30, SEKm 326 hadbeen recorded as non-recurring charges for the FPP. In addition, and as previously communicated, in connection with the closure of the factory in Dison, aprovision has been made for an estimated non-recurring charge of SEKm 116. This was related to certain specified components, for a previously sold customized Munters solution, having to be replaced at a specific customer’s sites.
In the first nine months, net sales growth and good progress in savings from the FPP led to an improved adjusted EBITA margin. Adjusted EBITA amounted
to SEKm 248, and adjusted EBITA-margin was 13.7% in the third quarter. Discontinued operations reported EBITA of SEKm -19 in the quarter.

Towards a more profitable company

In the coming quarters I will focus on driving steady, continuous improvements in order to solidify a stable base for Munters. Operational excellence is key
for us and imperative in order to create room for continued investments in future growth initiatives. I am very happy that Peter Gisel-Ekdal, after 12 years at
the helm of the business area FoodTech has accepted to head up the business area AirTech. Over the coming months I, together with the organization, will
focus on setting the strategic priorities that will guide us over the years to come, including a finalization of the strategic evaluation of the Data Center andMist Elimination businesses.

Klas Forsström, President and CEO

Financial summary *SEKmOrder intake
Net sales
Operating profit (EBIT)
Adjusted EBITA
Adjusted EBITA margin, %Net income
Earnings per share before and after dilution, SEK

Q3

Jan-Sep

2019
1,680
1,813
174
248
13.7
104
0.56

2018
1,590
1,559
136
186
12.0
59
0.31

-238
-1.32
177
3,368

62
0.33
-38
3,169

∆%
6
16
28
33

LTM

2019
5,457
5,311
397
641
12.1
200
1.09

2018
4,964
4,655
371
500
10.7
218
1.15

-176
-0.98
388
3,368
3.5

227
1.19
0
3,169
4.0

∆%
10
14
7
28

Full year

Oct-Sep
7,192
7,067
555
866
12.3
269
1.44

2018
6,698
6,412
529
725
11.3
286
1.50

-497
-2.76
828
3,368
3.5

-94
-0.57
441
2,843
3.7

The KPI´s below includes discontinued operations
Net income
Earnings per share before and after dilution, SEK
Cash flow from operating activities
Net debt
Net debt/Adjusted EBITDA, LTM* The income statement has been restated for the period Jan-Sep 2019 and 2018 to reflect discontinued operations in line with IFRS 5, Non-current Assets Held for Saleand Discontinued Operations. Discontinued operations is defined as the business within the Data Center operations in Dison, Belgium. All income statement items in thisreport refers to Munters continuing operations, if not otherwise stated. See more information on page 19.

Munters Group AB, third quarter 2019

1

Q3
2019

Financial performance
Previous business segments Mist Elimination and Data Centers were incorporated into business area AirTech in the firstquarter of 2019, see restatement of 2018 on page 9. The new accounting standard for leases, IFRS 16 has been applied
from January 2019, for further information see page 18. Munters reports the business within the Data Center operations in
Belgium as a discontinued operation and has restated all income statement comparisons, for information see page 19.

Order intake (SEKm)
2,500

8,000

2,000

6,000

1,500

Q3

Jan-Sep

LTM

Full year

1,000
500

SEKm

2019

2018

∆%

2019

2018

∆% Oct-Sep

2018

Order intake

1,680

1,590

6
10
-2

5,457

4,964

10
17
-4

7,192

6,698

16
23
3

5,311

14
20
3

7,067

33
44
12

641

28
42
8

866

AirTechFoodTech
Other and eliminations

Net sales

AirTechFoodTech
Other and eliminations

Adjusted EBITA

AirTechFoodTech
Other and eliminations

Adjusted EBITA margin, %AirTechFoodTech

1,179
513
-13

1,813

1,288
534
-9

248

167
85
-3

1,073
524
-8

1,559

1,050
517
-8

186

116
76
-5

3,892
1,596
-31
3,777
1,563
-29
476
217
-52

3,332
1,655
-23

4,655

3,158
1,521
-24

500

336
200
-36

5,181
2,048
-37
5,044
2,060
-37
662
266
-62

4,621
2,107
-30

6,412

4,426
2,018
-32

725

522
249
-46

13.7

12.0

12.1

10.7

12.3

11.3

12.9
15.9

11.0
14.7

12.6
13.9

10.6
13.1

13.1
12.9

11.8
12.4

0

4,000
2,000

Q3 Q4 Q1 Q2 Q3
Quarter0
LTM

Net sales (SEKm)
2,0 008,000

1,5 006,000

1,0 00

4,000

50 0

2,000

0

Q3 Q4 Q1 Q2 Q3
Quarter0
LTM

Adjusted EBITA (SEKm)

ORDER INTAKE
Third quarter

300

1,000

250

800

Order intake in the third quarter increased by 1% organically. Growth was driven by a few large orders received
from the lithium battery industry as well as a very strong growth in Services. Business area AirTech saw increasedorder intake of 5% organically. Services order intake increased organically by 8% in the third quarter.

200

Business area FoodTech saw order intake declined organically by -7%. Order intake for 2018 included a large
SaaS order of SEKm 34 and no order of similar large value was received in the third quarter 2019. Order intake
remained weak in the Americas, driven by overcapacity and uncertainty about the consequences from new trade
tariffs and the African Swine Fever (ASF).

50

600

150

400

100
0

200
Q3

Q4

Q1

Quarter

Q2

Q3

0
LTM

Nine months

Order intake over nine months increased by 4% organically. Business area AirTech saw increased order intake of 10% organically with an organic increaseof order intake in Services by 12% in the first nine months.The order intake for Data Centers in the US was strong as well as order intake for Services globally. Order intake remained weak for business area FoodTech in Americas and China, driven by overcapacity and uncertainty about the consequences fromnew trade tariffs and ASF. Order intake in FoodTech decreased by -9% organically.

NET SALES
Third quarter

Net sales for the third quarter increased by 11% organically. Net sales in business area AirTech grew by 18% organically with an increase in Services net
sales by 16% organically. Also Data centers in the US and Mist Elimination solutions saw net sales increases. This was offset by decreased deliveries to thecommercial sector as well as component deliveries to OEMs. Net sales for business area FoodTech declined by -2% organically, as net sales from theregion Americas as well as China continued to be negatively impacted by overcapacity and uncertainty about the consequences from new trade tariffs andthe ASF.

Nine months

Net sales for the first nine months of the year increased by 8% organically. Business area AirTech net sales grew by 13% organically with Services increasing organically by 11%. Strong sales growth was recorded in parts of the industrial market, Data Centers solutions in the US as well as a very solid growth inServices. The weakened demand in the commercial market and for components resulted in lower net sales for the first nine months in these areas
compared to 2018. Business area FoodTech net sales decreased by -3% organically with a decline in net sales in China and the US following the weaker
order intake during the first nine months of the year.

Munters Group AB, third quarter 2019

2

Q3
2019

ADJUSTED EBITA

Adjusted EBITA excludes Items Affecting Comparability, IAC.

Third quarter

Adjusted EBITA in the third quarter increased by 33% to SEKm 248 (186), corresponding to an adjusted EBITA margin of 13.7% (12.0).
Adjusted EBITA for business area AirTech in the third quarter amounted to SEKm 167 (116), corresponding to an adjusted EBITA margin of 12.9% (11.0).
The improvement was driven by savings realized from the initiatives run within the FPP program as well as net sales growth and improved utilization rates inthe Data Centers operations in the US and the Mist Elimination operations.
Adjusted EBITA in business area FoodTech in the third quarter amounted to SEKm 85 (76), corresponding to an EBITA margin of 15.9% (14.7). The margin
improvement was mainly driven by higher gross margins resulting from a higher share of sales of controllers, as well as operational improvements in the
production facility in Mexico.

Nine months

The Group’s adjusted EBITA in the first nine months increased by 28% to SEKm 641 (500), corresponding to an adjusted EBITA margin of 12.1% (10.7).
Adjusted EBITA in business area AirTech amounted to SEKm 476 (336), corresponding to an adjusted EBITA margin of 12.6% (10.6).
Adjusted EBITA in business area FoodTech amounted to SEKm 217 (200) corresponding to an EBITA margin of 13.9% (13.1). The improvement compared
to last year was driven by savings achieved from initiatives run within the FPP, as well as improved gross margin driven by a higher share of sales fromcontrollers, together with overall operational improvements.

ITEMS AFFECTING COMPARABILITY (IAC)
Continuing operations

During 2019 Munters has incurred IACs relating to the FPP program launched in February 2019 as well as IACs related to other operating excellence initiatives. In the third quarter, costs amounting to SEKm -42 (-8) were accounted for as IACs in Munters continuing operations. The costs consisted mainly of
costs related to severance and consulting fees. IACs, excluding discontinued operations, for the first nine months amounted to SEKm -139 (-8).

2019
SEKm
AirTechSeverance costs
Consulting fees and other
FoodTechSeverance costs
Consulting fees and other
Other
Severance costs
Consulting fees and other
Total

2018

Q3
-11

Q2
-14

Q1
-23

Jan-Sep
-48

Q4
-8

Q3
-8

Q2
−

Q1 Full year
−
-16

-11
-1

-9
-5

-19
-4

-39
-9

-5
-4

−
-8

−
−

−
−

-5
-11

-6

-8

-19

-33

−

−

−

−

−

0
-7

-1
-7

-9
-10

-10
-24

−
−

−
−

−
−

−
−

−
−

-24

-14

-18

-57

-22

−

−

−

-22

-16
-8

-1
-14

-4
-14

-21
-36

-22
-0

−
−

−
−

−
−

-22
-0

-42

-36

-61

-139

-31

-8

−

−

-39

Discontinuing operations

The closure of the Data Centers factory in Dison, Belgium, is part of the FPP. During the third quarter, the closure of Dison was decided and therefore theEuropean Data Centers business, and the related IAC´s, has been defined as a discontinued operation inaccordance with IFRS 5. The IACs during the third
quarter amounted to SEKm -205, whereof SEKm -135 was severance pay and SEKm -70 mainly asset and inventory write-downs. During the first ninemonths IACs amounted to SEKm -209, whereof SEKm -139 was severance pay and SEKm -70 mainly asset and inventory write-downs.
In relation to the closure process of Dison, specified components, for a previously sold customized Munters solution, have to be replaced at a specific customer’s sites. As a result of this, Munters has made a provision for an estimated non-recurring cost of SEKm -116 in the third quarter 2019. The estimatednon-recurring cost of SEKm 116 is in addition to the previously communicated total cost for the Munters Full Potential Program. Munters has insurance
solutions in place for this type of events, but since Munters has not concluded the discussions with the relevant customer and its insurance providers thefinancial and cash flow net effect on Munters can not yet be finally determined.

OPERATING PROFIT (EBIT)

Third quarter

Operating profit (EBIT), excluding discontinued operations, in the third quarter was SEKm 174 (136), including depreciation of SEKm -60 (-25) and amortization and write-downs of SEKm -32 (-43), where SEKm -24 (-37) was related to amortization of intangible assets from acquisitions. Depreciation of leased
assets in the third quarter was SEKm -31 (-) (see specification of IFRS 16 impacts on page 18). EBIT was also negatively impacted by SEKm -42 (-8) due to
IAC´s, which are further outlined above.

Nine months

EBIT, including discontinued operations, for the first nine months 2019 was SEKm 397 (371), including depreciations of SEKm -162 (-70) and amortizations
and write-downs of SEKm -105 (-121), where SEKm -73 (-104) was related to amortization of intangible assets from acquisitions. Depreciation of leased
assets during the first nine months was SEKm -81 (-) (see specification of IFRS 16 impacts on page 18). EBIT was also impacted by SEKm -139 (-8) due to
IAC´s, which are further outlined above.

Munters Group AB, third quarter 2019

3

Q3
2019

FINANCIAL ITEMS

Financial income and expenses for the third quarter was SEKm -40 (-49). The financial expenses were positivly impacted by currency effects compared tothe same quarter last year. The interest expenses increased due to the new accounting standard for leases, IFRS16. Further information of the IFRS 16
impact is found in the section Accounting Principles, page 16. The average weighted interest rate including fees per end of the third quarter was 4.4% (4.2).
Financial income and expenses for the first nine months amounted to SEKm -134 (-94). The increase in the financial expenses in the first nine months 2019
compared to 2018 is due to increased interest rates.

TAXES

Income taxes for the third quarter was SEKm -30 (-29). The effective tax rate in the third quarter was 22% (33%). Income taxes for the first nine months was
SEKm -63 (-59). The effective tax rate for the first nine months was 24% (21%).

EARNINGS PER SHARE

Net income, including the discontinued operation, attributable to Parent Company’s ordinary shareholders amounted to SEKm -241 (61) for the third quarter.
Earnings per share, before and after dilution, in the third quarter 2019 was SEK -1.32 (0.33).
Net income, including the discontinued operation, attributable to Parent Company’s ordinary shareholders amounted to SEKm -178 (219) during the firstnine months. Earnings per share, before and after dilution, was SEK -0.98 (1.19).
The average number of outstanding ordinary shares as per September 30, 2019, was 183,597,802 before and after dilution, whereof 1,852,000 was held in
own custody.

FINANCIAL POSITION AND LIQUIDITY

Munters primary financing facilities consists of a term loan of USDm 250 and a revolving credit facility of EURm 185. In addition, Munters was granted a
temporary revolving credit facility (RCF) of EURm 19 valid from April 1 until December 31, 2019. The facilities have no mandatory amortization requirement.
The final maturity date is May 2022. The loan agreement has one financial covenant (consolidated net debt in relation to adjusted EBITDA). The new
accounting standard for leases, IFRS 16, does not affect the covenant calculation according to the loan agreement definition. For further information on the
IFRS 16 effect, see section Accounting Principles on page 16. Interest-bearing liabilities amounted to SEKm 3,623 (3,277) and cash and cash equivalents
amounted to SEKm 496 (322) as of September 30, 2019.
At quarter end the term loan was fully drawn with USDm 250 and EURm 115 of the total revolving of EURm 185 credit facility were utilized in EUR, USD and
SEK. The temporary RCF of EURm 19 was unutilized. Available unutilized credit facilities as of September 30 amounted to SEKm 1,233 (637). Along withthe main loan facility, an amount of SEKm 25 (9) in local debt is outstanding in i.a. China, India and Brazil.

CASH FLOW AND CAPITAL EMPLOYEDCash flow from operating activities was SEKm 177 (-38) in the third quarter. Working capital impacted with an increase of SEKm -11 (-128). Cash flow fromoperating activities was positively affected by SEKm 31 (-) due to IFRS 16, compared to the same period last year, as lease payments are reflected aschange in lease liabilites under financial activities. Cash flow from operating activities during the first nine months amounted to SEKm 388 (0). Cash flowfrom operating activities during the first nine months was positively affected by SEKm 91 (-) due to IFRS 16, compared to the same period last year. The
increase compared to last year was due to a large increase in working capital during 2018.
Average capital employed for the last twelve months was SEKm 7,317 (6,858). Return on capital employed (ROCE) for last twelve months was -3% (8%).
The increase in capital employed was mainly related to IFRS 16, see page 18.
Return on capital employed, where EBIT is adjusted for items affecting comparability (IAC) and capital employed adjusted for goodwill, for the last twelve
months was 9% (21%). EBIT was affected by a write-down of goodwill amounting to SEKm 323 in the fourth quarter of 2018.

PARENT COMPANY AND OWNERSHIP

Munters Group AB offers group supporting functions. The Company holds shares in subsidiaries, cash and accounts payables. The Parent Company does
not engage in sales of goods and services to external customers. Cash and cash equivalents at the end of the period amounted to SEKm 35 (78).
As of September 30, Nordic Capital was the biggest shareholder (36.5%) followed by FAM AB (14.1%), First AP-fund (7.2%), Swedbank Robur Funds(7.0%) and AMF (6.4%).

EMPLOYEESThe number of permanent employees at September 30, 2019 was 3,241 (3,412), where the decline mainly relates to the FPP-program.

OTHER EVENTS DURING THE FIRST NINE MONTHS•

Full Potential Program - In February 2019, Munters announced the launch of a three-phase plan for progression to capture Munters full potential to improve Group earnings. As part of the first phase of the program, Munters announced the intention to close down the European Data
Centers factory in Dison, Belgium. This has been subject to union negotiations, which were finalized in the third quarter and the process to close
the factory has been decided. During 2019, Munters is set to gradually shift focus to the second phase of the program, including activities suchas driving business mix towards most attractive applications, focused product development, drive continuous improvements, further improvements of go-to-market models and pricing practices and drive cost of goods sold savings through product design cost-out and material purchasing practices. The third and final phase in the program is to accelerate growth with focus on attractive segments where the company see solid
long-term demand and where strong market positions can be established. The total estimated run-rate overhead cost saving from the program is
SEKm 160. In addition, the closure of the Data Centers factory in Dison, will give an estimated profit improvement of SEKm 50. In total, Munters

Munters Group AB, third quarter 2019

4

Q3
2019

expects a positive Group adjusted EBITA effect of SEKm 105 in 2019 and SEKm 210 in annual effect from 2020. Non-recurring charges for the
Munters Full Potential Program is expected to be SEKm 375. The Munters Full Potential Program will temporarily increase the leverage during
2019 and necessary consent from the lending banks has been received. Group leverage is expected to be in line with the mid-term financial
leverage target in 2020.
•

Management changes – In April 2019, the Board of Directors appointed Klas Forsström as President and CEO of Munters Group AB. He entered his position on August 12, 2019. Prior he was the President of Sandvik Machining Solutions Business area. He has more than 20 years ofexperience holding different senior management positions within Sandvik, including positions such as President of Sandvik Hard Materials andSandvik Coromant. Klas has a M.Sc. in Materials Physics and an MBA from Uppsala University as well as advanced management studies at
INSEAD. Johan Ek, the interim President and CEO of Munters from December 2018 until August 12 remain in his current role as a member ofthe Board of Directors of Munters. In May 2019, Munters Group appointed Annette Kumlien as new Group Vice President and CFO. Annette
entered her position on August 12, 2019, taking over responsibilities from Jonas Ågrup, CFO of Munters Group since 2011. Annette Kumlien has
prevoiusly held positions at Diaverum as SVP and COO and prior to that as CFO. She has also had the position of CFO at the listed companies
Höganäs and Pergo, as well as business controlling roles at Perstorp and Sandvik. Annette has a Bachelor of Science in Business Administrationfrom the Stockholm School of Economics.

•

Buy-back of shares in Munters Group AB – In August Munters announced it had repurchased a total number of 385,000 shares pursuant tothe authorization granted by the Annual General Meeting 2019. The purpose of the repurchases is to secure the delivery of shares to the participants of Munters’ long-term incentive programme which was resolved by the Annual General Meeting 2019, and to cover costs related to theprogramme. As of August 13, Munters had repurchased a total of 385,000 shares to an average price of SEK 40.98.

•

Nomination committee for the 2020 Annual General Meeting – In September Munters announced the Nomination Committee of Munters
Group AB. The Nomination Committee shall be composed of the representatives of the four largest shareholders in terms of voting rights listed in
the shareholders’ register maintained by Euroclear Sweden AB as of 31 August each year, and the Chairman of the Board, who will also convene
the first meeting of the Nomination Committee. The Nomination Committee has now been appointed and comprises the following members:
Robert Furuhjelm, Nordic Capital, Chairman of the Nomination Committee, Lars Wedenborn, FAM AB, Johan Grip, First AP-fund, Jan Dworsky,
Swedbank Robur Funds and Magnus Lindquist, Chairman of the Board of Munters.

EVENTS AFTER THE CLOSING OF THE PERIOD•Management changes – In October, Munters announced that Peter Gisel-Ekdal had been appointed the role as President of business area
AirTech as of November 1, 2019. Peter Gisel-Ekdahl has been President of Munters business area FoodTech since 2007 and been a member ofGroup Management team since 2011. FoodTech has, in recent years, done an important strategic journey developing a clear customer offeringboth with leading hardware products as well as new digital software IoT solutions. This has offered increased customer value and a solid platform
for the future. Johan Ekeström, currently Vice President Finance for FoodTech, has been appointed as Interim President for FoodTech as of 1
November.

•

European Data Centers operation incures additional costs - In October, Munters announced that the European Data Centers operations will
make a provision for an estimated additional non-recurring costs of SEKm 116 in the third quarter 2019 related to the closure of the Data Centersfactory in Dison, Belgium. The estimated non-recurring costs are incurred due to certain specified components, for a previously sold customized
Munters solution, having to be replaced at a specific customer’s sites. Munters has insurance solutions in place for this type of events, but since
Munters has not concluded the discussions with the relevant customer and its insurance providers the financial and cash flow net effect on
Munters can not yet be finally determined. This is expected to be concluded during the coming months.

Munters Group AB, third quarter 2019

5

Q3
2019

AirTech•Order intake increased, driven by a strong demand in the Data Centers market in the US, a strong
growth in the lithium battery industry as well as an increase of Services orders in all regions•

Strong net sales growth driven by increase in Services, Data Centers solutions in the US and
Mist Elimination solution•

Improved adjusted EBITA margin in the third quarter to 12.9% compared to 11% previous year

FINANCIAL SUMMARY

Q3

Jan-Sep

LTM

Full year

SEKm

2019

2018

2019

2018 Oct-Sep

2018

Order intake

1,179

1,073

3,892

3,332

5,181

4,621

Growth10%

Net sales

1,288

3,158

5,044

4,426

406

318

591

503

476

336

662

522

10.6

13.1

11.8

Growthof which organic growthof which currency effects

Operating profit (EBIT)
Adjusted EBITA
GrowthAdjusted EBITA margin, %

17%

1,050

23%
18%
5%

20%
13%
6%

151

104

167

116

44%

12.9

3,777

42%

11.0

12.6

Order intake

Order intake increased 5% organically in the third quarter. Growth was driven by a few larger orders received
from the lithium battery industry, Mist Elimination solutions for the marine market in Europe as well as acontinued strong growth in Services, especially in Europe and Asia. Order intake from OEMs were slightly downin all regions. The demand in the Supermarket sub-segment in the US remained weak in the quarter.
Order intake for the first nine months increased 10% organically. This was mainly driven by a strong increase inorder intake for Data Centers solutions in the US, a strong growth in the lithium battery industry as well as astrong increase of Services orders in all regions. Orders in EMEA increased, but at a lower pace than in thesame period 2018, impacted by a weaker economic climate and lower investment rate in the region.

Net sales

Net sales grew 18% organically, driven by a strong net sales increase in Services, Data Centers solutions in the
US and Mist Elimination solutions. This was offset by decreased deliveries to the commercial sector as well ascomponent deliveries to OEMs.
In the first nine months net sales grew 13% organically with strong sales growth in the industrial market, Data
Centers solutions in the US as well as a very solid growth in Services. The weakened demand in the commercial
market and for components resulted in lower net sales for the first nine months in these areas compared to 2018.

Adjusted EBITA

Adjusted EBITA in the third quarter amounted to SEKm 167 (116), corresponding to an adjusted EBITA marginof 12.9% (11.0). The improvement was driven by savings realized from the initiatives run within the FPP program
as well as net sales growth and improved utilization rates in the Data Centers operations in the US and Mist
Elimination.
For the first nine months EBITA amounted to SEKm 476 (336), corresponding to an adjusted EBITA margin of
12.6% (10.6).

Order intake (SEKm)
2,000

6,000
5,000

1,500

4,000

1,000

3,000
2,000

500
0

1,000
Q3 Q4 Q1 Q2 Q3
Quarter0
LTM

Net sales (SEKm)
1,600

6,000
5,000

1,200

4,000

800

3,000
2,000

400
0

1,000
Q3 Q4 Q1 Q2 Q3
Quarter0
LTM

Adjusted EBITA (SEKm)
250

800

200

600

150

400

100

200

50
0

Q3

Q4

Q1

Quarter

Q2

Q3

0
LTM

Munters Group AB, third quarter 2019

6

Q3
2019

FoodTech•

Organic order intake and net sales declined in the quarter, impacted by lower demand in Americas•

Strong demand for climate solution controllers•

Improved adjusted EBITA margin to 15.9% compared to 14.7% previous year

FINANCIAL SUMMARY

Q3

Jan-Sep

LTM

Full year

SEKm

2019

2018

2019

2018 Oct-Sep

2018

Order intake

513

524

1,596

1,655

2,048

2,107

Growth-2%

Net sales

534

1,521

2,060

2,018

Growthof which organic growthof which currency effects

-4%

517

3%
-2%
5%

1,563
3%
-3%
6%

Operating profit (EBIT)

75

73

172

191

225

244

Adjusted EBITA

85

76

217

200

266

249

13.1

12.9

12.4

GrowthAdjusted EBITA margin, %

12%

15.9

8%

14.7

13.9

Order intake

Order intake for the quarter declined organically by -7%. Order intake last year included a large SaaS order andno order of similar large value was received in the third quarter 2019. Excluding the SaaS order in 2018, orderintake was on the same level in the third quarter 2019 as in 2018. Order intake in Asia increased, primarily in thelayer and broiler markets in China, where demand continued to strengthen, driven by investments in higher efficiency production capacity. Order intake from the swine market in China picked up compared to the second
quarter 2019 as the negative consequences from the outbreak of the ASF became less severe. In the Americas,
order intake decreased due to continued low level of investments in swine farms in the US, driven by overcapacity and uncertainty about the consequences from new trade tariffs and the ASF. In the US, demand and orderintake for climate solution controllers increased.
Order intake over nine months decreased by -9% organically, mainly due to weak demand from the swine market in the US and China caused by the ASF, the effects from trade tarrifs as well as an overcapacity in the US
market. Order intake in the layer and broiler markets increased, with strong growth in China. US saw increasedorder intake as demand for climate solution controllers was strong and the market demand improved in Eastern
Europe.

Net sales

Net sales for the quarter declined by -2% organically. Development of net sales in the different regions followed
the order intake development.
Net sales over nine months decreased by -3% organically with a decline in net sales in China and the US
following the weaker order intake during the first nine months of the year.

Adjusted EBITA

Adjusted EBITA in the third quarter amounted to SEKm 85 (76), corresponding to an EBITA margin of 15.9%(14.7). The margin improvement was mainly driven by higher gross margins resulting from a higher share ofsales of climate solution controllers, as well as operational improvements in the production facility in Mexico.
Adjusted EBITA in the first nine months was SEKm 217 (200) corresponding to an EBITA margin of 13.9%(13.1). The improvement compared to last year was driven by savings achieved from initiatives run within the
FPP, as well as improved gross margin driven by a higher share of sales from climate solution controllers,
together with overall operational improvements.

Order intake (SEKm)
800

2,400
2,000

600

1,600

400

1,200
800

200
0

400
Q3

Q4

Q1

Q2

0

Q3

QuarterLTM

Net sales (SEKm)
600

2,500

500

2,000

400

1,500

300

1,000

200

500

100
0

Q3

Q4

Q1

Q2

Quarter

0

Q3

LTM

Adjusted EBITA (SEKm)
100

300

80

250
200

60

150

40

100

20
0

50
Q3

Q4

Q1

Quarter

Q2

Q3

0

LTM

Munters Group AB, third quarter 2019

7

Q3
2019

Quarterly overview Group and Segments
Group
SEKm
Order backlog
Order intake
Net sales
Operating profit (EBIT)
Financial income and expenses
Tax
Net income
Amortization and write-down
Items affecting comparability (IAC)
Adjusted EBITA
Adjusted EBITA margin, %

2019
Q3

Q2

Q1

Jan-Sep

Q4

Q3

Q2

2,440
1,680
1,813
174
-40
-30
104
-32
-42
248
13.7

2,496
1,840
1,877
185
-51
-34
100
-41
-36
262
13.9

2,554
1,938
1,620
38
-43
1
-3
-32
-61
131
8.1

2,440
5,457
5,311
397
-134
-63
200
-105
-139
641
12.1

2,170
1,735
1,757
158
-31
-59
68
-36
-31
225
12.8

2,222
1,590
1,559
136
-49
-29
59
-43
-8
186
12.0

2,227
1,748
1,686
161
-19
-26
116
-40
−
201
11.9

AirTechSEKmExternal order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %

2018

2019

2,097
1,626
1,410
74
-27
-5
43
-38
−
113
8.0

2,170
6,698
6,412
529
-125
-118
286
-157
-39
725
11.3

2018

Q3

Q2

Q1

Jan-Sep

Q4

Q3

Q2

1,886
1,179
1,286
1
151
-5
-11
−
167
12.9

1,926
1,264
1,323
1
173
-13
-14
−
199
15.1

1,993
1,449
1,164
2
82
-5
-23
−
110
9.4

1,886
3,892
3,773
4
406
-22
-48
−
476
12.6

1,652
1,289
1,265
2
185
-5
-8
-13
185
14.6

1,671
1,073
1,049
1
104
-4
-8
−
116
11.0

1,670
1,145
1,138
1
132
-3
−
−
135
11.9

FoodTech

Q1 Full year

2019

Q1 Full year
1,599
1,114
968
2
82
-3
−
−
85
8.8

1,652
4,621
4,421
5
503
-15
-16
-13
522
11.8

2018

SEKm

Q3

Q2

Q1

Jan-Sep

Q4

Q3

Q2

Q1 Full year

External order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %

554
513
527
7
75
-4
-6
−
85
15.9

570
582
554
8
74
-4
-8
−
85
15.2

561
500
456
9
24
-4
-19
−
46
9.9

554
1,596
1,537
25
172
-11
-33
−
217
13.9

518
452
491
6
53
-3
−
-7
49
9.9

552
524
510
8
73
-3
−
−
76
14.7

557
610
548
7
77
-3
−
−
81
14.5

498
520
442
6
41
-3
−
−
43
9.7

Other and eliminations

2019

518
2,107
1,991
27
244
-12
−
-7
249
12.4

2018

SEKm

Q3

Q2

Q1

Jan-Sep

Q4

Q3

Q2

Q1 Full year

Order intake
Transactions between segments
Operating profit (EBIT)
Amortization and write-down
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA

-13
-9
-52
-24
-24
−
-3

-7
-9
-62
-24
-14
−
-23

-11
-11
-67
-23
-18
−
-25

-31
-29
-180
-72
-57
−
-52

-6
-8
-80
-28
-22
20
-10

-8
-8
-41
-36
−
−
-5

-7
-8
-48
-33
−
−
-15

-8
-8
-48
-32
−
−
-16

Munters Group AB, third quarter 2019

-30
-32
-217
-130
-22
20
-46

8

Q3
2019

Discontinued operations
Discontinued operations

2019

2018

SEKm

Q3

Q2

Q1

Jan-Sep

Q4

Q3

Q2

Q1 Full year

External order backlog
Order intake
External net sales
Operating profit (EBIT)
Amortization and write-down
Items affecting comparability (IAC)
Adjusted EBITA

8
-3
38
-341
3
-325
-19

43
3
87
-20
-0
-3
-17

111
11
42
-24
0
-0
-24

8
11
167
-386
3
-329
-60

147
18
78
-414
-344

166
111
190
8
-1

250
79
252
9
-1

419
9
190
2
-1

-71

8

10

3

147
216
710
-396
-346
−
-49

Restatement of AirTech
Previous business segments Mist Elimination and Data Centers were incorporated into former Air Treatment (renamed to AirTech) in the first quarter of 2019, see restatementof 2018 below.

2018
SEKm

Q4

Q3

Q2

Order intake AirTech
Order intake Air Treatment
Order intake Data Centers
Order intake Mist Elimination
Transactions between segments

1,289
979
204
117
-11

1,073
906
68
106
-7

1,145
951
80
125
-10

1,114
963
57
97
-4

4,621
3,798
409
445
-32

External net sales AirTech
External net sales Air Treatment
External net sales Data Centers
External net sales Mist Elimination

1,265
1,060
82
123

1,049
924
34
91

1,138
963
89
86

968
775
104
89

4,421
3,723
309
389

EBIT AirTech
EBIT Air Treatment
EBIT Data Centers
EBIT Mist Elimination

185
176
-13
22

104
121
-32
15

132
126
-3
9

82
73
3
6

503
496
-44
52

Adjusted EBITA AirTech
Adjusted EBITA Air Treatment
Adjusted EBITA Data Centers
Adjusted EBITA Mist Elimination

185
170
-6
22

116
124
-23
15

135
129
-2
9

85
75
4
6

522
497
-27
52

Munters Group AB, third quarter 2019

Q1 Full year

9

Q3
2019

Condensed income statement
Q3

Jan-Sep

Full year

LTM

SEKm

2019

2018

2019

2018

Oct-Sep

2018

Net sales
Cost of goods sold
Gross profit

1,813-1,223590

1,559-1,019540

5,311-3,5501,760

4,655-3,0381,618

7,067-4,673
2,394

6,412-4,1602,252

Selling expenses
Administrative costs
Research and development costs
Other operating income and expenses
Operating profit

-222
-147
-46
-1
174

-238
-117
-46
-2
136

-763
-462
-144
6
397

-732
-382
-138
5
371

-1,018
-633
-198
9
555

-987
-553
-191
8
529

Financial income and expenses
Profit/Loss after financial items

-40
134

-49
87

-134
263

-94
277

-165
390

-125
404

Tax
Net income for the period from continuing operations

-30
104

-29
59

-63
200

-59
218

-121
269

-118
286

Net income from discontinued operations

-342

4

-376

9

-765

-380

Net income for the period

-238

62

-176

227

-497

-94

Attributable to Parent Company shareholders

-241

61

-178

219

-502

-105

2

1

2

8

6

11

181,929,746
181,929,746

183,597,802
183,597,802

182,063,783
182,063,783

183,597,802
183,597,802

182,080,538
182,080,538

183,165,852
183,165,852

0.56
0.56

0.31
0.31

1.09
1.09

1.15
1.15

1.44
1.44

1.50
1.50

-1.32
-1.32

0.33
0.33

-0.98
-0.98

1.19
1.19

-2.76
-2.76

-0.57
-0.57

133

-57

250

176

266

193

−
−

−
−

−
-1

−
−

-17
3

-17
4

Other comprehensive income, net after tax

133

-57

249

176

253

179

Total comprehensive income for the period
Attributable to Parent Company shareholders
Attributable to non-controlling interests*_Excluding shares held in own custody

-105
-107
2

5
5
0

74
71
2

403
396
6

-244
-251
7

85
75
10

Attributable to non-controlling interests
Average number of outstanding shares before dilution*
Average number of outstanding shares after dilution*
Earnings per share for net income for the period fromcontinuing operations attributable to the ordinary equity
holders of the company:
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK
Earnings per share for net income for the period attributable tothe ordinary equity holders of the company:
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK
Other comprehensive income
Other comprehensive income that may be reclassified to profit orloss in subsequent periods:
Exchange-rate differences on translation of foreign operations
Other comprehensive income not to be reclassified to profit or loss
in subsequent periods:
Actuarial gains and losses on defined-benefit pension obligations,incl. payroll tax
Income tax effect not to be reclassified to profit or loss

Munters Group AB, third quarter 2019

10

Q3
2019

Condensed balance sheet
SEKm

2019/09/30

2018/09/30

2018/12/31

4,537
1,529
258
561
181
67
17
240
7,390

4,511
1,504
160
262
150
47
11
221
6,865

4,218
1,480
168
270
137
62
11
227
6,575

CURRENT ASSETS
Raw materials and consumables
Products in process
Finished products and goods for resale
Projects in progress
Advances to suppliers
Accounts receivable
Prepaid expenses and accrued income
Derivative instruments
Current tax assets
Other receivables
Cash and cash equivalents
Total current assets

417
165
289
19
21
1,064
378
0
54
109
496
3,013

409
119
335
7
26
1,473
162
2
52
171
322
3,079

391
106
282
7
20
1,095
224
3
53
109
404
2,693

TOTAL ASSETS

10,403

9,944

9,268

ASSETSNON-CURRENT ASSETS
Goodwill
Patents, licenses, brands, and similar rights
Buildings and land
Plant and machinery
Equipment, tools, fixtures and fittings
Construction in progress
Financial assets
Deferred tax assets
Total non-current assets

Munters Group AB, third quarter 2019

9

11

Q3
2019

Condensed balance sheet
SEKm

2019/09/30

2018/09/30

2018/12/31

Shareholders' equity
Non-controlling interests
Total equity

3,775
-2
3,773

4,039
-4
4,034

3,720
-4
3,716

NON-CURRENT LIABILITIESInterest-bearing liabilities
Provisions for pensions and similar commitments
Other provisions
Other liabilities
Deferred tax liabilities
Total non-current liabilities

3,491
237
26
153
426
4,333

3,266
211
17
134
410
4,038

3,002
230
16
137
421
3,805

CURRENT LIABILITIESInterest-bearing liabilities
Advances from customers
Accounts payable
Accrued expenses and deferred income
Derivative instruments
Current tax liabilities
Other liabilities
Provisions for pensions and similar commitments
Other provisions
Total current liabilities

131
278
535
681
3
40
198
9
422
2,296

11
383
498
659
2
46
174
8
90
1,871

11
285
535
590
1
28
181
8
107
1,746

TOTAL EQUITY AND LIABILITIES

10,403

9,944

9,268

EQUITY AND LIABILITIESEQUITYCONDENSED STATEMENT OF CHANGES IN EQUITY
2019/09/30

2018/09/30

2018/12/31

Opening balance
Total comprehensive income for the period
Change in non-controlling interest
Put/call option related to non controlling interests
Dividends paid
Repurchase of shares
Share option plan
Closing balance

3,716
74
-0
-3
−
-16
2
3,773

3,748
403
0
-3
-55
-59
1
4,034

3,748
85
0
-4
-55
-59
1
3,716

Total shareholders´equity attributable to:
The parent company's shareholders
Non-controlling interests

3,775
-2

4,039
-4

3,720
-4

SEKm

Munters Group AB, third quarter 2019

12

Q3
2019

Condensed cashflow statement
Q3
SEKm

Jan-Sep

LTM

Full year

2019

2018

2019

2018

Oct-Sep

2018

Operating profit
Reversal of non-cash items
Depreciation, amortization and impairments
Provisions
Other profit/loss items not affecting liquidity
Cash flow before interest and tax

-168

144

11

390

-245

134

141
136
154
263

70
-32
-5
176

326
130
167
635

196
-31
-0
555

732
146
186
820

602
-15
19
740

Paid financial items
Taxes paid
Cash flow from operating activites beforechanges in working capital

-35
-41

-46
-40

-125
-79

-83
-76

-152
-126

-109
-123

187

90

431

396

542

507

Cash flow from changes in working capital

-11

-128

-43

-396

286

-67

Cash flow from operating activities

177

-38

388

0

828

441

INVESTING ACTIVITIESBusiness acquisitions
Sale of tangible fixed assets
Sale of intangible fixed assets
Business divestments
Investment in tangible assets
Investment in intangible assets
Cash flow from investing activities

−
0
0
−
-32
-16
-48

-36
0
−
−
-33
-21
-90

−
3
1
−
-95
-47
-138

-36
1
0
-0
-106
-60
-202

-1
4
2
−
-136
-71
-202

-37
2
1
-0
-148
-84
-266

FINANCING ACTIVITIESLoan raised
Amortization of loans
Repayment of lease liabilities
Repurchase of shares
Dividends paid
Cash flow from financing activities

1
-115
-31
-16
−
-160

214
-53
−
-59
0
102

114
-183
-91
-16
-0
-175

408
-176
−
-59
-55
117

114
-479
-91
-16
-0
-472

408
-474
−
-59
-55
-180

Cash flow for the period
Cash and cash equivalents at period start
Exchange-rate differences in cash and cash equivalents
Cash and cash equivalents at period end

-33
521
9
496

-25
358
-11
322

74
404
19
496

-85
402
5
322

154
322
21
496

-5
402
8
404

OPERATING ACTIVITIESCash flow from the discontinued operations is disclosed in a separate note, see page 19.

Munters Group AB, third quarter 2019

13

Q3
2019

Parent company
CONDENSED INCOME STATEMENT
Q3
SEKm

Jan-Sep

LTM

Full year

2019

2018

2019

2018

Oct-Sep

2018

Net sales
Gross profit/loss

−
−

−
−

−
−

−
−

−
−

−
−

Administrative costs
Profit/Loss before interest and tax (EBIT)

-15
-15

-1
-1

-36
-36

-6
-6

-41
-41

-11
-11

Financial income and expenses
Profit/Loss after financial items

-0
-15

0
-1

-0
-36

-0
-6

-0
-41

-0
-11

Group contributions
Profit/Loss before tax

−
-15

−
-1

−
-36

−
-6

−
-41

−
-11

Tax
Net income for the period

−
-15

−
-1

-0
-36

−
-6

0
-41

0
-11

CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Q3

Jan-Sep

LTM

Full year

SEKm

2019

2018

2019

2018

Oct-Sep

2018

Profit/Loss for the period
Other comprehensive income, net after tax
Comprehensive income for the period

-15
−
-15

-1
−
-1

-36
−
-36

-6
−
-6

-41
−
-41

-11
−
-11

Munters Group AB, third quarter 2019

14

Q3
2019

Parent company
CONDENSED BALANCE SHEET
SEKm

2019/09/30

2018/09/30

2018/12/31

4,086
0
4,086

4,086
−
4,086

4,086
0
4,086

1
0
0
−
35
36

−
0
0
0
78
79

−
0
0
−
77
77

4,122

4,165

4,163

2019/09/30

2018/09/30

2018/12/31

6
4,074
60
-36
4,104

6
4,074
87
-6
4,161

6
4,074
87
-11
4,155

1
5
0
3
9
18

1
1
−
2
−
4

0
2
3
2
−
8

4,122

4,165

4,163

ASSETSNON-CURRENT ASSETS
Participations in subsidiaries
Other financial assets
Total non-current assets
CURRENT ASSETS
Other current receivables
Prepaid expenses and accrued income
Current tax assets
Receivables from subsidiaries
Cash and cash equivalents
Total current assets
TOTAL ASSETSSEKm
EQUITY AND LIABILITIESEQUITY
Share capital
Share premium reserve
Profit brought forward
Income for the period
Total equity
CURRENT LIABILITIES
Accounts payable
Accrued expenses and deferred income
Liabilities to subsidiaries
Other liabilities
Other provisions
Total current liabilities
TOTAL EQUITY AND LIABILITIES

Munters Group AB, third quarter 2019

15

Q3
2019

Other disclosures
ACCOUNTING POLICIESThis report has been prepared, with regards to the Group, in accordance with IAS 34 Interim Financial Reporting, recommendation RFR 1 of the Swedish
Financial Reporting Board and the Swedish Annual Accounts Act and, with regards to the Parent Company, in accordance with recommendation RFR 2 of
the Swedish Financial Reporting Board and the Swedish Annual Accounts Act. The accounting principles applied correspond to those presented in the
Annual Report 2018 (Note 1).
As of January 1, 2019 all new lease agreements are accounted for according to requirments under IFRS 16. This means that lease agreements are reported
as right-of-use assets in the balance sheet and a corresponding lease liability recognized on the commencement day of the lease. Each lease payment isdivided between a repayment of the debt and an interest expense. The interest expense is distributed over the lease term so that each accounting period isexpensed with an amount corresponding to a fixed interest rate for the liability recognized during the respective period. The right-of-use asset is depreciatedon a straight-line basis over the shorter of the asset's useful life and the length of the lease. Assets and liabilities arising from leases are initially recognizedat present value. The lease payments are discounted with the implicit interest rate if that interest rate can be determined, otherwise the incremental
borrowing rate. The incremental borrowing rate is decided based on the contract duration and contract transaction currency. Payments for short-term
contracts and leases of low value are expensed on a straight-line basis in the income statement. Short-term contracts are contracts with a lease term of 12months or less. Contracts of low value include various IT-equipment and smaller office furniture. The Parent Company, should it have any leaseagreements, will not recognise leases in the balance sheet. Instead leasing fees will continue to be expensed on a straight-line basis over the lease term inaccordance with the exemption from IFRS 16 in RFR 2, Accounting for Legal Entities.
For transition purposes the simplified transition approach has been used to transfer to the new accounting standard and therefore there are no restatementsof comparative amounts for the year prior to the first adoption. Right-of-use assets are measured at the amount of the lease liability on adoption (adjusted
for any prepaid or accrued lease expenses). Munters has used the transition exempt rule under IFRS 16 not to make a new assessment if a contract is orcontains parts that constitute a lease and has therefore applied the standard for all contracts that have previously been identified as leases. Munters has
also applied the exempt rule to exclude intitial direct costs when calculating the right-of-use asset. As of January 1, 2019, Munters has recognised right-ofuse assets of approximately SEKm 475, lease liabilities of SEKm 458 (after adjustments for prepayments and accrued lease payments recognised as at
December 31, 2018) and provision for dismantling expenses of SEKm 18. Net profit after tax expects to decrease, provided no new agreements are added,
by approximately SEKm 13 for the full year 2019 as a result of adopting to the new rules. EBITDA is expected to increase with approximately SEKm 109 as
the operating lease payments were included in EBITDA but the depreciation of the right-of-use assets and interest on the lease liability are excluded fromthis measure. Adjusted EBITA is expected to increase by approximately SEKm 1, as the operating lease payments were included in EBITA but the intereston the lease liability is excluded from this measure. Total cash flow will not be affected, however there is a shift in cash flow from operating activities tofinancial activites since the lease payments are repaying the recognized lease liability.
As of September 30, 2019 Munters are reporting a discontinued operation, see further information in separate note below. The discontinued operation
relates to the disposal group that has been abandoned constituting the European Data Center factory in Dison, Belgium. According to IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations a single amount shall be disclosed in the statement of comprehensive income comprising the total of the
post-tax profit or loss of the discontinued operation. An disclosure of the single amount is required and is presented in the separate note together with adisclosure of cash flows from operating, investing and financing activities related to the discontinued operation.
The Group presents certain financial metrics in the Interim report that are not defined in accordance with IFRS. The Group is of the opinion that these
metrics provide valuable complementary information, in that they enable an evaluation of the Group’s performance. The financial metrics are calculated inaccordance with the definitions presented on page 134 of the Annual Report 2018.

TRANSACTIONS WITH RELATED PARTIESAt the annual general meeting in May 2019 it was resolved in accordance with the Board’s proposal on the implementation of a long-term incentive programin the form of a performance based employee stock option program for members of the group management and certain other key employees (“LTIP 2019”or the “Programme”), approximately 72 employees in total. The Programme was to comprise no more than 1,595,000 employee stock options divided inthree series. No more than 100,000 of these employee stock options was to be cash-settled, the remaining employee stock options shall entitle to the acquisition of shares in the company. A total of 68 employees has accepted the offer comprising 1,498,000 employee stock options, whereof 85,000 cash settled.
The employee stock options has been granted free of charge. Exercise of the employee stock options of Series A and Series B is dependent on the extent
to which certain performance targets are satisfied during the financial years 2019-2021 (the “Performance Period”). The performance conditions determine
the extent to which (if any) the employee stock options of the respective series may be exercised to acquire shares in the company or receive a cash
amount at the expiry of a period of three years from and including the date of the grant of the employee stock options (the “Vesting Period”). Each employee
stock option that is not cash settled shall entitle the holder to acquire one share in the company at an exercise price equivalent to SEK 50.27. Each cashsettled employee stock option shall entitle the holder to a cash amount equivalent to the value of one share in the company, calculated as the volumeweighted average price paid for the company’s shares at Nasdaq Stockholm during a period of ten business days immediately prior to the exercise of theoption, with deduction of an exercise price of SEK 50.27. The Programme participants shall be able to exercise employee stock options during a one year
period as from and including the date of the expiry of the Vesting Period. The costs of the program are estimated to SEKm 13 that will be incurred over thethree-year period.
In February Munters’ largest shareholder, a Nordic Capital Fund VII entity, offered the Chairman of the Board of Directors, Magnus Lindquist, and the acting
CEO, Johan Ek, to acquire in total 6,000,000 call options for shares in Munters. The program entailed that Magnus Lindquist and Johan Ek was offered toacquire in total 6,000,000 call options (3,000,000 call options per person) at a total value of SEKm 13.8. The Chairman of the Board of Directors, Magnus
Lindquist, acquired 3,000,000 call options and Johan Ek acquired 3,000,000 call options at February 20, 2019. Nordic Capital believes that the call option
incentive program contributes to creating a clear alignment of interests between these individuals and the other existing shareholders in Munters.

Munters Group AB, third quarter 2019

16

Q3
2019

ENVIRONMENTAL IMPACT AND ENVIRONMENTAL POLICY

Munters’ operations affect the external environment through air and water emissions, the handling of chemicals and waste, transport of input goods andfinished products to and from Munters factories. Munters is committed to constant vigilance regarding the environmental impact of its operations. Munters iscommitted to complying with all laws and to continuously promoting improvements in all Environment, Health & Safety (“EHS”) aspects, wherever Muntersconducts business. Munters constantly seeks opportunities to reduce risk and to create a safer, healthier, more diverse and more environmentally friendly
workplace for our employees, customers, communities, and the overall environment. Munters’ manufacturing facilities all over the world are committed toworking according to an EHS Management Program. The purpose of the EHS Program is to ensure regulatory compliance, actively prevent injuries, andreduce the impact that our business has on the environment.

RISKS AND UNCERTAINTIESThe Group’s significant risks and uncertainties can be divided into four categories; strategic, operational, financial and regulatory risks. In these categories,
there are both risks due to political and macroeconomic trends and specific risks directly linked to the business carried out by the Group. A risk assessment
is carried out on an annual basis and the purpose is to identify and address the most important risks.
Munters’ products are used in complex customer processes. Quality and contract obligations are critical and could result in claims for damages. The Groupdepends to some extent on key customers and key personnel. Considering that Munters is a company with geographically widespread operations and manysmall organizational units, there is a risk of failure to comply with relevant regulations in the business ethics area, e.g. anti-bribery rules. Financial risks
mainly consist of currency, interest and financing risks.
Munters works actively with insurance solutions, and group-wide insurances are governed by central guidelines. This includes for example coverage forgeneral liability and product liability, property, business interruption, transportation, the liability of Board members and the CEO and employment practices
liabilities. A more detailed description of the Group’s risks and how they are managed can be found in the Annual Report 2018.

ALLOCATION OF NET SALES

The majority of customer contracts within Munters business segments AirTech and FoodTech fulfill the requirements to recognize net sales at a point in
time, however there are a number of customer contracts within these business segments that requires to recognize net sales over time, especially in the
sub-segment Data Centers within AirTech, which is reflected in the below matrix. In addition to unit/equipment sales, Munters provides different kinds ofservices to customers such as installation, commissioning, startup and maintenance. Net sales from services are recognized over time as these services are
performed. The services transferred over time in the matrix below is not equivilent to the net sales from Services mentioned on the business segment pages
earlier in this interim report. This is due to the fact that part of Services net sales are recognized at a point in time, such as spare parts, in the matrix below.
Net sales from the discontinued operation is all recognized over time.

Jan-Sep 2019

Q3 2019
SEKm
Allocation timing of revenue recognition
Goods transferred at a point in time
Goods transferred over time
Services transferred over time
Total
whereof related to the discontinued operation
Total net sales from continuing operations

AirTechFoodTech

Total

AirTechFoodTech

Total

754
362
208
1,324
38
1,286

443
44
39
527
−
527

1,197
407
247
1,851
38
1,813

2,576
981
383
3,940
167
3,773

1,384
47
106
1,537
−
1,537

3,960
1,028
490
5,478
167
5,311

Q3 2018
SEKm
Allocation timing of revenue recognition
Goods transferred at a point in time
Goods transferred over time
Services transferred over time
Total
whereof related to the discontinued operation
Total net sales from continuing operations

Munters Group AB, third quarter 2019

Jan-Sep 2018

AirTechFoodTech

Total

AirTechFoodTech

Total

908
244
86
1,239
190
1,049

472
-0
37
510
−
510

1,381
244
123
1,748
190
1,559

2,671
881
236
3,788
632
3,155

1,399
1
100
1,500
−
1,500

4,070
882
336
5,288
632
4,655

17

Q3
2019

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Group’s derivatives, recognized at fair value in the statement of financial position, are measured according to IFRS 9 and are categorized in level 2 in
the fair value hierarchy. The derivatives amounted to SEKm 0 (2) in financial assets and to SEKm 3 (2) in financial liabilities.
The Group’s contingent earn-outs and put/call acquisition options, recognized at fair value in the statement of financial position, are measured according to
IFRS 9 and are categorized in level 3 in the fair value hierarchy. The opening balance for the period was related to the put/call option from the acquisition of
MTech Systems in 2017 and a contingent consideration related to the acquisition of Humi-Tech Services Ltd in July 2018. The change in the period relates
to a discounting effect on the put/call option and currency translations.

SEKm

2019/09/30

2018/09/30

2018/12/31

137
−
−
4
12
152

136
8
-24
1
13
134

136
8
-24
2
14
137

Contingent considerations and put/call options
Opening balanceContingent consideration
Excersied put/call option
Discounting
Exchange-rate differences for the period
Closing balance

Munters deems that the interest rate on interest-bearing liabilities are in line with market terms at September 30, 2019, and the fair value at the end of thereporting period therefore in all material aspects corresponds to the carrying amount.

IMPACT OF THE NEW ACCOUNTING STANDARD FOR LEASES, IFRS 16

As of January 1, 2019 all lease agreements are accounted for according to the requirments under IFRS 16, Leases. If previous accounting principles forleases (IAS 17) would have been applied, the reported EBIT in the third quarter would be SEKm 3 higher, financial expenses SEKm 6 lower and profit after
tax SEKm 6 higher. The reason for EBIT and profit after tax being higher without IFRS 16 is due to the fact that a leased asset has been written down during
the third quarter. However, with previous principles the lease contract would most probably been regarded as onerous, resulting in a negative impact in both
EBIT and profit after tax with approximately the equivalent numbers. The reported EBIT in the first nine months would be SEKm 1 higher, financial expenses
SEKm 13 lower and profit after tax SEKm 11 higher. IFRS 16 does not have an impact on reported cash flow, however there is a shift in cash flow fromoperating activities to financial activites since the lease payments are repaying the recognized lease liability. Below is a specification per segment on theeffect of the new standard on the balance sheet and income statement as of September 30, 2019.
Within the discontinued operation a write-down totaling SEKm 21 has been recorded in the quarter impacting depreciations and write-downs in the income
statement from the discontinued operation. The write-down is associated with the leased assets within the European Data Center factory in Dison, Belgium.

2019/09/30
SEKm
Reported amounts in the balance sheet
Right-of-use assets
Buildings, leased
Land, leased
Plant and machinery, leased
Equipment and tools, leased
Total

AirTech FoodTech

Other

Total

27
0
179
11
218

2
0
0
2
4

84
2
272
45
403

186
33
219

1
3
4

313
107
420

54
2
92
31
180

Lease liabilities reported within interest-bearing liabilities
Long-term lease liabilities
Short-term lease liabilities
Total

127
71
197

Q3 2019
Reported amounts in the income statement
Continuing operations
Depreciation and write-downs on right-of-use
assetsInterest expense on lease liabilities
Discontinued operation
Depreciation and write-downs on right-of-use
assetsInterest expense on lease liabilities

Munters Group AB, third quarter 2019

Jan-Sep 2019
AirTech FoodTech

AirTech FoodTech

Other

Total

-18
-2

-12
-2

-1
0

-31
-4

-50
-6

-25
0

0
0

0
0

-25
0

-31
-2

Other

Total

-29
-7

-3
0

-81
-13

0
0

0
0

-31
-2

18

Q3
2019

DISCONTINUED OPERATIONSOn September 9, 2019 Munters decided to close its European Data Center factory in Dison, Belgium, following the finalization of negotiations with theunions. Therefore, this business is classified as a discontinued operation. All income statement items in this report have been restated and relates toMunters continuing operations if not otherwise explicitly stated. The closure is according to the plan of the Munters Full Potential Program launched at thestart of 2019 to increase the overall performance of the company.
IACs during the first nine months relating to the closure, amounted to SEKm -209, whereof SEKm -139 was severance pay and SEKm -70 mainly asset andinventory write-downs. All is mainly reflected as cost of goods sold below.
In relation to the closure process of Dison, specified components, for a previously sold customized Munters solution, have to be replaced at a specific customer’s sites. As a result of this, Munters has made a provision in the third quarter for estimated non-recurring costs, amounting to SEKm -116 reported
within other operational income and expences. The estimated non-recurring cost of SEKm 116 is not part of the previously communicated total cost for the
Munters Full Potential Program, but has been taken in addition to these costs. Munters has insurance solutions in place for this type of events, but since
Munters has not concluded the discussions with the relevant customer and its insurance providers the financial and cash flow net effect on Munters can not
yet be finally determined. This is expected to be concluded during the coming months.
The statement of comprehensive income of the discontinued operation is presented below. The discontinued operations has mainly had cash flows fromoperating activities during 2018 and 2019.
Q3

Jan-Sep

Full year

LTM

SEKm

2019

2018

2019

2018

Oct-Sep

2018

Net sales
Cost of goods sold
Gross profit

38
-234
-196

190
-163
27

167
-371
-204

632
-556
77

245
-506
-262

710
-690
20

Selling expenses
Administrative costs
Research and development costs
Other operating income and expenses
Operating profit

-13
-14
-2
-116
-341

-13
-5
-1
1
8

-27
-30
-9
-116
-386

-39
-14
-5
-0 19

-363
-30
-30
-116
-800

-375
-15
-26
0
-396

Financial income and expenses
Profit/Loss after financial items

-1
-342

-1
7

-3
-388

-2
17

-3
-803

-2
-397

Tax
Net income for the period from discontinued operations

-0
-342

-3
4

12
-376

-8
9

37
-765

17
-380

Cash flow from operating activities

-57

-51

-255

-193

12

74

Munters Group AB, third quarter 2019

19

Q3
2019

This is a translation from the original review report in Swedish.

REVIEW REPORT

Munters Group AB (publ.), corporate identity number 556819-2321

Introduction

We have reviewed the condensed interim report for Munters Group AB (publ.) as at September 30, 2019 and for the nine months period then ended. The
Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and theSwedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance
that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
Stockholm, October 24, 2019
Ernst & Young AB

Rickard Andersson
Authorized Public Accountant

Munters Group AB, third quarter 2019

20

Q3
2019

INFORMATION AND REPORTING DATESContact person:
Ann-Sofi Jönsson, Head of Investor Relations
Phone: + 46 (0)730 251 005
Email: ann-sofi.jonsson@munters.se
At 9:00 the President and CEO, Klas Forsström, together with the Group Vice President and CFO, Annette Kumlien will present the report in an audiocast
with telephone conference.
Audiocast:
http://www.financialhearings.com/event/11800
Dial-in number for the telephone conference:
SE: +46850558365
UK: +443333009032
US: +18335268395
The interim report, presentation material and a link to the audiocast will be available on https://www.munters.com/en/investor-relations/____________________________________________________________________________________________________________________________
Financial calendar:
February 13, Year-end report 2019
April 23, January-March interim report 2020
May 7, Annual General Meeting 2020
July 17, January-June interim report 2020
October 22, January-September interim report 2020____________________________________________________________________________________________________________________________
This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets
Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on October 24, 2019
Munters Group AB, Corp. Reg. No. 556819-2321

About Munters Group
Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate forcustomers in a wide range of industries. Munters has been defining the future of air treatment since 1955. Today, around 3,600 employees carry out manufacturing and sales in more than 30 countries. Munters Group AB reports annual net sales of about SEK 7 billion and is listed on Nasdaq Stockholm. For
more information, please visit www.munters.com.
Every care has been taken in the translation of this interim report. In the event of discrepancies, the Swedish original will supersede the English translation.
The addition of the totals presented may result in minor rounding differences.

Munters Group AB, third quarter 201921