Forcustomersuccess anda healthierplanetA N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

CONTENT
Introduction
This is Munters
Industries
JJ Market analysis and trends
JJ Events 2019
JJ Comments from the CEOJJ History 
JJ
JJ

Corporate Governance
2
4
6
8
10
12

Strategy
Munters Full Potential ProgramStrategic prioritiesJJ Targets
JJ
JJ

PeopleCustomers 
JJ InnovationJJ Market
JJ Excellence in everything we do
JJ Business units
JJ AirTech
JJ FoodTech 
JJ

14
16
18

20
24
26
28
30
34
36
42

Sustainability report
JJ Resource efficiency
JJ Responsible business practices
JJ People & society

Board of Directors’ Report 
Financial statements
JJ NotesJJ Assurance
JJ Auditors’ report
JJ Definitions
JJ
JJ

56
60
62
63
64
72
75

46
50
52
54

76
81
90
123
124
127

The formal annual report for Munters Group AB (publ), corp. reg.
no. 556819-2321, refers to pages 76-123.
Because all amounts in this report are rounded, rounding differences can occur. This English version of the Annual Report is atranslation of the Swedish original. The Swedish text is the binding
version and shall prevail in the event of any discrepancies.
Financial Calendar

Sustainable Operations
JJ

JJ

Financial reports

Operations
JJ

Risks and risk management
The share 
JJ Information to shareholders
JJ Comments from Chairman of the BoardJJ Corporate governance report
JJ Board of Directors & Management
JJ Auditor’s Report
JJ

23 April, Interim Report January-March 2020
7 May, Annual General Meeting 2020
28 May, Capital Markets Day
17 July, Interim Report, January-June 2020
22 October, Interim Report January-October 2020

For
customersuccess anda healthierplanetMunters has played a role in shaping the industry for climate
solutions since the company was founded in 1955. Curiosity and adrive to create pioneering technologies are part of our DNA. Our
climate solutions are mission-critical to our customers’ success andcontribute to a more sustainable planet.
Learn more about the strategy on pages 14-19.
M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 1

INTRODUCTION | THIS IS MUNTERS

A leader in sustainableclimate solutions
Munters is a global leader in energy-efficient and sustainable climate solutions.
The solutions guarantee temperature and humidity control, which is mission-critical forcustomers. Munters is organized in two business areas, AirTech and FoodTech. Throughinnovative technologies, the Group creates the perfect climate for demanding industrial
applications, the largest segments of which are manufacturing, defense, data centers, food,
pharmaceutical and agriculture. Founded in 1955, Munters has many patents in our coretechnologies, dehumidification and cooling. Sustainable value creation is an important partof the Group’s offering.

Our production andassembly units globally
Read more about ourbusiness areas on pages
4–5.

Tobo
HorstmarLansing
Selma

Amesbury
Buena Vista

Dison
Hamburg

HruskyChiusaveccia & Pieve de Teco

Beijing

Tel Aviv

Jiang Yin

Fort Myers
Monterrey

Mumbai (Ambernath)

Tokyo

Chashan

Pune

Production units
Assembly units

Araucaria
Johannesburg

Number of employees asof December 31, 2019

Number ofplants~3 100 18

Sales and manufacturing, countries

Percentage of womenin senior positions, %>30

25(2018: 20)

2

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

»

Munters is a global leader in innovative,
energy-efficient and sustainable climate solutions for mission-critical processes

Net sales
SEKm
8,000
6,000
4,000
2,000
0

2015 2016 2017 2018 2019

Net sales
per region

Americas 43 %EMEA 36 %APAC 21 %Operating profit andmargin
SEKm

%

600

12

400

8

200

4

0

2015 2016 2017 2018 20190

Operating profit
MarginM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 3

INTRODUCTION | INDUSTRIES

Sustainable value creationin many industries
Munters offers innovative, efficient and sustainable solutions for customers in manydifferent industries where controlling temperature and humidity is mission-critical. Our
solutions reduce customers’ climate and environmental impact through lower resource
consumption, and in the process contribute to cleaner air, higher efficiency and reduced
carbon emissions. Sustainability is an important part of Munters’ business strategy and value
creation.

AirTechAirTech is a global leader in energy-efficient air treatment forindustrial and commercial applications. We offer solutions for mission-critical processes that require exact control of moisture andtemperature, with a focus on energy efficiency and sustainableclimate systems. Our climate systems also provide better indoor air
quality and comfort, as well as increased production capacity.
4

FoodTech
FoodTech is one of the world’s leading suppliers of innovative,
energy-efficient climate systems for livestock farming and greenhouses, as well as software for controlling and optimizing the entire
food production value chain. Our solutions increase productivity
while contributing to sustainable food production, where strict
requirements are placed on quality, animal health and food safety.
M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

FMCG and Retail

Data centers

Electronics

Retail and grocery stores generatehigher sales with lower operating
costs when they install Munters’
efficient, high-performance HVAC
systems. Heating and ventilation
systems work better, and so
do refrigerators and freezers.
Customers and employees
both enjoy a pleasant, healthy
environment.

Digitization and global data
traffic continue to increase, andan ever-growing number of data
centers are being built aroundthe world. A data center has towork round the clock, year inand year out. Advanced climate
cooling solutions are critical toreliability and also enable lower
energy consumption and carbon
emissions.

Our solutions provide an optimal
environment for demanding customers in the electronics industry.
Manufacturers of lithium-ion
batteries, monitors, components
and LEDs get a better air environment for their sensitive processes
along with lower energy costs andreduced carbon emissions.

Aviation and Defense

Pharmaceuticals

Shipbuilding and Marine

In the defense and aviationindustries, dehumidificationis critical to protect sensitiveequipment, electronic systems
and components from technicalfailures. Climate control in hangars
and supply depots keeps vehicles
and materials intact. At the sametime, building maintenance costs
are reduced.

Munters offers customized
dehumidification solutions forthe pharmaceutical industry that
protect raw materials and finishedproducts during production, storage and transport. Careful control
and monitoring keep humidity
constant, so medicines in the formof tablets, capsules, granules andpowders maintain their quality andshelf life.

Munters’ mist eliminators remove
95 per cent of the harmful sulfur
found in ship emissions. Engines
and ventilation systems on ships
and offshore platforms also haveto be protected from anythingthat causes rust and soggy filters.
Munters offers modern air intake
systems that stop rain and snow,
sea salt and harmful particles.

Food & Beverages

Agriculture

Greenhouses

Our solutions control climate
conditions the whole way “fromfarm to table,” ensuring hygiene
and optimal product quality at
the same time that they conserve
energy and increase productivity.
We supply customers in the dairy
and meat industries, breweries,
bakeries, restaurants and more.

Munters develops and manufactures energy-efficient climate
control systems for sustainable
farming. We optimize the indoor
climate for poultry farming, egg
production, pork farming andmilk farms, enabling increased
productivity with minimal resource
waste, while at the same time
meeting strict quality and foodsafety requirements.

By providing the perfect indoor
climate for growing plants,
Munters’ solutions give growers
the opportunity to produce under
optimal conditions. The innovative
product range includes control
equipment ventilation, evaporative
cooling and heating.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 

5

INTRODUCTION | MARKET ANALYSIS AND TRENDS

Climate change is an
important megatrend
Munters is benefitting from strong global drivers and trends that support the useof advanced solutions for climate control. Perhaps the most important megatrend for
Munters is climate change, with a focus on resource efficiency, where the Group is well
positioned and can be part of the solution for a more sustainable world.

TREND: CLIMATE CHANGE
Around the world demandis increasing for sustainable andenergy-efficient solutions forindoor climate control, which
help Munters’ customers reduce
emissions. Achieving global
climate goals will require major
investments and force morecompanies to take responsibility
for and ensure sustainability
throughout the value chain.
Contributing to more efficientuse of the earth’s resources is an
important success factor.

How Munters is addressing thetrend:
Munters’ energy-efficientsolutions help customers to meettheir climate and sustainability
commitments.
Examples:JJ Munters’ products can extend
the service life of bridges andother infrastructure and thereby
create resource efficiency.
JJ Our solutions can separate
hazardous substances in industrial
processes and flue gases.
JJ Munters enables a large
proportion of the world’s
production of lithium-ion batteries
by supplying ultra-dry air.

TREND: INCREASED DIGITIZATION
Increasing data traffic,
greater use of cloud services anda growing number of connected
devices are driving growth inindustries that are exposed to digitization. Digitization also opens up
doors to new ways to create value
and interact with customers. One
example is offering connected
service and support.

6

How Munters is addressing thetrend:
Munters’ customer solutions
connect products and climate
systems, providing more dataand control in the customer’s
production environment and theentire value chain.

High demand for cooling data
centers. Our data center solutions
provide significant energy savings
compared with traditional cooling.
JJ

Examples:JJ Digitization facilitates new
solutions with long-term potential
for Munters to sell indoor climate
as a service.
JJ Munters’ IoT solution forconnecting farms and food plants,
SonarEcho, optimizes the logistics
chain and thereby minimizes
resource consumption.
M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

TREND: POPULATION GROWTH
An increased focus on climatechange - and the environment
and a scarcity of resources due toglobal population growth, as well
as a growing urban middle-classthat consumes more animaland plant based protein, aredriving demand for energy- andresource-efficient solutions.

SUBTREND POPULATION GROWTH:
Strict demands on production environments
Higher quality standards,
tighter competition and anincreased understanding of the
impact of the climate on productivity and product quality are raisingdemand for advanced climate
solutions. The food industry needs
cost-efficient solutions for mist, ice
formation, condensation and othermoisture-related problems to meetzero-tolerance guidelines andavoid discrepancy reports.

SUBTREND: POPULATION GROWTH:
Strict regulations
More rigorous laws andenvironmental standards are
driving demand for solutions to
reduce pollution from exhaust andflue gases, e.g., in the shipping
industry. Requirements are also
being tightened on dehumidification efficiency in public buildings,
including in the US.

MUNTERS |How Munters is addressing thetrend:How Munters is addressing thetrend: On the whole, Munters
has the most energy-efficientsolutions in the market, which help
customers increase efficiency andreduce their carbon footprint
Examples:JJ Exact climate control in livestock
farming optimizes resource
consumption in the form of foodand water and improves animal
health.
JJ Energy-efficient coolers insupermarkets reduce energy
consumption by up to 40 percent.
JJ Environmentally friendly andenergy-efficient air treatment
systems, which recycle heat
energy and transform it into
cooling, are used in officebuildings, supermarkets andproduction facilities.

How Munters is addressing thetrend:
Munters offers exact control of
the climate to meet our customers’
requirements for better control of
their environment.
Examples:JJ Munters’ portfolio of DedicatedOutdoor Air Systems (DOAS) is themost efficient in the industry in termof moisture removal.
JJ A good climate in livestock
farming is important for the
animals’ well-being as well as theemployees’ work environment andincreased productivity.

How Munters is addressing thetrend:
Munters has many solutions
to meet customers’ needs andrequirements for treating emissions
from coal-fired power plants andships, where the Group’s mist
eliminators purify emissions to ahigh level.

Examples:JJ Munters energy-efficient HVAC
solutions (Heating, Ventilation and
Air Conditioning) can meetdemand for higher energy-efficiency in the food industry, forexample.
A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 7

INTRODUCTION | EVENTS 2019

Important events
during the year
January

February

Launch of three-phase plan
to capture Munters’ full potential.
In February, an extensive plan was
launched in three phases – stability, profitability and growth – toimprove the Group’s earnings.
Stability
Establish a stable, profitable base– Strengthen the Management Team– Simplify the Munters organization in two
decentralized business areas– Create an easier, more efficient organisation and improve capital efficiency– Pursue earnings growth in Data CentersMarch

New organization with twobusiness areas
Munters, which previously had
four business areas, was reorganized in the first quarter in two
business: AirTech and FoodTech.
The former business area Air
Treatment changed name to
AirTech and now also includes thebusiness segments Data Centers
and Mist Elimination. In addition,
the business area AgHort haschanged its name to FoodTech.

Profitability
Improve profit– Steer the business mix toward the most
attractive segments– Pursue continuous improvements within
business area organizations and productionunits– Improve our go-to-market models and our
pricing models– Create cost savings through more efficientmaterials sourcing

April

May

Good growth in services
Munters’ service offering is a
growing and profitable part of
the Group, accounting for 13
percent of sales in 2019. The goal
is to reduce customers’ energy
consumption, guarantee quality
and environmental performance,and extend the service life of our
products. Our offering comprises
everything from installation andmonitoring to maintenance, spareparts and upgrades, which are
combined into optimal solutions foreach customer’s needs.

GrowthIncrease growth in attractive segments– Focus on rapidly growing segments andmarkets where Munters has leading positions– Digitize the customer offering– Carry out selective acquisitions to increase
growthGrowthProfitability
Stability

INCREASE GROWTH IN
ATTRACTIVE SEGMENTS

June

Munters’ first CapitalMarkets Day
In early May, Munters held its
first Capital Markets Day to give
institutional investors, financial
analysts and the financial media
a detailed description of thecompany’s strategy, the Munters
Full Potential Program, and management’s view of the businessand outlook.

Management changes
In April, Klas Forsström wasappointed the new President
and CEO of Munters. Klas has abackground as President of the
Sandvik Machining Solutions
business area and over 20 yearsof experience from various senior
positions at Sandvik.
In May, Annette Kumlien was
appointed the new Group Vice
President and CFO of Munters.
Annette was the most recently with
Diaverum, where she held theposition of SVP and COO, andprior to that CFO.
Both started their new positions
on August 12, 2019.

IMPROVE PROFITESTABLISH A STABLE,PROFITABLE BASE

8

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

July

AugustSeptember

SaaS order for FoodTech in
the USIn the second quarter, a new SaaS
(Software as a Service) order was
signed within FoodTech. While thisis just the first order for this service,
SaaS is an exciting growth areafor Munters. The order was signedwith a major customer in the US
and will be recognized in net sales
over a five-year period.

Closure of European Data
Center factory in Dison
After completing union negotiations, the process of closing theEuropean Data Center factoryin Dison, Belgium began in
September. The closure waspart of the Full Potential Program
launched in early 2019 to improve
the Group’s earnings.

The lithium-ion battery
segment continues to seegood growth
Lithium-ion batteries, which areused in a growing number ofapplications from smartphones toelectric cars, are manufactured in
a complex and controlled air envi-

ronment. Munters can supply theultra-dry air solutions needed forsafety and quality in p
­ roduction.
Thanks to our application knowhow, our solutions are used inaround half of the world’s produc­tion of lithium-ion batteries forelectric cars.

OctoberNovember

Major order for Data Centercooling in the US
In October, Munters received
a major order for data centercooling in the US valued at
approximately USD 25 million.
Munters will deliver Oasis™
Indirect Evaporative Cooling units.
– We are pleased to havereceived a large order to deliver
a configured cooling solution fora Data Center client in the US. We
worked closely with the client’s
project team to develop an innovative in direct evaporative coolingsolution, both in terms of energy
efficiency and water usage, and
we look forward to delivering thisproject,” says Michael Gantert,
President Data Centers.

Launch of the new AirC
control platform
In October, Munters launched anew, innovative control platform,
AirC, which will make its systems
more intuitive, more efficient andDecember

New President of Munters’
largest business area,
AirTech
In October, Peter Gisel-Ekdahl
was appointed as Presidentof business area AirTech as ofNovember 1, 2019. Peter has
been President of business area
FoodTech for the last 12 years anda member of Group Management
since 2011.

better connected. The proprietary
AirC control system helps customers to optimize energy consumption and allows service and system
updates through remote access.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 9INTRODUCTION | COMMENTS FROM THE CEO

In 2019 we strengthened
Munters’ platform forthe future
In 2019, major investments were made within Munters to strengthen the platform.
First, we completed the Munters Full Potential Program (FPP) to increase profitability, andsecondly we analyzed the business and refined our strategic direction. We had stabledemand during the year, strong growth in net sales and an increase in the adjusted EBITA
margin. In addition, a decision was made to close the Data Center factory in Dison,
Belgium. To deliver on our medium-term goals, the focus in 2020 is on strengthening
business acumen in the company.

In August 2019, Klas Forsström took over as President and CEO of
Munters. Johan Ek returned to his previous position as a memberof the Board of Directors. In this interview, we get to know Klas
better, read his comments about the past year and learn more
about the strategic direction for the future.
What is your first impression as CEO of Munters?
– I have been very impressed by the competence and skills you canfind in every part of Munters. It is an organization with a wealth ofknowledge both globally and at the local level. Today we live in aworld of constant change, which means big challenges and opportunities. We benefit from a number of strong long-term trends, all ofwhich are making the world more sustainable. Our energy-efficientsolutions help customers to be more efficient and reduce emissions.
In addition, our employees create tremendous value, in several
dimensions, every day. I am proud to lead the company and see
great opportunities for Munters to strengthen its market position
and business opportunities going forward.
What attracted you to Munters?
– Munters has a strong market position based on technologicalexpertise, and we are correctly positioned and benefit fromimportant trends such as climate change and the focus on energy
efficiency. Munters has a recognized brand, and with the opportunities I see for future development there is great potential. That is
why I was excited to come here and lead the company.
What experience did you bring with you to Munters?
– With my business and leadership experience, I realize that
continuous improvements, investments in innovation and acomprehensive view of the value chain are all very important.
Technological innovations are only innovations when they arecommercially viable. This is why a focus on innovation is closely
connected with a focus on going to market and meeting customers.

10 

Can you comment on Munters’ development in 2019?
– Net sales increased 6 percent organically in 2019 to SEK 7,153
million. We saw sales rise in Data Centers USA, Mist Eliminationand good growth in Services. In our business area FoodTech, currency-adjusted net sales were weaker due to overcapacity in the
US swine market and uncertainties related to trade tariffs and theAfrican swine flu. Adjusted EBITA rose strongly and the adjusted
EBITA margin improved to 12.2 percent, mainly thanks to costsavings from the FPP program.
2019 was dominated by the FPP program, which was launchedin February. A reorganization and other changes were made tocreate a more streamlined and profitable business. The biggest
activity in the program in 2019 was the closure of the European
Data Center factory in Dison.
My focus has been on continuing the work that had begun andto identify activities that will drive long-term growth. Last fall, thepriority for me and the management team was streamlining theactivity plan and working on Munters’ strategic direction.
The organization and management team were changed
under your leadership. What were your intentions?
– After I took over in August 2019, I took my time to travel aroundand visit Munters in various parts of the world. It was important forme to understand the business and organizational flow within thecompany before I made any changes. In the fall of 2019, Peter
Gisel-Ekdahl, formerly the President of FoodTech, was named
the President of the larger business area AirTech. Peter has done
excellent strategic work with FoodTech and I look forward toworking with him to develop AirTech, especially our digital IoT
offering.
In early 2020, I announced additional changes in the organizational structure to simplify the organization and the way wework. In my experience, the simpler you make an organization,
the better employees know how to contribute and produce top
results.
M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

»Continuous improvements, investments in innovation and a comprehensive view of the value chain
are very important
The FPP program contained three phases: stability, profitability
and growth. Now the focus is shifting to the strategy we developed, where we are continuously incorporating these aspects into
the normal way we work.
What does Munters’ strategy journey look like going
forward?
– In February 2020, we launched the framework and directionthat now will guide the activities that will lift Munters’ earnings andgrowth for a long time to come. Basically, the strategy consistsof three key focus areas: customers, market and innovation.
Employees are the hub of our business and we have to be efficientand maintain high quality in everything we do, especially withrespect to customers. We are now working actively to roll out andcommunicate our strategy internally and externally.

What are your expectations for Munters in 2020?
– I look forward to fully implementing the strategy throughout theorganization and working with continuous improvements. I see theorganization as a team, and with a clearer structure and goals we
can go far and win.
Munters is well positioned in a market driven by sustainability,
energy efficiency and digitalization. At the same time, we face
new challenges. In late 2019, a corona virus was found in Chinathat can spread to humans and cause the disease Covid-19. In
early 2020, the global spread of the corona virus escalated. The
way in which and to what extent the spread of the virus may affect
Munters’ business and financial prospects in 2020 is still too early
to have a well-founded understanding of.
I want to especially thank all our employees, who have done a
fantastic job despite the challenging changes we went through in
2019.
Stockholm, March 2020

Klas Forsström,
President and CEO

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 11INTRODUCTION | HISTORY

Munters’ journey
Munters has been a pioneer in climate control solutions since the company
was founded in 1955. Munters’ culture has always been based on curiosity andinnovation. We try to continuously improve in order to stay successful in a changing
market.

1980s
1970s
1960s
1955

In 1955, Munters is founded byinventor and entrepreneur Carl
Munters together with Marcus
Wallenberg. The company
develops modern air-conditioning
systems based on evaporative
cooling, dehumidification andheat recovery. The dehumidification business gets off the ground in
1958, when the Swedish Armed
Forces orders 200 dehumidifiers.

12 

In the 1960s, Munters expands
its business and grows not only
in Sweden but internationally as
well. Dehumidifier production isestablished in the US. The launchof new, innovative products
continues and the best-sellingmodel ever, the M100, is launched
in 1964.

The product range, customer
segments and areas of application
all expand. An international distribution network is established. The
oil crisis of 1973 leads to energy
savings requirements and gives
Munters major market potential.
Munters is acquired in 1974 by
Incentive AB.

Resellers and agents are acquired
over a period of several years
to broaden and strengthen thebusiness. Munters establishes
operations in a number ofcountries, including Japan in 1987.
Munters focuses on environmental
improvements and in 1988
acquires a unique Swedish air
purification technology, Zeol,
which it further improves withMunters’ rotor technology.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

In the power and processing
industry, Kevin Enterprises ofIndia, a specialist in mass transfer,separation and mist elimination, is
acquired in 2017.

2010-talet

2000s

1990s

Munters continues to expand
and becomes an internationalgroup with sales offices in over 25
countries. A new manufacturing
plant is built in San Antonio, in theUS, to concentrate dehumidification solutions for supermarkets
and ice rinks. Environmental issues
become increasingly important to
Munters’ customers and society as
a whole, creating a foundation for
new products in evaporative cooling. Munters acquires Eurroemme
and offers complete climate
solutions for the rapidly expanding
poultry industry. In 1997, Munters
AB is listed on the Stockholm Stock
Exchange.

The innovator Carl Munters

The Munters brand, our strategy
and our culture are strongly rooted
in innovation, and the entrepreneurial spirit from Carl Munters is
a strong part of our culture.
Carl Munters discovered
pioneering technology in climate
control. During his time at Munters,

Munters invests in sales and production in Asia. The acquisitionsof Aerotech, Agro A/S, Turbovent
Environment and Form makeMunters a world leader in climate
systems for livestock farming andgreenhouse cultivation. Munters
also acquires Des Champs
Technologies, strengthening thecompany’s position as a leading
supplier of energy-efficientsolutions for commercial buildings,
as well as Toussaint Nyssenne, aleading European manufacturer oflarge-scale air treatment systems.

he applied for nearly 1,000
patents, most in the areas ofdehumidification and evaporative
cooling, which are still two of
Munters’ core technologies.
Innovation not only means technological innovations, but also theway we work and how Munters

In 2010, Munters is acquiredby Nordic Capital Fund VII anddelisted from the Stockholm Stock
Exchange. A number of strategicacquisitions are made in several
areas in subsequent years. In livestock farming and greenhouses,
Munters strengthens its position
upward in the value chain throughacquisitions. In 2011, it acquires
Rotem of Israel, an expert incontrol and management systems.
This is followed by the acquisitionof the German company Reventa,
specialists in climate control, andthe acquisitions of MTech Systems
and Edata, software developers
for poultry and swine production.

Proflute, a leading supplier of desiccant rotors to the global OEM
market, is acquired in 2013. This
strengthens Munters’ position in air
treatment for industrial and commercial applications. It is further
strengthened in 2015, when HBGroup, a supplier of customized
hygienic air treatment systems forclients in the food industry, among
others, is acquired.
In 2017, Munters Group (MTRS)
is listed on Nasdaq Stockholm. In
2019, a three-phase program islaunched for stability, profitability
and growth to capture Munters’
full potential.

delivers products and services to
its customers – everything fromcomponents to comprehensive
solutions and new connected
technologies and services for dataprocessing and analysis.
Learn more on pages 26-27.
Carl Munters

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13

STRATEGY | MUNTERS FULL POTENTIAL PROGRAM

In 2019 we laid thefoundation for continued
profitable growth
In February 2019, an extensive and ambitious plan was launched to capture Munters’
full potential and improve the Group’s earnings, the Munters Full Potential Program (FPP).
The reason why the program was started was that profits had been below expectations inall of Munters’ business areas, especially the former business area Data Centers. The plancontains three phases: stability, profitability and growth.
In December 2018, an analysis of the business was launched
to identify measures that will deliver higher profits in line withMunters’ financial targets. This was followed in February 2019by the presentation of an extensive and ambitious plan in threephases to improve the Group’s earnings.
The aim of the first phase of the program was to establish a stable and more profitable base for Munters. This phasebegan right after the plan was approved. The main measures wereto:
JJ Strengthen the management teamJJ Simplify the Munters organization in two decentralized business areas, from four previously
JJ Create an easier, more efficient organization and improve
capital efficiency
JJ Pursue earnings growth in Data Centersbusiness in Europe are limited due to market overcapacity andcontinuing price pressure. In the third quarter, it was therefore
decided to close the European Data Centers factory in Dison,
Belgium. Our focus going focus will primarily be on the US Data
Center market, where there is a commercially more stable base toachieve profitable growth.
Various strategic alternatives for Data Centers and Mist
Elimination were evaluated in 2019, resulting in a decision tokeep these businesses. They made significant progress in 2019.
Considering our strategic direction, we see great potential tocreate further value in the future, and both businesses fit well in
Munters, since they serve markets with good growth potential,
are driven by digitization and have high demand for sustainable
solutions.

In 2019, the management team was strengthened. President and
CEO Klas Forsström and GVP and CFO Annette Kumlien joined
Munters in early August. Since the start of 2019, the organization
has consisted of two business areas, AirTech, which also includes
the former Mist Elimination and Data Centers business areas, andFoodTech, previously AgHort.
An evaluation conducted at the start of the program showedthat the prospects for establishing a profitable Data Center

PHASE 2:PROFITABILITY

Förbättra resultatet

PHASE 1:STABILITY
Establish a stable andprofitable baseFebruary 201914 

December 2019
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Last fall, the program gradually transitioned to thesecond phase with a focus on profitability and improving earnings. The main measures were to:
JJ Steer the business mix toward the most attractive segments
JJ Pursue continuous improvements within business area organizations and production unitsJJ Improve our go-to-market models and our pricing models
JJ Create cost savings through more efficient materials sourcing
JJ Improve how we control and work with working capitalIn the second half of 2019, Munters gradually shifted to phasetwo of FPP. We worked on among other things projects to improve
working capital, accelerated the pace of product development inorder to create higher value for customers, and launched continuous
improvements in production. Munters has also initiated projects
together with the Group’s suppliers to improve sourcing efficiency.
Different parts of the Munters Group are in different phasesof efficiency program. As part of the continuous improvements,
focused initiatives will be launched for the Group’s various
operations.

Going forward, the program will gradually shift tothe third phase, the aim of which is to increase growth in attractive
segments and geographical areas. The main measures are to:
JJ Focus on rapidly growing segments and markets where
Munters has leading positions
JJ Digitize the customer offering
JJ Carry out selective acquisitions to increase growth
The third phase of the program begins in 2020. It is focused onincreasing the growth rate with an emphasis on attractive areas
where we see solid long-term demand and where we have or canestablish strong market positions.
At the same time that the company is working on the program andthese initiatives, the management team was busy in autumn 2019
formulating a future strategic direction for Munters. The various parts
of FPP will be included in the new strategic direction that takes effectin 2020.

PHASE 3:

GROWTH
Increase growth inattractive segments
and geographical areas

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15

STRATEGY | STRATEGIC PRIORITIES

Munters’ strategic
priorities

Inellencexc

everytin

PeoplePeople

ion
vat
no

s
er
ng we d
hi

o

Cust
om

Munters has a strong position in most of our markets. We see major opportunities toimprove and strengthen our market position and to achieve our financial targets and deliveron our strategy. The key to success is how we respond in working toward our goals. Our
overarching strategic priorities show which areas we regard as important to our success. For
each strategic priority we have clear action plans and ambitions what we want to achieve.
Sustainability is a priority issue reflected in every strategic priority.

E

M a r k e ts

16 

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PeopleThe employees at Munters are the hub of our business. Throughcollaboration and a passion for creating sustainable solutions
for our customers and partners, we contribute to our customers’
success and a better world.

Customers
We closely cooperate our customers. We try not only to understand their needs today, but also in the future. Our expertise is built
through unique insight into our customers’ businesses and production processes. Munters works every day to deliver value over andabove our customers’ expectations.

Innovation
We at Munters work in a structured way to optimize innovation in
the organization. We continually monitor technological developments in the market and work closely with our customers tounderstand their needs. We also work with other institutions thatstrengthen our competence and create value for customers. By
continuously questioning and improving how we work, we create
sustainable solutions, technologies and business models for the
future.

MarketMunters is active around the world in a market driven by strong
trends in sustainability and digitization. We focus resources on
strengthening our position in areas where we can be a market
leader. For Munters, a market leader not only has a leading position but also higher profitable growth than others in the industry.

Excellence in everything we do
We strive for quality and efficiency in everything we do. We workwith continuous improvements in every area. We prioritize andfocus on selected investments and areas of improvement. We
follow up, learn, correct and improve..

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17

STRATEGY | TARGETS

Future objectives
Both financial and sustainability goals benefit our strategy for profitable, cashflow-generating growth. A responsible business with stable finances and efficient resource
use is essential for Munters to carry out its strategy. In 2019, an analysis of the sustainability
work was completed, including a review of all priority areas and their goals. The
management of Munters firmly believes that more ambitious sustainability goals must be set
going forward. In 2020, the focus will be on laying a foundation for them.

FINANCIAL TARGETS
Net sales growth

Adjusted EBITA margin

Capital structure

Dividend policy

Annual growth in organic net
sales of 5 percent starting in 2019,supplemented by selected add-on
acquisitions.

An adjusted EBITA margin of 14
percent in the medium term.

A ratio of net debt to adjusted
EBITDA of 1.5x to 2.5x, which
may temporarily exceed this level(e.g., as a result of acquisitions).

%%

multiple

10

16

4

5

12

3

0

8

2

According to the dividend policy
adopted by the Board of Directors,
Munters’ aim is to pay an annual
dividend corresponding to 30–50
percent of net income for theyear. The pay-out decision will bebased on the company’s financial
position, investment needs,
acquisitions and liquidity position.
There can be no assurances that inany given year a dividend will be
proposed or declared, however.

-5

4

1

-10

2016

2017

2018

Target as of 2019

18 

2019

0

2016

Target

2017

2018

2019

0

The Board of Directors proposesthat no dividend be paid for 2019.
2016

2017

2018

2019

TargetM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

SUSTAINABILITY GOALSRESOURCE EFFICIENCYEnergy efficiency

Green electricity

Recycling rate

A continuous reduction ofelectricity consumption in our
production units.

The percentage of electricity fromrenewable sources in our production facilities will continually
increase.

Our goal is to continually raise ourrecycling rates (i.e., the percentage
of waste reused or recycled out of
the total amount of waste).

MWh/Tkr

%

%

1.5

60

60

50

50

40

40

30

30

1.0

0.5

0.0

2017

2018

20

20

10

10

0

2019

2017

2018

0

2019

2017

2018

2019

PEOPLE AND SOCIETY
Proportion of women

Accidents

Our goal is to increase thepercentage of female employees
and executives.
The goal is 23 percent in 2020
and 30 percent in 2025.

The goal is to continuously reduce the number of accidents in production.
We measure Total Recordable Incident Rate (TRIR), which is calculated as
the number of accidents where the employee has to seek medical attention
multiplied with 200,000/number of hours worked.

%

SEKm

% Number of

4,000

4

100

3,000

3

75

2,000

2

50

1,000

1

25

30
25
20
15
10
5
0

2018 20192018 2019

Workforce

Executives

Target 2020

0

2017

2018

2019

0

Production value, SEKm
Number of accidents
Number of accidents/production value, %RESPONSIBLE BUSINESS GOAL
Supplier code of contact
%
100
80
60
40
20
0

2018

2019

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19

OPERATIONS | PEOPLE

Employees are the hubof our operations
The employees at Munters are the hub of our operations. Our culture is based on
engagement, trust and collaboration across boundaries. Through cooperation, a passion
for continuous improvements and by creating sustainable solutions for our customers andpartners we contribute to our customers’ success and a better world.
The Munters Full Potential Program was implemented in2019 to capture Munters’ full potential and improve the Group’s
earnings. A new organizational structure was launched, where wewent from four to two business areas. This created a simpler, more
efficient and performance-oriented company. An internal survey
conducted at the end of 2019 showed that a majority of employees
are motivated and proud to work at Munters.
DIVERSITY AND INCLUSION
To drive our strategy forward, we have to continuously question
the ways we are working to create leading technologies and new
ways to get to the market. Munters has a mix of employees withdifferent perspectives and backgrounds. This provides valuable
insight and creates a dynamism that leads to innovative solutions
and new ways of working.
Our goal is greater gender equality. In 2019, we surpassed the2020 target of 23 percent female executives when we reached 25
percent (20). The management team consists of half women andhalf men. By 2025, Munters’ goal is to increase the percentage offemale employees and executives to 30 percent.
Whistleblower channel
Munters’ employees can anonymously raise an alarm about
serious improprieties in the workplace through an online whistleblower channel maintained by an independent service provider.
In 2019, nine whistleblower cases were reported and addressed
through the channel. See also page 52.

HEALTH AND WELL-BEING
Munters has various guidelines on the environment and occupational health and safety and promotes a work-life balance. We
have zero tolerance for work-related accidents and the aim is tocontinuously improve safety at our work sites. We closely monitor
the Total Recordable Incident Rate (TRIR), which is the ratio ofaccidents to the number of hours worked. For further information,
see pages 30 and 54.
Since 2018, we encourage employees to work flexible schedules in order to maintain a work-life balance. This means, for example, that they work from home or take advantage of flexible hours. »

An internal survey conductedat the end of 2019 showed thata majority of employees are
motivated and proud to workat Munters

DEVELOPMENT AND CAREER PATHS
We support individual career paths for all our employees andencourage them to take on new challenges. Through performance
reviews with an immediate supervisor, personal development
plans are followed up each year. Our HR development process
is updated and continuously improved. In 2019, a process wasintroduced to set clearer career, mobility and leadership goals.
Leadership abilities are a driver of growth
Leaders who motivate, inspire and build trust are critical to driving
the business forward in an effective way. Together with employees, they set clear, individual goals that align with our strategic
goals and are regularly monitored.

20 

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Employees at Munters’head office in Kista.

Our values

HR focus and the road ahead

Sustainable value creation
JJ Passion for results
JJ There is always a better way
JJ Team spirit

To support the new organizational
structure, the HR team focused on
the following in 2019:
JJ Developed the process for
employee interviews
JJ Follow-up of the employee
survey 2018
JJ Employee Referral Program waslaunched
JJ Inventory around our local
bonus schemes
JJ Started to implement a global
and standardized exit interview
processJJ

Our values must permeate
everything we do. Together with
our Code of Conduct, they govern
our attitude towards each otherand in our relationships with ourcustomers and other stakeholders.

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In 2020, we will continue working
with the above points and also
focus more on:
JJ Strengthen the Employer Brand
and optimize current talentacquisition process to identify andattract the right people
JJ Optimize current people andleadership development process
to create and maintain a global
talent pool/pipeline and drive
employee engagement
JJ Update our career framework
and review current Rewards
practices
JJ Define a Digital HR Strategy
JJ Strengthen the culture with achange, growth and knowledgetransfer mindset
JJ Create a compliance/
workplace standards assessmentthat supports our people strategy
JJ Develop, lead and promote theorganizations’ sustainability
initiatives related to Business
Ethics, People & Society

Percentage offemale employees
2019

2018

2017

21 %

20 %

18 %

Percentage offemale executives
2019

2018

2017

25%

20 %

17 %

21

OPERATIONS | PEOPLE

Interview withPeter Gisel EkdahlPeter has worked at Munters since 2007 and been a member of Group Management
since 2011. For 12 years he has been responsible for what today is the business area
FoodTech. In recent years, he has lived with his family in Imperia, Italy, near the Muntersfactory in Chiusavecchia. Since November 2019, he is President of Munters’ largest
business area AirTech.
What attracted you to the role of President of the
AirTech business area?
AirTech is a business area with products and solutions that arestrongly positioned in the global market, but which today is mainly
a component and system supplier. Considering how the world andespecially technology are developing, I see that the core business,dehumidification, can be improved. At the same time, I envision
great opportunities for us to develop and broaden our offering tocustomers in terms of both components and solutions and services.
What is the most important thing you learned fromyour years at FoodTech that you are bringing with you
to AirTech?
FoodTech has transitioned in recent years from a component supplier to a complete system supplier. The business area has connected products and also offers Software-as-a-Service (SaaS),
which has created strong growth and a more dynamic business.
This journey, what I would call a digitization journey, is one of themost important things I bring with me to AirTech.

22 

What makes Munters a good employer?
There is an entrepreneurial spirit at Munters. We are constantly
in movement, changing shape and developing as our employees drive the business forward. It is really enjoyable to work at
Munters, which has great potential to continue to grow.
What have you focused on since you began at AirTech
and what will you prioritize going forward?
Together with my team, I have been working on creating a clear
vision, objectives and action plan for AirTech. We will now focus
on the core business and closely related areas and strengthenthem.
Becoming President of AirTech is a fantastic opportunity for me,
and it is important to challenge yourself sometimes. This can mean
taking on a new role, working in a new area or another region
and creating change. Together with the management team, I will
strengthen our business acumen and lift up our employees. Thereare fantastic opportunities at Munters.

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Satisfied employees despite achallenging year
An internal questionnaire that theemployees answered to at theend of the year shows that mostemployees have great confidence
in the company and its future, aremotivated and proud to work for
Munters.
With the Munters Full Potential
program and the ongoing closureof the Dison factory, about 500
employees have left the company
in 2019. Despite the large numberof layoffs, the employees continue
to give Munters high marks in mostareas.

In response to what they think
is unique or different with Munters
as an employer, the three mainthings mentioned were: good
employer, team spirit and positive
work environment. Employees are
particularly committed to Munterscore values, which include sustainable value creation, passion
for results, there is always a better
way and team spirit.

1,000 days without workplace accidents
In 2019, Munters’ production
facility in Israel passed its 1000th
day without a work-related
accident. This is the longest timethat a Munters production facility

has been without an accident andshows that safety is a high priority.
In fact, it is the most important
issue in Munters’ workplaces andis integrated in our culture. We

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work continuously to find betterand safer ways for our employeesto do their jobs. 

23

OPERATIONS | CUSTOMERSUnique insight from close
collaborations with ourcustomers
Since the start, Munters has worked closely with customers. Over the years, we havebuilt up a unique knowledge of the industries we supply with products and solutions.
Today, we have expertise and a deep understanding of processes in many industries,
where we can help customers to meet their climate control needs efficiently andsustainably.

Detailed knowledge of customers’ applications
and processes
The majority of Munters’ products and solutions are available
today in many countries. We are a global and at the same time
local company. Our strategy is focused on developing a deep
understanding of customers’ needs and utilizing our broad knowledge of applications, technologies and components to delivercustomized solutions.
Our sales team works closely with each customer’s productionengineers and research and development department to ensurethat our solution meets their specific criteria and application
demands and delivers high energy efficiency. The goal is tounderstand our customer’s needs and processes better than they
do themselves.
The insight we gain on customers’ needs through these collaborations is utilized cost-effectively across the entire customer base.
For example, mist elimination products and solutions are often
based on a similar technology, and new insight gained in a product group or a specific customer’s application can be introduced inother product groups or applications.
Meeting customers
In the business area AirTech, distribution is mainly through our
local sales representatives in mature markets in Europe and in
the US. An important success factor for us is our long history inthe market and the applications know-how and experience ofour marketing organization. Sales are also made to a lesser
extent through distributors. OEM components for customers thatuse Munters’ products and technology as part of their solutions
account for a portion of sales. Munters serves the OEM industry
mainly in growing markets such as direct evaporative cooling.
Sales in business area FoodTech are mainly through distributors
in local markets. Software solutions are usually sold directly tofood producers, and in some geographical markets and segments
climate control products are also sold directly to the end customer.

24 Mission-critical processes
Munters’ systems are used in many mission-critical applications
and processes where precise control of humidity, temperature andother environmental parameters are critical to production safety,
production quality and energy efficiency. At the same time, theyusually represent a small percentage of the overall investment in acustomer project, e.g., a production facility or a farm.
Services
Munters also has a growing service organization with service
centers around the world. Services are an especially large area
for AirTech and in 2019 accounted for 13 percent of net sales.
Service, upgrades and product replacements offer growth potential with good profitability. Thanks to the local presence in many
countries and our applications know-how, we maintain close
relationships with customers and can offer a high standard of service and support for our installed base of products. Together withvaluable upgrades, Munters can help to reduce energy consumption, ensure quality and environmental performance, and extend

the service life of the products.

»Our strategy is focused on
developing a deep understandingof customers’ needs

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25

OPERATIONS | INNOVATION

Leader in key
technological areas
Munters works continuously with new innovations and on improving products,
so that we can supply our customers with smarter and more efficient climate solutions.
The Group has a long history of pioneering discoveries, many patents and extensive
applications know-how. We are proud that our climate solutions are contributing to energyefficient businesses and a more sustainable world.

Mission-critical solutions
In developing the best climate solution for the customer, our goal is
to understand their needs better than they do themselves. We haveextensive knowledge of specific applications and access to unique
technology that we have often developed ourselves. Coupled with
our history of innovations, this enables us to create the most efficient solution for the customer, whether it mean a lithium battery
production plant, wind turbine or greenhouse.
Munters’ products and solutions are often used in mission-critical processes, where they create a perfect climate by precisely
controlling temperature and moisture. If the climate control does
not work, it can mean big problems for the customer. Climate
control systems often represent a large percentage of the energy
consumption for many businesses, and here we help them to more
efficiently use energy and water resources through an optimal
solution. Munters provides guaranteed climate control in ourcustomers’ processes, often with lower energy consumption andfewer emissions.
In 2019, Munters invested 3.8 percent (4.3) of net sales in
research and development
Innovation
We have a long tradition of technological advances and innovations. Munters has a leading position in our key technological areas.
In the last year, we focused on the further development of
SyCool, technologies for low dew points, extending the service life and performance of our evaporative cooling products,
and improvements to overall energy efficiency. We also began
establishing global product platforms in order to provide the samehigh-performance products and consistent execution in every
region. We stay updated on and experiment with potentiallydisruptive technologies as part of our daily work.

26 

Key areas of innovation
Close collaboration between teams from Munters and our customers increases the precision and enhances the efficiency of ourinnovation work.
Research, sales and production work closely together so that
we are better able to develop products that meet specific customer
needs. As a result, new technologies and insights can be quickly
introduced in more product groups and applications.
Our basic technologies include:
Dehumidification rotors
JJ Systems for direct evaporative cooling
JJ Heat exchangers with in direct evaporative technology
JJ Mist eliminators
JJ Controllers for monitoring the production climate
JJ Agricultural fans
JJ Air dehumidifiers
JJ Control equipment
JJ Data analysis/visualization
JJ

In addition to these basic technologies, Munters has been developing software for many years that enables our technicians andpartners to quickly configure optimal solutions.
Innovation based on customer needs
Our research and product development is steered by changing
customer needs as well as our knowledge and Munters’ position invarious areas of application. Each business area is responsible forresearch and development in their respective product areas, withtechnology centers close to customers.
We all share the Munters Product Development Model (MPDM),
a multidisciplinary model with clear control points. With this model,
the development process is based on individual creativity, disciplined innovation and direct insight into customers’ needs.

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Product launches
One of the key product launches during the year was a new,innovative control platform, AirC, which will make systems from
Munters more intuitive, more efficient and better connected – andensure that all products have the latest functionality over time.
The proprietary AirC control system helps customers to optimize
energy consumption and allows service and system updates
through remote access.
Among other product launches were a new generation of control systems for our DryCool products and new components andupdates for dehumidifiers in the MX series, to extend their service
life when electricity and control systems are replaced with thelatest technologies.

Innovation portfolio
We work with an innovation portfolio where several activities areunderway at the same time to maximize results and minimize thetime spent in research and development. The activities are:
JJ Research, where we develop new knowledge that can be used
for new innovations
JJ Technological development, where we develop new systems
that can be integrated in the Group’s products
JJ Product development, where we develop new products andclimate solutions
JJ Further development, how we maintain and update installed
products

Munters’ productdevelopment modell

Concept
development

PrestudyGO
NO GO
1. Feasibility study

The feasibility study
describes and analyzes
a new product in terms ofmarket potential, how it fits
strategically in Munters’
offering, commercial
potential, technicalrequirements, feasibility
and risks.

Design &verification

GO
NO GO

2. Concept
development

Concept development
is the beginning of the
product development project. All the technical andcommercial requirements
are translated to a productspecification. The goal is
to develop and document
a conceptual solution that
fulfills the specification.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 

GO
NO GO

3. Design &verification

Preproduction

The goal of the designand verification stage isto optimize the productdesign in order to meetthe specification andto create the complete
documentation needed to
manufacture the product.

Project
closureGO

NO GO
4. Test production

The goal of the test
production stage is to
finalize installation ofsourced components,
finalize the production
methods and validate theprocesses. Manuals andlaunch plans are prepared
simultaneously.

GO
NO GO
5. Conclusion of the
project

PThe project officially concludes when the project
team has completed theagreed activities and finalized the project report. The
commercial follow-up isdone outside the productdevelopment project.

27

OPERATIONS | MARKET

We are a global company
with a strong local presence
Munters is benefitting from a number of global factors that are creating growth
opportunities in our markets and segments. One general trend is the growing demand forsustainable products and improved energy efficiency around the world.
Market trends
Munters is a leading supplier of climate control solutions in its mostimportant markets. The need for production efficiency and highquality requirements are strong reasons for the growing demand.
Other factors that are spurring the market’s growth are population
growth, GDP growth, industrialization and rising standards ofliving, which together are driving growth in Munters’ markets.
The market is undergoing consolidation with a few global
actors. Growth has historically been stable in most customer
segments, and the market is expected to continue to grow. Munters
is strongly focused on energy-efficient climate systems that can
reduce electricity and water consumption and contribute to sustainable production environments.
With strong technology and solid applications expertise,
Munters is well positioned to help industrial and commercial
customers with turnkey climate- and energy-related solutions.
Continuous development of new applications and competencies
provides good opportunities for growth.
Local presence
The most important countries with the largest share of Munters’
sales are the US, China and Germany.
The company has 18 production facilities and sales and manufacturing in over 30 countries. In September 2019, a decision wasmade to close the production facility in Dison, Belgium. During
2019 the number of production units where 18 but will consequently drop in 2020. In addition, Munters four assembly plants
in four countries. Staying close to local customers reduces leadtimes and shortens logistics flows. Munters also has sales offices ina number of countries such as Australia. The head office is basedin Kista, just outside Stockholm, where the Nordic sales office isalso based.

Acquisitions and partnerships
An important part of the growth strategy is to acquire local
companies that strengthen Munters’ local presence or offering. In
recent years, Munters has acquired several companies; see
pages 12-13.
Partnerships with universities, for example, are important to
Munters’ strategy to strengthen its local presence and drive innovation forward.

»Climate systems are mission-criticalto the production of high-quality
lithium-ion batteries

Offering
Munters works continuously to evaluate and improve its offering. This means that the product portfolio changes depending
on research and development and the service offering. Today,
Munters has several products and solutions that are adapted to
local markets and customers. We see that future products andsolutions will be more uniform, driven by a focus on modularization and by the trends toward digitization and globalization.

28 

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Net sales by region

Net sales, largest countries

AirTech’s most importantsegments

FoodTech’s most importantsegments

SEKm
3,000
2,500
2,000
1,500
1,000
Americas 43 %EMEA 36 %APAC 21 %

500
0

USA

China

Germany

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Industry 41 %Service 17 %Data Centers 13 %Components 15 %Mist Elimination 10 %Commercial 10 %Poultry 43 %Swine 31 %Eggs 14 %Greenhouses 5 %Dairy 4 %Other 3 %29

OPERATIONS | EXCELLENCE IN EVERYTHING WE DO

Continuous improvementsin every area
Munters aspires to efficiency and quality in everything we do. Our Groupwide processes and work follow lean principles. This enables us to satisfy customers in termsof safety, quality, delivery performance, cost efficiency and sustainability at every step.
Our goal is to build a world-class production and supply chain.
We routinely evaluate our supplier chain to ensure that
we are staying close to customers. This facilitates the development,
design and sales process, while simplifying adaptations andservice and reducing lead times. At the same time, it means lower
logistics costs and less impact on the environment and climate.
In 2019, we had production at 18 plants and four facilities for
final assembly and customization around the world. In general,
our facilities in the US and Europe specialize in products for one of
Munters’ business areas, while facilities in other parts of the world
manufacture and assemble products for more than one businessarea. In 2019, a decision was made to close the production facility in Dison, Belgium.
The environment, health and safety are priorities. To this end,
we use a systematic risk evaluation in our production units to
reduce environmental impacts and increase the focus on healthand safety. Our production structure is continuously adjusted
based on changing market conditions.
The majority of Munters’ plants are certified under the ISO
9001 system and five facilities are also certified under the ISO
14001 environmental management system.
Continuous improvements
At Munters, we continuously improve how we work in every area.
The Munters Production System (MPS), which is based on leanprinciples, is being applied in our production processes. The goalis that all units will apply MPS by the end of 2021.
In 2019, Munters invested a total of about SEK 60 million (100)to improve production efficiency.
Sustainability in production
We work with a systematic risk evaluation of our production units
to preventively reduce environmental impacts while increasing the
focus on health and safety. Other areas covered by the risk evaluation include fire safety, waste and chemical management, and an
overhaul of electrical installations. All units are assessed on a rolling
three-year schedule. In 2019, risk evaluations were conducted at nine
manufacturing plants.

number of workplace accidents by being proactive. In 2019, theTotal Recordable Incident Rate (TRIR) (calculated as the number ofaccidents where the employee sought medical treatment multipliedby 200,000 and divided by the number of hours worked) was 2.9,
down from 3.4 in 2018. Safety work remains a high priority and
we are working hard to reduce the number of accidents. All accidents are immediately reported to Group Management and eachindividual case is followed up by the head of Global Operations,who ensures that the causes are analyzed and measures are taken
locally.
A STRONG SUPPLY CHAIN
Our supplier network is valuable to us and is built on mutual trust
and many years of partnership. Munters sources goods and services from around 2,000 suppliers in 29 countries. A global sourcing organization coordinates procurement in order to increase
standardization and consolidate sourcing volumes to fewer suppliers. At the same time, sourcing is becoming more regional, a trend
driven by increased protectionism and new trade barriers.
Direct material represents about two thirds of a typical component manufactured by Munters. We place strict requirements on
quality, efficiency and sustainability. Together with our suppliers,
we find new technical solutions that reduce costs. A large partof the sourcing volume is negotiated annually, but we are trying
to increase the proportion of multi-year agreements to securedeliveries, shorten lead times, and ensure quality and stable pricelevels.
The 25 largest direct material suppliers by volume represented
29 per cent of the total sourcing volume in 2019. The goal set in2018 for the period 2019–2021 is to cut the number of directmaterial suppliers in half. In 2019, the number of suppliers
decreased by 15 percent (8).

Workplace accidents
Munters has a Vision Zero plan concerning serious workplace
accidents, and reducing the number of accidents is one of our top
priorities. Systematic health and safety work is part of the Munters
MPS system, which includes incident reporting, continuous inspections and risk mitigation. The goal is to continuously reduce the30

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

Trade barriers
Trade conflicts, above all between the US and China, continued
in 2019, and tariffs on steel, aluminum and other raw materials
increased production costs in both the US and China.
To ensure quick and secure deliveries, Munters has several main
suppliers in each product group, and a detailed plan is in placefor each individual plant.
RESPONSIBLE SOURCING
All suppliers are expected to comply with Munters’ ethicalguidelines. In 2019, 92 percent (66) of our suppliers, representing about 80 percent (80) of our directly sourced material, hadsigned the revised Code of Conduct. The Code has also beensigned by the Group’s IT and shipping suppliers. The goal in 2020is that all suppliers will have signed the Group’s Code of Conduct.
Compliance with the Code of Conduct is monitored throughvisits and audits by Munters or a third party. In 2019, audits
were conducted in every region. If the supplier does not meet therequirements, an action plan is drawn up. If the schedule is notfollowed, the relationship will be terminated.
SOURCED RAW MATERIALS
Direct material represents about two thirds of the total cost of a
product – and raw materials accounted for 30 percent of that.
Copper, the most important raw material, is part of electronic
components and fan motors. Munters has tools that the Group uses
to minimize the impact of price fluctuations.
Energy consumption in production processes
The climate impact from our manufacturing facilities mainly comesfrom heating for heating, ventilation, cooling and production
processes. We are working actively to improve efficiency in our
production processes through increased availability and withnew, energy efficient production equipment, as well as by utilizing
waste energy and installing LED lighting and sensors. We also
looking at ways to increase renewable energy sources. Moremanufacturing plants switched electricity suppliers in 2019 andthree now buy only renewable electricity.
The goal is to continuously reduce energy consumption andmake the plants and processes more efficient. We monitor energy
efficiency by comparing electricity consumption to production
value. In 2019, the ratio was 1.05 percent (1.11). Renewableenergy accounted for 40 percent (31) of the electricity used by our
production facilities.

»

The Munters Production System(MPS) is based on Lean principles. The goal is that all units will
apply MPS by the end of 2021

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 

Employees at Munters’head office in Kista.

Waste from our production facilities
We are working to continuously reduce waste from our manufacturing plants and increase recycling rates. A linchpin in this work
is continuous quality improvement, which reduces spillage andsaves on costs and the environment.
In 2019, the recycling rate was 53 percent (60). The goal is to
reduce the percentage of waste that cannot be reused or recycled.
Water consumption
Lower water consumption and water treatment in our production
processes are an important contribution to reducing environmental impacts. We separate both chemicals and particles in thewastewater from our plants. Our goal is to gradually reduce water
consumption in the plants and processes.
SUSTAINABLE TRANSPORTATION ALL THE WAY
In 2019, we continued our efforts to find cost-efficient and sustainable logistics solutions that shorten lead times, while reducing
climate and environmental impacts from transports throughout theentire chain – from suppliers to our facilities, distribution centersand out to the customer. We are just beginning this work, where
we see great opportunities for improvement. A stable production
flow provides the possibility of coordinating transports, and abetter process and control reduce the need for shipments by air.
We actively select suppliers that offer sustainable transport
solutions and switch from road and air shipments to ships andtrains where possible. 

31

OPERATIONS | EXCELLENCE IN EVERYTHING WE DO

Successful improvements in
the Monterrey plant
The Munters manufacturing
plant in Monterrey, Mexico produces evaporative cooling pads
under the Glasdek brand name,which are mainly exported to the
US market. The production facility
had previously had problems withlong lead times, products that did
not meet customers’ expectations,weak financial results and highemployee turnover. A new
management team and motivated employees have, throughsystematic improvements, createdefficiency and stability in the plant.
The previous production problems
have now been alleviated anddeliveries of evaporative coolingpads are working well.
The improvement work
incorporated the Munters
Production System (MPS), which islargely based on lean principles.

The aim is to improve safety,
quality, delivery performance andefficiency. The key to the successful
turnaround was management’s
communication with employees tobuild awareness of the problems
that the plant had. This createdthe motivation to change, anda winning culture began to takehold.
The employees embraced thechallenge to do things the right
way and trust management’s new
initiatives. One of the changes atthe plant was to base decisions
on facts, not on old routines andfeelings. Management provided
the employees operating data,
information and guidance. Muchof the time was spent understanding the fundamental reasonsfor the problems, so that lastingproduction changes could bemade and to avoid a regression to
old habits.
Every morning, there is adialogue where employees canreview their production results
and also receive support frommanagement. A so-called Gemba
Walk based on lean principles
has been implemented to bring
management closer to employees
and get a better overview of thework.
On Fridays, a meeting is held
where the key performanceindicators (KPIs) are announced
and the person responsible foreach KPI can receive support fromthe whole team if needed. As aresult, performance indicators
have improved significantly. For
example, employee turnover has
dropped dramatically, from 15.5
percent in 2016 to 0.9 percent in2019. The work has also resulted
in a major reduction in energy
consumption and waste despite ahigher production volume.
As a sustainability initiative,
the plant has also switched from
distribution by trucks to greateruse of rail transports. In addition
to increasing quality and delivery
performance in our Monterey
plant, the successful improvements
have substantially reduced thetotal carbon footprint.

Employee turnover
Percent

20
15
10
5
0

2016

2017

2018

2019

Electricity consumption
MW
12

8

4

Morning meeting with
employees to review the
production results.

0

2017

2018

2019

Monterrey, Mexiko32 

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

Interconnected processes
and information flows
increase efficiency
Munters’ strategy forincreased efficiency in theprocesses includes working with“Best practices” where we areinspired by the prime examples ineach individual area, and workin accordance with leading Leanprinciples throughout the value
chain. In order to achieve efficiency and quality in everything
we do, it is necessary to ensurethat our processes - from “order-to-cash”, are linked throughout thewhole value chain.
In 2019, an analysis was madeof the internal processes, both
functional and operational. The
conclusion is that we need todevelop and strengthen our ways
of working to build a world-classvalue-chain and processes. A
project has been initiated thatis run in accordance with Lean
principles and is based on “Bestpractices” to increase efficiency.
Thereby we can ensure scalability
in the business and that increased
investments will generate
profitable cash-generating growthin the future.

Examples of processes
included in the project:
JJ Research and development
JJ Product management
JJ Sales-to-order
JJ Sourcing
JJ Order-to-delivery
JJ Delivery-to-reorder
JJ Finance
JJ Human resources

BRIEF INTERVIEW:
ANNETTE KUMLIEN, GROUP VICEPRESIDENT AND CFO
Munters is a global company
with a strong local presence inmany markets and through our
performance management weensure that the entire organizationis on the way towards the same
objectives. We work continuously
and uniformly with government
and follow-up of the business. To
achieve efficiency and quality
in everything we do, we haveto work with every step in ourvalue chain from orderto-cash.
Our ambition is to continuously
improve how we go to market andwork with our customers, at thesame time that our products andsolutions have to be optimized
and meet customers’ expectations.
In 2020, we will focus on among
other things to drive projects tostrengthen our processes, skills

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 

development, innovation anda continued focus on cash flow
including working capital. The aimof all our projects is to reach themedium-term targets of growth,a stronger balance sheet, an
improved EBITA margin, and anunderstanding of which actions
will get us there.

33

OFFERING | BUSINESS AREAS

Our business
areas

AirTech, share of theGroup’s sales

72 %

34 

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AirTech is a global leader in energy-efficient air treatment
for industrial and commercial applications. AirTech offers climate
solutions for mission-critical processes that require exact control
of moisture and temperature, with a focus on energy efficiency
and sustainable climate systems. Our climate systems also provide
better indoor air quality and comfort, as well as increased production capacity.

FoodTech is one of the world’s leading suppliers of innovative and energy-efficient climate control systems for livestock
farming and greenhouses, as well as software for controlling andoptimizing the entire food production value chain. FoodTech’s
solutions increase productivity while enabling sustainable foodproduction where strict requirements are placed on quality, animal
health and food safety.

FoodTech, share of
the Group’s sales

28 %M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 35

OFFERING | AIRTECH

Climate solutions formission-critical processes
AirTech is a global leader in energy-efficient air treatment for industrial
and commercial applications. AirTech offers climate solutions for mission-criticalprocesses that require exact control of moisture and temperature, with a focus onenergy efficiency and sustainable climate systems. Our climate systems also provide betterindoor air quality and comfort, as well as increased production capacity.
Important events 2019
JJ In January 2019, the former business area AirTreatmentchanged its name to AirTech. The former business areas Data
Centers and Mist Elimination were integrated in AirTech
JJ Peter Gisel-Ekdahl was appointed President of AirTech as ofNovember 1, 2019
JJ A new, innovative control platform, AirC, was launched.
JJ The company decided to close the production facility in Dison,
BelgiumJJ Decision to retain Mist Elimination and Data Centers US thanks
to good opportunities for value creation
Order intake
Order intake for 2019 increased by 14 percent and by 8 percent
organically, mainly driven by a strong increase in the order intake
for climate solutions in Data Center US, Mist Elimination and anincrease in Services. Order intake was weaker in the Supermarket
segment in the US, and we also saw lower demand from thelithium battery industry in China. The EMEA region reported
stronger orders, driven by positive development in Mist Eliminationand Services.

quality. Demand for advanced air treatment is also supported byregulations and industry standards, which are leading to more
stringent environmental requirements.
The global market for energy-efficient air treatment is characterized by a large number of firms, many of them local. A consolidation
has been underway for several years. Growth has historically beenstable and the market is expected to continue to grow.

»Munters enables about half of
the world’s battery production forelectric cars

Net sales
Net sales for the year increased, driven by a strong sales increasein Data Centers US, Mist Elimination and good growth in Services.
The industrial and commercial segments posted net sales forthe full-year in line with 2018. Component deliveries to OEMs
decreased due to lower demand from the lithium battery industry
in China.
Operating profit
Operating profit was SEKm 565 (503). The improvement was a
result of higher net sales and a higher utilization rate, together
with a changed product mix and lower indirect costs from the FPP
program.
Trends and drivers
The market is driven by global factors such as population and
GDP growth, industrialization, digitization and an increased standard of living. Global data traffic is increasing rapidly and society
is becoming more dependent on IT. These factors are leading togreater pressure on our environment and a strong focus on energy
efficiency, as well as stricter requirements on sustainability and36

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Custom

Customers
With its strong technology and unique applications know-how,Munters is well positioned to help new and existing customers
with complete climate solutions. Continuous dialogue with ourcustomers and development of new applications and skills give usa strong base for further growth.
Munters’ priority customer segments within AirTech are data
centers, the food industry, lithium-ion battery manufacturers, themarine segment, the power and processing industries, and supermarkets and shopping centers.
Approximately 11 percent of AirTech’s sales relate to components sold to distributors or OEM customers that use Muntersproducts and technologies as part of their solutions. Munterstargets the OEM industry in markets such as lithium-ion battery
manufacturing, pollution control and direct evaporative cooling.

serPeopleMark n a d

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Ma

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Peoplerk n a d

Kundf
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us

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Markets

Innovation
At AirTech, it is important that our application experts team up withthe customers’ process owners to find an optimal solution. In thisway, Munters can offer an optimized and innovative solution thatfills a number of different climate control functions. We combine
various technologies and components that we have developed
and customize solutions that are optimized based on the customer’s specifications and needs.
We are seeing increased interest in real-time data collection
and climate data analysis and are therefore developing connected digital solutions that provide performance analysis andremote monitoring for our product portfolio. In addition, advanced
IoT (Internet of Things) solutions are contributing to higher productivity and energy efficiency. In 2019, we further strengthened our
product portfolio through the launch of AirC (see also page 40).
MarketMunters offers climate solutions for mission-critical processes
that require exact control of moisture and temperature to several
different industries. Our focus on efficient solutions that can reducethe customer’s electricity consumption and hazardous emissions,and that contribute to sustainable production environments, isin demand from the electronics industry – e.g., companies that
produce lithium-ion batteries, displays, etc. – retailers, schools,
offices, restaurants, the pharmaceutical industry, data centers,
the power industry, the shipbuilding and marine industry, and thedefense industry. AirTech has 13 production facilities in 13 countries and assembly plants in eight countries. In 2019, a decision

Net sales andOperating profit

Sub-segments

SEKm

Net sales,
SEK million

5,159
Female executives

26 %Operating profit,
SEK million

565
Number of employees,
Munters AirTech

2,184

Order intake,rolling 12 months

SEKm

SEKm

SEKm

6,000

800

1,500

6,000

4,500

600

1,200
4,000

900

3,000

400

1,500

200

600

Americas 47%
EMEA 33  %APAC 20 %0

2018

Net sales
Operating profit

2019

0

2,000

300

Industri 41 %Service 17%
Data Center 13 %Komponenter 11 %Mist Elimination 10 %Kommersiella 8 %

0

Q4 Q1
2018

Q2

Q3

Q4
2019

0

Order intake, per quarter
Order intake, 12 months rolling

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 37

OFFERING | AIRTECH

was made to close the production facility in Dison, Belgium. Thismeans that as of 2020 there is no production of customized products and systems for Data Center customers in Europe.
The total number of employees at year-and was 2,184, themajority of whom are based in the US, China and Sweden.
Extending the service life of our products
Munters has an extensive global service network with its own local
service centers around the world. Thanks to this local presence, we
maintain close relationships with our customers and can quickly
offer service for the installed base.
Our service and support offering is a valuable productupgrade. They lead to lower energy consumption and consistentquality and environmental performance, while extending theservice life of our products. Our service offering consists of eightcategories: installation, commissioning and startup, performance
testing and inspections, repairs and reconditioning, upgrades andretrofits, spare parts, training, and Munters Flex Rental.
Services accounted for a total of 13 percent of Munters’ total
net sales in 2019. We have an ambition to grow Services share of
net sales going forward.

38

Data Centers and Mist Elimination are part of AirTech
since 2019
Since January 1, 2019, the former business areas Data Centers
and Mist Elimination are part of AirTech.
Data Centers offers climate systems for large and medium-sizeddata centers where capacity, reliability and availability are
mission-critical. The range of products and solutions comprises anumber of key technologies, including Munters’ EPX Polymer heatexchanger, GlasDek evaporative media and dehumidification
through sorption rotors.
Mist Elimination’s product range consists of a number of vanetype mist eliminators, which are mainly used in emission scrubbing
applications and to protect equipment downstream from the air
intake. Munters also offers solutions for mist elimination as well asmechanical separation and mass transfer used in refineries andchemical factories.
An evaluation of various strategic alternatives for Data Centers
and Mist Elimination in 2019 resulted in a decision to retain thebusinesses within Munters. Both businesses made significant
improvements during the year. In view of our strategic direction,
we see great potential to create further value going forward, andboth businesses fit well in Munters, since they serve markets withgood growth potential, driven by digitization and high demandfor sustainable solutions.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

Sustainability throughrenovation and upgrade
The Belgian company Niko
NV is an expert in beautiful andwell-designed, intuitive and userfriendly controls for buildings. It
supplies more than 5,000 different
products and solutions for switches
and sockets, door communication
systems, lighting control and home
automation systems. The company
has offices in Europe and an
extensive network of agents anddistributors. Niko is committed
to controlling and minimizing
the environmental impact of its
manufacturing facilities, andmeasures are taken to reduceenergy consumption and theclimate impact.
In the production facility in
Belgium, Munters’ MDS1500
dehumidifiers provide dry air to
optimize the drying process forgalvanized tiles after they are
removed from a zinc bath. The
MDS unit, which has been in
operation since the 1990s, has anairflow of 15,000 m³ per hour andoperates continuously, 12 hours aday, five days a week.
During an annual service visitby Munters Global Services in
Belgium, it was concluded that arenovation and upgrade of the
MDS unit would lead to improved
dehumidification capacity andsignificant energy savings. Since
the capacity of the rotor had
declined significantly after many
years of daily use, the drying time
for the galvanized tiles was nolonger optimal. By replacing therotor and restoring the originalunit’s performance, the drying time
could be shortened substantially.
Niko NV agreed with theproposal and the renovation
and upgrades led to significantly
shorter drying times, more precise
control and energy savings that
produced a return on investment(ROI) in just 20 months.

The MDS dehumidifier was also
equipped with a coil to preheat
the airflow used for regenerationof the rotor. Since Niko NV has
access to 50°C hot water fromcooling compressors, which
had previously been treated aswastewater, it was possible tobegin using this hot water in theregeneration cycle.
The renovation also included
a complete update of key components. Lastly, Munters updated
the dehumidifier’s control system
to a new Climatix control, whichis integrated with Niko’s building
management system. The upgrade
provides a better working control
system that can handle the extra
energy-saving components, suchas flushing and the pre-heater.
The renovated MDS unit isexpected to deliver a perfectclimate in the production facility
for many years to come.

»Niko is committed to controllingand minimizing the environmental
impact of its manufacturing facilities

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 39

AirC improves thecustomer experienceand increases functionality
In 2019, Munters launched
a new, innovative control platform
named AirC. The platform will
make systems from Munters moreintuitive and efficient and better
connected – and ensure thatall products will have the latest
functionality over time.
The new AirC control system
will improve how our equipment
works. Munters’ long experienceand technological know-how havebeen built into this customized,
proprietary control system, whichhelps customers to optimize energy
consumption and allows service
and system updates throughremote access.
The smart to digital display
is user-friendly, which gives
operators access to everythingfrom system status to moisturecontrols. The full-color display canbe adapted to show the data thatare most important to the user andimprove the customer experience.
Behind the display, thehardware has become much
more advanced. Thanks to thesophisticated design, more internalsensors can be connected to
AirC, further increasing the levelof available information andgiving customers access to new
functionality – even though thephysical product is unchanged.
The software in AirC can also be
used to fully automate systems andensure that they operate at optimal
efficiency round the clock. Thismeans that companies can spend
less time on maintenance and saveenergy as well. »

The AirC control system makes
systems from Munters moreintuitive and efficient and better
connected
40

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Energy-efficientbattery production
Highly efficient lithium-ion
battery manufacturer
Burstcap Technology Co. Ltd isa high-tech company foundedin 2018 and located in Ningbo,
China, which specializes in the
research and development,
production and sales of highly
efficient lithium-ion batteries,
battery cells and energy storage
systems. The company has its own
battery platform and an annual
production capacity of 35 million
highly efficient batteries.
Stable and controlled humidity
is necessary to produce lithium-ion
batteries and affects the batteries’
quality and performance.
Burstcap’s production takes place
in a specially designed facility witha dew point below -40°C andintake air below -60°C. Energy
consumption and production costs
can be high, since electricity is the
only energy source permitted in

the factory.
Burstcap selected Munters’
dehumidification system withrotors, which is based on 60 yearsof technological innovation andextensive global application experience, and is specially designed
for manufacturing conditions that
require low temperature and very
humidity. Munters’ dehumidifiers
can handle very low dew points,
at the same time that they consume
up to 40 percent less energy
compared with other technology.
With Munters’ climate solution,
Burstcap can precisely control
the humidity level in the dry
production area as needed, andaccording to operating data thecompany has cut its energy costsby more than 30 percent per year.
”We listened carefully to
Munters’ presentation of its products’ energy-saving technology
and ability to maintain a low dew

point, which are very important tous, since we have high demands
when it comes to humidity control
and low energy consumption.
From planning in the factory,
project scheduling, simulation
experiments and eventually customer training, Munters has shown
great professionalism, and we arevery pleased with the operating
inspection,” says production
manager Dr. Yang Bin.
The two sets of Muntersdehumidifiers have maintained a
dewpoint in the dry production
facility below -40°C with stable
operations for more than six
months without a stoppage, as
the customer required. Munters’
product quality, reliability andperformance are critical to
Burstcap’s battery cell researchand production processes.

»With Munters’ climate solution,
Burstcap can cut its energy costs bymore than 30 percent per year

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 41

OFFERING | FOODTECH

Innovative climate systems
for livestock farming andgreenhouses
FoodTech is one of the world’s leading suppliers of innovative and energyefficient climate control systems for livestock farming and greenhouses, as well assoftware for controlling and optimizing the entire food production value chain.
FoodTech’s solutions increase productivity while enabling sustainable food production
where strict requirements are placed on quality, animal health and food safety.
Important events 2019
JJ In January 2019, the former business area AgHort changed its
name to FoodTech
JJ Market conditions were uncertain during the year due toAfrican swine fever and the effects of trade tariffs
JJ Positive development for our software solutions and digitaloffering within Software as a Service (SaaS), which represents
an exciting growth area

Increased traceability of food is a rapidly growing need thatis leading to increased demand for data collection and analysis
throughout the food chain, including feed production, stalls, production facilities and transportation all the way to the store. Together
with increased demands for productivity, this has led to rapid development of the software used by food producers to plan, control andoptimize the entire production chain from feed to finished product.

Order intake
Order intake decreased by -1 percent in 2019 and by -6 percent
organically. This was mainly driven by weaker demand from theswine segment in China and the US as a consequence of overcapacity in the US swine market as well as uncertainties related to
new trade tariffs and ASF. Order intake increased in Europe andthe Middle East, partly due to increased sales of controllers andstrong demand in the CIS countries.

»

Net sales
Net sales for the full-year increased by 1 percent and decreasedby -5 percent organically with a decrease in net sales in China andthe US after a weak order intake in the first nine months of 2019. Net
sales were slightly more positive than the order intake for the year,
since part of the order intake growth in 2018 included Software asa Service (SaaS) contracts recognized over several years.

The food consumed in one ofevery seven meals around theworld is produced in facilities withMunters’ climate control

Operating profit
Operating profit was SEKm 226 (244). A decrease in indirect costs
led to an improved gross margin and operational improvements.
Investments in the digital offering (SaaS) and weaker sales in thehigh-margin US market had a negative effect on operating profit.
Trends and drivers
Demand within FoodTech’s various customer segments is partly
driven by population and GDP growth and partly by increased
consumption of animal and plant based protein. Growth in thecustomer segments is contributing to higher demand for advanced
climate control systems that ensure increased energy efficiency andlower emissions. It is also being driven by demand for less use ofantibiotics in livestock farming from both regulators and consumers.
42 

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Custom

Customers
FoodTech offers complete systems for controlling the environment
in stalls, including equipment for ventilation, cooling and heating,as well as various types of control systems and software. Our
offering is built on long experience and innovative products thatare reliable and sustainable.
Efficient climate control is one of the most important factors forprofitable, sustainable production. Both international companies
and independent growers are among our customers. Thanks totechnology from the subsidiary MTech Systems, FoodTech has
many of the world’s largest food producers in the broiler segment
as customers, since they use our software for planning and monitoring their operations.
Sales are primarily through distributors in local markets.
Software solutions are most often sold directly to food producers.
In some geographical markets and segments, climate control
products are also sold directly to the end customer.

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FoodTech offers equipment for ventilation, cooling and heating,as well as the various types of control systems. The product portfolio also includes software. To stay on the forefront of productdevelopment, we collaborate with and customers and resellers.
Through these collaborations, we can optimize our productdevelopment process and customize units with regard to moisture
content, temperatures, emissions and energy consumption.
We are seeing great interest in real-time data collection andanalysis from our customers. Looking ahead, we see more opportunities to improve energy efficiency by optimizing these systems.
Digitized processes are, and will remain, an important factor to
optimize production, increase integration between various actors,
and strengthen the food production value chain.
Munters is currently a world leader in the software used by foodproducers to plan, control and optimize their entire production
chain from feed to finished product. There is great interest andpotential for these internet-based solutions, but competition is stiffand requires continued investments and improvements.

Net sales andOperating profit

Sub-segments

SEKm

2,500

Female executives

21 %Operating profit,
SEK million

226
Number of employees,
Munters FoodTech

833

Order intake,rolling 12 months
SEKm

SEKm

300

600

6,000

500
400

200

1,500

4,000

300

1,000

200

100

2,000

100

500
0

2,032

SEKm

2,000

Americas 31 %EMEA 46 %APAC 24 %Net sales,
SEK million

2018

Net sales
Operating profit

2019

0

0

Poultry 41 %Swine 27%
Eggs 16 %MTech 6 %Greenhouses 5 %Dairy 3 %

Q4 Q1
2018

Q2

Q3

Q4
2019

0

Order intake, per quarter
Order intake, rolling 12 months

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019  4 3

ERBJUDANDE | FOODTECH

Kundf
ok
us

n
atio
ov
nn

I

M a r k ets

MarketFoodTech is one of the world’s leading suppliers of advanced
climate control for various agricultural segments, with a strong
position in the layer and broiler markets in the US and Europe.
FoodTech is also one of the leaders in the swine farming market,
with a strong position in the US and growing sales in China. In
2019, China and other parts of the world suffered from the airborne African swine fever, which led to a dramatic drop in swine
production. The Chinese market is shifting from smaller farms
without climate control equipment to larger farms with advanced
technology. FoodTech is also active in the dairy and greenhousesegments.
FoodTech has two production facilities in two countries andassembly plants in two countries. The total number of employees
at year-and was 833, the majority of whom are based in Italy, theUS and China. 

From farm to table
In early 2017, Munters acquireda majority of the shares in thecompany MTech Systems, basedin Atlanta, in the US. Through theacquisition, Munters strengthened
its position in climate control for
livestock farming by integrating
data analysis expertise with its»

high-tech control systems. For over
30 years, MTech has developed
expertise in innovative software
through the use of data and analysis. By combining high-tech control
systems with advanced tools fordata collection and analysis,
Munters has in recent years helped

Munters is strongly engaged inensuring that people get foodon the table by controlling theclimate in facilities aroundthe world

customers to optimize the entire
value chain in poultry and swine
production.
Munters is strongly engaged inensuring that people get food on
the table by controlling the climate
in facilities around the world.
Munters’ combined climate systems

Cooling

Environmental

ClimateControllers

Heating

Air
Circulators

Light Filter

Inlet
Air Entry

44

and software used at farms and inplants for planning and optimizing
make it easier for poultry andswine producers to connect every
part of the value chain.

Outlet Air
Extraction

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Gruppo Padana, a leading producerof plants and cuttings
Gruppo Padana was founded
in 1988 through the acquisitionof a company with greenhouses
and since then has never stopped
growing its organization and sales.
Today, Gruppo Padana is one of
the ten largest companies in Europe
in seedlings and cuttings, with anassortment of over 2,500 items.
Headquartered in Paese(Treviso), in northeastern Italy, thecompany had around 250,000 m²
greenhouses and around 30,000
m² accessory agricultural facilities
as of 2016.
A major renovation wasrecently completed to upgrade
the headquarters and facilities.
This included the construction of a
new complex for logistics, services
and offices, on an overall area of
about 16,000 m².
The climate where Gruppo
Padana is located is subcontinental, with warm summers and cold

winters. Precipitation ranges frommedium to high. The biggest challenge the company faces is thateach greenhouse has “individual”
rooms with specific needs in termsof temperature, humidity, lighting
and ventilation regardless of theoutdoor climate.
Gruppo Padana selected
Munters for its expertise, reliability
and competence to understand anddeliver the various climates it needs.
Munters has delivered climate
solutions and lighting systems forthe large greenhouses, as well as
for logistics and office space.
The climate solution has consistedof among other things fans andevaporation cooling pads withvarious types of cooling systems.
Munters has also combined lightcovers with cooling systems toachieve an optimal climate for plantsthat need shade regardless of thelighting conditions outdoors.

In the office and administrative
areas, the goal has been to
make sure that climate conditions
are compatible with the plants’growing needs, but also to create
a good environment for theemployees. The solution was a
WDP water distribution systemwith CELdek 7090 evaporative
cooling pads and a ventilationwall to generate a cold storageof airflow at higher heights
in the facilities. This creates a
climate where employees are notbothered by the high, cold air
and at the same time creates theright environment for the plants
to thrive. An overarching goal of
the project has been to create aclimate solution that is both costand energy efficient.

»Every greenhouse has specificneeds in terms of temperature,humidity, lighting and ventilation

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SUSTAINABILITY REPORT

Sustainability report 2019

Sustainability is a broad concept that comprises many different elements. For Munters,
it means that everything we do has to be sustainable for all our stakeholders and theenvironment. Our medium-term financial targets are important to create room for investmentsin the future. As we work toward these targets, we take various decisions and act in the best
way to achieve our ambitions. These ambitions contain priorities on resource efficiency,
responsible business practices and people & society. These three parts today constitute theframework for Munters’ sustainability agenda. The following pages describe the three areas indetail, the opportunities and challenges we see, activities conducted during the year and ourplans going forward.
Munters is covered by the requirements of the Annual Accounts Act for sustainability
reporting. This report is an integral part of the Annual Report, see pages 46-55; Risks andrisk management, pages 56-59; and diversity, page 67. These pages also constitute our
Communication on Progress under the UN Global Compact.
With this Sustainability Report, we want to create transparency around our priorities, activities,
challenges and goals in the field of sustainability. The report covers the operations of the entire
Group.

46

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RESOURCE EFFICIENCYPAGE 50RESPONSIBLE BUSINESSPRACTICES
PAGE 52PEOPLE & SOCIETY
PAGE 54

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SUSTAINABILITY REPORT

Sustainability affects every
strategic priority as Munters
goes forward
Sustainability is one of the most important drivers for Munters’ strategy today
and in the future. In 2019, the company conducted a strategic analysis of its sustainability
work. This included a review of all priority areas and their goals. The management of
Munters is firmly convinced that more ambitious goals must be set for the sustainability work
going forward. In 2020, intensive work will be done to lay the foundation for this.
To ensure that Munters sets the right strategic priorities interms of sustainability, an ongoing dialogue is maintained withvarious stakeholders. In addition, we monitor global trends inlight of our strategic direction. Sustainability is fully integrated
in Munters’ operations. For us, sustainability means conducting
our business sustainably in every way, i.e., we have to create
profitable growth, generate value for all our stakeholders andcontribute to a better world. In the fall of 2019, management
conducted a strategic analysis of where Munters stands at present
and which strategic and financial targets we want to reach in the
short and long term. This resulted in a decision to prioritize sustainability issues to a greater extent than before and to set more, andmore ambitious, goals. In 2020, the analysis work will continue toensure a solid base from which Munters can set ambitious goals
for its continued sustainability efforts.
Organization and governance
Munters’ sustainability agenda is part of the company’s strategy.
The President and CEO bears ultimate responsibility for integrating the sustainability agenda in the strategy and for meeting thecompany’s various goals. The management team is responsible
for proposing sustainability priorities, coordinating and planningGroup-wide sustainability efforts, monitoring established goals
and regularly communicating results and outcomes to the Board of
Directors and affected parts of the organization. For each of theprioritized sustainability areas, an individual is assigned responsibility for the work in their area and for reporting the goals andresults.
The Group’s basic approach to sustainability issues is describedin a number of policies and governing documents. The two mostimportant documents are the Code of Conduct and the special
Code of Conduct for suppliers. In addition, the work is governedby several different documents, e.g., HR policy, environmental
policy, occupational health & safety policy and the rules on
business travel.

48

The Board of Directors adopts Munters’ Code of Conduct
and sustainability report
Sustainability risks are surveyed and evaluated as part of theyearly risk assessment process. For more information on the material risks in the area of sustainability and how we manage them,see pages 56–59.
Global Compact and Agenda 2030
Munters has committed since 2018 to report in accordance withthe ten principles of the UN Global Compact’s on human rights,
labor, the environment and anti-corruption. The Code of Conduct
and the special Code of Conduct for suppliers are based on theseten principles and describe Munters’ view on issues such as theenvironment, social responsibility, business ethics and humanrights. Compliance with these policies is monitored each year
and reported to the Board of Directors. In addition to the Global
Compact, Munters has chosen to embrace the Carbon Disclosure
Project (CDP) and reported to it in 2019.
In 2019, we did not conduct the same employee survey that had
been done in previous years, although at the end of the year an
employee and brand survey was conducted. It showed that mostemployees are proud to work at Munters and felt that it is a goodcompany to work for and has a culture they see as positive. In
2020, Munters will again conduct an employee survey similar tothe ones in 2017 and 2018.
Based on the priority sustainability areas and the opportunities
to make a difference, Munters has chosen to focus on nine of the
UN Sustainable Development Goals, see next page. They arealso linked to Munters’ strategic goals.

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THE SUSTAINABLE DEVELOPMENT GOALS
Goal 2. Zero hunger
Munters’ products contribute to greater resource
efficiency in food production. By increasing efficiency, we can help to reduce the load on the Earth’s
resources and promote sustainable agriculture.

Goal 4. Quality education
Munters regularly holds activities in its local workplaces to promote education, including mentorships.

Goal 5. Gender equality
We are convinced that diversity leads to greater
innovation and higher profitability. Munters currently
has a relatively low proportion of female employees. We have therefore decided to focus on genderequality mainly in our diversity work.

Goal 6. Clean water and sanitation
Munters’ products contribute to increased resource
efficiency, which also includes less use of water inthe processes where Munters’ products are installed.

Goal 8. Decent work and economic
growthIn every country and area where Munters works, it
is essential that we have an inclusive workplace withdecent conditions for all.

Goal 9. Industry, innovation and infrastructure
We are working to reduce our own environmental
impact through energy- and resource-efficient production facilities. We also contribute with innovative
solutions for our customers, so they can reduce theirimpact.

Goal 12. Responsible consumption andproduction
We work continuously to limit the environmental
impact of the transportation methods we use.

Goal 16. Peace, justice and strong institutions
Munters has zero tolerance for all forms of corruption and bribery.

Goal 7. Affordable and clean energy
Through our energy-efficient products, we canensure that our customers will consume less energy
and that their environmental impact will be lower.

Stakeholder dialogue
BUSINESS PARTNERS

CHANNELS FOR DIALOGUEIMPORTANT ISSUES

Business partners
Customers
Resellers
Suppliers

Continuous dialogue with customers and resellers. Munters also
Delivery reliability, quality and continuous suggestions for
conducts regular customer surveys and supplier summits to ensure a improvements
positive dialogue.
Compliance in environment, business ethics and social issues
such as labor laws and human rights.

Employees
Current employees
Potential employees

Employee surveys
Conferences and employee meetings
Employment interviews
Participation in job fairs at various universities
Partner in various projects that promote collaborations between
businesses and the academic sector.

Inclusion and diversity
Health and safety
Discrimination and harassment

Individual meetings and continuous dialogue withvarious investors
Participation in investor conferences
Continuous dialogue with the analysts who cover Munters
Individual meetings and continuous dialogue withMunters’ lenders.

Sustainability agenda and focus areas
Innovation with a focus on energy efficiency
Compliance

Capital market
Shareholders
Analysts
LendersM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 49

SUSTAINABILITY REPORTResource efficiency
FOCUS AREAS
1. Sustainable products andofferings
We strive to offer our customers
energy- and resource-efficientsolutions so that they can reduce
their environmental impact.
Resource efficiency, and energy
efficiency in particular, have been
watchwords for Munters’ productdevelopment since the company
was founded. Energy-efficient

products and solutions are not only
necessary for the environment andthe climate, but also result in lower
operating costs for the customer.
Our success in providing the mostenergy-efficient solutions gives
us a big competitive advantage.
More of our customers are also
producing their own sustainability
agendas with a focus on energy
efficiency and lower emissions,which gives us with new business
opportunitie.
The challenges revolve around
prioritizing which projects topursue to make our products evenmore energy-efficient but also
more sustainable from a broader
perspective. Choice of materials
and eco-design, for example, aresomething customers will likely
demand more going forward.

In addition, it is becoming more
important to always follow products
through their entire lifecycle andoffer services to optimize service
life and utilization. The products
also have to be taken care of after
they are no longer being used.
Offering complete product lifecycle
service is an aim of Munters’ in the
future.

w

GOALS AND OUTCOMES
Energy efficiency

Green electricity

Recycling rate

Electricity consumption in our
production facilities will continually decrease. (MWh/production
value, SEK 000).

The share of electricity fromrenewable sources in our production facilities will continually
increase.

The proportion of waste reused or
recycled out of the total amount ofwaste will continually increase.

Outcome 2019

Outcome 2019

Outcome 2019

Outcome 2018: 1.11 %Outcome 2017: 1.15 %Outcome 2018: 31 %Outcome 2017: 29 %Outcome 2018: 59 %Outcome 2017: 57 %1.05 % 40 %

50

53 %
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»

In 2019, more production facilities in Europe signed
green electricity contracts. A total of six of 18 facilities today have green electricity contracts
2. Sustainable production
We reduce our own environmental
impact through energy- andresource-efficient production units.
Climate change is something
we all must confront, and at
Munters we want to minimize
the environmental and climate
impact of our operations. The
Group has 18 production facilitiesin 11 countries. If we succeed in
making production more energy
efficient, it also means lower costs.
We receive many questions from
customers regarding how wework on environmental and safetyissues. In addition, we have many
committed employees who want tomake a difference and be involved
in implementing the sustainability
agenda. Taken together, all thiscreates a natural internal focus on
the issues.
Among the challenges, we
see that access to electricity fromrenewable sources such as waterand the sun is limited in most areas
where we have production.

3. Sustainabletransportation
We limit the environmental impactof the transportation we use bychoosing low-emission alternatives
and through logistics planning.
Munters has customers andsuppliers in large parts of theworld, and shipping materials
and products — as well as ourbusiness travel — has a significant
environmental impact. For businesstravel, new improved technology
for virtual meetings allows us
to meet without traveling. We
continued working in this area in
2019, and our goal is to reducecarbon emissions from businesstravel going forward. For shipping,
we have identified opportunities toimprove our internal processes andoversight and ensure, for example,
that we minimize the amount ofgoods transported by air.
One challenge we see isthat electric and hybrid vehicle
technology has to improve before
switching completely to thesevehicles makes sense. Since thebattery range is still fairly short,
it is difficult to find models thatsuit our service technicians andvendors. Material and productshipping is procured from various
companies, and we have to place
clear requirements on these suppliers concerning the environmental
impact. This is an area we canwork on more.

Governance
JJ Policy for the environment,
health and safety: Munters’commitments for environmentallyfriendly and safe production.
JJ ISO 14001: Twelve of eighteen
facilities are certified under ISO
14001.
JJ Review process: Governance toachieve Munters’ sustainability
goals, see page 48.
JJ Code of Conduct for suppliers:
Describes the requirements
Munters imposes on its partners(e.g. suppliers and distributors) in
the areas of environmental andsocial responsibility, as well as
business ethics.

Sustainable Development
Goals (SDG)

Renewable electricity
in Italy

Environmental fines

The activities that Munters
carries out in the area of resource
efficiency support the following
areas in the UN’s 2030 Agenda
for Sustainable Development.

As of January 1, 2019, Muntersin Italy (Munters Italy S.P.A.) has
only consumed electricity fromrenewable sources. Shown below
is the certification issued by Egea
S.r.l.

Fines received owing to non-compliance with environmental laws
and regulations. The goal is not
to receive any fines. An environmental audit in Mexico found one
area of non-compliance regarding
waste management administration.
The issue was addressed immediately, but unfortunately resulted ina fine of SEK 50,000. A follow-up
audit found no non-compliance.

Activities completed in 2019
The work on CO2 measurements and the possibility of setting
relevant goals continued during
the year.
JJ Several facilities continued tofocus on renewable energy during
the year and switched to green
electricity.
JJ A review of the policy on theenvironment, health and safety(EHS) was conducted.
JJ

Planned activities 2020
JJ Continue working on CO2
measurements and prepare to set
relevant goals.
JJ Increased focus on recycling thematerials used in production
processes.
JJ Increase the share of facilities
with green electricity contracts.
JJ Continue the analysis of thepriority areas started in late 2019.
As part of this, the formulations of
the various priorities will be
reviewed.

Outcome 2019, SEK

50,000Outcome 2018: 0 SEK
Outcome 2017: 0 SEK

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Responsible businesspractices
FOCUS AREAS
4. Sustainable, profitable
operations
We create value for our
stakeholders, such as shareholders
and employees, by carryingout sustainable and profitable
operations.
The exhaustive debate on
climate change and ethicalissues is here to stay and presents
Munters with major opportunities,
but challenges as well.
In the fall of 2019, management worked intensely on a review
of Munters’ strategic priorities. This
resulted in an updated strategy
with clearer ambitions for oursustainability work. Munters’ visionand strategy both reflect the jobthat has been done to ensure that
Munters becomes an even moresustainable business and can offer
customers solutions with a stronger
sustainability focus than before.
Operating sustainably usuallyrequires a longer perspective
on many issues, which can bechallenging both internally andexternally. This places highdemands on uniform, clear communication concerning the value ofa sustainable business.

5. Business ethics
We conduct our operations
ethically, honestly and in abidancewith the law. Through sounddecisions and ethical choices inour daily work, we gain trust ineach other, as well as among
our customers and collaborating
partners.
Complying with laws andregulations is the foundation of an
ethical and sustainable business.
Acting ethically builds credibility
and strong relationships thatcreate opportunities for fruitfulcollaboration and profitablebusiness.
Munters conducts operations inmany countries, and the views on
what is moral and ethical differ
in various cultures. A numberof countries in which Munters
operates rank relatively low on
Transparency International’s
annual Corruption Perception
Index. In these countries, we placehigher requirements on having
an effective process for ensuring
compliance with laws andregulations and that human rights
are not put at risk.

6. Collaborations andpartnerships
We require our collaborating
partners, such as suppliers anddistributors, to observe the same
ethical guidelines that we havepledged ourselves to.
If our partners do not act inabidance with the law and in an
ethical manner, it could affect
Munters negatively in many ways,e.g., the quality of our products
and services could suffer and or
it result in negative publicity. This
is why we place clear demands
on our partners in the Code of
Conduct, requiring them to readthrough it and affirm that they
understand and will comply with
its content. Routine dialogue with
our partners on these issues yields
several advantages and opportunities for in-depth, long-term
relationships and prevents risk.

Munters uses a large numberof suppliers spread among many
countries in which the cultures andattitudes toward issues concerning
human rights and the environment
differ widely. This requires effective
tools, a clear procedure andtraining by the organization to
verify that suppliers are meeting
our very strict requirements. We
have come a long way, but thework on refining the process andthe tools is still in progress.

GOALS AND OUTCOMES
Code of Conduct for
suppliers
Our largest suppliers accountfor 80 percent of purchases. The
target for 2020 is that all of themwill have signed the Code of
Conduct.

Whistleblower cases
Number of whistleblower cases
via the external reporting channel.
In 2019, the cases mainly related
to suspected cases of discrimination and harassment.

Outcome 2019

Outcome 2019

Outcome 2018: 66 %Outcome 2018: 7

92 %

52 

Sustainable Development
Goals (SDG)
The activities that Munters carries
involving responsible businesspractices support the following
areas in the UN’s 2030 Agenda
for Sustainable Development.

9a

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»

Munters started reporting to the Carbon
Disclosure Project (CDP) in 2019

Governance
Code of Conduct: Defines
Munters’ basic view on issues in
the areas of the environment,
ethics and human rights.
JJ Code of Conduct for suppliers:
See description in the section
Resource efficiency.
JJ Anti-corruption policy: Munters’commitment that employees andpartners will comply with
anti-corruption laws andregulations.
JJ Review process: Governancefor achieving Munters sustainability goals, see page 48.
JJ Data protection policy: Provides
guidance on how personal data ishandled correctly, in compliancewith the law.
JJ Compliance with competition
rules: Explains the fundamentals ofcompetition law to prevent
violations.
JJ Whistleblower policy: See
description in the section People &society.
JJ Compliance with sanction
regulations: Defines the checks
that employees have to carry out
in conjunction with movement ofgoods, services and technology
across national borders to ensurethat we do not violate any
sanctions.
JJ Insider policy: Provides
guidance for employees on insider
regulations, with the aim of
reducing the risk of insider trading.
JJ

Activities 2019
Further development of theprocedure for supplier self-assessments as well as on-site evaluations at suppliers of the areas
covered by the Code of Conduct.
The goal has been to implement a
process that facilitates andautomates this work and to
produce a checklist that can beused when our purchasers are out
on visits to suppliers.
JJ Initiated an evaluation ofannual sustainability checks. The
areas concerned included
business principles, discrimination,harassment, competition laws andbribes.
JJ The sourcing function continued
the work to get all our mostimportant suppliers to affirm theircompliance with the Code of
Conduct for suppliers.
JJ

Planned activities 2020
JJ All our most important suppliers
will affirm that they are incompliance with the Code of
Conduct for suppliers.
JJ Continue the sustainability
evaluations through various
checks.
JJ Continue the analysis of thepriority areas started in late 2019.
As part of this, the formulations of
the various priorities will be
reviewed.

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SUSTAINABILITY REPORT

People & Society
FOCUS AREAS
7. Equal and inclusive work
environment
We offer a fair, safe, and inclusive
workplace to a workforce marked
by diversity.
Ensuring we deliver on ourvalues requires that all employees
are engaged, enjoy their work andcan develop professionally. We
are convinced that diversity provides us with different perspectives
and valuable insights that improve
our company and our offering. A
few years ago, Munters set a goalthat 30 percent of both employees

analysis of the accident itself,what caused it and what needs tochange to ensure that the same
type of accident is not repeated.
Diversity and safety are bothnever-ending jobs, and the challenge lies in staying focused on
the issue by routinely conducting
various kinds of activities to ensurethat the subject remains top ofmind.

8. Community involvement
We dialogue with our stakeholders
and with the local communities
where we operate.
Our collaboration with otheractors in the locations where
we operate is important for us
to attract both customers andworkers. In addition, many ofthe projects create a sense ofcommunity and pride among our
employees, which also createsvalue for Munters. Examplesof activities that are routinely
conducted at our facilities include
participation in various type ofjob fairs arranged by schools,
collaboration with schools
where we offer benefits such as
mentoring and project work, open
houses for members’ families andvarious forms of support for sports
clubs and relief organizations
Currently there is no central
governance for the activities inthis area. It is up to each facility to
decide what is right there. It canbe a challenge to find projects thatare not simply charities but also
contribute positively to Muntersfrom a business perspective.

Proportion of women in
management

Total Recordable
Incident Rate* (TRIR)

Sustainable Development
Goals (SDG)

Our aim is to increase the proportion of women in management. The
target is 30 percent by 2025.

Munters strives to continually
reduce the number of accidents in
production, and we measure the
Total Recordable Incident Rate
(TRIR).

The activities that Munters carries
out in the area of People & society
support the following areasin the UN’s 2030 Agenda for
Sustainable Development.

Outcome 2019

Outcome 2019

Outcome 2019

Outcome 2018: 20 %Outcome 2017: 18 %Outcome 2018: 20 %Outcome 2017: 17 %Outcome 2018: 3.4 %Outcome 2017: 3.5 %and managers will be women by2025. All aspects of diversity are
equally important, but since we
ascertained that the proportionof women in the company waslow (only 16 percent whenmeasurements began in 2016),
management chose to focus ongender equality first.
Safety work at our production
facilities has been a more
important focus in recent years.
All accidents have been routinely
reported to Group Management
since the end of 2018 with a clear

Munters employees at thehead office in Kista.

GOALS AND OUTCOMES
Proportion of women
Our aim is to increase the proportion of women in our workforce.
The target is 23 percent by 2020
and 30 percent by 2025.

21%

54 

25%

2.7%
* Number of accidents where the employee
sought medical treatment multiplied by
200,000 and divided by the number ofhours worked.

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»

In 2019, we further strengthened safety efforts in theworkplace

Governance
JJ Policy for the environment,
health and safety: Munters’commitment to environmentallyfriendly and safe production.
JJ Policy for diversity andinclusion: Munters’ commitment toan equitable, inclusive andcollaborative workplace marked
by diversity.
JJ Review process: Governancefor achieving Munters sustainability goals, see page 48.
JJ Anti-discrimination andharassment policy: Munters’commitment to protect its
employees against discrimination,harassment and bullying in theworkplace.
JJ Flex work policy:
Encouragement to managers at
Munters, where possible, to offer
employees the opportunity to work
flexibly.
JJ Whistleblower policy: Defines
Munters’ view on mismanagement
and improprieties and theprocedure employees can use to
make Group Management and theBoard of Directors aware of similar
situations.

Activities completed in 2019
Follow-up of local equality
plans. This has been a standard
item on the agenda at local
companies’ board meetings.
JJ Revision of the global
management training guidelines
on discrimination and harassment.
Ensured a uniform Group message
and continued to spread themessage about the whistleblower
channel in pursuit of the goal of a
100% discrimination- andharassment-free workplace.
JJ Further strengthened safety
efforts in the workplace andincreased the focus on the numberof healthy employees, e.g.,
introduced regular measurements.
JJ

Planned activities 2020
Actively work to increase theproportion of female employees
and managers.
JJ Continue the analysis of thepriority areas started in late 2019.
As part of this, the formulations of
the various priorities will be
reviewed.
JJ

TOP to TOP Global Climate
Expedition
In 2019, Munters sponsored theglobal climate expedition TOP toTOP, a Swiss NGO whose aim is
to inspire young people to help
save our planet. On the journey
aboard the sailboat Pachamama,they have visited more than 100
countries. Along the way, they
have made presentations on
climate change to over 100,000
students. Munters has supplied amodel MG90 dehumidifier thathas helped them to maintain theright moisture level and temperature on the ship.

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CORPORATE GOVERNANCE | RISKS AND RISK MANAGEMENT

Risks and risk management
Risks are a natural element of all businesses. Effective risk management is crucial
therefore for Munters to achieve its business goals. Munters’ strategic framework together
with external factors create risks that must be managed. At the same time, these risks createbusiness opportunities if managed correctly.
A properly defined procedure for identifying, evaluating,managing and reporting risks enables:
JJ A competitive customer offering
JJ Compliance with laws and regulations
JJ A healthy, safe work environment
JJ Sustainable profitability and performance

Risk categories

Munters serves customers in various industries and market segments. Munters has production and assembly plants, combinedwith sales, in nearly 20 countries and sales-only offices in a
number of additional countries. Altogether, this provides Munterswith underlying risk diversification, at the same time that a global
presence creates challenges linked to differences in cultures, laws
and political climates.

Strategic risks

Risks are divided into four categories: Strategic, Operational,
Regulatory and Financial. This encompasses both general risks
due to political and macroeconomic trends, and specific risks
directly related to the Group’s operations. A number of risks lie
outside Munters’ direct control, while others can be controlled.
Strategic risks are associated with decisions taken by management at various levels of the company concerning strategic
direction, organizational structure, resource allocation, and major
investments and acquisitions. Risks associated with internal andexternal communication also fall into this category.

Risk management

Risk evaluation process
Every business area and Group function within Munters is responsible for identifying and managing risks within their organizationin accordance with the Group’s risk process and current policies
and guidelines. In combination with Enterprise Risk Management(ERM), which focuses on the overall risks and uncertainties thatthe company is exposed to, this provides both top-down and bottom-up support for Munters’ medium-term goals. The purpose of
ERM is to give a Group-wide overview of the risks and uncertainties that the company is exposed to and to support value creation,
ensure risk awareness and balance risks versus return.
The ERM function, which reports to the CFO, is responsible
each year for overseeing a Group-wide risk evaluation as part ofthe strategy process. In 2019, this process was carried out late in
the year. The risk evaluations are compiled by the business areas
and Group functions, which identify and evaluate risks based on
their probability and potential impact on the business. The mostimportant risks and uncertainties, and how they are managed, areregularly reported to Group Management, the Audit Committee
and the Board of Directors.

ImpactManaging risks is an important part of internal control. The Boardof Directors has ultimate responsibility for the Group’s risk management and approves the company’s risk management policy.
Group Management identifies, evaluates and manages risks intheir respective areas of responsibility. The CFO is responsible
for coordinating risk evaluation and compiles the documentation
reported to the Audit Committee and to the Board of Directors.

Probability
Identified risks are mapped in a risk matrix. They are evaluated based on their potential impact
on Munters, the probability that they will occur and how well the risk is managed.

56

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Operational risks
Operational risks are linked to the company’s internal resources:
systems, procedures and employees. Examples include a work
stoppage due to a fire, a machinery breakdown or extreme
weather. Staff-related operational risks are associated withsuccession planning, the ability to retain core competences andrelationships with trade unions. In the area of IT, it could be associated with information security.

Regulatory risks
Regulatory risks include the risk of loss of reputation and costs
owing to violations of laws and regulations. This category also
covers risks resulting from violations of the provisions of signed
agreements with employees, customers and other business
partners.

Financial risks
Financial risks mainly consist of currency, interest and financing
risks. A description of the financial risks and how they are managed can be found in Note 3.

Sustainability risks
Risks related to sustainability, e.g., environmental issues, climatechange, health and safety, respect for human rights, bribery, andcorruption, are part of — and evaluated among — strategic, operational and regulatory risks. For more information on how we arework in our priority sustainability areas, see pages 46-55.

Insurable risks
Munters works actively with insurance solutions, and Groupwide policies are governed by central guidelines. This includes
all the usual types of business insurance, such as general liability,
product liability and injury prevention, the main purpose of whichis to prevent property damage and business interruptions. Also
included are property and casualty insurance, directors and officers liability insurance, and employment practices liabilities.
Insurance is obtained from both the Swedish and international
insurance market. In addition, Munters’ internal audit function is
responsible for independently evaluating the effectiveness of asample of the internal control processes each year.

Munters Loss Prevention Standard
We also work preventively to minimize the risks related to fire,
the work environment, and health and safety. The Munters Loss
Prevention Standard (LPS) is built on the Group’s guidelines
and rules, but also local laws and other regulations as well as
insurance requirements. LPS is used in risk evaluations by our
production and assembly facilities. The objective is for all production plants to be evaluated over a three-year cycle; in 2019,evaluations of nine facilities were conducted. LPS is also used forevaluations in conjunction with business acquisitions, investments
and construction.

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CORPORATE GOVERNANCE | RISKS AND RISK MANAGEMENTHigh priority risks 2019
In the first half of 2019, the focus was on the high priority risks
identified in 2018. In the risk assessment conducted in the latterpart of 2019, a total of seventeen risks were deemed as potentially having a significant impact on Munters. A brief descriptionof these risks and how they are being monitored and managed
follows below. The risks are grouped by risk category, in alphabetical order.

RISK

RISK DESCRIPTIONMANAGEMENT

Allocation of production
capacity

The risk that Munters will not have sufficient production capacity
to realize its business plans or will experience over-capacity thatnegatively affects the company’s ability to generate competitive
profit margins.

The development of the Sales and Opera-tions Planning (S&OP)
procedure continued in 2018, and in 2019 more improvements were
made. Regular S&OP meetings are planned with the entire GroupManagement team in 2020.

Insufficient investment ininnovation

The risk that Munters is incapable of developing and maintaining aculture where sufficient investments are made in inno-vation, which
could adversely affect the company’s technological expertise.

After re-evaluating Munters’ strategy in late 2019, GroupManagement decided that more focused investments will be madeto drive innovation within Munters in coming years. This includes
investments in priority areas and to strengthen the company’s productdevelopment process.

Trade barriers

Political instability and increased customs duties in important markets
could affect the possibility of marketing and selling our products andservices.

The business areas worked together with Global Operations in 2019
to routinely monitor trends in the area and to ensure that sourcing
and production are planned in such a way that the effect of any tradebarriers is minimized, e.g., by manufacturing the most important
products at several sites around the world. The creation of a regional
supply chain has continued as well.

M&A implementation,planning and integration

The risk of not being able to seize opportunities for acquisitions anddivestments or not achieving goals for completed investments andacquisitions, e.g., synergies.

No acquisitions were made in 2019. The internal project organization(PMO) worked during the year on monitoring the acquisitions madein recent years.

Technology changes, IoT

Risks associated with the rapid transition to digital and connected
products and services.

This issue is regularly discussed and monitored by GroupManagement and the business areas. The IT staff also monitors it andcoordinates ongoing development projects. Every business area is
responsible for IT security for connected products.

Strategic risks

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RISK

RISK DESCRIPTIONMANAGEMENT

Dependence on small
number of customers

Risks associated with being dependent on a small number of major
key customers.

This issue is regularly discussed and monitored by GroupManagement and the business areas. Within AirTech, Data Centers
US was especially successful in 2019 in actively broadening its
customer base and increasing its share of after-market business (i.e.
spare parts and services).

Dependence on small
number of manufacturing
plantsRisks associated with important product components only manufactured in one or a small number of manufacturing plants leading, e.g.,
to long lead times.

Global Operations management has worked continuously to ensurethat critical products and components are manufactured at strategically selected sites with a suitable geographical spread. This iscoordinated with the work being done to manage the risk associatedwith trade barriers (see above under “Strategic risks”).

Quality control

Risk of insufficiently thorough quality control, which could result in
the company’s products having to be recalled or not functioning
as promised, thereby negatively impacting earnings and customer
relationships.

Global Operations appointed a Global Quality Manager in 2018.
The aim was to create an efficient, uniform quality system, which
Munters has since been introducing at all its plants globally. In addition, Global Operations has been especially focused on complianceand the development of the Munters Production System.

Employees and key
competences

Risk that Munters fails to attract and retain employees with thecompetences needed to implement the company’s strategies.

New managers, managers in production and experienced managers
who want to take their leadership to the next level are offered leadership development courses. HR is working continuously on salarysurveys to ensure that Munters offers competitive salaries.

IT risks

Cyberthreats are a risk that has also increasingly targeted Munters
and its products. Some products contain a large amount of software,and it is becoming more common for products to be connected tovarious networks.
There is a risk that Munters’ existing IT systems are not structured
in a way that optimally supports the company’s business processes
or strategic ambitions. There is also an information management risk
consisting, e.g., of IT attacks.

Munters has clear policies, rules, procedures, and routines in place tomanage IT and communication security. The IT department regularly
tests Munters’ various IT systems to ensure a high security level. All
employees receive training in information management and security.
A comprehensive survey and analysis of the existing IT infrastructure
was conducted in 2019 in order to create a long-term development
plan for a more uniform IT infrastructure.

Forecasts related toresource allocation

Risk of forecast errors that negatively impact resource allocation,
production processes and logistics flows.

Munters does monthly forecast updates, and careful reviews enable
quick action when needed. The forecasts are continuously analyzed
on several levels in the organization.

Agreement routines

Risk that contracts with customers and suppliers are not negotiatedand approved in accordance with applicable internal routines andthat this results in contract risks such as commitments that are too
far-reaching.

Munters has a structured internal contract vetting process thatapplies to both business areas. In addition, Munters has an internalrisk committee that includes members of Group Management, whoreview major contracts. A checklist for contracts that are not basedon standard terms and conditions is strictly applied throughout theorganization.

Bribery and corruption

Risk that the Group’s employees and distributors do not comply withlaws against bribery and corruption, and that this results in legal
and financial conse-quences as well as damage to the Group’s
reputation.

Munters has policies in the area in the form of the Code of Conduct
and a specific anti-corruption policy. Online training is mandatory for
all salaried employees of Munters. All contracts with suppliers anddistributors stipulate that distributors must comply with anti-corruption
laws and regulations. In addition, Munters has a whistleblower
channel that facilitates anonymous reporting.

Sanctions

Risk that Munters signs agreements with customers who violate applicable sanction regulations in the US, the EU and the UN and that thisresults in legal and financial consequences as well as damage to theGroup’s reputation.

Munters has a sanctions policy and guidance for these issues. The
company routinely collaborates with outside advisers to monitor
trends in the area.

Operational risks

Regulatory risks

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CORPORATE GOVERNANCE | THE SHARE

The share
The Munters share trended higher during the year. In 2019, the share price increased
44.3 percent, while the Stockholm Stock Exchange OMXS30 rose 25.8 percent during thesame period.
The closing price on the last trading day of the year was
SEK 49.06 (34.00), equivalent to a market capitalization of SEK
9.0 billion (6.2). The highest price paid in 2019 was SEK 50.50(58.50), and the lowest price was SEK 33.70 (31.90).

Trading in Munters shares
In 2019, a total of 117.9 million shares (65.8) were sold. Averagesales over the year totaled 471,720 shares per day (263,155).
Dividend
Under the dividend policy adopted by the Board of Directors,
Munters aims to pay an annual dividend corresponding to 30–50
percent of its net income for the year. Decisions on any dividend
proposals are taken by the Board in consideration of the company’s financial position, investment needs, acquisitions and liquidity
position.
The Board of Directors has proposed that no dividend be issued
for 2019.
Share capital
At December 31, 2019, the number of shares and votes in Munters
totaled 183,597,802. Each share has a quota value of SEK 0.03,
and the share capital totaled SEK 5,507,934.06.
Munters’ share capital is composed of one share class, in which
each share has the same number of votes and yields the sameright to a dividend. Under the Articles of Association, the number

60

of shares may not fall below 150,000,000 and not exceed
600,000,000. The company’s share capital may not fall below
SEK 4,500,000 and not exceed SEK 18,000,000. The company’s shares are registered with Euroclear Sweden AB, whichadministers the company’s share register and records the sharesfor individual investors. Munters Group AB has its own holding of
1,852,000 shares related to employee incentive programs.
OwnersThe number of shareholders at December 31, 2019 was 5,988,
and the proportion of shareholders outside Sweden at year-end
was 27.9 per cent. The ten largest individual shareholders had
69.6 per cent of the share capital at that time.
FAM AB was the largest shareholder, with 21.1 percent of theshare capital.
Ownership changes after the end of the year
In February 2020, Nordic Capital divested its total holding in
Munters Group AB, i.e., 14.7 percent of the capital. Subsequently,
Nordic Capital’s holding in the company is 0 percent. FAM AB
announced at the same time that it had increased its holding
by 5.0 percent and thereby held 26.1 percent of the capital in
Munters Group AB. At the same time, Odin Fund Management
announced that it had acquired 7.1 percent of the capital in
Munters Group AB.

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THE TEN LARGEST SHAREHOLDERS
AS OF DECEMBER 31, 2019

KEY FIGURES* Proposed dividend

Name
FAM AB
Nordic Capital
Swedbank Robur Funds
First AP-fund
Handelsbanken Funds
Fourth AP-fund
JP Morgan Asset Management
Kuwait Investment Authority
AMF Insurance and Funds
La Financière de l'Echiquier

ANALYSTSSHAREHOLDING BY SIZE

Number of shares at year-end, millions
Market capitalization at year-end, SEKm
Number of shareholders
Share price at year-end, SEK
Earnings per share, SEK
Change in share price during the year, %Regular dividend, SEK/share
Dividend as a % of earnings per share
Proportion of shares in Sweden, %Proportion of shares owned by 10 largest shareholders

184 (184)
9.0 (6.2)
5,988 (6,673)
49.06 (34.00)
1,55 (1,73)
44.3 (-38.4)–* (–)– (–)
72.1 (39.97)
69.6 (86)

Holding
38,817,907
26,999,607
16,563,586
15,874,746
6,925,000
6,432,760
4,645,133
4,375,301
3,976,068
3,159,999

Holding, %
21.1
14.7
9.0
8.6
3.8
3.5
2.5
2.4
2.2
1.7

Analysts who actively cover the Munters share.

Bank
Carnegie
Danske Securities
Goldman Sachs
Kepler Cheuvreux
NordeaParetoName
Kenneth Toll Johansson
Björn Enarson
William TurnerMats Liss
Carl Ragnerstam
Anders Roslund

OWNERSHIP DISTRIBU−
TION BY COUNTRY

Telephone+46 (0) 8 58 86 89 11+46 (0) 8 568 80605+44 (0) 207 552 2998
+46 (0) 8 723 51 18+46 (0) 101 562 817+46 (0) 8 402 52 88

Holding
1–1,000
1,001–10,000
10,001–50,000
5,001–500,000
500,001–1,000,000
1,000,001–5,000,000
5,000,001–10,000,000
10,000,001–20,000,000
20,000,001–
Unknown owners

Number ofshareholders
5,341
486
79
57
6
13
2
2
2

Holding,
%
0.5
0.9
1.0
6.0
2.2
18.5
7.3
17.7
35.8
10.2

Votes,
%
0.5
0.9
1.0
6.0
2.2
18.5
7.3
17.7
35.8
10.2

THE MUNTERS SHARE
Trading volumes per day

SEK
90

30,000,000

80

MuntersOMXSPI

25,000,000

70

20,000,000
60
Sweden 72,1 %USA 5,0 %United Kingdom 3,2 %Finland 2,6 %Kuwait 2,4 %

15,000,000

50

10,000,000

40

5,000000

30

0

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

20

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CORPORATE GOVERNANCE

Information to theshareholders
Annual General Meeting 2020
The Annual General Meeting of Munters Group AB (reg.no.
556819-2321) will be held at 3 p.m. CET on May 7, 2020 at Kista
Science Tower, Auditorium, Färögatan 33 in Kista, Stockholm.
Registration for the meeting will commence at 2 p.m. CET.
Right to participate in the Annual General Meeting
Shareholders who wish to participate in the Annual General
Meeting must:

Reports can be ordered from Munters Group AB:
Web: www.munters.com
Email: info@munters.se
Address: Munters Group AB
Box 1188, SE-164 26 KISTA, Sweden
For more information:
Ann-Sofi Jönsson, Head of Investor Relations
Phone: +46 (0)730 251 005
Email: ann-sofi.jonsson@munters.se

be registered in the share register maintained by Euroclear
Sweden AB on Thursday April 30, 2020, andJJ notify the company of their intention to attend by mail to theaddress Munters Group AB, “Årsstämma 2020,” c/o Euroclear
Sweden AB, Box 191, SE-101 23 Stockholm, Sweden, by calling +46-8-402 92 73 weekdays between 9 a.m. and 4 p.m.,
or at the website www.munters.com, no later than Thursday,
April 30, 2020.
JJ

In the notification, shareholders must state their name, address,
telephone number (daytime), personal or corporate identity
number, and information on their shareholding.
Shareholders or proxies for shareholders may be accompanied by a maximum of two representatives at the Annual General
Meeting. Representatives may only attend the meeting if theshareholder gives notice of their attendance as described above
for notification.
For shareholders who will be represented by proxy, a powerof attorney in the original must be enclosed with the notification.
A power of attorney template is available on the company’s
website, www.munters.com, and will be sent by mail on request to
shareholders who contact the company and provide their address.
A power of attorney is valid one year from its issue or the longer
period set out in the power of attorney, but not more than five
years. For those representing a legal entity, a verified copy of theregistration certificate or corresponding documents showing thecompany’s signatories must also be submitted.
To be entitled to participate at the Annual General Meeting,shareholders whose shares are registered in the name of a trustee
must re-register their shares in their own name at Euroclear
Sweden AB. Shareholders who require such re-registration should
notify their trustee well in advance so that the shareholder isentered in the share register maintained by Euroclear Sweden AB
on Thursday, April 30, 2020. Such registration may be temporary.

62 

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Comments from Chairman of
the Board Magnus Lindquist
In 2019, Munters completed a restart that meant again focusing
on our core business and a more results-oriented organization. I
am proud to see how the company delivered on the action planthat the Board of Directors decided on at the beginning of theyear to strengthen Munters’ foundation. We have an active anddynamic collaboration between the Board and management
team, which changed during the year. Now, after the end of 2019,
we are pleased to see that Munters reported growth, an increased
adjusted EBITA margin and a stronger balance sheet. The action
plan has been a major challenge for the organization andemployees at Munters. They have worked hard, which we on
the Board of Directors very much appreciate and are proudof. Munters’ culture is distinguished by an innovative andpersistent spirit with strong cohesiveness that has been thebasis of the action plan’s success. This same cohesivenessand strong spirit continue to drive improvements at Munters.
In 2020, it is important to increase efficiency by streamlining the product range, strengthening quality work andintensifying a review of the business structure.
Last fall, we began the job of clarifying Munters’ strategic direction. In light of the work begun in 2019 and which
continues in 2020, I as Chairman know that we on the Board
will be doing our share to bring Munters into an exciting future.
Munters is unique in how we help our customers to use resources
more efficiently and reduce their climate impact. In many cases,
we can help companies to reduce energy consumption in theirproduction by 20-40 percent compared with competing technologies. Several important innovations in society today would
not be commercially viable without dehumidification technology from Munters. I have in mind among other things lithium
batteries, which needs stable and controlled humidity without
stoppages in production to ensure high quality and performance,
which our solutions can guarantee. Another example is offshore
wind farms, which would have a much shorter service life without
our innovations and product solutions. Munters has much tocontribute to a more sustainable planet.
It is with pride that I, along with the other members of theBoard of Directors and Group Management, look forward tocontinuing to build Munters into a world-class company.
Stockholm, in March, 2020

Magnus Lindquist

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CORPORATE GOVERNANCE

Corporate governance report
The goal of corporate governance is to guarantee that the company is managed
as efficiently as possible for the shareholders. This entails establishing an effective
organizational structure, systems for internal control and risk management, and transparent
internal and external reporting.
Munters Group AB (Munters, or “the Company”) is a Swedish
public company listed on Nasdaq Stockholm. Corporate governance is primarily regulated by the Swedish Companies Act
and other Swedish legislation, the Nasdaq Stockholm rulebook
for Issuers and the Swedish Corporate Governance Code (“theCode”). Munters has applied the Code since May 19, 2017,
when the company’s shares were admitted for trading on Nasdaq
Stockholm, and hereby submits its Corporate Governance Reportfor the financial year 2019.

COMPLIANCE

External governance systems
The external governance systems that constitute the framework for
Munters’ corporate governance consist primarily of the Swedish
Companies Act, the Swedish Annual Accounts Act, the Nasdaq
Stockholm rulebook for Issuers and the Code, as well as otherapplicable regulations and relevant legislation.
Internal governance systems
The Articles of Association adopted by the Annual General
Meeting (AGM), the Munters Board Rules of Procedure adopted
by the Board, the instructions for the CEO, and the instructions
for the Compensation and Audit Committees constitute the key
internal governance systems.

CORPORATE GOVERNANCESTRUCTURE
1. Shareholders

2. General Meeting
8. External Auditor

5. Audit Committee

3. Nomination Committee

4. Board of Directors

6. Compensation Committee

7. CEO

7. Group Management64

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In addition, the Group has a number of policies and instructions
with rules and principles for the Group’s operations and employees. In 2019, the Munters Board of Directors passed resolutions on
the following policies and instructions:
Rules of Procedure for the Board of Directors
Instructions for the CEO
JJ Rules of Procedure and instructions for
the Compensation Committee
JJ Rules of Procedure and instructions for the Audit Committee
JJ Code of Conduct
JJ Steering documents
JJ Finance policy
JJ Sustainability policy
JJ Communication policy
JJ Insider policy
JJ Internal control policy
JJ Information security policy
JJ
JJ

Deviations from the Code
The Code applies to all Swedish companies whose shares arelisted on a regulated market in Sweden. The Code indicates anorm for good corporate governance at a higher level of ambition
than the minimum requirements of the Swedish Companies Act andother rules.
The Code is built on the “comply or explain” principle. Thismeans that the company does not have to observe every rule in
the Code at all times, but can choose other solutions deemed tobetter address the circumstances in the individual case, provided
that the company openly reports every such deviation, describes
the solution chosen instead and indicates the reasons for this in thecorporate governance report.
Munters deviates from Rule 9.7 in the Code with respect to thewarrant program introduced in connection with listing the company’s shares on Nasdaq Stockholm. Pursuant to the terms of one of
the two warrant series, participants may exercise such warrants to
subscribe for shares after a two-year period, through November
19, 2019, a shorter period than the minimum three years prescribed by the Code. The other warrant series entitles participants
to exercise the warrants to subscribe for shares after a three-year
period. The offering of warrants that can be exercised after two
and three years is considered to be in line with Munters’ long-termbusiness plan, strategy and financial targets. In the future, Muntersintends to implement only three-year programs.
Munters has deviated from Rule 9.8 of the Code in that former
CEO John Peter Leesi’s fixed salary during the notice period andseverance pay upon the company’s termination of his employment
amounts to three years’ fixed salary, which exceeds the two years’
fixed salary prescribed by the Code. During the notice period (12months) and the period when severance pay is paid (24 months),
the CEO is subject to a non-compete clause, which the company
considers to be in the interest of the company and its shareholders,
and thus justified the deviation from Rule 9.8 of the Code.

MUNTERS’ ARTICLES OF ASSOCIATION
Munters’ Articles of Association were adopted at an Extraordinary
General Meeting on May 7, 2017 and contain no particular provisions on the appointment and dismissal of Board members or onchanges to the Articles of Association. For the complete Articles of
Association, refer to the Munters website.

1. Shareholders
Shares in Munters have been listed on Nasdaq Stockholm
since May 19, 2017. At year-end, share capital totaled SEK
5,507,934.06, distributed among 183,597,802 shares. All shares
are of the same class and have equal rights in every respect. On
December 31, 2019, Munters had 5,988 shareholders (comparedwith 6,673 on December 31, 2018). The largest shareholders
were FAM (21.1 percent of the votes) and Nordic Capital (14.7
percent of the votes). Additional information on the share andshareholders can be found in the section on the Munters share andon the Munters website.
Share buy-back
For the purpose of guaranteeing delivery of shares to participantsin the long-term incentive program resolved at the 2019 AGM,
the Board of Directors was authorized by the AGM to decide on
the acquisition of at most 385,000 own shares for the period up
to the next AGM. The Board of Directors decided to utilize of the
buy-back authorization on July 17, 2019, and shares were repurchased between August 5 and August 13, 2019. In total, 385,000
shares were repurchased at an average share price of SEK 40.98.
The total number of own shares Munters holds is 1,852,000, corresponding to approximately 1 percent of the share capital.
2. General Meeting
The right of the shareholders to decide on matters concerning
Munters is exercised at the General Meeting (GM). Shareholders
who are recorded in the share register on the record date andhave registered for the GM within the time indicated in the notice
to attend have the right to participate in the GM, either in personor by proxy.
Decisions at the GM are normally taken by simple majority. On
certain issues, however, the Swedish Companies Act prescribes aqualified majority of votes, and in specific cases a certain portionof shareholders must be present for a quorum.
The AGM must be held within six months of the end of the financial year. Munters’ AGMs are held in Stockholm, Sweden, every
calendar year before the end of June.
Under the Articles of Association, notices convening General
Meetings are issued by announcement in Post- och Inrikes
Tidningar (the Swedish Official Gazette) as well as on the Munters
website. Announcement that a notice convening a GM has been
issued shall be made in Svenska Dagbladet.
Apart from the AGM, Extraordinary General Meetings may
be held if the Board considers it necessary, or if Munters’ auditor
or owners of at least 10 percent of total shares in the company
request one.
All shareholders who are directly recorded in the share register
maintained by Euroclear Sweden five weekdays (Saturdays
included) prior to the AGM and who have notified the companyof their intention to participate in the AGM not later than thedate indicated in the notice of the AGM are entitled to attend theAGM and vote for the number of shares they hold. In addition to
notifying the company, shareholders whose shares are nominee
registered through a bank or other nominee must request that theirshares be temporarily registered in their own names in the register
maintained by Euroclear Sweden to be entitled to participate
in the AGM. Shareholders should inform their nominees well inadvance of the record date.
Shareholders who wish to have an issue brought before theGeneral Meeting must submit a request in writing to the Board of
Directors. The request should normally be submitted to the Boardof Directors seven weeks before the General Meeting at the latest.

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CORPORATE GOVERNANCE
2019 Annual General Meeting
The AGM on May 8, 2019 at Kista Entré Konferens in Stockholm
was attended by 64 shareholders representing 80.2 percent of
the share capital. The meeting was held in Swedish. All Board
members and the Group’s current auditor in charge were present.
The issues resolved by the AGM including the following:
JJ That no dividend be distributed for the financial year 2018
JJ Re-election of Board members Magnus Lindquist, Johan Ek,
Helen Fasth Gillstedt, Per Hallius, Andreas Näsvik, Lena
Olving and Kristian Sildeby and election of Juan Vargues as a
new Board member
JJ Re-election of Magnus Lindquist as Chairman of the BoardJJ Fees to the Board of Directors
JJ Compensation guidelines for senior executives
JJ Long-term incentive program for Group Management and certain other key employees, including the issuance of employee
stock options and hedging arrangements in respect of the
programJJ Authorization of the Board of Directors, until the next AGM, toresolve to issue, on one on more occasions, new shares and/or
convertible bonds and/or warrants up to a total of 18,359,780
shares that can be issued, the convertible bonds that can beconverted to, and that can be subscribed for by exercising
warrants.
2020 Annual General Meeting
The 2020 Annual General Meeting will be held on May 7, 2020
in Stockholm, Sweden. For further information, refer to the Munters
website.
3. Nomination Committee
Nomination Committee activities
The Nomination Committee is charged with preparing and submitting proposals on behalf of the shareholders for election of the
Chairman of the AGM and election of a Chairman of the Boardand other Board members, in addition to a reasoned statement,
election of auditors, decisions on fees to auditors and to the Board(divided between the Chairman and the other members, as well as
remuneration for committee work) and, where necessary, proposing changes to the appointment of the Nomination Committee. In
addition, the Nomination Committee assesses the independenceof Board members in relation to the company and its major shareholders. The company’s Audit Committee assists the Nomination
Committee in its work on proposing the election of auditors; theNomination Committee’s proposals to the General Meeting
regarding the election of auditors must contain the recommendation of the Audit Committee.
Prior to submitting its proposals to the Board, the Nomination
Committee may review the evaluation of the activities of the Boardand its members and familiarize itself in general with the Board’s
activities through interviews with the company’s CEO and selectedcommittee and Board members.
Shareholders who wish to submit proposals to the Nomination
Committee may do so via the Committee’s e-mail: valberedningen@munters.se or by post: Munters Group AB, Nomination
Committee, Box 1188, SE-164 26 Kista, Sweden.

Nomination Committee shall appoint the member representing
the largest shareholder by votes. The Nomination Committee also
includes the Chairman of the Board, who also convenes the first
Nomination Committee meeting.
The composition of the Nomination Committee shall normallybe announced no later than six months before that meeting.
Remuneration shall not be paid to the members of the Nomination
Committee. Changes in the composition of the Nomination
Committee shall be made public immediately.
Nomination Committee prior to the 2020 AGM
The composition of the Nomination Committee was publishedthrough a press release and on the Munters website on September
24, 2019. Due to Nordic Capital’s sale of shares in Munters on
November 6, 2019, Lars Wedenborn was appointed Chairmanof the Nomination Committee to replace Robert Furuhjelm.
The Nomination Committee for the 2020 AGM consists of Lars
Wedenborn (FAM AB), Robert Furuhjelm (Nordic Capital), Jan
Dworsky (Swedbank Robur Fonder), Johan Grip (First Swedish
National Pension Fund) and Magnus Lindquist (Chairman of theBoard of Munters). From the time it was constituted up until thesubmission of the Annual Report, the Nomination Committee has
held seven meetings.
4. The Board of Directors
Board activities
The duties of the Board of Directors are primarily set forth in the
Swedish Companies Act and the Code. In addition, Board activities are guided by formal rules of procedure that the Board adopts
every year. The rules of procedure govern the division of work andresponsibility among the members of the Board, its committees, its
Chairman and the CEO. The instructions for the CEO also contain
instructions for financial reporting. The tasks of the Board of
Directors include adopting strategies, business plans and targets,and issuing interim reports and year-end financial statements,
managing risks, and setting policies and guidelines. The Board isalso required to follow economic developments, ensure the qualityof financial reporting and the internal controls, and evaluate theGroup’s operations based on the objectives and guidelines set by
the Board of Directors. The Board is responsible for appointing
the CEO as well. Finally, the Board of Directors decides on major
investments and organizational and operational changes.
Composition of the Board of Directors
Under the company’s Articles of Association, Munters’ Boardof Directors shall consist of at least three and no more than ten
members elected by the AGM for a term of office until the end of
the next AGM. At the 2019 AGM, all seven Board members werere-elected and one new member was elected. Under Swedish law,
the trade unions have the right to representation on the Board; in2019 they were represented by two members and two deputies. A
presentation of the Board members can be found in the section on
the Board of Directors
The CEO and CFO of Munters participate as presenters at Board
meetings. Attorney Johan Lekholm serves as the Board’s secretary.
Other officers participate in Board meetings to present specificissues.

Composition of the Nomination Committee
Under the Nomination Committee instructions adopted by the2017 AGM, which are in force until further notice, the Nomination
Committee shall be composed of representatives from the fourlargest shareholders in terms of votes listed in the share register maintained by Euroclear Sweden AB as of August 31 ofeach year. According to this instruction, the Chairman of the66

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NOMINATION COMMITTEE PRIOR TO
THE 2019 AGM

Holdings/
votes atDecember 31,
2019

Name

Appointed byLars Wedenborn

FAM AB

21.1 %

Robert Furuhjelm

Nordic Capital

14.7 %Jan Dworsky

Swedbank Robur Fonder

9.0 %Johan Grip

Första AP-fonden

8.6 %Magnus Lindquist

Chairman, Munters–

The reasoned statement of the Nomination Committee for the2019 AGM states that the Nomination Committee applied Rule4.1 of the Code as its diversity policy in drawing up its proposal
for the Board of Directors. The goal of the policy is for the Board,
given the company’s operations, stage of development, andconditions in general, to have a suitable composition marked bydiversity and breadth as regards the competence, experience,and background of the members elected by the GM, and topromote gender parity. The 2019 AGM resolved to elect Board
members in accordance with the proposal of the Nomination

Committee. The Nomination Committee’s aim is to achieve greater
diversity on the Board of Directors, primarily through the goalof improving gender equality. In the process of finding a new
Board member, the Nomination Committee therefore sought a
female candidate who met the requirements and criteria that theNomination Committee had set with respect to the new member’squalifications. After weighing the desired competences, however,it was decided that Juan Vargues was the best choice. Eight members were elected at the 2019 AGM: two women and six men.

COMPOSITION OF THE BOARD OF DIRECTORS
Attendance

Name
Magnus Lindquist, ordförande
Helen Fasth Gillstedt
Per Hallius
Andreas Näsvik
Lena Olving
Kristian Sildeby
Juan Vargues6)
Johan Ek, interim President and CEO7)
Pia Nordqvist8)
Simon Henriksson8)
Tor Jansson9)
Robert Wahlgren9)

Elected
in
2018
2017
2013
2011
2017
2017
2019
2018
2004
2017
2019
2019

Fee, SEK 1)
1,050,000
400,000
400,000
400,000
400,000
400,000
400,000
400,000-

Committee
fees
100,0002)
150,0003)
150,0002), 3)
100,0003)
50,0002)-

Indepen­dent
Yes
Yes
Yes 4)
No5)
Yes
No5)
Yes
No5)
-

Board
meetings
21/21
21/21
21/21
19/21
18/21
21/21
6/10
21/21
19/21
21/21
8/13
17/21

Audit Compensation
Committee
Committee
8/8
7/7
5/7
8/8
7/7
5/5
-

Compensation determined for work from the 2019 AGM to the 2020 AGM.
Compensation Committee fee.
Audit Committee fee.
4)
Per Hallius has a consulting agreement with Nordic Capital Limited and Nordic Capital Funds.
5)
Independent in relation to the company and Group Management, but not to the company’s major shareholders.
6)
Juan Vargues was elected to the Board of Directors at the AGM on May 8, 2019.
7)
Interim President and CEO through August 12, 2019. During the time he served as interim President and CEO, Johan Ek did not receive any Board fees.
Johan Ek returned to his role as a member of Munters’ Board and received Board fees on a pro rata basis as of August 12, 2019.
8)
Employee representative.
9)
Employee representative, deputy.
1)

2)

3)

Changes to the composition of the Board in 2019
In connection with the 2019 AGM, Joakim Zetterlund stepped
down as a member of the Board of Directors, while Juan Vargues
was elected as a new Board member. On February 26, thetrade union IF Metall elected Tor Jansson as an employee
representative.

Independence of the Board
The company meets the requirements in the Code as a majorityof the members elected by the AGM are independent of the company and company management, and that at least two of them
are independent of the major shareholders. The independenceof the Board members at the time of publication of this report isshown in the table, “Composition of the Board of Directors.”

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CORPORATE GOVERNANCE

2019 Board meetings
In 2019, the Board of Directors held 21 meetings. Following is an overview of the most important issues addressed at these meetings.

February– Decision on Munters Full Potential
Program.
–D ecision on dividend proposal
for the financial year 2018.
– Approval and release of theyear-end report (Q4).

January–R ecruiting process for the
new President and CEO.

68

April
–A
 pproval of the annual
report for 2018.
– Appointment of Klas
Forsström as the new
President and CEO.
– Approval and release of
the Q1 report.

March– Priority issues andorganizational structure.

July– Approval and release of the
Q2 report.
– Decision to repurchaseshares by virtue of the authorization from the 2019 AGM
to safeguard commitments
under the incentive program.

May– Approval of revised
policies proposed bymanagement.
– Reelection ofCompensation and Audit
Committee members andelection of new members.
–D ecision to adopt therules of procedure for the
Board of Directors and therules of procedure for theCompensation and Audit
Committees.

September– Decision to close
Munters’ European
data center in Dison,
Belgium.

October– Approval and release of
the Q3 report.
–R eview of ongoingstrategy work andmanagement changes.

NovemberStrategy andorganizational plans.

DecemberFinancial plan for2020.

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Responsibilities of the Chairman of the Board
The Chairman of the Board of Directors leads and oversees thework on the Board, ensuring that its activities are con-ducted efficiently. The Chairman also ensures that the Swedish Companies
Act and other applicable laws and regulations are observed, thatthe Board receives the training required and that it improves its
knowledge of Munters. The Chairman follows operations in close
dialogue with the CEO, conveys opinions from shareholders to
the other Board members, and serves as spokesperson for the
Board. The Chairman of the Board is responsible for other Board
members receiving sufficient information to perform their work
effectively, and for ensuring that the decisions of the Board are
implemented. The Chairman of the Board is also responsible for
the Board evaluating its work on a yearly basis.
Board fees
The 2019 AGM resolved that fees of SEK 1,050,000 would be
paid to the Chairman and SEK 400,000 each to the other members elected at the meeting. It was further resolved that fees of SEK
150,000 would be paid to the chair of the Audit Committee, withSEK 100,000 to each of the other members of the committee; andSEK 100,000 to the chair of the Compensation Committee, withSEK 50,000 to each of the other members of the committee.
Evaluation of Board activities
An evaluation is conducted each year to ensure the quality of
the Board’s work and to identify any need for additional competence or experience. The Chairman of the Board is responsible
for conducting this evaluation and providing it to the Nomination
Committee. Upon request of the Nomination Committee, theBoard members must participate in interviews with the Nomination
Committee to facilitate the evaluation.
In 2019, the Chairman of the Board conducted an evaluation of
the Board’s work by holding individual discussions and follow-ups
with every member of the Board. The Chairman has reported theresults of the Board evaluation to the Nomination Committee.
Board Committees
The Board of Directors has two committees: the Audit Committee
and the Compensation Committee. Reports to the Board on issues
addressed during the meetings of the Committees are either inwriting or given orally. The work of each committee is performedin accordance with written guidelines and the rules of procedure
stipulated by the Board of Directors. Minutes of committee meetings are provided to all Board members.

5. Audit Committee
The main tasks of the Audit Committee are to ensure that the Boardof Directors fulfills its supervisory duty in relation to internal control, auditing, financial risk management, accounting and financial
reporting; to prepare matters regarding the procurement of audit
and other services provided by the auditor; and to prepare certain
accounting and auditing matters to be resolved by the Board.
The Audit Committee also reviews procedures and routines
for the aforementioned areas. The Audit Committee submits
recommendations and proposals to ensure the reliability of thefinancial reporting and its compliance with generally accepted
accounting principles, continually discusses the company’s
accounting principles and financial control with the auditors andGroup Management, and considers recommended improvements
to internal control. In addition, the Audit Committee monitors theimpartiality and independence of the auditor, evaluates the audit
work, and discusses the collaboration between the auditor andthe company’s internal control function. The Audit Committee
also assists the Nomination Committee in preparing nominations

for auditor and proposals in respect of audit fees by submitting
recommendations to the Nomination Committee.
During the period between two consecutive AGMs, the Audit
Committee is required to hold at least five meetings, normally in
conjunction with the ordinary meetings of the Board of Directors.
In 2019, the Audit Committee consisted of Helen Fasth Gillstedt(Chair), Andreas Näsvik and Lena Olving. The Audit Committee
fulfills the requirement in respect of accounting and auditing
competence as set forth in the Swedish Companies Act. The
Audit Committee had seven meetings in 2019. Board member
attendance is shown in the table, “Composition of the Board of
Directors.”

6. Compensation Committee
The task of the Compensation Committee is to prepare issues
relating to compensation for the CEO and Munters’ other senior
management. The Compensation Committee proposes guidelines for, among other things, the distribution between fixed andvariable compensation, the principal conditions for bonuses
and incentive schemes, conditions for non-monetary benefits,pensions, termination, and severance pay. The Committee also
makes proposals on individual compensation packages for the
CEO and other senior executives. Furthermore, the Compensation
Committee monitors and evaluates the outcome of variable compensation schemes and the company’s compliance with compensation guidelines adopted by the Annual General Meeting.
In 2019, the Compensation Committee consisted of Magnus
Lindquist (Chair), Andreas Näsvik, Joachim Zetterlund (throughMay 8, 2019) and Kristian Sildeby (as of May 8, 2019). The
Compensation Committee held eight meetings in 2019. Board
member attendance is shown in the table, “Composition of theBoard of Directors.”

7. Group Management and CEO
Apart from the President and CEO, Group Management in 2019consisted of four business area Vice Presidents and the CFO,
and seven Group Vice Presidents responsible for the following
central functions: Global Operations, Global Services, Innovation
and Technology, HR & Communications, Strategy & Business
Development, CSR and Investor Relations. Group Managementchanged in 2019, after which it consists, apart from the President
and CEO, of two business area Vice Presidents and the CFO, and
two Group Vice Presidents responsible for the central functions
Global Operations and HR & Communications & Sustainability.
The CEO is responsible for day-to-day management inaccordance with the guidelines and instructions of the Board of
Directors. The CEO’s responsibilities include taking all measuresnecessary to ensure that the organization and control of thecompany’s accounting comply with current rules and regulations.
The CEO also prepares all necessary infor-mation and supporting documentation for Board meetings and, if requested by the
Chairman of the Board, summons the meeting. The CEO reports at
the Board meetings and submits motivated proposals for decision
to the Board of Directors.
The CEO ensures that the Board members continually receive all
information necessary to assess the company’s financial situation. The quality of the report be such that it allows the Board of
Directors to make a well-grounded assessment.
Changes to Group Management in 2019
In conjunction with the publication of the Q4 2018 report, Muntersannounced that CFO Jonas Ågrup would be leaving Munters at
the end of 2019 and that recruitment of a new CFO had begun.
Additionally, it was announced that Peter Lindquist had been
appointed interim Group Vice President Air Treatment as of

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CORPORATE GOVERNANCE
February 13, 2019, replacing Scott Haynes. Klas Forsström took
over as the new President and CEO on August 12, 2019. Johan
Ek, interim President and CEO since December 2018, returned tohis role as a Board member. Annette Kumlien took over as CFO
and Group Vice President on August 12, 2019. She succeeded
Jonas Ågrup, who left the company at the end of December 2019.
Peter Gisel-Ekdahl took over as President of the business area
AirTech on November 1, 2019. He succeeded Peter Lindquist,
who will remain in his interim roles as President of Mist Eliminationand Senior Strategic Advisor. Johan Ekeström was named interim
President of the business area FoodTech as of November 1, 2019.
He succeeded Peter Gisel-Ekdahl.
Remuneration guidelines for senior executives
Guidelines for remuneration to senior executives are evaluated and put forward for approval at the AGM by the Boardof Directors. Compensation for the CEO is prepared by theCompensation Committee and decided by the Board of Directors.
Compensation for other senior executives is prepared by the CEO
and decided by the Compensation Committee.
Munters endeavors to offer total compensation that is reasonable
and competitive in relation to what applies in the country or regionof employment for the respective Group Management member andenables Munters to recruit and retain the senior executives needed
for the company to reach its short- and long-term targets.
Compensation can consist of:
JJ Fixed salary
JJ Variable salary
JJ Other benefits such as pension and insurance
The Board of Directors will annually evaluate whether or not topropose a long-term incentive program to the AGM. The 2019
AGM resolved to introduce a long-term incentive programin the form of an employee stock option program for GroupManagement and certain other key employees.
For additional information on compensation to senior executives, long-term incentive programs and pension benefits, refer toNotes 31 and 32.

8. External Auditor
Munters’ external auditor is appointed by the AGM. The auditor
reviews the Annual Report and the consolidated financial statements, as well as management by the Board of Directors and theCEO. The audit is conducted in accordance with the International
Standards on Auditing and generally accepted auditing standards
in Sweden.
The audit is reported on a continual basis over the year to thecompany’s Audit Committee. During the year, the auditor participated in all Audit Committee meetings and in the Board meeting
where the annual accounts were addressed. The auditor participates in the AGM, describing the audit work and the observations
made in the audit report.
The auditor’s fee for their audit work is paid on a continual basis
according to approved invoices. Apart from audit work, Munters’audit firm EY provided other services during the year, primarily inacquisitions and tax-related issues. For information on remuneration to EY, refer to Note 33.
EY has been Munters auditor since 2010, and Rickard
Andersson, authorized public accountant and member of FAR(the professional institute for authorized public accountants in
Sweden), has been auditor-in-charge since 2019. At Munters’
AGM in 2016, EY was re-elected as auditor for a term of four
years, through the 2020 AGM.

INTERNAL CONTROL OF FINANCIAL REPORTING
Internal control concerns clarity, order and ensuring that what has
to be done is done as intended. Internal control is the collective
term for the organization and the systems, processes and routinesthat enable this.
Munters’ internal control of its financial reporting is basedon the framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This
framework covers five main areas: control environment, risk
assessment, control activities, information and communication,and monitoring.

GROUP STRUCTURE

President and CEO Munters

AirTechFoodTechGlobal Operations

HR, Communications andSustainability

70 

Finance, IT, IR
and Strategy

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Control environment
Internal control is shaped by the overall control environment. The
Board of Directors is responsible for establishing an effective
system of internal control and supervising the work through theCEO. Group Management sets the tone for the business andimproved employees’ awareness of control. One condition for astrong control environment is that there are clearly defined values
in terms of ethics and integrity, and that they are communicatedthrough policy documents such as policies, guidelines, manuals
and codes. For financial reporting, Group Management issues
policies and guidelines to all subsidiaries, which are followed up
with newsletters, telephone conferences and direct control activities. Courses are also conducted for many accounting areas andinternal reporting requirements/systems.
Risk assessment
A risk assessment is conducted on a yearly basis pursuant to
the Group’s risk management policy. The purpose is to identify,
document and quantify the consequences and probability ofevents occurring that would prevent Munters from achieving its
objectives. The risk assessment comprises identifying and evaluating strategic, operational, financial, legal and regulatory risks.
Furthermore, an action plan for the most material risks is prepared.
For more information on Munters’ risk work, refer to pages 56–59.
Control activities
Controls have been designed based on identified risks to detect,prevent and correct errors and discrepancies. Controls can takeplace at the transaction level, as Group level controls and as IT
general controls. Control activities are carried out in the entire
organization, at all levels, and for all functions. Transaction-based
controls, which can be either manual or automatic, are performed
to manage the risk of errors in financial reporting. Reconciliation
and analysis are examples of this type of control. Company-wide
controls pertain to such actions as guaranteeing compliancewith instructions for payment approval rights, authorizations andresponsibilities in credit granting. Examples of general IT controls
are change management, back-up routines and authorizations.
The company’s CFO is responsible for ensuring that identified
risks relating to financial reporting at Group level are addressed.
In each legal entity, the accounting staff is responsible for having
the necessary control activities in place, and that accounting andthe financial statements are fair and correct. Global controllers,
as well as financial directors, in each legal entity update forecasts
and conduct outcome analyses. All business areas present theirfinancial results in written monthly reports to the CFO, who in turnpresents them to Group Management.
During the year, Munters invested in an Internal Control system,
where the subsidiaries report that key controls are performed ona quarterly basis, in accordance with Munters Risk and Control
framework.
Information and communication
Munters has information and communications channels that aim
at ensuring that information is identified, collected and communicated in a way and within a timeframe that enables employees
and directors to perform their tasks. Instructions for reporting andaccounting guidelines are conveyed to the employees concerned
through monthly newsletters and quarterly teleconferences. The
Group uses a shared system for reporting and consolidation offinancial information.
Governing documents – in the form of policies, guidelines andmanuals for financial reporting – are communicated primarily via
the intranet and the Group’s financial handbook, and updated

as needed. Information for external parties is communicated on
the Munters website together with other news and press releases.
Quarterly reports are published and supplemented with presentations and investor meetings. The Annual Report is provided toshareholders and other stakeholders through publication on the
Munters website, and in print upon request.
Monitoring
Monitoring and testing of control activities are routinely conducted throughout the year to ensure that risk has been taken into
account and satisfactorily managed. Testing is carried out by
employees who are independent of the controls and possess thecompetence to evaluate the performance of the controls. Failed
controls must be mitigated, which means that actions must be taken
and implemented to correct deficiencies. Reports are presented to
the Audit Committee twice yearly.
The Board of Directors has final responsibility for all decisions
regarding compliance within Munters. The Board reviews andapproves internal control policies on a yearly basis. If needed,
reviews and approvals are more frequent.
Every head of a division is ultimately responsible for the financial information for their division. The information is followed up
at the business area level by Group Management and, lastly, by
the Board of Directors. Munters’ financial position, strategies andinvestments are discussed at every Board meeting. The Boardis also responsible for monitoring internal control. This includes
ensuring that measures are taken to address any deficiencies
and following up on proposed measures that were pointed out inconjunction with the external audit.
Assessment of the need for a separate internal
audit function
Munters has no internal audit function, as it is the Board’s opinion
that the company’s internal organization and processes formonitoring fulfill this function in a satisfactory manner. For certain
special audits, outside expertise can also be sought.

MUNTERS CONTROL ENVIRONMENT

Risk assessment

Improvement

Inform &Communicate

Control activities

MonitoringM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 71

BOARD OF DIRECTORS & GROUP MANAGEMENT

Board of Directors

Magnus Lindquist

Kristian Sildeby

Chairman of the Board
since December 2018.

Board member since2017.

Education andprofessional
experience:
MBA, Stockholm Schoolof Economics. More than
20 years of experiencefrom senior positionsin global industrial
companies, mainly asGroup Vice President
at Autoliv and Perstorp
Group. Many years ofexperience as a SeniorPartner of Triton.

Education andprofessional experience: BSc in Business
Administration, Stockholm School of Economics. Investment Manager
and CFO at FAM AB.
Former Vice President,
Head of Finance andRisk Management at
Investor AB.

Current assignments/positions:
Chairman of the Board
of Ryds Bilglas. Partnerof CORDET CapitalPartners.
Selected previous
assignments: Chairman of Norma, Ambea,
Alimak and Polygon,
and a board member ofBravida, Mycronic andOvako.
Holding in Munters
Group AB: 3,000,000
call options.
Independent in relation
to the Company andGroup management aswell as the company’s
major shareholders.

Other current assignments/positions:
Chairman of 82an Invest
AB, Board member of
Höganäs AB, Kivra AB,
Nefab Holding AB,
Spendrups Bryggeri AB
and QuNano AB.
Selected previous
assignments: Chairman of Blasieholmen 54
Restaurang AB. Board
member of Lindström& Göthberg Executive
Development AB andPower Wind Partners
AB.
Holding in Munters
Group AB: 6,000
shares.
Independent in relation
to the Company andGroup management, but
not the company’s major
shareholders.

Helen Fasth
Gillstedt
Board member since2017. Chairman of the
Audit Committee.
Education andprofessional
experience: M.Sc. in
Finance & Control andInternational Business,
Stockholm School of
Economics. Studies
in Sustainable Development, Stockholm
Resilience Center at
Stockholm University
and KTH Royal Instituteof Technology. Over
twenty years of experience in senior positionsat Statoil and SAS
Group.
Other current assignments/positions:Board member of Handelsbanken Fonder AB
and its representative on
nomination committees,
Storytel AB, PowerCell
AB, Samhall AB, andCEO of Blong AB.
Selected previous
assignments: Board
member of Humana
AB, AcadeMedia AB,
Lindorff Group AS,
Swedesurvey AB, Svefa
Holding AB (publ),
Intrum AB
Holding in Munters
Group AB: 4,000
shares.
Independent in relation
to the Company andGroup management aswell as the company’s
major shareholders.

72 

Johan Ek

Pia Nordqvist

Board member since
2018.

Board member since2010. Employee representative appointed byUnionen.

Education andprofessional
experience: M.Sc.
in Economics, Hanken
School of Economics in
Helsinki, Finland. Extensive experience frommanagement positions
and board work. Interim
President and CEO of
Relacom and Presidentof Powerwave Technologies Inc and LGP Allgon.
Interim President andCEO of Munters fromJanuary to mid-August
2019.

Position at Munters
Senior Business
Application Specialist,
Munters AB.
Holding in Munters
Group AB: -Current assignments/positions:
Chairman of the Boardof Sunrise Medical and
GHD GmbH, board
member of Handicare.
Selected previous assignments:
Chairman of Handicare,
Saferoad and CPS
Color, board member ofAcino and Ramirent.
Holding in Munters
Group AB: 3,000,000
call options.
Independent in relation
to the Company andGroup management, but
not the company’s major
shareholders.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

Simon Henriksson

Juan Vargues

Andreas Näsvik

Per Hallius

Lena Olving

Robert Wahlgren

Deputy member since2017. Employee representative appointed by
IF Metall.

Board member since
2019.

Board member since2011. Member of the
Audit Committee andthe Compensation
Committee.

Board member since2013.

Board member since2017. Member of the
Audit Committee.

Deputy member since2010. Employee representative appointed byUnionen.

Position at Munters:
Material supplier, Tobo
plant.
Holding in Munters
Group AB: 350 shares.

Education andprofessional experience: Management
education IMD Lausanne (CH); Executive
MBA, Lund University(EFL); and high school
degree in MechanicalEngineering, Tekniska
Vuxengymnasiet,
Gothenburg. Many
years of experiencefrom senior positions
with global manufacturers, including ASSAABLOY and Besam.
Current assignments/positions:
President and CEO of
Dometic Group AB.
Selected previous
assignments: Headof Entrance Systems at
ASSA ABLOY, President
and CEO of theBesam Group, various
positions within the SKF
Group.
Holding in Munters
Group AB:
Independent in relation
to the Company andGroup management aswell as the company’s
major shareholders.

Education andprofessional
experience:
M.Sc. in Economics andBusiness Administration,
Stockholm School of
Economics. Work withcorporate finance,
private equity, mezzanine investing and debt
restructuring in DeutscheBank, Goldman Sachs
Investment Banking andGoldman Sachs CapitalPartners.
Other current assignments/positions:Board member of Ryds
Bilglas. Partner of NC
Advisory AB, advisor
to the Nordic CapitalFunds, and board
member of Intrum AB.
Selected previous
assignments: Board
member of Lindorff AB.
Holding in Munters
Group AB: Independent in relation
to the Company andGroup management,
but not in relation to
the Company’s major
shareholders

Education andprofessional experience: MBA, Harvard
Business School. M.Sc. in
Economics and Business
Administration, Stockholm School of Economics. Independent advisor,board representativeand investor. Almost 25
years in management
consulting, most recently
as Senior Partner at
the Boston Consulting
Group.
Other current
assignments/
positions: Chairmanof Nefab Group AB.
Deputy Chairman of
Ruukki Construction Oy.
Board member of PMH
Affärsutveckling AB,
Beowulf AB and Quant
AB. Industrial advisor to
Nordic Capital Funds.
Advisor to senior executives in large industrial
multinationals.
Selected previous assignments:
Chairman of the Boardof United Minds Samhällsanalys AB and My
Academy Sweden AB.
Holding in Munters
Group AB: 84,031
shares.
Independent in relation
to the Company andGroup management aswell as the company’s
major shareholders. Per
Hallius has a consultancy
arrangement with Nordic
Capital Limited and theNordic Capital Funds.

Education andprofessional
experience: M.Sc. in
Mechanical Engineering, Chalmers Universityof Technology. Various
senior positions at Volvo
Cars, including 5 years
in Asia and 7 years inGroup Management.
Former President andCEO of Mycronic AB(publ.), Samhall Highland AB, and COO anddeputy CEO of Saab AB(publ.).

Position at Munters:
Customized Project
Engineering Coordinator, Munters Europe AB.
Holding in Munters
Group AB: -Other current assignments/positions:
Partner and founder of
Olving & Ohberg AB,
Chairman of Academic
Work Holding AB,
Chairman of the Swedish
Royal Opera. Board
member of Assa Abloy
AB (publ.), Investment
AB Latour (publ), NXP(publ) and IVA’s Business Executives Council(Näringslivsrådet).
Selected previous
assignments: Board
member of Alfa Laval(publ.), Gunnebo AB(publ.), Norsk Hydro(publ.) Novozymes AS(publ.) and SJ AB.
Holding in Munters
Group AB: 500 shares
Independent in relation
to the Company andGroup management aswell as the company’s
major shareholders.

Tor Jansson
Deputy Board member andemployee representative
appointed by IF Metall
is not shown in the photo.

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BOARD OF DIRECTORS & GROUP MANAGEMENTGroup Management
In February 2020, Munters announced that an organizationalchange has been done. The previous role “Global Operations”,
part of the Group Management Team, has been changed into
“Strategic Operations” with focus to drive continuous improvements, including production processes, tools and processes in theoperations to be used by both business areas and an optimizationof the different factories. Two new roles has been added to theGroup Management Team:
Innovation, with focus on driving the research and development
process, which includes coordination of shared technology between
the business areas and the product development process. The role ofCommercial Excellence has also been added, with a focus on coordinating the development and training of the sales process, driving

Annette Kumlien

Klas ForsstromGroup Vice President
and CFO since August
12, 2019

President and CEO sinceAugust 12, 2019

Education: Bachelorof Science in Business
Administration from
Stockholm School of
Economics.

Education: M.Sc. inMaterials Physics andan MBA from Uppsala
University as well as
advanced management
studies at INSEAD.

Previous assignments and professional experience:
SVP and COO of
Diaverum and prior tothat CFO. Former CFO
of a several listed companies such as Höganäs
and Pergo as well as
business controller at
Perstorp and Sandvik.

Previous assignments and professional experience:
Former President of
Sandvik Machining
Solutions. Over 20 yearsof senior management
positions at Sandvik,
including as President of
Sandvik Hard Materials
and Sandvik Coromant.

Holding in Munters
Group AB: 4,000
sharesHolding in Munters
Group AB: 14,200
sharesKatarina
LindströmGroup Vice President
Global Operations since
2018
Education: M.Sc.
Material Science, KTH
Royal Institute of Technology, Stockholm.
Professional
experience: Various
management positions
at Volvo since 1988,
such as Senior Vice
President International
Manufacturing, Volvo
Group Trucks Operationand Senior Vice
President, Operations
and Supply Chain Management at Volvo Group
Trucks Operation. Board
member of Gränges andelected member of theSwedish Royal Engineering Academy.
Holding in Munters
Group AB: 10,000
shares.

74 

the development of pricing strategies and Munters different go-to
market methods. Recruitment is ongoing for these roles.
Katarina Lindström, Group Vice President, Global Operations,has decided to leave Munters during 2020 due to the changeof the role Global Operations, after securing a good transition.
Stefan Måhl, has been appointed as interim Vice President ofStrategic Operations.
In February 2020 it was announced that Pia Brantgärde Linder,
currently Business Unit Manager of High Voltage Products inNorthern Europe at ABB, has been appointed President of Business
Area FoodTech as of August 16, 2020. Johan Ekeström willcontinue in his dual roles as interim President of FoodTech and Vice
President Finance at FoodTech until Pia takes on her new position.

Johan Ekeström

Sofia Gellar

Interim President of
FoodTech since November 1, 2019

Group Vice President
HR, Communications
and Sustainability since
2018

Education: M.Sc. in
Economics and Businessfrom the Stockholm
School of Economics,
MBA courses at Carlson
School of Management,
University of Minnesota.
Previous assignments and professional experience:
Johan has been withMunters since 2011 inseveral management
positions within Finance,
Product Marketing andBusiness Development.
Prior to this, he held
positions at McKinsey &Company and Procter &Gamble.
Holding: –Education: Bachelorof Science in Human
Resources Development
and Labor Relations,
Stockholm University.
Professional
experience: Morethan 20 years of experience within Human
Resources, including
as Head of Corporate
HR and Head of HR
Support at Scania, Headof Talent Management
at SSAB EMEA and VP
Human Resources Ruukki
Construction.
Holding in Munters
Group AB: –Peter
Gisel-EkdahlGroup Vice President of
AirTech since November
1, 2019
Education: M.Sc. in
Chemical Engineering,
KTH Royal Institute ofTechnology. M.Sc. in
Business Administration,
Copenhagen Business
School.
Previous assignments and professional experience:Group Vice Presidentof FoodTech from2011 through October
2019, various positionsat Wedholms andHackman. Deputy board
member of Drivec AB.
Other current
assignments: Board
member of ABECE AB
and Wedcooling AB.
Holding in Munters
Group AB: 191,176
shares and 295,000
warrants

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Auditor’s report
AUDITOR’S REPORT ON THE
STATUTORY SUSTAINABILITY
STATEMENT

AUDITOR’S REPORT ON THE
CORPORATE GOVERNANCE
STATEMENT

To the general meeting of the shareholders of Munters Group AB(publ.), corporate identity number 556819-2321

To the general meeting of the shareholders of Munters Group AB(publ.) corporate identity number 556819-2321

Engagement and responsibility

Engagement and responsibility

It is the Board of Directors who is responsible for the statutory
sustainability statement for the year 2019-01-01 – 2019-12-31,
for which the extent is presented on page 46, and that it has been
prepared in accordance with the Annual Accounts Act.

It is the Board of Directors who is responsible for the corporate
governance statement for the year 2019-01-01 – 2019-12-31 on
pages 64-71 and that it has been prepared in accordance with
the Annual Accounts Act.

The scope of the audit

The scope of the audit

Our examination has been conducted in accordance with FAR’s
auditing standard RevR 12 The auditor’s opinion regarding thestatutory sustainability statement. This means that our examinationof the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinions.

Our examination has been conducted in accordance with FAR’s
auditing standard RevU 16 The auditor’s examination of thecorporate governance statement. This means that our examinationof the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinions.

Opinions

Opinions

A statutory sustainability statement has been prepared.

A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 the second
paragraph points 2-6 the Annual Accounts Act and chapter 7
section 31 the second paragraph the same law are consistent withthe annual accounts and the consolidated accounts and are inaccordance with the Annual Accounts Act.

Stockholm 20 March 2020
Ernst & Young AB

Rickard Andersson
Authorized Public Accountant

Stockholm 20 March 2020
Ernst & Young AB

Rickard Andersson
Authorized Public Accountant

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BOARD OF DIRECTORS’ REPORTMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

1

FINANCIAL REPORTS | Board of Directors’ Report

BOARD OF DIRECTORS’ REPORT
Board
of Directors’ report
The Board of Directors and the CEO of Munters Group AB (publ),
corp. reg. no. 556819-2321, with its registered office in Stockholm, Sweden, hereby submits the consolidated accounts andannual report for the fiscal year January 1 to December 31
2019. “Munters Group AB” or “the Parent Company” refer toMunters Group AB (publ), and “Munters” or “the Group” referto the Munters Group, which comprises Munters Group AB and
its Group companies.
The Board of Directors approved the annual accounts for publication March 17, 2020. The consolidated and Parent Company
income statements and balance sheets will be submitted for approval at the Annual General Meeting on
May 7, 2020.

OPERATIONSThe Munters Group is a world-leading supplier of energy efficientdehumidification and air treatment solutions. Using innovativetechnology, Munters’ experts create the perfect climate forcustomers in a variety of business segments. Munters has been apioneer in the field of air treatment since the company was
founded in 1955. As of now production and sales occur in over
30 countries by our 3,100 coworkers. Munters AB has since 2017
been listed on Nasdaq Stockholm. Since the beginning of 2019the operation is organized into two business segments: AirTech
and FoodTech, read more under significant event during the year.

The summary below for 2019 refers to continuing operations and, with respect to the income statement for 2018, is restated for discontinued operations; see also the next section. The profit/loss items order intake, net sales, EBIT and operating margin for the period 20152017 are also restated for discontinued operations and reflect the continuing operations.
Five-year summary

2019

2018

2017

2016

2015

Order intake, SEKm

7,302

6,698

6,316

5,840

5,262

Net sales, SEKm

7,153

6,412

6,122

5,610

5,337

Earnings before interest and tax, SEKm

556

529

491

537

383

EBIT margin, %

7.8

8.3

8.0

9.6

7.2

Profit/Loss after financial items, SEKm

367

404

152

153

13

Income for the year, SEKm

283

327

173

85

-18

3,062

2,843

2,661

2,724

2,617

36

40

41

38

37

10,093

9,268

9,198

8,991

8,008

Net debt, SEKm 1)
Equity/assets ratio, % 1)
Total assets, SEKm
Investments (excl. leased assets), SEKm
Average number of employees
1)

232

170

183

112

3,653

3,559

2,953

2,874

Net debt and the equity/assets ratio for the years 2014–2016 are calculated excluding shareholder loans.

Discontinued operations
The income statement has been restated for the years 2019 and2018 to reflect discontinued operations in line with IFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations.
Discontinued operations is defined as the business connected to
the Data Centers operations in Dison, Belgium, where the production has ceased but minor installation services remains at customer
sites. All income statement items in this report refers to Munters continuing operations, if not otherwise stated. See more information innote 9.
Order intake and net sales
Group
Order intake increased with 9% to SEKm 7,302 (6,698), corresponding to an organic increase of 3%.
Net sales increased with 12% to SEKm 7,153 (6,412), corresponding to an organic increase of 6%.
AirTechBusiness area AirTech order intake increased by 14% and by 8%organically, driven by strong order intake in Data Centers US thatduring 2019 expanded the solution portfolio and Mist Elimination.
Services had increased order intake during the year, whereas demand from the Supermarket segment was low. The Industrial segment saw weak order intake, with lower volumes in the lithium battery sector in China and lower demand from Aerospace applications in the Americas.
Net sales in AirTech increased by 17% and by 10% organically,
mainly driven by an increase in Data Centers US and Mist Elimination. Services increased sales by 8% organically. The Industrial
segment increased sales for the year driven by a strong demand
76 

191
3,406

from the lithium battery segment, which was partially offset byweaker demand from the Aerospace segment.
FoodTechBusiness area FoodTech order intake declined by -1% andorganically by -6%. This was primarily driven by a weaker demand
from the swine segment in China and the US. In the US demand
was weaker as a consequence of an overcapacity in the swine
market, together with uncertainties related to consequences fromnew trade tariffs and the African Swine Flue (ASF) that also affected the demand in China negative.
Business area FoodTech net sales increased by 1% and decreased for the full year of -5% 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. Net sales this year have
had a slightly more positive development than order intake, assome of the order intake growth in 2018 included Software as aService contracts recognized over several years.
Gross profit
Gross profit amounted to SEKm 2,331 (2,252) and gross margin
was 32.6% (35.1).
Indirect costs
Selling and administrative costs for Munters amounted to SEKm
1,580 (1,539) corresponding to 22% (24) of net sales. Currencytranslation effects increased the cost by SEKm 80 compared to2018.

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

BOARD OF DIRECTORS’ REPORT

Operating profit (EBIT) and Adjusted EBITA
Group
Operating profit 2019 was SEKm 556 (529), corresponding to an
operating margin of 7.8% (8.3%). Depreciation amounted to SEKm
213 (95) and amortizations and write-downs of SEKm 134 (157),
where SEKm 88 (133) was related to amortization of intangible assets from acquisitions. Depreciation of leased assets for the fullyear was SEKm 106 (-) (see specification of IFRS 16 impacts on
page 21). EBIT was also impacted by SEKm 181 (39) due to IAC´srelated to the continuing operations.
Amounts in SEKm
EBIT, including discontinued
operation
EBIT, discontinued operation
EBIT, continuing operation
Amortizations intangeble assets,continuing operation
EBITA, continuing operation
Items affecting comparability incontinuing operation
Adjusted EBITA, continuing
operation

AirTechFoodTech

Other

Total

115
-450
565

226
0
226

-236
0
-236

105
-450
556

-31
595

-15
242

-88
-147

-134
690

-67

-36

-78

-181

662

278

-69

871

AirTechAdjusted EBITA in business area AirTech increased 27% to SEKm
662 (522), corresponding to an adjusted EBITA margin of 12.8%(11.8). The improved margin is a result of higher volumes and ahigh utilization rate, together with a changed product mix andlower indirect costs resulting from the Full Potential Program (FPP).
FoodTech
Adjusted EBITA in business area FoodTech increased 12% to SEKm
278 (249) corresponding to an adjusted EBITA margin of 13.7%(12.4). The improvement compared to last year was driven bysavings 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.
Net financial items

The comments below on financial income and expenses relates toMunters total business, i.e. including the discontinued operation.
Financial income and expenses for the year amounted to SEKm
-194 (-127). The increase was mainly due to increased interest
rates and higher interest expenses related to IFRS16.
Taxes
Income taxes for the full year was SEKm -83 (-77) and the effective
tax rate was 23% (19).
Items affecting comparability
During 2019 Munters has incurred IACs relating to the FPP program launched in February 2019 as well as IACs related to otheroperating excellence initiatives. The IACs have been incurred inboth the continuing operation as well as the discontinuing operation. IACs amounted to SEKm 554 (39).
Items affecting comparability for continuing business amounted to
SEKm 181 (39), whereof SEKm 153 related to the FPP-programand consisted mainly of severance costs.
The closure of the Data Centers factory in Dison, Belgium, hasbeen a part of the FPP program. During the third quarter 2019, theclosure of Dison was decided and as of then the European Data
Centers business, and the related IAC´s, has been defined as a discontinued operation in accordance with IFRS 5. IACs amounted to
SEKm 257, of which SEKm 239 (0) was related to the FPP program and SEKm 139 was severance pay and SEKm118 was warranty and other accruals as well as fixed asset and inventory writedowns.

2

In relation to the closure process of Dison, specified components,
for a previously sold customized Munters solution, had to be replaced at a specific customer’s sites. Because of this, Munters incurred non-recurring cost of SEKm 116 in the third quarter 2019,
which was paid in the fourth quarter. This cost is not included in
the total cost for the FPP program described above. Munters has insurance solutions in place for this type of events, but since Munters
has not concluded the discussions with the relevant customer andits insurance providers the final financial and cash flow net effecton Munters cannot yet be determined.
Investments

Comments about financial items refers to Munters total business,
i.e. including discontinued business.
Investments in tangible assets amounted to SEKm 118 (148).
A large portion relates to machinery and equipment prom the production units in Mexico, Italy, US, China and Germany. Depreciations totaled to SEKm 280 (99).
Investments in intangible assets excluding goodwill other assets
related to acquisitions totaled to SEKm 74 (84). Amortizations
amounted to SEKm 132 (504). In 2018 a write-down of SEKm
324 of goodwill in Data Centers was made.
Goodwill
Goodwill as of December 31, 2019 amounted to SEKm 4,348(4,218). The increase is result of currency effects from a weaker
SEK in relation to USD in comparison to last year.
Financial position and liquidity
On April 1, 2019, Munters was granted an additional revolving
credit facility of MEUR 19 in order to ensure sufficient level of payment capacity through the FPP program, which included cost andpayments of one time character. The facility matured as of December 21, 2019.
Munters primary financing facilities consists of a term loan of
USDm 250 and a revolving credit facility of EURm 185. 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 affectthe covenant calculation according to the loan agreement definition. For further information on the IFRS 16 effect, see section Accounting Policies. Interest-bearing liabilities amounted to SEKm
3,497 (3,013). Cash and cash equivalents amounted to SEKm
722 (404) as of December 31, 2019.
At quarter end the term loan was fully drawn with USDm 250
and EURm 91 of the total revolving credit facility were utilized in
EUR, USD and SEK. Available unutilized credit facilities as of December 31 amounted to SEKm 985 (918). Along with the mainloan facility, an amount of EURm 25 (13) in local debt is outstanding in i.a. China and Brazil.
SIGNIFICANT EVENTS DURING THE YEAR
During the first quarter Munters was reorganized from four Business segments to two. Business segments went through a namechange as well, Air Treatment was renamed to AirTech and AgHort became FoodTech. Former business segments, Data Centers
and Mist Elimination, are as of 2019 a part of AirTech.
In February 2019, Munters announced the launch of a threephase 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. The process to close the factory
was decided and initiated in the third quarter. During 2019,
Munters gradually shifted focus to the second phase of the program, which included activities such as driving business mix to-

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BOARD OF DIRECTORS’ REPORTMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 20193

FINANCIAL REPORTS | Board of Directors’ Reportwards most attractive applications, a more focused product development, etc. 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 canbe established. The total yearly run-rate overhead cost saving fromthe program was well in line with the SEKm 210 at the end of theyear 2019. The program has been implemented successfully andthe financial targets have been realized. The majority of the actions
took effect already during the first half of 2019. Specifically for theDison closure, the reporting of the European Data Center businessas a discontinued business means that the full impact was realized
already in 2019.
Non-recurring charges for the FPP program totaled SEKm 392
and they were all charged in 2019. The FPP program has temporarily increased the leverage during 2019 and necessary consent
from the lending banks has been received.
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. Johan Ek, the interim President
and CEO of Munters from December 2018 until August 12, 2019,
remain in his current role as a member of the Board of Directors of
Munters. In May, Munters Group AB appointed Annette Kumlien as
the new Group Vice President and CFO. Annette Kumlien took overon August 12, succeeding Jonas Ågrup, CFO at Munters since2011. Annette previously held positions at Diaverum as COO andCFO.
The Annual General Meeting in May 2019 resolved in accordance with the Board’s proposal to implement a long-term performance based employee stock option program for members of theGroup management and certain other key employees (“LTIP2019”), approximately 72 employees in total. The program was tocomprise no more than 1,595,000 employee stock options divided in three series. No more than 100,000 of these employee stock
options would be cash settled, with the remainder entitling the acquisition of shares in the company. A total of 68 employees accepted the offer, comprising 1,498,000 employee stock options,whereof 80,000 cash settled. The employee stock options havebeen granted free of charge. For more information on the program, see Note 32.
In August, Munters repurchased a total number of 385,000
shares pursuant to the authorization granted by the Annual General Meeting 2019. The purpose of the repurchases was to secure
the delivery of shares to the participants of Munters’ long-term incentive programme.
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 Muntersbusiness area FoodTech since 2007 and a member of Group Management team since 2011. Johan Ekeström was appointed Interim
President for FoodTech as of 1 November 2019.
FINANCIAL INSTRUMENTS
Financial instruments in the Group, beyond those arising in operating activities, consist of interest-bearing bank borrowings and currency derivatives. Further information on the financial instruments ispresented in Notes 3, 19 and 20.
RESEARCH AND DEVELOPMENT
Costs for research and development amounted to SEKm 197(191), corresponding to 2.8 % (3.0) of net sales. Capitalization ofinternally generated intangible assets amounted to SEKm 62 (60).
Activities in the area comprise research initiatives, technologicaland product development, and product ownership. To ensure sustainable value creation, innovation, development and productlaunches are balanced. A clear trend has been to focus on digitization and smarter products, which will create great opportunities in

78 

both business areas. Sustainability and energy efficiency are something Munters considers very important, and a large part of our research resources are used for the development of new technologies
in these areas.
EMPLOYEESThe number of permanent employees at year-end was 3,088(3,518). The decrease was mainly due to the three-phase plan aspart FPP to capture Munters’ full potential to improve the Group’s
earnings. The single biggest contributor to the personnel decrease
was the closing of the European Data Centers factory in Dison, Belgium.
Employee turnover was 26% (19). The high turnover mainly relates to Belgium, where the European Data Centers factory wasclosed during the year, as well as the US and Mexico, where
Munters has large production operations. The average age was 43(42). Women accounted for 21% (19) of employees.
For remuneration to senior management as well as adopted remuneration guidelines see Note 31.
FINANCIAL RISKS
Financial risks mainly consist of currency, interest and financing
risks. Global economic development, including changes in interest
and currency rates, is an uncertainty for future profitability. A moredetailed description of financial risks and how they are controlled
and managed is provided in Note 3. For a description of risks
other than financial risks, see page 56.
PARENT COMPAN Y
The Parent Company does not engage in sales of goods and services to external customers. Cash and cash equivalents at the endof the period amounted to SEKm 28 (77). The Parent Company
had four permanent employees, two men and two women.
SHARE CAPITAL AND OWNE RSHIPThe share capital of SEK 5,507,934 comprises 183,597,802
shares, whereof 1,852,000 shares in custody, with a par value of
SEK 0.03 per share, accounting for 1.0%. The shares in Munters
Group AB are listed on Nasdaq Stockholm under the symbol
MTRS. Munters Group AB’s ten largest shareholders as of December 31, 2019 hold a total of 69.6% (86.3) of the number of shares
outstanding. Of these, FAM AB holds 21.1 % (11.4), followed by
Nordic Capital indirectly, through its fund Nordic Capital VII, with
14.7% (50.1). No other shareholder holds more than ten percentof the shares in Munters Group AB either directly or indirectly.
PROPOSAL O N DISTRIBUTION OF DIVIDEND
Earnings of SEK 4,133,272,124 are at the disposal of the Annual
General Meeting. The Board of Directors of Munters Group AB
propose that the Annual General Meeting 2020 resolve that nodividend be paid, and that the standing profits at the disposal of
the AGM be carried forward.
PROVISIONS IN ARTICLES OF ASSOCIATIONThe Annual General Meeting is charged with appointing and dismiss Board members. The Annual General Meeting decides onchanges to the Articles of Association.
GUIDELINES FOR REMUNERATION TO SENIOREXECUTIVES
The guidelines for remuneration to senior executives that has applied in 2019 are shown in Note 31. The company's auditors
have reviewed that the guidelines decided by the Annual General
Meeting have been followed

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BOARD OF DIRECTORS’ REPORTThe Board of Directors proposes that the 2020 annual general
meeting resolve on guidelines for the remuneration of senior executives to be in force until further notice, pursuant to the following.
The group of executives encompassed by the guidelines comprises the CEO and other members of the group management. The
guidelines also encompass any remuneration to Board members,
other than Board fees. The guidelines shall apply to remunerationagreed, and amendments to remuneration already agreed, after
adoption of the guidelines by the 2020 annual general meeting.
The guidelines do not apply to any remuneration resolved by thegeneral meeting.
The guidelines’ promotion of the company’s business strategy,
long-term interests and sustainability
Munters business strategy is to be a global leader in energy-efficient and sustainable climate solutions. Our solutions enable energy efficient production processes with reduced carbon dioxide
emissions for our customers. Through innovative technologies, theGroup creates the perfect climate for demanding industrial applications, the largest segments of which are manufacturing, defense,
data centers, food, pharmaceutical and agriculture.
Munters conducts operations in two business areas:• AirTech is a global leader in energy-efficient air treatment forindustrial and commercial fields of application.
• FoodTech is one of the world’s leading suppliers of innovativeand energy-efficient climate systems for livestock farming andgreenhouses, as well as software for controlling and optimizing
the entire food production value chain.
For further information regarding Munters business strategy, see
Munters website (https://www.munters.com/en/about-us/muntersin-short/).
A prerequisite for the successful implementation of Munters business strategy and safeguarding of the company’s long-term interests, including its sustainability, as well as delivery on the ambitions the company has, is that the company is able to recruit andretain qualified personnel. In order to do so, Munters must be able
to offer a competitive total remuneration based on market terms,
which these guidelines enable.
Munters has implemented long-term share-related incentive programs in 2017, 2018 and 2019, in which some senior executives
have had the opportunity to participate. These programs havebeen resolved by each general meeting and are therefore excluded from these guidelines. The long-term share-related incentive
program proposed by the Board of Directors to the 2020 annual
general meeting to resolve on, or any other future share-related incentive program resolved by the general meeting, are excluded forthe same reason. For information regarding performance criteria,
terms and conditions, and costs for these programs, see the Boardof Directors’ complete proposal for each general meeting on
Munters website and in Munters annual report.
Variable cash remuneration covered by these guidelines shall
aim to promote the company’s business strategy and long-term interests, including its sustainability.
Types of remuneration, etc.
The remuneration shall be on market terms and may consist of thefollowing components: fixed annual cash salary, variable annual
cash salary, pension and other benefits. Additionally, the general
meeting may – irrespective of these guidelines – resolve on, for example, share and share price-related remuneration.
Fixed cash salary
The fixed cash salary shall reflect the demands and responsibility
that the position entails as well as individual performance. The
fixed cash salary shall be revised annually.
Variable cash salary
Variable cash salary shall be maximized to 140 per cent of the

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

4

fixed annual cash salary for the CEO and 70 per cent of the fixedannual cash salary for other members of the group management.
The satisfaction of criteria for awarding variable cash salary shallbe measured over a period of one year.
The variable cash salary shall be linked to predetermined andmeasurable financial criteria, such as operating result and working
capital. By linking the remuneration of the senior executives to thecompany’s earnings and financing of its operating activities, thecriteria promote the implementation of the company’s businessstrategy and long-term interests, including its sustainability. Furthermore, the criteria for variable cash salary shall be designed so thatthey do not encourage excessive risk taking.
To which extent the criteria for awarding variable cash salary
has been satisfied shall be evaluated when the measurement period has ended. The Board of Directors is responsible for the evaluation so far as it concerns variable cash salary to the CEO. For variable cash salary to other members of the group management, theCompensation Committee is responsible for the evaluation. For financial objectives, the evaluation shall be based on the latest financial information made public by the company.
Terms and conditions for variable cash salary shall be designed
so that the Board of Directors, if exceptional economic circumstances prevail, has the option of limiting or refraining from payment if such a measure is considered reasonable.
Additional variable cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are limited in time and only made on an individual basis, either for the purpose of recruiting or retaining executives, or
as remuneration for extraordinary performance beyond the individual’s ordinary tasks. Such remuneration may not exceed an amountcorresponding to 50 per cent of the fixed annual cash salary andshall not be paid more than once per year and per individual. Resolution on such remuneration shall be made by the Board of Directors based on a proposal from the Compensation Committee.
PensionFor the CEO, pension benefits, including health insurance, shall bedefined contribution. Variable cash salary shall not qualify for pension benefits. Pension contributions for defined contribution pension
shall amount to not more than 35 per cent of the fixed annual cash
salary.
For other members of the group management, pension benefits,
including health insurance, shall be defined contribution unless theexecutive concerned is subject to defined benefit pension under
mandatory collective agreement provisions. Variable cash salary
shall qualify for pension benefits to the extent required by mandatory collective agreement provisions applicable to the executive.
Pension contributions for defined contribution pension shall amountto not more than 35 per cent of the fixed annual cash salary.
Other benefits and compensation
Other compensation may consist of other benefits that are customary and in line with market terms, such as medical insurance, life
insurance and company cars, which shall not constitute a significant part of the total remuneration. Such benefits may amount to
not more than 10 per cent of the fixed annual cash salary.
For employments governed by rules other than Swedish, pension
benefits and other benefits may be duly adjusted for compliancewith mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
Consultancy fee to Board members
In specific cases, and for a limited time, Munters Board members
elected by the general meeting may be able to be remunerated forservices within their respective areas of expertise, which does notconstitute board work. For these services (including services performed by a Board member wholly-owned company), a fee on

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BOARD OF DIRECTORS’ REPORTMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

5

FINANCIAL REPORTS | Board of Directors’ Reportmarket terms can be paid, provided that such services contribute to
the implementation of Munters business strategy and safeguardingof Munters long-term interests, including its sustainability. Such consultancy fee may, for each Board member, in no case exceed one
year’s Board fee.
Termination of employment
Fixed cash salary during the notice period and severance pay, as
well as remuneration for any non-compete restrictions, shall in total
not exceed an amount corresponding to the fixed cash salary for
two years for the CEO and 18 months for other members of thegroup management. Severance pay shall not be paid if notice oftermination of employment is made by the CEO and other members of the group management. The notice period between thecompany and the CEO, and other members of the group management, shall not exceed 6 months.
Remuneration for any non-compete restrictions shall compensate
for any loss of income and shall only be paid for such period as
the former executive does not have the right to severance pay. The
remuneration shall amount to not more than 60 per cent of the
fixed annual cash salary at the time of termination of employment,
unless otherwise provided by mandatory collective agreement provisions, and shall be payable during the period subject to the noncompete restriction, which shall not exceed 12 months after termination of employment.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the company and the group’s Swedish operation havebeen taken into account by including information on the employees’ total remuneration, the components of the remuneration andincrease and growth rate over time, in the Compensation Committee’s and the Board of Directors’ basis of decision when evaluating
whether the guidelines and the limitations set out herein are reasonable. In the company, i.e. in Munters Group AB, there are only
four employees (all are senior executives).
Preparation and decision-making process
The Board of Directors has established a Compensation Committee. The committee’s tasks include, among other things, preparing
the Board of Directors’ decision to propose guidelines for remuneration to senior executives. The Board of Directors shall prepare a
proposal for new guidelines at least every fourth year and submit
the proposal to the annual general meeting. The guidelines shall bein force until new guidelines are adopted by the general meeting.
The Compensation Committee shall also monitor and evaluate
programs for variable remuneration for the group management, theapplication of the guidelines for remuneration to senior executives
as well as the current remuneration structures and compensationlevels in the company. The CEO and other members of the groupmanagement do not participate in the Board of Directors’ processing of and resolutions regarding remuneration-related mattersin so far as they are affected by such matters. Remuneration to the
CEO is prepared by the Compensation Committee and decided by
the Board of Directors. Remuneration to other members of thegroup management is prepared by the CEO and decided by theCompensation Committee.
Derogation from the guidelines
The Board of Directors may temporarily resolve to derogate fromthe guidelines resolved by the general meeting, in whole or in part,
if in a specific case there is special cause for the derogation and aderogation is necessary to serve the company’s long-term interests,
including its sustainability, or to ensure the company’s financial via-

80

bility. As stated above, the Compensation Committee’s tasks include preparing the Board of Directors’ resolutions in remunerationrelated matters, which includes preparing any resolutions to derogate from the guidelines.
SIGNIFICANT EVENTS AFTER PERIOD END AND FUTURE
OUTLOOK
During 2019 a strategic evaluation of the Data Centers and Mist
Elimination operations has been conducted. In February 2020, thisresulted in a decision to keep these businesses in Munters. Bothbusinesses made significant progress during 2019. Considering
our refined strategic direction we see a good strategic fit. Bothbusinesses operate in markets with good growth potential, driven
by digitalization and high demands for sustainable solutions.
In February an organizational change was announced. Thechange aims at creating a clearer business ownership and capture
local synergies and value drivers across the Group, by aligning thevalue chain within the business areas. The change means that thebusiness areas have full profit and loss responsibility for their respective area. The role Global operations in the Group management team will be changed into a Strategic operations role with focus on driving lean practices, manufacturing excellence, shared
tools and processes and overall footprint optimization. Two roles
have been added: Innovation, with focus on driving R&D processes, including shared technologies coordination and product introduction development and Commercial excellence, with focus on
coordinating sales training, drive practice of value selling, pricing
strategies and go-to-market methods.
In February 2020, it was also announced that Pia Brantgärde
Linder, currently Business Unit Manager of High Voltage Products
in Northern Europe at ABB, has been appointed President of business area FoodTech as of August 16, 2020. Pia has had a longcareer at ABB. She is currently Senior Vice President and the Business Unit Manager for High Voltage Products in Northern Europe.
Pia has a Master of Science in Mechanical Engineering from
Chalmers University of Technology and an Executive Master inBusiness Administration (EMBA) from Stockholm School of Economics.
In late 2019, a coronavirus was found in China that can spreadto humans and cause the disease Covid-19. In early 2020, theglobal spread of the corona virus escalated. The way in which andto what extent the spread of the virus may affect Munter's businessand financial prospects in 2020 is still too early to have a wellfounded understanding of.”
CORPORATE GOVERNANCE REPORT ANDSUSTAINABILITY REPORT
Munters Group AB has chosen to prepare the Corporate Governance Report and Sustainability Report as a separate documentfrom the Annual Report. The Corporate Governance Report is outlined on Pages 64–71and the Sustainability Report on
Pages 46-55. For descriptions of risks and controls in conjunction
with preparation of the consolidated accounts, refer to the Corporate Governance Report.
FINANCIAL STATEMENTS AND NOTESThe Group’s income and financial position in other respects arepresented in the following statements of comprehensive income,financial position, cash flows and changes in equity, as well as in
the Notes. The Parent Company’s income and financial position inother respects are presented in the following income statement andbalance sheet, statement of changes in equity, cash flow statement
and notes. All amounts are in millions of Swedish kronor (SEKm)
unless otherwise specified.

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

6

FINANCIAL REPORTS | FINANCIAL STATEMENTS

STATEMENTS OF COMPREHENSIVE INCOME

Statement of comprehensive income
GROUP
Amounts in SEKm

Note

2019

2018

4, 6

7,153
-4,822

6,412-4,160

2,331

2,252

7

9
-970
-610
-197
-7

14
-987
-553
-191
-6

5, 7, 8, 9

556

529

Net sales
Cost of goods sold
Gross profit/loss
Other operating income

7

Selling expenses
Administrative costs
Research and development costs
Other operating expenses
Earnings before interest and tax (EBIT)
Financial income

10

7

5

Financial expenses

10

Profit/Loss after financial items
Tax

11

-196
367
-83
283

-130
404
-77
327

-448

-421

Net income for the year

-164

-94

Attributable to Parent Company shareholders
Attributable to non-controlling interests

-166
2

-105
11

181,983,219
181,983,219

183,165,852
183,165,852

Net income for the year from continuing operation
Net income from discontinued operation

9

Average number of outstanding shares before dilution
Average number of outstanding shares after dilution

Earnings per share for net income for the year from continuing operation attributable to the ordinary equity holders of the company:
21
1.55
Earnings per share before dilution, SEK
21
Earnings per share after dilution, SEK
1.55

1.73
1.73

Earnings per share for net income for the year attributable to the ordinary equity holders of the company:
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK

-0.91
-0.91

-0.57
-0.57

122

193

24

-44

-17

11

Other comprehensive income, net after tax

9
87

4
179

Comprehensive income for the year
Attributable to Parent Company shareholders

-77
-79

85
75

2

10

21
21

Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss 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 on other comprehensive income not to be reclassified to profit or loss in subsequent periods

Attributable to non-controlling interests
Earnings per share, basic and diluted, are calculated based on income for the year related to Parent Company ordinary shareholders.

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 20197

FINANCIAL REPORTS | FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOWSStatement of cash flows
GROUP

2019

2018

105

134

408
63

602
19

Change in provisions
Provisions
Cash flow before interest and tax

158
735

-19
736

Paid financial items

-177

-109

Taxes paid
Cash flow from operating activites before changes in working capital

-111
448

-123
503

Amounts in SEKm

Note

OPERATING ACTIVITIES
Earnings before interest and tax (EBIT), including discontinued operation
Reversal of non-cash items;
Depreciation, amortization, and impairments
Other profit/loss items not affecting liquidity

8

Cash flow from changes in working capital
Cash flow from operating activities

9

221

-63

669

441

−
18
2

-37
2
1

−
-118
-76
-174

-0
-148
-84
-266

INVESTING ACTIVITIESBusiness acquisitions
Sales of tangible assets
Sales of intangible assets

12

Business divestment
Investment in tangible assets
Investment in intangible assets
Cash flow from investing activities

12
13
14

FINANCING ACTIVITIESLoans raised

20

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

20
20
23
23

284

407

-332
-123
-16
−
-185

-473
−
-59
-55
-180

Cash flow for the year

310

-5

Cash and cash equivalents at January 1
Exchange-rate differences in cash and cash equivalents
Cash and cash equivalents at December 31

404
7
722

402
8
404

19

Interest received totaled 7 (5). Interest paid on bank debt totaled -176 (-132).

82 

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 20198

STATEMENTS OF FINANCIAL POSITION

Statement of financial position
GROUP
Amounts in SEKm

Note

2019

2018

8, 15

4,348
1,469
248
554

4,218
1,480
168
270

162
55
19
249
7,103

137
62
11
227
6,575

350
107

391
106

296
7
12
1,050
288
5
56
96
722
2,989

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

10,093

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
Other financial assets
Deferred tax assets
Total non-current assets

8, 14,15
8, 13
8, 13
8, 13
13
19
11

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
TOTAL ASSETS

3, 17, 19
18
19

19
19

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

9

FINANCIAL REPORTS | FINANCIAL STATEMENTS

STATEMENTS OF FINANCIAL POSITION

Statement of financial position
GROUP
Amounts in SEKm

Note

2019

2018

6
5,083
664
-2,125
3,628
-0
3,627

6
5,083
543
-1,913
3,719
-4
3,716

3,371
282
24
134
409
4,221

3,002
230
16
137
421
3,805

126
374
556
716
−
32
153
9
278
2,244

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

10,0939,268

EQUITY AND LIABILITIESEQUITY
Attributable to Parent Company shareholders
Share capital
Other capital contributions
Reserves
Profit brought forward

23

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

19, 2024
25
19
11

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
TOTAL EQUITY AND LIABILITIES

84 

19, 20

19
26
19

19
24
25

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

FINANCIAL STATEMENTS

10STATEMENTS OF CHANGES IN EQUITYStatement of changes in equity

Attributable to Parent Company shareholders
GROUP

Other
Share
capitalcapital contri-butions

Translation
reserve

Profitbrought
forward

543

Total

Noncontrollinginterests

Total
equity-1,912

3,719

-4

3,716

Put/call option related to non controlling interests
Acquisition of non-controlling interests
Repurchase of shares

0
0
-16

0
0
-16

1
-

0
1
-16

Share option plan
Other
Income for the year

4
-1
-166

4
-1
-166

-0
2

4
-1
-164

121
121

-35
-200

86
-80

1
3

87
-77

Amounts in SEKm
Opening balance, January 1, 2019

6

5,083

Changes in equity, 2019

Other comprehensive income, net after tax
Comprehensive income for the year
Closing balance, December 31, 2019

6

5,083

664

-2,125

3,628

-0

3,627

6

5,083

351

-1,691

3,748

0

3,748

Put/call option related to non controlling interests
Acquisition of non-controlling interests

-4
14

-4
14

-14

-4
0

Dividends paid*
Repurchase of shares

-55
-59
1

-55
-59
1

-

-55
-59
1

Opening balance, January 1, 2018
Changes in equity, 2018

Share option plan
Income for the year
Other comprehensive income, net after tax

193

-105
-13

-105
-180

11
-1

-94
179

Comprehensive income for the year

193

-118

75

10

85

543

-1,912

3,719

-4

3,716

Closing balance, December 31, 2018

6

5,083

* Dividends paid amounts to SEK 0.30 per share.

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201911

FINANCIAL REPORTS | FINANCIAL STATEMENTS

STATEMENTS OF COMPREHENSIVE INCOME

Statement of comprehensive income
PARENT COMPANY
Amounts in SEKm

Note

2019

2018

Net sales−−

Gross profit/loss−−

Administrative costs

-44

-11

Earnings before interest and tax (EBIT)

-44

-11

-0
-44

-0
-11

43
-1

−
-11

Financial expenses
Profit/Loss after financial items

10

Group contributions
Profit/Loss before tax
Tax

0

0

-1

-11

2019

2018

Profit/Loss for the year

-1

-11

Other comprehensive income, net after tax
Comprehensive income for the year

−
-1

−
-11

11

Income for the year

OTHER COMPREHENSIVE INCOME
Amounts in SEKm

86

Note

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201912

STATEMENTS OF FINANCIAL POSITION

Statement of financial position
PARENT COMPANY
Amounts in SEKm

2019

2018

16

4,086
4,086

4,086
4,086

18

0

0

0
45
28
74

0
−
77
77

4,160

4,163

6

6

4,074
18
41
-1
4,139

4,074
18
68
-11
4,155

3
11

0
2

0
2
5
21

3
2
−
8

4,160

4,163

Note

ASSETSNON-CURRENT ASSETS
Participations in subsidiaries
Total non-current assets
CURRENT ASSETS
Prepaid expenses and accrued income
Current tax assets
Receivables from subsidiaries
Cash and cash equivalents
Total current assets
TOTAL ASSETSEQUITY AND LIABILITIESEQUITY

23

Restricted equity
Share capital
Unrestricted equity
Share premium reserve
Other capital contributions
Profit brought forward
Income for the year
Total equity

CURRENT LIABILITIES
Accounts payable
Accrued expenses and deferred income
Liabilities to subsidiaries
Other liabilities
Other provisions
Total current liabilities
TOTAL EQUITY AND LIABILITIES26

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201913

FINANCIAL REPORTS | FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOWSStatement of cash flows
PARENT COMPANY
Amounts in SEKm

Note

2019

2018

-44

-11

5
0

0
-0

-39

-12

OPERATING ACTIVITIESProfit/Loss after financial items
Profit/loss items not affecting liquidity
Taxes paid
Cash flow from operating activities before changes in working capital

Cash flow from changes in working capital
Cash flow from operating activities

0

-1

-39

-12

FINANCING ACTIVITIESGroup contributions

6

89

Loan amortization

0-20

Repurchase of shares

23

-16

-59

Dividends paid

23

0

-55

Cash flow from financing activities

-10

-45

Cash flow for the year

-49

-57

Cash and cash equivalents at January 1

77

134

Cash and cash equivalents at December 31

28

77

88

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FINANCIAL STATEMENTSMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201914

STATEMENTS OF CHANGES IN EQUITYStatement of changes in equity
PARENT COMPANY

Amounts in SEKm
Opening balance January 1, 2019

RestrictedequityUnrestricted equity

Share
capitalSharepremium
reserve

Other capital
contributions

Profitbrought
forwardIncome forthe year

Total

6

4,074

18

68

-11

4,155

-11

11

0

-1

-16
-1

Changes in equity, 2019
To be carried forward
Repurchase of shares
Income for the year

-16

Closing balance, December 31, 2019

6

4,074

18

41

-1

4,139

Opening balance January 1, 2018

6

4,074

18

257

-75

4,281

To be carried forward

-75

75

Dividends paid

-55

Repurchase of shares
Income for the year

-59

Changes in equity, 2018

Closing balance, December 31, 2018

6

4,074

18

68

-55

-11

-59
-11

-11

4,155

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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201915

FINANCIAL REPORTS | Notes

NOTES
Notes
NOTE 1. ACCOUNTING POLICIES
Munters Group AB, corp. reg. no. 556819-2321, is a Swedish
public limited company registered in Sweden with its registeredoffice in Stockholm, Sweden. The address of the headquarters is
Munters Group AB, Box 1188, SE-164 40 Kista, Sweden. This
Annual Report and Consolidated Accounts were signed by the
Board of Directors for Munters Group AB on March 17, 2020, andapproved for release by the Board on the same date. The income
statements and balance sheets for the Parent Company and theGroup published in the Annual Report and Consolidated Accounts
is to be adopted by the Annual General Meeting on May 7, 2020.
The most important accounting policies applied in preparing thefinancial reports are reported below. In the main, the same
principles applied to the Parent Company were applied to theGroup. The extent to which the Parent Company’s accounting
policies differ from those of the Group, or to which it was deemed
important to explain the principle applied in the Parent Company,
is indicated under a special heading at the end of this Note.
BASIS OF PREPARATIONThe Consolidated Accounts were prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU, the Swedish Annual Accounts Act and the Swedish
Financial Reporting Board’s recommendation RFR 1 –Supplementary Accounting Rules for Corporate Groups. The Parent
Company’s Annual Report has been prepared in accordance with
the Annual Accounts Act and with the application of the Swedish
Financial Reporting Board’s recommendation RFR 2 – Accounting
for Legal Entities. IFRS rules for measurement and disclosure arethus applied, with the exception of the deviations indicated in thesection titled Accounting Policies of the Parent Company.
Basis for assessment
The Consolidated Accounts are based on historical acquisition
costs with the exception of financial derivatives, acquisition options
and purchase considerations.
New and amended IFRS applied from January 1, 2019
As described in note 13 in this report, the Group applies IFRS 16
Leases as of January 1, 2019.
For transition purposes the simplified transition approach has
been used and therefore there are no restatements of comparative
amounts for the prior year 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 exemption under IFRS 16 and has not reassessed whether a contract is or contains parts that constitute alease, and has therefore applied the standard for all contracts thathave previously been identified as leases. Munters has also applied the exemption rule to exclude initial direct costs when calculating the right-of-use asset. In the calculation the lessee’s marginalloan rate as of January 1, 2019 has been used. The lessee’s
weighted average marginal loan rate applied as of January 1,
2019 was 4.18%. The Group did not have any finance leases before the transition.
As of January 1, 2019, Munters has, in accordance with thenew principles, recognized right-of-use assets valued at approximately SEKm 475, lease liabilities of SEKm 458 (after adjustmentsfor prepaid and accrued lease payments recognized as at December 31, 2018) and provision for dismantling expenses of SEKm
18.

90

See below for reconciliation between commitments for operational
leases as of December 31, 2018 and the reported lease liability asof January 1, 2019;
Reconciliation lease obligations
Operating lease commitments disclosed at December 31,
2018
Low value and short term leases
Adjustments regarding extension and termination options

SEKm
451
-101
186

Operating leasing obligation per December 31, 2018,
Not discounted

536

Discount effect from the groups incremental borrowing rate

-78

Lease liability recognised at January 1, 2019458

The net profit after tax was expected to decrease, provided no newagreements were added, by approximately SEKm 13 for 2019 asa result of adopting to the new rules. EBITDA was expected to increase with approximately SEKm 109 as the operating lease payments were included in EBITDA but the depreciation of the right-ofuse assets and interest on the lease liability are excluded from thismeasure. Adjusted EBITA was expected to increase by approximately SEKm 1, as the operating lease payments were included in
EBITA but the interest on the lease liability is excluded from thismeasure. For the actual impact of the transition to the new policy,
see Note 13. The actual increase in EBITDA for the full year was
SEKm 115 and the deviation from the expected impact is explained by the fact that new contracts have been signed during theyear. Actual adjusted EBITA for the full year from the remaining operations was SEKm 4 m and SEKm 3 from the discontinued operations.
Total cash flow is not affected, but the new policy results in ashift in cash flow from operating activities to cash flow from the financial operations because the lease payments amortizes the reported lease liability.
The other changes linked to new and changed standards have
not had any impact on any amounts reported in the previous financial year and is also not expected to have a material impact on
current or future periods.
New and amended IFRS that have not started being applied
A number of new standards and interpretations enter into force forthe financial year beginning after 1 January 2019 and have notbeen applied to the preparation of this financial report. None ofthese new IFRS or IFRIC changes are expected to have a significant
impact on the Group's financial statements.
BASIS FOR CONSOLIDATIONThe Consolidated Accounts encompass Munters Group AB (theParent Company) and its subsidiaries.
Subsidiaries are all companies over which the Group has acontrolling influence. The Group has controlling influence over acompany when it is exposed to, or has the right to, variable returns
from its holdings in the company and can impact the returns
through its controlling influence in the company. Subsidiaries areincluded in the Consolidated Accounts as of the date on which
controlling influence was transferred to the Group. They are
excluded from the Consolidated Accounts as of the date on which
controlling influence ceases.
The financial statements for the Parent Company and its
subsidiaries included in the Consolidated Accounts refer to thesame period and have been prepared in accordance with theaccounting policies that apply to the Group. All intra-Grouptransactions, revenues, costs, gains, or losses that arise in

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NOTEStransactions between companies included in the Consolidated
Accounts have been wholly eliminated.
Business acquisitions
The Consolidated Accounts have been prepared using applicationof the acquisition method, which involves eliminating theacquisition cost of shares in subsidiaries against their equity at thetime of acquisition. Transaction costs related to acquisitions are notincluded in the acquisition cost, but are expensed on an ongoingbasis. The equity acquired in the subsidiaries is established using amarket-based evaluation of assets, liabilities and contingent
liabilities at the time of acquisition. The Group’s equity thus
includes only that part of the subsidiaries’ equity that arose after
the time of acquisition. In the event of business combinations where
the sum of (i) the acquisition cost of shares in subsidiaries; (ii) thevalue of holdings without controlling influence; and (iii) the fairvalue of previous holdings exceeds the fair value at the time ofacquisition as regards the Group’s share of the identifiable net
assets required, the difference is recognized as goodwill. A
potential negative difference – negative goodwill – is recognized
as income immediately after being established.
The useful life of each individual intangible asset is establishedand then amortized over the established useful life. If the useful life
is deemed indefinite, no amortization is recognized. An assessmentthat causes the useful life of an intangible asset to become indefinite takes all the relevant circumstances into account and is basedon the premise that there is no predictable maximum time limit for
the net cash flow generated by the asset. The useful life of goodwill
is assumed to be indefinite and goodwill is not amortized.
If the initial recognition of a business combination is incompleteat the end of the reporting period when the business combination
took place, the amounts for items where recognition is incomplete
is recognized on a preliminary basis. These preliminary amounts
can be adjusted during the evaluation period, or additional assets
or liabilities can be recognized, to reflect new information
obtained about the facts and conditions that existed as of the timeof acquisition, and would have impacted the recognized amounts
at that time if the information had been available.
Contingent considerations are classified as financial liabilities
and re-evaluated every period to fair value. Re-evaluation profits
and losses, if any, are recognized in income for the year. If thebusiness combination is carried out in several steps, the previous
equity shares in the acquired company are re-evaluated to their fairvalues at the time of acquisition. Any resulting profit or loss arisingout of the re-evaluation is recognized in income for the year.
Munters has call options and has issued put options regarding
non-controlling participations, which were agreed on in conjunction with the business combination. Depending on the conditions in
the options as well as in the shareholder agreements, each of theoptions are classified and recognized based on one of the two following principles:• In the event the conditions are deemed to mean that all economic
benefits and disadvantages accrue to Munters right from the timeof acquisition, no non-controlling interest is recognized but a liability equivalent to the fair value of the future redemption price,on the other hand, is; changes in value attributable to the liability
are recognized over the income statement. At 31 December
2019, Munters recognizes no options based on this principle.
• In the event the conditions in the put/call options are not deemed
to mean that all financial benefits and disadvantages accrue toMunters as of the time of acquisition, Munters recognizes noncontrolling
participation initially and allocates this part of the income. The
Group also recognizes a liability corresponding to the discounted expected redemption price for the options whereupon

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019non-controlling participations attributable to the options are eliminated. The difference between liabilities for the options and thenon-controlling participations to which the options refer is recognized directly in equity and disclosed separately from otherchanges in equity. The dissolution of the discounting effect is also
therefore directly recognized against equity. Munters recognized
the option attributable to MTech Systems in the US based on thisprinciple.
Non-controlling interests
In the event of acquisitions under one hundred percent but wherecontrolling influence is achieved, non-controlling interest is determined either as a proportional share of fair value on identifiable
net assets excluding goodwill, or at fair value. This choice of principle is made for each individual business combination.
Non-controlling interests are recognized as individual items in
the Group’s equity. The Group’s earnings and each component inother comprehensive income are attributable to the Parent Company’s owners and to non-controlling interests. Losses attributable
to non-controlling interests, if any, are also recognized if it meansthat the share is negative. Transactions with non-controlling interests that do not lead to loss of control are recognized as equity
transactions (i.e. as transactions with owners in their role as owners). A change in holdings is recognized through an adjustment of
the recognized values for controlling and non-controlling interests
so that they reflect the changes in their relative interests in the subsidiary. Upon acquisition from non-controlling interests, the difference between fair value of purchase consideration paid and theactual share acquired of the recognized value of the subsidiary’s
net assets are recognized in equity. Profits and losses on divestments to non-controlling interests are also recognized in equity.
When the Group no longer has controlling interest, each remaining holding is evaluated at fair value at the time when controllinginterest was lost. The change in recognized value is recognized in
the income statement. Fair value is used as the initial recognizedvalue and constitutes the basis for the continued recognition of theremaining holding as an associated company, joint venture or financial asset.
Translation of the accounts, functional currency and reporting
currency of foreign subsidiaries
Items included in the financial reports for the various units in theGroup are valued in the currency used in the economic environment where the respective companies primarily operate (functional
currency).
The Consolidated Accounts are prepared in SEK, which is thefunctional and reporting currency of the Parent Company. Resultsof operations and financial condition for all Group companies thathave a functional currency other than the reporting currency aretranslated into the Group’s reporting currency as follows:• assets and liabilities are translated into the exchange rate on thebalance date;• revenue and costs are translated into the average exchange rate;and• all exchange-rate differences that arise are recognized in othercomprehensive income.
Goodwill and adjustments of fair value that arise in connection
with acquisition of foreign operations are handled as assets and liabilities in that operations and are translated into the exchange
rate as of the balance date.
Exchange-rate differences attributable to translation of a net investment in foreign operations are recognized in the Consolidated
Accounts, together with exchange-rate differences attributable toborrowing or other financial instruments classified as hedging instruments for such investments, in Other comprehensive income andclassified as hedge reserves in equity. Accumulated gains andlosses in equity are recognized in the income statement when foreign operations are fully or partially divested.

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

FINANCIAL REPORTS | Notes

The following foreign exchange rates have been used in translating
accounts:
Average rate

Closing rate

Currency Country

2019

2018

2019

2018

AUD
CAD
CNY
DKK

Australia
CanadaChina
Denmark

6.57
7.13
1.37
1.42

6.49
6.71
1.31
1.38

6.51
7.13
1.33
1.40

6.32
6.59
1.31
1.38

EUR
GBP
JPY
NOK
SGD
THB
USD
ZAR

Euro zone
United Kingdom
Japan
NorwaySingapore
Thailand
United States
South Africa

10.59
12.07
0.09
1.07
6.93
0.30
9.46
0.65

10.26
11.59
0.08
1.07
6.44
0.27
8.69
0.66

10.43
12.21
0.09
1.06
6.90
0.31
9.32
0.67

10.28
11.35
0.08
1.02
6.56
0.28
8.97
0.62

TRANSACTIONS IN FOREIGN CURRENCIESTransactions denominated in foreign currencies are translated into
the functional currency at the exchange rates that apply on thetransaction date. Exchange rate gains and losses that arise in connection with payment of such transactions and upon translation ofmonetary assets and liabilities in foreign currency to the exchange
rate on the balance date are recognized in the income statement.
Exchange rate differences concerning operating receivables andoperating liabilities are recognized in EBIT, while exchange rate
differences attributable to financial assets and liabilities are recognized as financial income or financial expense. Realized and unrealized exchange-rate differences are thus recognized in income forthe year.
SEGMENT REPORTING
Operating segments are reported using a method that tallies with
the internal reporting submitted to the chief operating decision
maker. The chief operating decision maker is the function responsible for allocating resources and evaluating the Group’s financial
position and earnings. In Munters, this function has been identified
as Group Management. Group Management monitors operations
from a product-based perspective, which also constitutes Munters’
operating segments: AirTech and FoodTech, which are also theGroups reportable segments.
The accounting policies applied by the segments are the same
policies applied by the Group.
DISCONTINUED OPERATION
Since September 30, 2019 Munters is reporting a discontinued
operation, see further information in note 9. The discontinued
operation relates to the disposal group that has been abandoned
constituting the European Data Centers-factory in Dison, Belgium.
According to IFRS 5 Non-current Assets Held for Sale andDiscontinued Operations a single amount shall be disclosed in thestatement of comprehensive income comprising the total of the posttax profit or loss of the discontinued operation. A disclosure of thesingle amount is required and is presented in the separate note
together with a disclosure of cash flows from operating, investing
and financing activities related to the discontinued operation.
REVENUE RECOGNITION
Munters provides goods such as equipment, components and spareparts to customers within two operating segments. Customer
contracts can contain pure equipment orcomponent sales or salesof equipment including activities such as installation, startup andcommissioning services. Both equipment and installation, startup
and commissioning services are all distinct in accordance with the

92 definitions in IFRS 15 meaning any bundled sales will compriseseveral performance obligations.
Sale of goods
The majority of customer contracts within Munters fulfill therequirement to recognize revenue at a point in time, which meansrevenue for the performance obligation to deliver equipment isrecognized when this performance obligation is satisfied (whencontrol passes of the equipment).
Customer contracts within the segment Data Centers within
AirTech fulfill the requirement to recognize revenue over time, i.e.
equipment is highly customized and customer contract terms
stipulate that cost incurred will be recovered with a reasonableprofit margin should the customer decide to terminate the contract.
Revenue for the performance obligation to deliver equipment isrecognized over time using a measurement of progress towards
complete satisfaction method. Munters uses an output method forthis purpose (equipment produced and passed internal quality
control), meaning number of equipment in relation to total
equipment in the customer contract.
Contracts including installation, startup and commissioning
activities (bundled sales) include several separate performanceobligations and the performance obligations to provide installation,
startup and commissioning services are satisfied over time, whichmeans revenue related to these performance obligations is
recognized over time according to the progress of completetion.
Revenue relating to these activities was already prior to IFRS 15
recognized over time as they were performed.
In a bundled sale the total transaction price is allocated to eachperformance obligation according to each performance obligations
relative standalone selling price. There are in general no significant
variable considerations in the customer contracts, but some contracts agree to volume and cash discounts. In such cases an estimate is made of the variable remuneration that is expected to berefunded to the customer and that part of the transaction price isrecognized as a liability.
Rendering of service
In addition to installation, startup and commissioning services thatcomes from bundled sales Munters provides other kind of services
to customers such as maintenance services. Revenue from service
contracts are recognized over time as the customer simultaneously
receives and consumes the benefits of the services.
Warranty obligations
Munters provides assurance-type warranties where the warranty isa guarantee of quality of the goods provided. These warranties willcontinue to be accounted for under IAS 37 Provision, Contingent
Liabilities and Contingent Assets. Munters’ commitment to repair or
replace defective products in accordance with normal warranty
rules is reported as a provision, see Note 25 for details.
There are a number of contracts with customers that include
extended warranty. These warranties are regarded as service-typewarranties and accounted for as separate performance obligations
with revenue recognized over the contraced time.
Interest income
Interest income on receivables of long maturity is calculated using
the effective-interest method. Interest income includes the accrued
amount of transaction costs and any discounts, premiums, andother differences between the original value of the receivable andthe amount received when due.
Dividends
Dividends are recognized as revenue when the right to receive
payments has been established. This applies even if the dividends
are disbursed from profits resulting before the time of acquisition.
Consequently, the investment may need to be tested for amortization.
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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

WARRANTY COMMITMENTS
Warranty costs are recognized in cost of goods sold. Provisions forwarranty costs are calculated at a standard rate in an amount that
corresponds to the average warranty costs in relation to sales in
the most recent 24-month period, with an adjustment for known
warranty claims exceeding the standard provision. Provisions forwarranty commitments are related to the stated warranty period.

costs are reported as an asset and depreciated over the remaining
useful life of the asset.

INCOME TAXESTax expenses for the period cover current tax calculated on taxable
earnings according to the prevailing tax rate. Current tax costs areadjusted with changes to deferred tax assets and liabilities attributed to temporary differences and loss carry-forwards. Current
tax costs are calculated on the basis of the tax regulations decided,or decided in practice, in the countries where the Parent Company
and its subsidiaries operate and generate taxable income. Taxes
are recognized in the income statement except when the underlying transaction is recognized directly in equity or other comprehensive income, in which case the associated tax is also recognized inequity or other comprehensive income.
Deferred tax is recognized on all temporary differences arising
between the carrying amount on assets and liabilities and their recognized tax base in the Consolidated Accounts. Deferred tax liability, however, is not recognized if it arises out of the initial recognition of goodwill. Nor is deferred tax liability recognized if it arises
out of a transaction constituting the initial recognition of an asset or
liability that is not a business combination and at the time of thetransaction impacts neither recognized nor taxable earnings. Deferred income tax is calculated by applying the prevailing tax rate(and laws) that were decided or announced as of the balance date
and are expected to be in effect when the deferred tax asset is realized or a deferred tax liability is settled. Deferred tax assets onloss carry-forwards are recognized to the extent that it will be possible to deduct such losses from future profits.
Deferred taxes attributed to temporary differences regarding
holdings in subsidiaries, associated companies or joint ventures
are recognized only to the extent to which the Parent Company
can control the timing of reversal of the temporary differences andthat it is probable that such a reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are offset when there
is a legal right to offset for current tax assets and tax liabilities, andwhen the deferred tax assets and liabilities are attributed to taxes
levied by the same tax authority and relate to either the same tax
subject, or different tax subjects when there is an intent to settle accounts through net payments.
TANGIBLE AND INTANGIBLE FIXED ASSETS
Non-current assets are recognized in the statement of financial position at acquisition cost, less accumulated depreciation according
to plan and any impairment losses. The assets of acquired companies are recognized at fair value on the date of acquisition, less accumulated depreciation or amortization.
The acquisition cost of the asset is depreciated or amortized on astraight-line basis to the estimated residual value over the anticipated useful life of the asset. For anticipated useful lives, refer toNote 8, Depreciation, amortization and impairment losses. Eachasset’s remaining useful life is tested at the end of each accounting
period, and adjusted as necessary.
Non-current assets with indeterminate useful life are recognizedin the statement of financial position at cost and tested for impairment when there is an indication of impaired value or at least oncea year.
Buildings, machinery and equipment
Land is not subject to depreciation because it is considered to havean indefinite useful life. Normal maintenance and repair costs are
expensed as they arise. More extensive renovation and upgrade

Leases
As of January 1, 2019, leases are recognized as right-of-use assets
and a corresponding liability on the day that the leased asset isavailable for use by the Group. Assets and liabilities arising fromleases are initially recognized at present value. The lease liabilities
include the present value of the following lease payments:• fixed payments (including in-substance fixed payments) after deducting any incentives in connection with the signing of the leaseas well as variable lease payments that depend on an index or arate, initially measured with the help of an index or rate on thecommencement date;• amounts expected to be payable by the lessee under residual
value guarantees;• the exercise price of an option to purchase the underlying asset if
the Group is reasonably certain to exercise that option;• payments of penalties for terminating the lease, if the lease termreflects that the Group will exercise an option to terminate thelease.
Lease payments that will be made for reasonably certain options toextend the lease are also included in the measurement of the liability. The lease payments are discounted by the lease’s implicit interest rate. If this interest rate cannot be determined easily, which isnormally the case for the Group’s leases, the marginal loan rate isused, i.e. the rate that the individual lessee would paid to borrowthe necessary funds to buy an asset of similar value as the right-ofuse asset in a similar economic environment with similar terms andcollateral.
The Group is exposed to future increases in variable lease payments based on an index or a rate, which are not included in thelease liability until they take effect. When adjustments of lease payments based on an index or a rate take effect, the lease liability isremeasured and adjusted against the right-of-use asset. Lease payments are divided between amortization of the liability and interest. The interest is recognized in profit and loss over the lease termin a way that produces a fixed rate for the lease liability recognized in each period. On the other hand, Munters has no variable
payments such as turnover-based rents or the like.
Options to extend and terminate contracts are included in a number of the Group’s leases primarily of factories. The terms are used
to maximize flexibility. The overwhelming share of the options toextend and terminate leases can only be exercised by the Groupand not by the lessors.
Munters has no appreciable residual value in the leases.
Right-of-use asset are measured at cost and include the following:• the amount that the lease liability was originally measured at;• lease payments paid on or before the commencement date, after
deducting any incentives received upon signing the lease;• initial direct costs;• costs to restore the asset to the condition under the terms of thelease.
Right-of-use assets are normally subject to straight-line depreciation
over the shorter of the useful life and the lease term. If Munters is
reasonably confident of exercising a purchase option, the right-ofuse asset is depreciated over the useful life of the underlying asset.
Payments for short-term leases and all leases of low-value assets
are expensed on a straight-line basis in the income statement.
Short-term leases have a term of 12 months or less. Leases of lowvalue assets include IT equipment, telephones and smaller officefurniture.

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FINANCIAL REPORTS | Notes
Goodwill
Goodwill relates to the value by which consideration remitted, noncontrolling interest (if any) in one’s own company and the fairvalue of previous equity share in the acquired company at the dateof acquisition (if the business combination was carried out in steps)
exceed the fair value of identified net assets. If the amount falls below fair value for the net assets acquired (in the event of an acquisition at low price), the average difference is recognized directly in
the income statement.
Goodwill is not amortized, but the impairment is tested yearly or
more often if events or changes in circumstances indicate a possible decrease in value. Goodwill is reported at acquisition cost lessaccumulated amortizations. In connection with the sale of a unit,
the recognized value of goodwill is included in the resulting
profit/loss.
Patents, licenses and similar intellectual property rights
Direct external expenses for the development of software for internal administrative use are capitalized, provided future efficiency
gains are probable and exceed the expenses committed. Activities
during the feasibility study phase, and maintenance and training
costs, are expensed on an ongoing basis.
Research and development
Costs for research are expensed as they are incurred. Researchoutlays are recognized as an intangible asset in the statement of financial position, provided that it is technically feasible and alsothat the Group intends to complete the asset for use or sale. There
should also be conditions to use and sell the asset, and it should bepossible to demonstrate the probability of future financial benefits.
In addition, adequate resources are required to complete the development and to use or sell the asset. Outlays arising before the mentioned criteria are met are expensed. Depreciation of capitalized
development starts when the asset is complete and ready to use.
Amortization occurs on a straight-line basis over the useful life, usually three to five years, and is recognized in the report on comprehensive income as research and development costs.
Impairment test
When there is an indication that a non-current asset’s value has declined, the carrying amount of the asset is assessed. Goodwill andother intangible assets with an indefinite useful life are impairment
tested on a yearly basis, or more often if there are indications of
impairment.
Impairment testing of individual assets
In the event a recognized value of an asset exceeds its estimatedrecoverable amount, the asset is depreciated to its recoverable
amount. The recoverable amount is the higher of the asset’s fairvalue minus sales costs, and its value in use. The recoverable
amount is assessed individually for each cash-generating unit.
“Net sale value” refers to the most likely sale price in a normallyfunctioning market. “Value in use” refers to the present value of theestimated future cash flows that are expected to result from the useof the asset plus the estimate residual value at the end of the asset’s
useful life.
Value in use is normally measured using discounted cash flow
models, which requires assumptions of such parameters as a discount rate, future cash flows, and the expenses necessary to generate the estimated cash flows. Any impairment previously recognized is reversed, if the recoverable amount is deemed to exceed
the carrying amount. The reversal amounts are limited such that a
carrying amount must not exceed what it would have been if no impairment had been recognized in prior periods.
Impairment testing of goodwill
For the purpose of testing the need for amortization, goodwill acquired in a business combination is allocated to cash-generating
units or groups of cash-generating units expected to be favored by
94 synergies in the acquisition. Each unit or group of units goodwill
has been allocated to corresponds to the lowest level in the groupat which the goodwill in question is monitored in internal governance. The Group's cash-generating units consist of the Group's previous four business areas: AirTech (formerly Air Treatment),
FoodTech (formerly AgHort), Data Centers, and Mist Elimination.
The two later business areas have been reorganized in 2019 andare now an integral part of the AirTech business area. Impairmentof goodwill is never reversed.
INVENTORY
Inventory (raw materials and consumables, products in process andfinished products and goods for resale) is valued at the lower ofacquisition cost and net sales value. Net sales value is the estimated sale price in operating activities less applicable variable
sales costs.
For products manufactured in-house, the acquisition cost consistsof direct manufacturing costs plus a reasonable share of indirect
manufacturing costs. Interest expenses are not included in the valueof inventory. Measurement has taken into account normal capacity
utilization. The acquisition cost is determined using the first-in, firstout method. Otherwise, weighted average cost may be used if thismethod is a good approximation of the first-in, first-out method. Required impairment is recognized for obsolescence based on eachitem’s age and rate of turnover.
FINANCIAL INSTRUMENTS
Financial instruments are all forms of contracts that give rise to a financial asset in one company and a financial liability or an equity
instrument in another company.
Classification
Munters classifies its financial assets and financial liabilities in thefollowing measurement categories:••

those to be measured subsequently at fair value throughprofit or loss (FVPL), andthose to be measured at amortized cost.

Measurement
At initial recognition, the group measures a financial instrument at
its fair value plus, in the case of a financial instruments not at fairvalue through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial instruments. Transaction costs of financial instruments carried at FVPL are expensed in
profit or loss. Subsequent measurement depends on the group’sbusiness model for managing the instruments and the cash flow
characteristics of the instruments. There are three measurement under IFRS 9:
Amortized cost
Instruments that are held for collection/payment of contractual cash
flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income/expense from these financial instruments is included in finance income/expense using the effective interest rate method.
Any gain or loss arising on derecognition is recognized directly in
profit or loss and presented in other gains/losses together with foreign exchange gains and losses. Impairment losses are presented
as separate line item in the statement of profit or loss.
Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for
selling the financial assets, where the assets’ cash flows represent
solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except
for the recognition of impairment gains or losses, interest income
and foreign exchange gains and losses which are recognized in

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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified fromequity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in finance income
using the effective interest rate method. Foreign exchange gains
and losses are presented in other gains/(losses) and impairment
expenses are presented as separate line item in the statement of
profit or loss.

Recognition and derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognized when therights to receive cash flows from the financial assets have expiredor have been transferred and the group has transferred substantially all the risks and rewards of ownership.

Fair value through profit and loss statement (FVPL)
Instruments that do not meet the criteria for amortized cost or
FVOCI are measured at FVPL. A gain or loss on a debt investmentthat is subsequently measured at FVPL is recognized in profit or loss
and presented net within other gains/(losses) in the period inwhich it arises.
As at December 31, 2019 Munters only had financial instruments in the categories amortized cost and FVPL.
Accounts receivable and other receivables
As the expected tenor of accounts receivable is short, they are recognized at the amount expected to be paid based on estimatedcredit losses with consideration of historical default rates. Any
amortization of accounts receivable affects operating profit or loss.
Accounts receivables and other receivables are measured at amortized cost.
Derivatives
Derivatives are recognizes in the statement of financial position on
the trading date and measured at fair value both initially and in
subsequent revaluations at the end of every reporting period.
Changes in value are recognized in the income statement, no
hedging is applied.
Cash and cash equivalents
Cash and cash equivalents are defined as cash, bank balances, investments in securities maturing in three months or less and utilized
overdraft facilities. Utilized overdraft facilities are recognized in thestatement of financial position as current liabilities.
Accounts payable and other payables
Accounts payable are commitments to pay for goods and services
acquired from suppliers in operating activities. The amounts are unhedged and most often paid within 30 days. Accounts payable
and other liabilities are classified as current liabilities if they fall
due within one year. If not, they are recognized as non-current liabilities. Accounts payables and other liabilities are measured atamortized cost.
Borrowing
Borrowing is initially recognized at fair value, net after transaction
costs. It is subsequently recognized at amortized cost, and any difference between the amount received and the amount repaid isrecognized in the income statement, allocated over the borrowing
period using the effective-interest method. Fees paid for loan facilities are recognized as transaction costs for borrowing to the extent
it is probable that the credit line will be used, either in whole or inpart. In such cases, the fee is recognized when the credit line isused. When no proof exists that it is probable the credit line will be
used, either in whole or in part, the fee is recognized as an advance payment for financial services and allocated over the tenorof the loan commitment in question.
Contingent purchase considerations and put/call options
Contingent purchase considerations and put/call options are initially and thereafter, recognized at fair value in the statement of financial position. Changes in value are recognized in the income
statement, or alternately in other operating expenses.

Impairment
The Group assesses on a forward looking basis the expected credit
losses associated with its debt instruments carried at amortized cost
The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables,
the group applies the simplified approach permitted by IFRS 9,which requires expected lifetime losses to be recognized from initial recognition of the receivables, see note 17 for further information.
Offsetting of financial instruments
Financial assets and liabilities may be offset against each otherand recognized net in the Consolidated Accounts in cases where
Munters has agreed with the counterparty that assets and liabilities
will be netted. No offsetting has taken place in the statement of financial position as of December 31, 2019.
PROVISIONS
Provisions are recognized when the Group has or may be considered to have an obligation as a result of events that have occurred,
and where it is probable that payments will be required to fulfill theobligation. An additional prerequisite is that it must be possible toreliably estimate the amount to be paid. Provisions for restructuring
measures are allocated when a detailed, formal plan for themeasures is established and well-founded expectations have beencreated among those who will be affected by the measures.
Provisions are measured as the present value of the amount expected to be required to settle the obligation. In this connection a
discount rate before tax is used that reflects a current market assessment of the time value of money and the risks associated withthe provision. The increase in the provision owing to time passing
is recognized as an interest expense.
CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Contingent liabilities are reported when there are possible obligations relating to transpired events that will only become actual obligations given the occurrence or non-occurrence of one of more uncertain future events that are not entirely within the control of
Munters. Contingent liabilities may also be an obligation arisingfrom transpired events but not reported as a liability or a provisionbecause it is not probable that the obligation will be settled or because the amount of the obligation cannot be calculated with sufficient reliability.
A contingent asset is a possible inflow of resources and is notrecognized as an asset in the statement of financial position before
it is as good as certain that an inflow of resources will arise as an
asset.
EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for salaries and benefits expected to be settled within 12
months after the end of the fiscal year are recognized as current liabilities at the undiscounted amount that is expected to be paid
when the liabilities are settled. The cost is recognized as the services are performed by the employees.

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FINANCIAL REPORTS | Notes
Post-employment benefits
Within the Group, there are several defined-contribution as well as
defined-benefit pension plans and other non-current employee benefits, including some with pension plan assets.
Defined-contribution pension plans
In defined-contribution pension plans, the Group pays a predetermined premium to a separate legal entity and does not have any
legal or informal obligation to make additional payments if, whencompensation to the employee is to be paid, the legal entity has insufficient assets. The Group’s payments relating to defined-contribution plans are recognized as an expense during the period the employee performed the services to which the expense relates. Deferred fees are recognized as an asset to the extent that cash repayment or reduction in future payments can be of benefit to theGroup.
Defined-benefit pension plans
All other plans for post-employment benefits other than defined-contribution plans are defined-benefit plans. The liability or asset regarding defined-contribution pension plans that is recognized in
the statement of financial position is the present value of the defined-benefit obligation at the end of the reporting period less thefair value of the plan assets. The defined-benefit pension obligation
is calculated annually by independent actuaries using the projected
unit credit method. The present value of the defined-benefit obligation is established by discounting estimated future cash flows using
the interest rate for high-quality corporate or housing bonds issued
in the same currency that the benefits will be paid in, with tenors
comparable to the pension obligation in question. For Swedish
plans, the discount rate equals the housing bond rate. Net interestis calculated by applying the discount rate to defined-benefit plans
and to the fair value of the plan assets. This cost is included in labor costs in the income statement.
Revaluation gains and losses arising out of experience adjustments and changes to actuarial assumptions are recognized inother comprehensive income during the period in which theyarose. They are included in profit brought forward in the statementof changes in equity and in the statement of financial position. Expenses for employment during previous periods are recognized directly in the income statement. Expenses for the year for employment in the current year are recognized in administrative costs andthe interest expense for the defined-benefit net liability is recognized in financial expenses in the income statement.
Special employer’s contribution in Sweden is calculated on the
difference between the pension obligation adopted according to
IAS 19 and according to the rules applied for the legal entities.
Calculated future employer’s contribution is recognized in the statement of financial position as a part of the pension obligation. Thechange in the provision is recognized, to the extent that it pertains
to the effects of revaluations, in other comprehensive income.
Share-based payment
The Group has a number of share-based payment plans where thecompany obtains services from employees as consideration for theGroup’s equity instruments. Information on these plans is disclosed
in Note 32.
Employee stock option program
The fair value of the service that entitles employees to an allotmentof options through the Munters employee stock option program isrecognized as a staff cost with a corresponding increase in equity.
The total amount to expense is based on the fair value of the options that are allotted:• including all market related terms (e.g., target share price)

96 • excluding any impact from service terms and non-market related
terms for vesting (e.g., profitability, sales goals and that the employee remains employed by the company for a given period oftime),• including the impact of terms that do not constitute vesting terms(e.g., requirement that employees retain the shares for a given
period of time).
The total cost is recognized over the vesting period, i.e., the period
over which all the specified vesting terms will be met. At the end ofeach reporting period, the Group reevaluates its assessments of
how many shares are expected to be vested based on the non-market related vesting terms and the service terms. Any difference compared with the original estimates that the revaluation gave rise to isrecognized in profit or loss with corresponding adjustments in equity.
The social security contributions that arise on the allotment ofstock options are regarded as an integral part of the allotment, andthe cost is treated as cash settled share-based payment.
When the options are exercised, the correct number of sharesare transferred to the employee. Payments received, after deducting any directly related transaction costs, are credited to equity.
Synthetic options
Share-based payment settled in cash is recognized as staff costs
over the time the service is performed. The fair value of the liability
is remeasured at the end of each reporting period and recognized
as a commitment for employee benefits in the balance sheet.
SHARE CAPITAL
Ordinary shares are classified as equity. Mandatory redeemablepreferential shares are classified as liabilities. Transaction costs
that can be directly attributed to issue of new shares or options arereported, net after tax, in equity as a deduction from proceeds.
DIVIDENDS
Dividends to the Parent Company’s shareholders are recognized as
a liability in the Group’s financial reports in the period when thedividend was approved by the Parent Company’s shareholders.
EARNINGS PER SHARE
Earnings per share before dilution are calculated by dividing earnings attributable to the Parent Company’s shareholders, excluding
dividends attributable to preferential shares, by a weighted average number of ordinary shares outstanding during the period.
Earnings per share after dilution are calculated by adjusting theamount used for calculating earnings per share before dilution
through observing the effect after tax of dividends and interest expenses on potential ordinary shares and of the weighted averageof additional ordinary shares that would have been outstanding in
the event of a conversion of all potential ordinary shares.
RELATED PARTY DISCLOSURESThe companies related to Munters are defined as the Parent Company, subsidiaries, and associated companies as well as othercompanies managed by FAM AB and Nordic Capital. “Related
physical persons” are defined as Board members, senior executives, and close family members of such persons. Companies inwhich any of the mentioned physical persons have significant influence are also defined as companies related to Munters. Information on transactions that entail a transfer of resources, services,or obligations between related parties is disclosed, regardless ofwhether or not remuneration is paid. The disclosure contains information as to the character of the relationship and the effect of therelationship on the financial statements.

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EVENTS AFTER THE END OF THE REPORTING PERIOD
If events arise that are significant but should not be taken into account when the amounts in the statement of comprehensive income
and statement of financial position are adopted, then the characterof the event and, if possible, an estimate of its financial impact will
be disclosed in the Board of Directors’ Report and notes. “Significant” implies that an omission to disclose the information could influence financial decisions made by users of the financial statements.
Significant events that confirm the situation existing at the end of
the reporting period and occur after the reporting period but prior
to the signing of the Annual Report will results in adjustments to theamounts in the Annual Report.

The estimates and assessments that are considered to have thegreatest impact on Munters earnings and financial position are outlined below.

ACCOUNTING POLICIES OF THE PARENT COMPANY
The Parent Company’s Annual Report has been prepared in accordance with the Annual Accounts Act and with the application of
the Swedish Financial Reporting Board’s recommendation RFR 2 –Accounting for Legal Entities. This means that IFRS are applied withthe deviations and additions presented below.
Financial statements
Under the requirements in RFR 2, the Parent Company’s financial
statements deviate from those presented for the Group. This meansthat the Parent Company has the following five statements in the
Annual Report: income statement, other comprehensive income,balance sheet, statement of cash flow and statement of changes inequity.
Financial instruments: Recognition and measurement
The Parent Company does not apply IFRS 9 Financial Instruments.
Instead, measurements are based on the acquisition costs of assets
and liabilities.
Ownership of subsidiaries
Holdings in subsidiaries are recognized in the Parent Company using the cost method. If there are indications of a decline in value,
the value is tested and, if required, the holdings are impaired.
Group contributions
The Parent Company recognized all Group contributions, paid andreceived, as appropriations.
Shareholders' contribution
Shareholders' contributions from the Parent Company are recognized directly in the receiver’s equity and capitalized in the sharesand participations of the Parent Company, to the extent impairment
is not required.
Leasing
In the event that the Parent Company has any leases, these are notrecognized in the balance sheet but are expensed linearly over thecontract period of the lease.

NOTE 2. SIGNIFICANT ESTIMATES AND
ASSESSMENTS
In preparing the financial statements, Group management and theBoard of Directors makes assessments and assumptions that affectthe final accounts and disclosures. These assessments are based on
experience and the various assumptions that management and theBoard consider reasonable under the prevailing circumstances. The
conclusions thus drawn form the basis for determinations concerning carrying amounts of assets and liabilities in cases where theycannot be readily determined using information from other sources.
Actual outcomes may differ from these assessments, if other assumptions are made or other conditions applied.

Measurement of goodwill
The Group tests for impairment of goodwill each year. This test requires an estimation of parameters affecting future cash flows anda determination of a discount rate. Then the recoverable amount ofeach individual cash-generating unit is established by calculating
the value in use. Note 15 presents the significant assumptions
made to test goodwill and describes the effects of reasonable andpossible changes to the assumptions on which the calculations
were based. At the end of 2019, the Group recognized goodwill
to a value of SEKm 4,348 (4,218).
Acquired intangible assets and establishing useful lives
When businesses are acquired, the intangible assets acquired aremeasured at fair value. In cases where there is an active market for
the acquired assets, the fair value is determined based on prices inthat market. Because active markets are often lacking for these assets, valuation models have been developed to estimate fair values.
One example of a valuation model is discounted future cash flows.
These assets are amortized based on established useful lives. Company management makes assumptions and judgements regarding
how long each asset will generate financial benefits for the Group.
At the end of 2019, the Group recognized Technology, Customer
relationships and Brands to a value of SEKm 1,278 (1,326).
Development expenses
Determining whether an intangible asset resulting from development should be recognized as an asset requires an assessment of
the extent to which certain specific conditions are satisfied. With
regard to capitalized development projects, management’s assessment is that their technical and financial feasibility are confirmed.
At the end of 2019, the Group recognized intangible assets regarding product development to a value of SEKm 140 (105).
Deferred tax assets on loss carry-forwards
The Group recognizes deferred tax assets on loss carry-forwards tothe extent that it is probable such losses can be deducted from future profits. The actual outcome may deviate from the assessments
made because of factors such as changes in the business climate
or to tax regulations.
At the end of 2019, the Group’s total tax loss carry-forward was
SEKm 1,307 (951). In the consolidated balance sheet, a value fortax purposes of capitalized loss carry-forwards was recognized in
the amount of SEKm 90 (101), relating primarily to Australia, theNetherlands, Mexico, Germany and Sweden.
Contingent purchase considerations
A contingent purchase consideration in connection with acquisitions is often dependent on future financial performance related tothe acquired unit. Actual results may differ from these assumptions,which involve changing a previously recognized contingent consideration.
Legal disputes
Provisions for legal disputes are estimates of the future cash flowsthat will be required to settle the obligations. The disputes primarily
relate to contracted obligations attributable to contracts with customers and suppliers, though other types of disputes also arise innormal business operations. Group Management considers it improbable that any of the known disputes in which Munters is currently involved, and where no provisions have been recorded, will
have a significant negative impact on the Group’s accounts.
Revenue recognition
A number of customer contracts fulfill the requirement to be recognized over time based on the degree of completion. The forecasts

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NOTES

FINANCIAL REPORTS | Notes
for each contract constitute an estimate of final revenue and expenses.

translation exposure when translating income statements and balance sheets into SEK.

Leasing
When defining the lease period, management takes into accountall available information that provides a financial incentive to exercise an extension option, or not to exercise an option to terminate
a contract. Opportunities to extend a contract are included only inthe lease period if it is reasonable certain to extend the contract (ornot terminate the contract). The majority of the extension options inlease agreements of office premises and vehicles have not been included in the reported lease liability as the Group can compensate
the assets without significant costs or interruptions in the business.
On the other hand, for lease agreements of factories, it is morecommon that extension options are included in the valuation, especially where the Group has spent improvement expenditure in thefactories in order to adapt them to Munter's operations or otherwise estimates that it would involve costs and interruptions in thebusiness if the contact is terminated. The lease period is reconsidered if an option is exercised (or not exercised) or whether theGroup is required to exercise the option (or not take advantage ofit). The assessment of whether it is reasonably certain is reconsidered only if there is any material event or change in circumstances
affecting this assessment and the change is within the lessee's control.

Transaction exposureGroup internal sales in foreign currency primarily occur throughthe Group’s production companies, which invoice the Group’s
sales companies in their functional currency. By doing so, transaction exposure and hedging operations are concentrated to a few
companies in the Group.
The hedging of transaction exposure shall primarily occur
through so-called natural hedges, whereby incoming and outgoing
cash flows in foreign currencies are matched in order to minimize
the net exposure. For example, Munters has decided to have theirmajor part of its external loans in USD to get a natural hedge towards the large inflows of USD presented in the table above. Otherwise, hedging shall primarily occur through forward selling ofcurrency. The value of forward contracts at year-end was SEKm
4.9 (1.7), see Note 19. Munters does not apply hedge accounting
for these financial instruments.
A significant proportion of Munters’ income and expense is generated in foreign currencies, of which the most significant are presented in the table above. The geographic distribution of Munters’
production plants results in a matching of revenues and expenses
in local currencies, which limits the currency exposure.
Munters’ sensitivity to variations in exchange rates is presented in
the table below. The analysis includes transaction exposure and isbased on EBIT for 2019. All other factors influencing earnings are
assumed unchanged in the calculation.

NOTE 3. FINANCIAL RISK MANAGEMENT
Through its operations in a global environment, Munters is exposed
to several different financial risks, such as currency risk, interest
rate risk, credit risk, and liquidity risk.
The financial risks are controlled and managed based on a financial policy approved by the Board of Directors. The policy covers the entire Group and is updated on an annual basis. The purpose of the policy is to create a framework for managing the various financial risks. Risk management and financing activities arehandled centrally by CFO and the Group Treasury function, monitored and controlled by the Board of Directors, Audit Committee
and CEO. The overall objective is to limit the volatility attributable
to financial factors in the income statement and balance sheet, protect financial assets and future cash flows, as well as optimize theGroup’s financing and meet financial covenants in banking agreements. The Treasury function, which acts as the Group’s internalbank, identifies, evaluates, and hedges financial risks in close cooperation with the Group’s operational units.
Percentage ofrevenue
Currency
USD

2019
41.8%

EUR

25.2%

CNY
JPY

2018

Percentage
of costs
2018

38.4%

2019
37.7%

34.2%

28.2%

28.7%

33.6%

12.2%

12.0%

9.4%

9.3%

1.8%

2.2%

1.2%

2.0%

Other

2.7%

3.0%

8.6%

4.5%

SEK

3.8%

2.7%

3.5%

7.3%

GBP

2.7%

1.9%

2.4%

2.8%

BRL

1.5%

1.6%

1.4%

1.5%

AUD

1.3%

1.8%

0.6%

1.3%

DKK

1.4%

4.7%

1.2%

1.5%

KRW

1.1%

1.3%

0.6%

0.6%

SGD

1.1%

0.9%

0.6%

0.7%

THB

3.5%

1.3%

4.0%

0.7%

Total

100%

100%

100%

100%

Currency risk
Due to Munters global presence, the Group is exposed to transaction exposure by transactions in foreign currency and through98

Estimated effect on
EBIT
SEK +10% compared with
USD
CNY
Other currencies
KRW
DKK
SGD
THB
TRY
AUD
CAD
CZK
MXN
ILS
EUR
Total

SEKm
-52.0
-28.2
-16.2
-6.5
-6.2
-5.2
-4.0
-3.7
-2.5
-1.0
2.0
5.1
7.7
19.8
-90.9

Translation exposure
A large proportion of Munters’ subsidiaries have net assets in theirfunctional currency, which is different from the Group’s reporting
currency. When these are translated into SEK, translation differences arise which are recognized in other comprehensive income.
Translation differences attributable to net investments in foreign currency are not hedged. However, pursuant to the financial policy,
this is monitored and calculated regularly in order to determine its
impact on earnings and financial position. The effect on other comprehensive income of the translation of foreign subsidiaries’ net assets into SEK totaled SEKm 122 (193). This refers mainly to subsidiaries that have USD, EUR and CNY as functional currency.
Interest rate risk
Interest rate risk refers to the risk of the value of financial instruments and interest-bearing assets and liabilities changing due tochanges in interest rate levels. To ensure efficiency and risk control
according to policy, the majority of borrowings are managed by
the Group Treasury function.
Munters is exposed to interest rate risk through interest-bearing
borrowings, which are one of the Group’s sources of financing in

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addition to equity and cash flow from operating activities. Interestbearing borrowings consist primarily of a long-term bank loan witha variable interest rate. In addition, few subsidiaries are permitted
to keep individual third party bank debt.
The Group has no significant interest-bearing assets besides bankbalances, so revenues and cash flow from operating activities arelargely independent of changes in market interest rates.
The Group had at the end of 2019 no outstanding interest rate
derivatives.

est payments and loan repayments. According to the financial policy, the long-term liquidity reserve shall exceed an amount equivalent to 1.5 months of disbursements. Short term the liquidity reserve
can fall below that level to SEKm 350. A risk to go below the permitted threshold level requires immediate actions. At the end of
2019, the Group had unutilized credit facilities of SEKm 985(918). The Group’s total liquidity reserve less trapped cash per endof 2019 amounted to SEKm 1,496 (1,275).
Group Treasury works actively to ensure an effective cash management structure within the Group by centralizing the liquidity tothe parent company through cash pools and other form of sweeping mechanisms. Cash surplus shall primarily be used to repay on
external debt. The Group’s cash and cash equivalents shall be deposited in bank accounts or high-liquidity interest-bearing instruments. Any surplus liquidity in subsidiaries shall be deposited withGroup Treasury. By securing accessibility to guaranteed long-term
credit facilities, spreading maturities and sources of financing forborrowings, the Group will avoid expensive financing and refinancing difficulties. For more information about the Group’s borrowings, see Note 20.

Interest exposure
The average fixed interest term for the Group’s external loans was
2 months (2) at year-end 2019. If the interest rate increases with
one percentage in all countries where Munters has loans or investments, the impact on net financial income and expense would beapproximately SEKm 26 (25). This sensitivity analysis assumes that
all other factors, such as exchange rates, remain unchanged.
Credit risk
Credit risk is the risk of Munters incurring losses due to a counterparty failing to pay.
Credit exposure
For Munters, the predominant portion of credit risk relates to accounts receivable. Munters works actively to limit this risk. An approved credit rating is required for a counterparty to be approved.
Advance payment is generally encouraged, and partial advancepayment is required when the value of the order is a significant
amount and delivery extends over a long period of time. Accounts
receivable are also mainly spread among many customers, primarily companies in different industries and with wide geographicaldistribution, which limits concentration of the credit risk. The
Group’s five largest customers accounted for 8% (15) of total revenues, calculated on a full-year basis. At December 31, 2019, thefive largest customers accounted for 13% (13) of total outstanding
accounts receivable.
To ensure that the Group’s accounts receivables are paid, themanagement of receivables is regulated in a special policy. According to this policy, each business unit must have establishedand documented processes for handling unpaid receivables. The
documented processes include specifications of time limits for taking various actions, including legal action, as well as who is responsible at various stages of the process. Documentation of actions taken ensures that follow-up is possible. The measures arematched to amounts and to different groups of customers and business areas in a manner that will result in efficient handling of overdue accounts receivable.
Counterparty exposure
A list of approved counterparties and maximum exposure to eachapproved counterparty is established in the financial policy. Approved counterparties should be characterized by high ethical values and have a credit rating of at least A-/A2 according to Standard & Poor’s/Moody’s credit assessments. Exceptions may sometimes be made for local banks, but such cases must have the advance approval of the CFO.
Liquidity risk
Liquidity risk refers to the risk of Munters, at a given point in time,
not having sufficient liquidity to cover expected or unforeseen expenses.
The liquidity reserve is defined as bank balances or invested
funds that can be released within two banking days without any
additional or minor cost, plus any unutilized credit facilities, committed for minimum 12 months, less any outstanding uncommitted
debt. Management continually monitors forecasts of Group cash
flows and liquidity reserves to ensure that the Group has sufficient
funds to satisfy the needs of operating activities and to cover inter-

Capital structure
Munters aims to have a capital structure that ensures long-term stability in operations, satisfies various investment requirements andsafeguards the value of the Group. Munters endeavors to ensurethat Group’s subsidiaries shall have an optimal capital structure relating to financing requirements, foreign exchange and tax regulations in each jurisdiction. Subsidiary financing shall mainly bedone by internal loans or capital contributions. Requirements in theGroups external loan agreement and common praxis following thetype of business of the individual subsidiary and country shall betaken into consideration when deciding form of financing. An analysis of the subsidiaries’ capital structure is done on a yearly basis
to secure that the different requirements are met.

NOTE 4. NET SALES
Satisfaction of performance obligations and payment terms
Munters overall supply consists of goods, such as equipment, components and spare parts, and services, such as installation, startup
commissioning and maintenance services, within two different operating segments: AirTech and FoodTech.
Customer contracts range from pure component deliveries,
mainly within FoodTech and in segment Mist Elimination within AirTech, to contracts comprising equipment, installation, startup andcommissioning services, mainly within AirTech.
The performance obligation to deliver goods within AirTech (excluding segment Data Centers) and FoodTech is in the great majority of contracts satisfied when Munters delivers the goods according to the delivery terms in the contract, however there are contracts within AirTech that are satisfied over time as Munters produces the goods. The performance obligation to deliver goods insegment Data Centers within AirTech is satisfied over time as
Munters produces the goods. This because the Data Centers customer contracts are customer-specific deliveries without alternative
use for Munters and with the right to recovere cost incurred with areasonable profit margin should the customer decide to terminate
the contract.
Installation, startup and commissioning services are services satisfied over time as Munters performs The same relates to aftermarket
services, such as maintenance services and extended warranties,
and services and subscription contracts within Munters software delivery.
Within FoodTech and in segment Mist Elimination within AirTech,
payment terms are in general at point of delivery, which also correlates to time of revenue recognition Within AirTech and especially

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NOTES

25

FINANCIAL REPORTS | Notes
within segment Data Centers customer advance payment is generally encouraged, and partial advance payment is required whenthe value of the order is a significant amount and delivery extends
over a long period. In these customer contracts, there is not a one
to one correlation between payment terms and revenue recognition, which creates customer balances in the financial statement.

ment Mist Elimination within AirTech revenue recognition and billing in general aligns. However, within FoodTech there are contracts with billing annually in advance. These contracts qualifies forrevenue recognition over time and therefore deferred revenue balances arises. Within FoodTech there is also other contracts qualifying over where payment terms deviates from revenue recognition,
which result in both deferred revenue and accrued income balances.
Within AirTech it is common with advanced billings, which creates advances from customers. Within AirTech the great majority ofcustomer contracts qualifies for at a point in time revenue recognition meaning that once equipment are delivered, revenue is recognized fully for that performance obligation and any advances inthe balance sheet is netted off and remaining balance is recognized as an accounts receivable. However, within segment Data
Centers within AirTech the great majority of the customer contracts
qualifies for over time revenue recognition meaning that as soon as
the measurement of progress of a performance obligation exceeds
any advanced billings contract assets are recognized due to thefact that the billing terms does not allow for further billing until further milestones have been reached.

Allocation of Net sales
The majority of customer contracts within Munters operating
segments AirTech (excluding segment Data Centers) and FoodTech
fulfill the requirements to recognize net sales at a point in time,even though there are a number of customer contracts within thesebusiness areas that requires to recognize net sales over time, whichis reflected in the below matrix. In contrast, the majority ofcustomer contracts within segment Data Centers within AirTech s
requires to recognize net sales over time.
In addition equipment sales Munters also provides different kindsof services to customers such as installation, commissioniong,startup and maintenance. Net sales from services are recognizedover time as these services are performed.
Allocation of the transaction price in a customer contract withseveral performance obligations is based on standalone selling
prices.
AirTechFoodTech

Total

Goods transfered at a point in time
Goods transfered over time

3,509
1,361

1,793
57

5,302
1,418

Services transfered over time
Total

457
5,327

151
2,002

608
7,329

176

−

176

5,151

2,002

7,153

AirTechFoodTech

Total

Goods transfered at a point in time
Goods transfered over time
Services transfered over time
Total

3,697
1,100
334
5,131

1,851
1
139
1,991

5,548
1,101
473
7,122

Related to the discontinued operation

710

−

710

4,421

1,991

6,412

2019

Related to the discontinued operation
Related to the continuing
operation

2018

Related to the continuing
operation

Contract balances

2019

2018

Accounts receivables (Note 17)
Accrued income (Note 18)
whereoff Contract asset

1,050
193
181

1,095
139
125

Contract liabilities
Advances from customers
Deferred revenue (Note 26)

374
63

285
55

Transaction price allocated to remaining performanceobligations
For information on the aggregate amount of the transaction priceallocated to the performance obligations that are unsatisfied (orpartially unsatisfied) as of the end of the reporting period (Orderbacklog), see segment information in note 6.

Contract balances
Accounts receivables are non-interest bearing receivables with ageneral payment term of 30-90 days. Within FoodTech and seg-

NOTE 5. INFORMATION ON COST BY NATURE

2019 Group
Material costs
Other production costs
Personnel and other administration
Cost of depreciation
Amortization and write downs on surplus values
Other costs
Total

10 0 

Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs

Total-2,993
-907
-701
-130
-3
-87
-4,822

-837
-36
-97
-970

-564
-41
-4
-610

-162
-6
-30
-197

-5
-5

-2,993-907-2,264
-213
-134
-92
-6,604

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

2018 Group
Material costs
Other production costs
Personnel and other administration
Cost of depreciation
Amortization and write downs on surplus values
Other costs
Total

26

Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs

Total-2,719
-805
-601
-70
-3
38
-4,160

-842
-6
-138
-987

-532
-18
-2
-553

-176
-2
-13
-191

2
2

-2,719-805-2,152-95-157
40-5,889M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 101

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

27

FINANCIAL REPORTS | Notes
NOTE 6. OPERATING SEGMENTS
Reportable operating segments
The Group’s reportable operating segments have been identified
from a management perspective. Thus, the segment information disclosed is based on internal reporting to the chief operating decision maker, which at Munters has been equated with Group management. The Group’s operations are managed and reported by
two business segments, AirTech och FoodTech.
Air Treatment manufactures and markets products and holistic solutions for controlling humidity and improving the indoor climate.
Customers’ manufacturing processes and warehousing are becoming more efficient and product quality, shelf life, and hygiene are
improving.

AirTech20192018

In 2019, the previous operating segments Data Centers and Mist
Elimination were integrated into AirTech. The Data Centers business is active in indoor climate systems for medium-sized to large
data centers. Mist Elimination manufactures and markets environmentally friendly solutions and products for drip capture, including
the purification of flue gas. The comparative figures have been restated in accordance to the new business segments. FoodTech manufactures and markets energy-efficient products and systems to create the right indoor climate for the animal husbandry and horticultural industries.
Business segment consolidation is performed applying the same
policies as for the Group as a whole. Transactions between business segments are conducted on market terms. Key control and reporting concepts are order intake, net sales, EBIT, and operating
working capital. No individual external customer represents 10%
or more of Munters’ sales.

FoodTech
2019
2018

Other &
Eliminations 1)
2019
2018

Total
2019
2018

Order backlog

1,780

1,652

526

518

0

0

2,307

2,170

Whereof recognized to net sales within one year

1,626

1,717

425

371

0

0

2,051

2,088

Order intake

5,253

4,621

2,087

2,107

-38

-30

7,302

6,698

Sales from external customers

5,151

4,421

2,002

1,991

0

0

7,153

6,412

Transactions between business segments

8

5

31

27

-38

-32

0

0

5,159

4,426

2,032

2,018

-38

-32

7,153

6,412

Earnings before interest and tax (EBIT)

565

503

226

244

-236

-217

556

529
164

Net sales

Change in accounts receivable

-45

182

87

-11

40

-7

82

Change in inventories

36

44

31

-14

0

0

66

30

Change in accounts payable

19

-32

-7

-36

-7

-7

5

-74
-117

Change in advances from customers

74

-100

7

-18

0

0

80

Change in operating working capital

83

94

118

-78

33

-14

234

2

Internal reallocations

-1

-13

0

-7

1

20

0

-0

Investment

-92

-155

-78

-66

-10

-10

-180

-231

impairments

156

70

91

45

100

137

347

253

Operating cashflow

712

500

357

138

-112

-85

957

553

2,184

2,559

833

875

71

84

3,088

3,518

Other disclosures
Number of permanent employees at year end

1) Pertains group internal eliminations and group items not allocated to any operating segment.

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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

GEOGRAPHIC INFORMATION
The information below is based on where customers have their registered head office.

The brands that emerged in connection with business combinationsacquired when Munters Group AB acquired Munters AB via
Munters Holding AB are deemed to have an indefinite useful life,
while the useful life of customer relationships and technology also
identified are estimated at 6–12 years. Depreciation, amortization,and impairment losses on non-current assets were charged to income for the year as shown above.

External net sales
SwedenUnited States
Germany
China
Other countries
Total

2019
180
2,744
459
920
2,850
7,153

2018
160
2,338
521
904
2,489
6,412

Non-current assets
SwedenUnited States
Euro countries
Other countries
Total

2019
497
4,141
1,707
491
6,835

2018
499
3,922
1,621
294
6,336

The information presented in the table above regarding non-current
assets is grouped according to assets location, i.e. where the entity
carries on its production of goods and services. Non-current assets
consist of buildings and land, plant and machinery, equipment,
tools, and installations, construction in progress, patents, licenses,
brands and similar rights and goodwill.

NOTE 7. OTHER OPERATING REVENUE AND
EXPENSESGroup
Cost of goods soldSelling expenses
Administrative costs
Research and development costs
Total

2019
-133
-133
-45
-36
-347

2018
-76
-468
-21
-37
-602

A write-down by SEKm 324 was made during 2018, which was
related to goodwill in the prior operating segment Data Centers. In
addition, a write down of SEKm 18.6 was made on internally generated intangible assets. These write-downs are recognized inselling expenses.
Group
Write down of inventory
Opening balance
Write down current year
Reversal of previous years write down
Organizational change
Exchange rate differences
Closing balance

2019
-77
-18
10
0
-2
-88

2018
-77
-5
6
-1
-77

Group
2019

2018

Other

7

6

Realized exchange rate differences

2

8

Total

9

14

Other operating income

Other operating expenses
Other

-5

Unrealized exchange rate differences

-1

-6
-1

Total

-7

-6

NOTE 8. DEPRECIATION, AMORTIZATION
AND IMPAIRMENT LOSSES
Amortization of intangible assets and depreciation of property,
plant, and equipment are based on the historical acquisition cost
and the estimated useful life of different groups of assets. For assets
acquired during the period, depreciation or amortization is calculated from the acquisition date. Depreciation and amortization are
charged primarily on a straight-line basis over the following useful
lives.
Research and development work
Patents, licenses, brands (with definitive useful life)
Customer relationships
Technology
Brands (with indefinitive useful life)
Machinery and equipment
Buildings

3-5 years
3-10 years
7-12 years
6-10 years
not amortized
3-10 years
20-33 years

Leased buildings
Leased plants

2-10 years
2-15 years

Leased machines
Leased cars

2-7 years
2-5 years

Most of the write-downs and reversal of write-downs are related tothe obsolescence that is made at each period end.

NOTE 9. DISCONTINUED OPERATIONSOn September 9, 2019 Munters decided and closed its European
Data Centers-factory in Dison, Belgium, following the finalization ofnegotiations with the unions. The production has ceased but minor
installation services remains at customer sites. Therefore, thisbusiness is classified as a discontinued operation and the earnings
from this business is presented on a separate line in the income
statement with restated comparatives disclosed.
The closure is according to the plan of the FPP-program launchedat the start of 2019 to increase the overall performance of thecompany.
In relation to the closure process of Dison, specified components,
for a previously sold customized Munters solution, had to be replaced at a specific customer’s sites. As a result of this, Munters incurred non-recurring cost of SEKm 116, which were in addition to
the previously communicated total cost for the FPP program. The reimbursement to the customer was paid during the fourth quarter2019. Munters has insurance solutions in place for this type of
events, but since Munters has not concluded the discussions with its
insurance providers the final financial and cash flow net effect on
Munters cannot yet be determined. No asset has been accountedfor.
The income statement for the discontinued operation is presented
below. The discontinued operation has mainly had cash flows fromoperating activities.

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28

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

29

FINANCIAL REPORTS | Notes
NOTE 10.

Group
2018

2019
Net sales

176

710

Cost of goods sold
Gross profit

-427
-251

-690
20

FINANCIAL INCOME AND
EXPENSESGroup

Parent Company

2019

2018

2019

2018

7
0
7

5
0
5

-

-

-155

-132

-0

-0

-19
-14
1
-10
-196

0
-8
15
-5
-130

-0
-0

-0
-0
-0

-189

-125

-0

-0

Financial income
Selling expenses
Administrative costs
Research and development costs
Other operating expenses

-39
-39
-9
-113

-375
-15
-26
-0

Operating profit

-450

-396

Financial income and expenses-5-2Profit/Loss after financial items
Tax
Net income for the year

-455
8
-448

-397
-24
-421

Cash flow from operating activities

-431

42

Interest income, other
Other financial income
Financial expenses
Interest expenses, loans
Interest expenses, leaseagreements
Financing Fees
Exchange-rate differences
Other financial expenses

Total

NOTE 11.

INCOME TAXES
Group
2019
2018

Parent Company
2019
2018

Current tax
Deferred tax related to temporary differences and loss carry-forwards

-119
37

-86
8

0
0

0

Tax recognized in income statement for the year

-83

-77

0

0

Profit/Loss before tax
Tax according to prevailing tax rate for the Parent Company
Tax effect of;Difference attributable to foreign tax rates
Non-deductible expenses
Non-taxable income
Utilization of losses not recognized as an asset in the balance sheet
Change in valuation of deferred tax on temporary differences and losses
Revaluation of deferred tax assets/liabilities due to change in tax rate
Non-income-related taxes
Tax attributable to prior years/withholding tax

367
-78

404
-87

-1
0

-11
3

-7
-4
4
-1
2
5
-2
-2

-9
-18
13
2
22
2
-2
-1

-

0
-2
-

Tax recognized in income statement for the year

-83

-77

0

0

Reconciliation of effective tax

Group
Group
Tax attributable to components of othercomprehensive income

2019

2019

2018

Buildings
Plant, machinery, equipment
Intangible assets
Inventory
Accounts receivable

3
4
0
29
7

0
3
-0
31
6

Provisions (excl deferred tax liability)
Pension provision
Accrued expenses and prepaid income
Goodwill
Other items

14
34
46
3
18

9
25
36
4
10

90
249

101
227

Deferred tax assets
2018

Deferred tax attributable to:
Actuarial gains and losses on defined-benefit pension
obligations

9

4

Total

9

4

Loss carry-forward
Closing balance104 

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

Group
2019
3

2018
3

Plant, machinery, equipment
BrandsOther intangiable assets
Inventory
Accrued expenses and prepaid income

29
299
53
1
1

28
301
60
0
13

Goodwill
Other items
Closing balance

22
1
409

16
1
421

Deferred tax liabilities
Buildings

Reconciliation of net change in deferred tax assets from the beginning of the year to the end of year:
Change in deferred taxes

Group
2019
2018

Opening balance
Acquisition of subsidiaries (Note 12)

194
-

152
4

Charges recorded in this year's profit
Tax on amounts recorded in Other comprehensive income

-37
-9

22
-4

Exchange-rate differences for the year
Closing balance

13

20

161

194

Deferred tax assets for pension provisions refer to the difference
between the calculation of defined-benefit pension obligations
based on local tax legislation and IAS 19 Employee Benefits.
Deferred tax assets relating to loss carry-forwards are recognized
to the extent that it is deemed likely that the losses will be used tooffset taxable income.
At year-end, there were tax loss carry-forwards in the group companies amounting to SEKm 1,307 (951), of which SEKm 1,249(904) may be carried forward for an unlimited period of time. Loss
carry-forwards for which deferred tax assets are not recognized totaled SEKm 919 (533), of which SEKm 917 (533) may be carriedforward for an unlimited period of time. Consequently, deferred tax
assets on loss carry-forwards totaling SEKm 389 (418) were recognized. These losses relate to the subsidiaries in Australia SEKm 15(17), Germany SEKm 42 (62), Brazil SEKm 2 (0), Mexico SEKm
21 (40), Netherlands SEKm 36 (33) and Sweden SEKm 260(266). Tax losses in Mexico may be carried forward for ten years
and tax losses the Netherlands may be carried forward for nine
years. In the other countries, losses may be carried forward for an
unlimited period of time.
SEKm 57 (73) of the total SEKm 389 (418) which has been thebasis for calculating deferred tax assets relates to Mexico and theNetherlands. During the year, the Netherlands and Brazil havegenerated tax deficits that are deemed to be used and thus a deferred tax asset is reported on them.
Deferred tax liabilities are mainly attributable to the surplus values identified in connection with the acquisition of Munters AB in2010.

NOTE 12.

BUSINESS ACQUISITIONS ANDDIVESTMENTS

ACQUISITIONS 2019
There have been no business acquisitions or divestments in 2019.
However, Munters UK's wholly owned subsidiary Humi-Tech Services Ltd has been merged with its parent company. Since this related to a merger of a wholly owned subsidiary, no merger result
has impacted the Group.
ACQUISITIONS 2018
H U MI - T E C H S E R VI C E S L T D

On July 2, 2018, Munters UK acquired 100% of the issued sharecapital of Humi-Tech Services Ltd, a company registered in the UK
providing services and maintaining humidifiers predominantly
within the UK market. Humi-Tech Services Ltd has a strong reputation in the market for being reliable and providing high quality
work and the main reason for the acquisition was to increase
Munters service footprint in the UK market. Humi-Tech Services Ltd
has contributed with seven highly qualified service engineers withknowledge in the humidification industry together with a strong customer base.
The purchase consideration amounted to SEKm 22 of which
SEKm 14 upfront and an earn-out of maximum SEKm 8 contingent
on the level of EBITDA in FY18 and FY19. Munters estimated thefull earn out to be paid out and provided for it fully. The surplus
values arising from the acquisition related to customer relationships. Acquisition costs incurred amounted to SEKm 0.5. Acquired
cash amounted to app. SEKm 1.
MT E C H S Y S T E MS

A part of the remaining put option of 40% in MTech was partly exercised where another 6.4% was acquired for SEKm 23. The original option remains and after this transaction there is a call option
to acquire the remaining 33.6% which terminates as of December
2022. The purchase price for the exercise of the option is basedon the financial result for the 12 months preceding the date of exercise of the option.

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

31

FINANCIAL REPORTS | Notes
NOTE 13.

FIXED AND RIGHT-OF-USE ASSETSDISTRIBUTION OWNED AND LEASED ASSETS
Presented below is the Groups owned and leased assets for 2019. No leased tangible assets are recognized for 2018.
Buildings
and land

Plant andmachinery

Equipment, tools,
fixtures,and fittings

Construction inprogress

Total

166
82
248

277
277
554

121
41
162

55
−
55

618
400
1,019

Buildings
and land

Plant andmachinery

Equipment, tools,
fixtures,and fittings

Construction inprogress

Total

Opening balance

414

854

514

62

1,844

Capital expenditures
Acquisitions (note 12)
Acquisitions, internal
Disposals of subsidiaries
Disposals, internal
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference

5
−
−
−
−
-0
11
10

26
−
−
−
−
-13
11
20

58
−
−
−
−
-55
7
15

28
−
0
−
-0
-0
-38
3

118
−
0
−
-0
-69
-8
48

Closing accumulated acquisition value

441

898

539

55

1,933

Accumulated depreciation
Opening accumulated depreciation
Depreciation for the year
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference

-244
-14
0
−
-6

-577
-48
13
8
-13

-377
-51
38
-8
-10

−
−
−
−
−

-1,197
-113
51
0
-29

Closing accumulated depreciation

-264

-617

-407

−

-1,288

Write downs
Opening accumulated write-downs
Write-downs for the year
Reclassification
Exchange difference
Closing accumulated write-downs

-1
-10
-0
0
-11

-8
-5
8
-0
-5

-0
-11
0
0
-11

−
−
−
−
−

-9
-26
8
0
-27

Closing carrying amount

166

277

121

55

618

2019 Group
Owned assets
Leased assets
Total

OWNED ASSETS
Presented below is the Groups owned fixed assets split per asset category.

2019 GroupAcquisition cost

Depreciation is based on an asset’s acquisition cost and its estimated useful life as specified in note 8. The carrying amount of land totaled
SEKm 39 (36).

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

32

Buildings
and land

Plant andmachinery

Equipment, tools,
fixtures,and fittings

Construction inprogress

Total

371
2
−
−
−
22
19
414

756
53
0
−
-8
12
42
854

460
46
0
-0
-13
-1
21
514

48
48
−
−
-0
-36
4
62

1,634
148
1
-0
-21
-3
86
1,844

Accumulated depreciation
Opening accumulated depreciation
Depreciation for the year
Acquisitions (note 12)
Disposals of subsidiaries
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference
Closing accumulated depreciation

-214
-11
−
−
−
-7
-12
-244

-530
-40
-0
−
7
14
-28
-577

-318
-47
-0
0
12
-6
-16
-377

−
−
−
−
−
−
−
−

-1,062
-99
-0
0
19
0
-56
-1,197

Write downs
Opening accumulated write-downs
Exchange difference
Closing accumulated write-downs

-1
-0
-1

-7
-1
-8

-0
-0
-0

−
−
−

-9
-1
-9

168

270

137

62

637

2018 GroupAcquisition cost
Opening balance
Capital expenditures
Acquisitions (note 12)
Disposals of subsidiaries
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference
Closing accumulated acquisition value

Closing carrying amount

LEASED ASSETS
As of January 1, 2019, leases are recognized in accordance withthe requirements in IFRS 16 Leases as a right-of-use asset and acorresponding liability on the day the leased asset is available foruse by the Group. For further description of the new accounting
policies and the transition effect of the new standard, see Note 1.
Munters had no financial leases in accordance with IAS 17 Leases
as of January 1, 2019.
General description of Munters’ leases
Munters leases various offices, warehouses, equipment and vehicles. In addition, Munters leases half of its manufacturing facilities
around the world, which amounts to around ten factories. The
leases are normally signed for fixed periods, but with the option toextend some contracts. The terms are negotiated separately foreach lease and contain a number of covenants.
The leases only include variable payments that are based on anindex, which is taken into account in the valuation of the lease liability and the right-of-use asset on the day the index is remeasured.
The leases contain both lease and non-lease components and it is
only the lease component that has been included in the calculationof the lease liability and the right-of-use asset.
Options to extend or terminate a lease are included in a numberof the Group’s leases. The terms are used to maximize flexibility inthe management of the assets used in operations. The overwhelming share of the options to extend or terminate leases can only be
exercised by the Group and not by the lessor.
Comparison if previous principles have been used in 2019
If the previous principles for leases (IAS 17) had been applied, recognized EBIT would have been SEKm 19 (-) higher, totalinterest expenses SEKm 19 lower and net profit after tax SEKm 31(-) higher. The reason why EBIT and net profit after tax are higher
without IFRS 16 is because of write downs of certain right-of-use assets during the year. But under the previous principles the leasewould most likely have been defined as an onerous contract andthereby had a negative impact on both operating profit and net
profit after tax of approximately the same amount.
IFRS 16 has no impact on total cash flow, but the introductionmeans a shift of cash flow from operating activities to cash flowfrom financing activities, since the lease payments repay therecognized lease liability.
Following is a specification of leased assets as of December 31,
2019. Note 20 discloses the lease liabilities associated with theleased assets.
Total interest expenses, which are included in financial expenses,
amounted to SEKm19 (-) during the year, whereof SEKm 17 (-) related to the continuing operation and SEKm 2 (-) related to the discontinued operation. Depreciation and write downs for the year
amounted to SEKm 141 (-), whereof SEKm 106 (-) related to thecontinuing operation and SEKm 35 (-) related to the discontinued
operation.
Short-term leases and leases of low-value assets were expensed
for SEKm 23 (-) during the year. These leases will mean paymentsof SEKm 59 between the years 2021-2024 and SEKm 6 in 2025
and beyond.
The total cash flow from leases recognized in the balance sheet
in 2019 was SEKm 123 (-) and is presented under financing activities as repayment of lease liabilities.

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

33

FINANCIAL REPORTS | Notes

Buildings,
leased2019 Group

Plant andmachinery,leasedEquipment andtools, leased

Total

Acquisition cost
Opening balance
New contract
Exchange difference

−

−

−

−

141

328

76

545

-2

-3

-1

-6

Closing accumulated acquisition value

139

325

75

539

Accumulated depreciation
Opening accumulated depreciation
Depreciation for the year
Exchange difference

−
-36
0

−
-48
1

−
-29
0

−
-114
1

Closing accumulated depreciation

-36

-48

-29

-112

Write downs
Opening accumulated write-downs
Write-downs for the year
Exchange difference
Closing accumulated write-downs

−
-21
0
-21

−
-0
0
-0

−
-5
−
-5

−
-27
0
-26

Closing carrying amount

82

277

41

400

NOTE 14.

PATENTS, LICENSES, CUSTOMER RELATIONS AND OTHER INTANGIBLE ASSESWITH DEFINITE USEFUL LIFE
Internallygeneratedintangible assets

Other
intangible
assets

Total

Technology

Customer
relationships

Acquisition cost
Opening balance

632

933

185

170

1,920

Capital expenditures
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference
Closing accumulated acquisitions

−
-2
−
19
650

−
−
−
29
961

62
-0
-4
6
250

11
-15
4
1
172

74
-17
0
56
2,033

Accumulated amortization
Opening accumulated amortization
Amortizations for the year

-508
-18

-799
-69

-52
-29

-107
-15

-1,466-131

Sold/Scrapped
Reclassification/Internal transfers
Exchange difference
Closing accumulated amortizations

0
−
-15
-541

−
−
-24
-892

−
-1
-1
-84

15
0
-1
-108

16
-1
-41
-1,624−

Write downs
Opening accumulated write-downs
Disposals, internal
Write-downs for the year
Reversed write-downs

-2
−
−
−

-10
−
−
−

-28
−
-1
3

-13
-0
−
−

-53
-0
-1
3

Reclassification
Exchange difference
Closing accumulated write-downs

−
-0
-2

−
-0
-10

1
-1
-26

−
-0
-14

1
-1
-51

107

60

140

51

358

2019 Group

Closing carrying amount

10 8 M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019NOTES

Technology
This item includes technology, SEKm107 (122), where the majorityof which was identified in conjunction with the acquisition of
Munters AB in 2010.
Customer relationships
This item includes customer relationships, SEKm 60 (124), where
the majority of which was identified in conjunction with the acquisition of Munters AB in 2010.
Internally generated intangible assets

2018 GroupAcquisition cost
Opening balance

34

Internally generated intangible assets mainly relates to recognizeddevelopment costs within FoodTech, AirTech and segment Data
Centers within AirTech.
Other intangible assets
Other intangible assets mainly include patents, tradenames, licenses, and similar rights in Sweden, Germany, the United States,
the Netherlands and China.

Technology

Customer
relationships

Internallygeneratedintangible assets

Other
intangible
assets

Total

592

852

116

147

1,707

Capital expenditures
Acquisitions (note 12)

−
−

−
26

60
−

24
−

84
26

Disposals of subsidiaries
Sold/Scrapped

−
−

-0
−

−
−

−
-1

-0
-1

Reclassification/Internal transfers
Exchange difference

−
41

−
56

2
8

-1
3

0
106

Closing accumulated acquisitions

632

933

185

170

1,921

-421
-57

-679
-73

-33
-17

-91
-14

-1,225
-161

−
−

−
−

−
0

0
-0

0
-0

-30
-508

-46
-799

-2
-52

-2
-107

-80
-1,466

Opening accumulated write-downs
Write-downs for the year

-2
−

-9
−

-11
-19

-13
−

-35
-19

Reversed write-downs
Exchange difference

−
-0

−
-1

1
-1

−
-0

1
-2

Closing accumulated write-downs

-2

-10

-28

-13

-53

122

124

105

50

401

Accumulated amortization
Opening accumulated amortization
Amortizations for the year
Sold/Scrapped
Reclassification/Internal transfers
Exchange difference
Closing accumulated amortizations
Write downs

Closing carrying amountM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 10 9

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

FINANCIAL REPORTS | Notes
NOTE 15.

GOODWILL AND OTHERINTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIFE

Intangible assets with indefinite useful life consist of brands andgoodwill.
2019 Group

BrandsGoodwill

Acquisition cost
Opening balance
Exchange-rate differences for the year
Closing balance

1,086
32
1,118

4,569
137
4,706

Accumulated impairment
Opening balance
Impairment of the year
Exchange-rate differences for the year
Closing balance

6
0
0
6

351
2
6
358

Closing carrying amount

1,111

4,348

2018 Group

BrandsGoodwill

Acquisition cost
Opening balance
Exchange-rate differences for the year
Closing balance

1,015
71
1,086

4,275
293
4,569

6
0
6

25
324
2
351

1,080

4,218

Accumulated impairment
Opening balance
Impairment of the year
Exchange-rate differences for the year
Closing balance
Closing carrying amount

Recognized brands per cash-generating unit

2019
908
0
136
67
1,111

2018
881
0
133
66
1,080

AirTech

2019
3,106

2018
2,955

Data Centers
FoodTech
Mist Elimination

0
1,095
146

0
1,121
143

Closing carrying amount

4,348

4,219

AirTechData Centers
FoodTech
Mist Elimination
Closing carrying amount
Recognized amount of goodwill per cashgenerating unit

Goodwill as of December 31, 2019 amounted to SEKm 4,348(4,218). The increase was a result of exchange rate effects, mainly
owing to a weaker SEK against USD compared to the previous
year.
Management estimates that brands have an indefinite useful life
because there is no predictable limit for the period of time during
which the brand is expected to generate net payments for the company.

110 

IMPAIRMENT TESTING OF GOODWILL AND BRANDS
The values of goodwill and brands are tested annually, or more frequently if necessary, to ensure that the value does not deviate negatively from book value. The carrying amounts for goodwill andbrands were tested at December 31, 2019.
Goodwill and brands with an indefinite useful life are allocatedto the Group’s cash-generating units, which are the smallest identifiable groups of assets that, as part of continual usage, generatecash inflows that are substantially independent of other assets orgroups of assets. The Group’s cash-generating units consist of theGroup’s four former business areas: AirTech, FoodTech, Data Centers, and Mist Elimination. The latter two business areas were reorganized in 2019 and are now an integral part of AirTech.
Impairment testing of recognized goodwill and brands has been
based on recoverable amounts for cash-generating units established through calculating future value in use. Future cash flows forthe first five years are mainly based on the forecasts approved by
the Board and Group management, and projections thereof. The
growth rate in the terminal period after the first five years has been
determined as 2% (2).
Significant assumptions used to calculate values in use are sales
growth and the EBITA margin, utilization of operating capital employed, and the discount rate. Management has established thegrowth rate forecast based on previous results and expectations
about future market trends by operating segment. These assessments take into account various economic indicators and internaland external analyses thereof. Also taken into account are important aspects of financial performance described in the Group’s
strategic plan.
The year’s impairment testing did not result in any impairment,
while the testing in 2018 resulted in impairment of goodwill andother intangible assets totaling SEKm 342 attributable to the business segment Data Centers, where the economic outlook has deteriorated. Goodwill that was allocated to Data Centers was then written down in its entirety, because of which no comments on Data
Centers are provided in the sensitivity analysis below.
The calculations for 2019 used a nominal discount rate (average
weighted cost of capital before tax) of 12.3% (11.7).
A sensitivity analysis for the parameters discount rate, sales
growth and EBIT margin has been performed for each cash-generating unit, as below. The effects refer to a change in the individual
parameter, all else being equal.
Sensitivity analysis
Discount rate
A 3.0 percentage point (3.0) increase in the discount rate would
be required for goodwill and brand impairment to be necessary inthe cash-generating unit AirTech and a 5.9 percentage point (65)increase in FoodTech. For Mist Elimination, no reasonable increasein the discount rate is judged to lead to a need for impairment.
Net sales growth
For AirTech, FoodTech and Mist Elimination, no reasonable decrease in net sales growth is judged to lead to a need for impairment
EBIT margin
A decrease of 4.0 percentage points (5.8) in the EBITA margin forthe period from 2021 to 2024, perpetuity value included, would
be required for impairment of goodwill and brands to be necessary in the cash-generating unit AirTech. For FoodTech and Mist
Elimination, no reasonable decrease in the EBITA margin is judged
to lead to a need for impairment.

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

35

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019NOTES

NOTE 16.

Provisions for bad debts corresponded to 5% (4) of total receivables and changed as follows.

PARTICIPATION IN
SUBSIDIARIES
Carrying
amountDirect shareholdings, 100%

Country
SwedenMunters Holding AB (corp. reg. no. 556818-9749)

4,086

Registered office: Stockholm
4,086
Material indirect shareholdings
Munters AB (Corp.reg. no. 556041-0606)
AB Carl Munters (Corp.reg. no. 556035-1198)
3039)
Pro Component Sweden AB (Corp.reg. no.
556904-0891)
Proflute AB (Corp.reg. no. 556558-3415)
Munters Corporation
Munters Canada Inc
Munters de Mexico S de RL de CV
Shelf Service Company No 1 S de RL de CV
Munters Brasil Industria e Commércio Ltda
Munters Beteiligungs GmbH
Munters Euroform GmbH
Munters GmbH
Munters Reventa GmbH
Munters Netherlands BV
HB Beheer BV
Munters BV
Munters Spain S.A.U.
HB KRAKO s.r.o.
Munters France S.A.S.
Munters Italy SpA
Munters Ltd
Munters Management Service Ltd
Munters Belgium SA
HB Drying Belgium
Munters Finland OY
Munters Israel Ltd
Munters A/S
Munters (Pty) Ltd
Munters-Form Endüstri Sistemleri Sanayive
Ticaret A.Ş.
Munters India Humidity Control Private Ltd
LtdCountry
SwedenSwedenSwedenJiangyin SAT Air Treatment Equipment Co Ltd
Munters Korea Co., Ltd
Munters Company Ltd
Munters (Thailand) Co. Ltd
Munters K.K.
Munters Pte Ltd
Munters Pty Ltd
M-Tech Systems USA, LLC
M-Tech Systems America Latina Ltda
M-Tech Processing, LLC

Percentage,
%
100
100
100

Provision for bad debts
Opening balance
Provision for anticipated losses
Realized losses
Reversals of unutilized amounts
Exchange-rate differences
Closing balance

2019
44
43
-6
-33
1
48

2018
38
31
-4
-23
2
44

The group applies the simplified approach under IFRS 9 Financial
Instruments to measure expected credit losses. This “expected credit
loss model” uses a lifetime expected loss allowance for all trade receivables and contract assets. The model is based on historical default rates over the expected life of the trade receivables adjusted
for forward looking estimates. Based on Munters historical statisticfrom confirmed credit losses the historical default rate has an insignificant effect on the credit loss provision and therefore the provision for bad debt is built on individual forward-looking estimates.

SwedenSwedenUnited States
CanadaMexicoMexicoBrazilGermany
Germany
Germany
Germany
Netherlands
Netherlands
Netherlands
Spain
Czech
FranceItaly
UK
UK
Belgium
Belgium
FinlandIsraelDenmarkSouth Africa

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Turkey
India
China

80
100
100

NOTE 19.

China
South Korea
ThailandThailandJapan
Singapore
Australia
United States
BrazilUnited States

100
100
100
100
100
100
100
66
66
66

Book value of financial assets and liabilities by
category

No restrictions exist regarding Group’s access to the subsidiaries
assets, as a result of regulations or minorities.

NOTE 17.

36

NOTE 18.

PREPAID EXPENSES AND
ACCRUED INCOME
Group
2019
2018

Prepaid rent and leases

Parent Company
2019
2018

Prepaid insurance premiums

7
26

7
22

0

0

Accrued income

193

139

0

-

26
37
288

14
42
224

0
0

0
0

Prepaid expenses for goods
and services
Other items
Closing balance

FINANCIAL INSTRUMENTS BY
CATEGORY
2019

2018

Other non-current financial assets
Accounts receivable
Other current receivables
Cash and cash equivalents

19
1,050
96
722

11
1,095
109
404

Closing balance

1,887

1,619

Financial assets measured at amortized cost

Financial assets measured at fair value throughprofit/loss
Currency derivatives whose cash flows are not subject
to hedge accounting

5

3

Closing balance

5

3

1,892

1,622

ACCOUNTS RECEIVABLES

Time analysis of accounts receivable,
net provision for bad debt
Current< 30 days
30-90 days
91-180 days
> 180 days
Closing balance

Total
2019
708
207
96
24
15
1,050

2018
667
206
129
62
30
1,095

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 111

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

FINANCIAL REPORTS | Notes
2019

2018

Financial liabilities measured at amortized costNon-current interest-bearing liabilities
Non-current interest-bearing lease liabilities
Current interest-bearing liabilities
Current interest-bearing lease liabilities
Accounts payable
Accrued expenses

3,057
314
16
102
556
12

3,002
0
11
0
535
12

Other non-current liabilities
Other current liabilities
Closing balance

-0
153
4,209

-0
181
3,741

Financial liabilities at fair value throughprofit/loss
Currency and interest rate derivatives whose cash flows
are not subject to hedge accounting
Acquisition option MTech, non-current 1)
Contingent consideration Humi-Tech Services Ltd.
Closing balance
Total

134
8
142

2
128
8
138

4,351

3,879

1) Fair value adjustments recorded through equity. Acquisition option is valid
through December 31, 2022.

Fair value of assets and liabilities
The carrying amounts of interest-bearing assets and liabilities in thestatement of financial position may deviate from their fair value forreasons such as changes in market interest rates. Munters deems
that the interest rate on interest-bearing liabilities is in line with market terms at December 31, 2019, and the fair value at the end of
the reporting period therefore in all material aspects corresponds
to the carrying amount.
The fair value of financial instruments such as accounts receivable, accounts payable, and other non-interest-bearing financial assets and liabilities, which are recognized at amortized cost lessany impairment, is deemed equal to the carrying amount becauseof the short maturities of these instruments.

Negative net amounts refer to sales, and positive net amounts refer
to purchases. All forward contracts are short-term and fall due forpayment during 2020.
Financial assets and liabilities that are offset, or which are covered by a legally binding master netting arrangement or similar
agreement
Financial assets and liabilities that can be offset against each otherconsist of foreign exchange derivatives covered by a legally binding master netting arrangement. In the year 2019 these items are
not offset in the balance sheet. The carrying amounts of such assets
and liabilities are listed in the table above.
Contingent earn-outs and put/call acquisition options
The Group’s contingent earn-outs and put/call acquisition options,recognized at fair value in the statement of financial position, were
measured according to IFRS 9 and categorized in level 3 according to 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 put/call option related to MTech Systems matures at December, 2022 and is based on EBITDA for the
12 months prior to execution. The earn-out in Humi-Tech Services
Ltd is based on EBITDA for the fiscal years of 2018 and 2019 andwill be settled in early 2020. The change in the period relates to a
discounting effect on the put/call option and currency translations.
Contingent price considerations
Opening balanceContingent consideration (Note 12)
Excersied put/call option
Discounting
Exchange-rate differences for the year
Closing balance

2019
136
1
5
142

2018
136
8
-24
2
14
136

Derivative instruments
The Group’s derivatives, recognized at fair value in the statementof financial position, are measured according to IFRS 9 categorized in level 2 according to the fair value hierarchy to IFRS 13.
This means that fair value is based on data for the asset or liability
other than quoted prices on an active market for identical assets or
liabilities that are observable either directly (as quoted prices) or indirectly (derived from quoted prices).
At year-end, there were forward currency contracts in the Group
as follows below.
2019
Nominalamount in
local
Carrying
currency
amount2018
Nominalamount in
local
Carrying
currency
amount

AUD/SEKCAD/SEK

1
2

0.0
-0.3

0

-0.1

CNH/SEKDKK/SEKEUR/SEK
GBP/SEK

-9
-5
-14
2

0.0
0.0
2.7
-0.1

-17
-10
1
-

-0.4
-0.0
0.3
-

JPY/SEKSGD/SEKUSD/SEKUSD/ILS
ZAR/SEK

20
2
-16
-20

-0.0
-0.0
3.0
-0.4

44
0
-17
-2
-20

0.1
-0.0
1.9
-0.1
0.2

Total

112 

4.9

1.7

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

37

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019NOTES

NOTE 20.

INTEREST BEARING LIABILITIESInterest bearing liabilities, non-current
Munters primary financing facilities consist of a term loan of
USDm 250 and a revolving credit facility of EURm 185. The facilities have no mandatory amortization requirement. The final maturity date is in May 2022. The loan agreement has one financial
covenant (consolidated net debt in relation to adjusted EBITDA). Of
the Revolving Credit Facility, EURm 20 is allocated to ancillary facilities made available for overdraft and guarantee purposes. As of
December 31, the total Interest-bearing liabilities amounted to
SEKm 3,081 (3,013). The table below outlines the long term debt
on Group level together with local bank debt in group companies
in among others, China and Brazil.

38

Munters’ financial policy regulates the management of externalborrowings. The Group’s forecasted performance in relation to thelimits stipulated by the covenant is closely monitored. This ensuresthat the Group fulfills its commitments to external lenders and minimizes the liquidity and financing risk. At December 31, 2019, thecovenant was met.
The total average weighted interest rate including both long- andshort term financing at the end of the year was 4.0% (4.4) and
4.2% (4.6) including financing cost.
Term Loan is deducted by financing cost activated in balance
sheet. Drawings under the revolving credit facility are listed among
non-current loans below.

Interest bearing loans, non-current

Book value

MaturityType of loan

Interest rate

Currency

2019

2018

2022
2022
2022
2022

Term Loan
Utilized committed credit facilities US
Utilized committed credit facilities Sweden
Utilized committed credit facilities Sweden

Variable
Variable
Variable
Variable

USD
USD
EUR
SEK

2,317
0
459
280

2,222
90
308
380

2020-2021

Other non-current loan

Fixed/
Variable

Variouscurrencies

Total

1

2

3,057

3,002

Interest bearing liabilities, current
The table outlines current bank debt in Munters subsidiaries inamong others Brazil and China.
Interest bearing loans, current
MaturityBook value

Type of loan

Interest rate

Currency

Other current loan

Fixed/
Variable

Variouscurrencies

2019
24

11

24

11

3,081

3,013

Total
Total non-current and current loans

Changes in interest-bearing liabilities
Munters has during the year amortized on loans in SEK, increased
borrowing in EUR and repaid USD loan under the2018

revolving credit facility. The change during the year is mainly
caused by currency effects originating from a stronger USD exchange rate.

Non cash
movements Closing balance

Opening balance

Cash flow

Currency effects

Term loan
Revolving credit facility
Other third party debt
Financing fees

2,243
778
2
-20

-44
-1
-

87
5
-

8

2,329
739
1
-12

Total

3,002

-45

91

8

3,057

Opening balance

Cash flow

Currency effects

Revolving credit facility
Other third party debt

11

13

-

-

24

Total

11

13

-

-

24

Non-current loans

Current loans

Total non-current and current loans

3,013

Non cash
movements Closing balance

3,081

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 113

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

39

FINANCIAL REPORTS | Notes
Changes in lease liabilities
Munters has during the year changed liabilities relating to leaseagreements with the below amounts, involving signing of newOpeningbalance

Lease liabilities

lease agreements, amortization of current agreements and interest
and currency effects.

Impact of new
accounting New contracts Amortizations ofpolicy during the year
loans

Interest on
loans

Currency
effects

ClosingbalanceNon-current interest-bearing lease liabilities

-

354

43

-95

14

-2

314

Current interest-bearing lease liabilities

-

104

8

-28

4

13

102

458

51

-123

19

11

416

Total

Maturity analysis of lease liabilities
The remaining undiscounted lease payments have the following
due date:
Undiscounted leasing liabilities as of December 31, 2019
Remaining term 1 year or lessRemaining term 1 to 5 years
Remaining term over 5 years
Total

NOTE 21.

102
248
127
476

EARNINGS PER SHARE

Net income, SEK ´000
Attributable to Parent Company
shareholders, SEK ´000
Attributable to non-controlling interests,
SEK ´000
Average number of outstanding shares
before dilution
Average number of outstanding shares
after dilution
Where of average number of shares in
own custody
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK

2019-164,015

2018-94,174-165,672-104,995

1,658

10,821

181,983,219 183,165,852
181,983,219 183,165,852
1,614,583
-0.91
-0.91

431,950
-0.57
-0.57

Computing earnings per share, basic and diluted, is based on the
net income attributable to the Parent Company’s ordinary shareholders. The number of shares used in the calculation consists of aweighted average of outstanding ordinary shares during the period. At December 31, 2019, the share price were below the redemption price for both the employee stock options program andthe warranty program.

NOTE 22.

PROPOSED DISTRIBUTION OF
EARNINGS

The following earnings (in SEK ´000) are at the disposal of the Annual General Meeting:
Proposed distribution of earnings, parent company
Unrestricted equity in parent company:
Opening balance of unrestricted equity
Repurchase of shares
Income for the year
Total
The Board of Directors proposes that earnings be distributed
as follows:
Dividend
To be carried forward
Total

Munters aim to pay an annual dividend corresponding to 30-50
per cent of its consolidated income after tax for the period. During
2019 Munters has made major changes to the overall overhead
cost structure, reducing its employees by approximately 500 and isreporting a loss for the year. Major efforts has gone into stabilizing
the business, ensuring value creation in all units. The work with stabilizing operations and make continuous improvement will continue
in 2020. In order to ensure long-term profitable growth, 2020 willentail investments in research and development and initiatives todrive synergies across the Group. On the basis of the current situation combined with the strategic intentions for the future, the Boardof Directors proposes to pay no dividend for 2019.

NOTE 23.

EQUITY

Share capital
The share capital of SEK 5,507,934 comprises 183,597,802(183,597,802) shares with a par value of SEK 0.03 (0.03) per
share. The shares in Munters Group AB are listed on Nasdaq
Stockholm under the symbol MTRS. The ten largest owners in
Munters Group AB hold a total of 69.6% (86.3) of outstanding
shares. Of these, FAM AB 21.1% (11.4) and Nordic Capital, indirectly via its Nordic Capital VII fund, 14.7% (50.1). No othershareholder holds more than ten percent of the shares, either directly or indirectly, in Munters Group AB.
The table below shows the changes in the number of shares.
Number of shares

2019
4,149,872-15,792-807
4,133,272

4,133,272
4,133,272

Opening number, January 1, 2018

183,597,802

Equity shares B

183,597,802

Changes 2018:
Closing number, December 31, 2018

183,597,802

Equity shares B
Of which in own custody/treasury shares

183,597,802
1,467,000

Changes 2019:
Closing number, December 31, 2019

183,597,802

Equity shares B

183,597,802

Of which in own custody/treasury shares

114 

1,852,000

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

The reserve for exchange rate differences consists of differencesthat arise when the income statements and balance sheets of foreign subsidiaries are translated into SEK. The positive exchangerate effects during 2019 were mainly due to a weaker SEK against
USD and EUR compared to previous year.

NOTE 24.

PROVISIONS FOR PENSIONSAND SIMILAR COMMITTMENTS

Group

2019

2018

Non-current defined-benefit obligations to employees

269
14
283

215
15
230

Other benefits to employees
Non-current

Reserve for exchange rate differences
Opening balance, January 1, 2018
Exchange rate differences
Closing balance, December 31, 2018

351
193
544

Exchange rate differences
Closing balance, December 31, 2019

122
666

Holdings of treasury shares 2019
The Board of Directors of Munters Group AB (“Munters”) resolved,
pursuant to the authorization granted by the Annual General Meeting held on May 8, 2019 to repurchase the company’s own shareson Nasdaq Stockholm. The purpose of the repurchase program
was to secure the delivery of shares to the participants of Munters’
long-term incentive program, which was resolved by the Annual
General Meeting 2019, and to cover costs related to the program.
In total, Munters repurchased 385,000 shares during the year at
an average price of SEK 40.98. Payment for the shares was madein cash and amounted to SEKm 16. As of December 31, 2019,
Munters Group AB held 1,852,000 shares in custody, equal to
1.0% of the registered share capital. The shares had a par value of
SEK 0.03 per share.
Holdings of treasury shares 2018
The Board of Directors of Munters Group AB (“Munters”) resolved,
pursuant to the authorization granted by the Annual General Meeting held on May 17, 2018, to repurchase the company’s own
shares on Nasdaq Stockholm. The purpose of the repurchase wasto secure the delivery of shares to the participants of Munters’ longterm incentive program, which was resolved by the Annual General Meeting 2018, and to cover costs related to the program. The
repurchases were made at a price per share within the from time totime registered trading interval. Payment for the shares was madein cash and amounted to SEKm 59. As of December 31, 2018,
Munters Group AB holds 1,467,000 shares in own custody, equal
to 0.7% of the registered share capital. The shares had a par valueof SEK 0.03 per share.
Dividend during the period
There has been no dividend paid during the year. Last year a dividend of SEKm 55 was made in accordance with the resolution
from the Annual General Meeting on May 17, 2018.

40

Current defined-benefit obligations to employees

66

Other current employee benefits
Current392
8

Total provisions for pensions
and similar obligations

292

238

Where-of provisions recognized for pension obligations

276

221

The Group finances pension plans for its employees in several
countries. These plans mainly follow practice in the country in question and may be defined-contribution or defined-benefit plans or a
combination of both. The most important defined-benefit pension
plans cover employees in Sweden, Italy and France. In France and
Italy, provisions are made for mandatory remuneration when employment ceases. For senior executives of the Group, there are
guidelines regarding pension rights and pension plans describedin note 31.
Defined-benefit pension plans in Sweden constitute 96% (94) oftotal Group provisions for pensions recognized under IAS 19. The
calculations are primarily based on final salary and the plans are
unfunded. The pension plans in Italy and France, which constitute
3% respectively 1% (4 respectively 1) of total pension provisions,are also unfunded.
The Swedish pension plans (known as ITP plans) supplement thecountry’s social insurance system, and result from agreements between employer and employee organizations. ITP plans mainlycomprise retirement pensions, disability pensions and survivor’s
pensions. The ITP plan has two parts, firstly, ITP1, which is a defined-contribution pension plan applying to employees born in1979 or later, and secondly, ITP2, which is a defined-benefit pension plan applying to employees born before 1979. White-collar
employees within the Group in Sweden were covered by boththese parts. The ITP2 plan is managed within Munters in the FPG/
PRI system. Financing occurs through provisions to an account in
the balance sheet, safeguarded by credit insurance from the mutual
insurance company Försäkringsbolaget PRI Pensionsgaranti. Defined-benefit pension plans subjects the Group to different kinds ofrisk attributable to increases in life expectancy, inflation and salary.
In the Group, there are also defined-contribution plans thatmainly comprise retirement pensions, disability pensions and survivor’s pensions. The premiums are paid continuously during theyear by each Group company to separate legal entities, such as insurance companies. The size of the premium is based on salary.
The cost of these defined-contribution plans for the period totaled
SEKm 63 (69).
Munters recognizes actuarial gains and losses in other comprehensive income in the period they occur to the extent that they refer
to post-employment remuneration. Actuarial losses totaled SEKm 44(17) for the period.
Below is the recognized provisions for pensions under IAS 19 in
the consolidated balance sheet:

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

41

FINANCIAL REPORTS | Notes

2019 Group
Opening balance

Present valueof defined
Recognizedbenefit Fair value ofprovision,
obligation plan assets
net
236

-15

221

10

-

10

6
16

0
0

6
16

Remeasurement, included in
Other comprehensive income
Actuarial changes arising fromchanges in financial assumptions
Experience adjustments

Exchange rate differences for theyear
Closing balance
Of which funded plans:Belgium

5
13

0
-

5
13

12

1

13

4
16

1

4
17

-6

0

-6

-1
-7

-2
-2

-2
-8

-2

1

-1

236

-15

221

Of which funded plans:Belgium

16

-15

1

Of which unfunded plans:
SwedenOther countries

208
12

Actuarial changes arising fromchanges in financial assumptions

-3

44
44

Experience adjustments

-7

0

-6

-7

1
1

1
-6

Benefits paid by employer
Benefits paid by employer to plan
assetsSettlements

0

0

0

293

-17

276

21

-20

1

Transactions

262
12

Plan assets comprise insurance contracts signed with independent
insurance companies. No portion of plan assets in 2019 or 2018
was invested in the Company’s equity instruments, debt instruments, real estate, or other assets used by the Company. The
Group only has a minor share of funded plans. The most importantactuarial assumptions are as follows:
2019
Sweden Others
1.45
0.70
1.75
2.25
1.75
2.25

1.75
-

2018

Future inflation, %Future wage and salary increases, %Pension increases, %Social security increases, %

8

44
47

12

Discount rate, %

-

0

262

Future inflation, %Future wage and salary increases, %Pension increases, %Social security increases, %8Current service cost
Interest cost/income on benefit
obligation-3

Other countries

Discount rate, %199

4

Of which unfunded plans:
SwedenWeighted values-16

Remeasurement, included in
Other comprehensive income

Transactions
Benefits paid by employer
Benefits paid by employer to plan
assetsSettlement215

Pension expenses, included inComprehensive income for theyear

Pension expenses, included inComprehensive income for theyear
Current service cost
Interest cost/income on benefit
obligation2018 Group
Opening balance

Present valueof defined
Recognizedbenefit Fair value ofprovision,
obligation plan assets
net

Sweden Others
2.45
1.70
2.00
2.50
2.00
2.50

1.50
-

Exchange rate differences for theyear
Closing balance

208
12

Sensitivity analysis
A reduction of 0.5 percentage points in the discount rate would increase the pension commitments by around SEKm
33 (24), while an increase in the rate of 0.5 percentage points
would reduce the commitment by around SEKm 28 (21). Alteredassumptions with respect to inflation being 0.5 percentage points
lower would reduce the commitment by around SEKm 21(16)and increase it by around SEKm 24 (18) in an assumption of it
being 0.5 percentage points higher. The sensitivity analysis isperformed by one actuarial assumption changing, while the otherassumptions are kept unchanged. The method shows the sensitivity of the liability to an individual assumption. This is a simplified
method, because actuarial assumptions are normally correlated.
Assumptions about life span are based on public statistics andexperience from mortality surveys in each country, and are set in
consultation with actuarial experts. As of this year, for Swedish
pension plans, the most current life span investigation DUS14.
Munters’ budgeted fees for defined-benefit obligations equal SEKm
10 (9) for 2020.
Duration analysis regarding expected payments for post-employment pension benefits (not calculated on present value):At the end of the reporting period, the discount rate is derived froma functioning market based on investment-grade corporate bonds
adjusted for the duration of the commitment.

116 

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

Payments in the future years
Within the next 12 months
Between 1 and 2 years
Between 2 and 5 years
Between 5 and 10 years
Total

2019
5
5
17
30
57

2018
5
5
16
34
61

The weighted average duration for the defined-benefit commitments
is 21 years (20).

NOTE 25.

OTHER PROVISIONSNOTE 26.

42

ACCRUED EXPENSES AND
DEFERRED INCOME

Vacation pay liabilities

Group
2019
2018
97
86

Parent Company
2019
2018
2
1

Social security contributions

49

36

2

0

Other expenses related topersonnel

122

132

4

-

invoiced

128

146

0

-

Commissions to agents/sales
representatives

68

48

0

-

Interest expenses
Deferred income

12
63

13
55

0
-

-

15
162
716

14
60
590

3
11

0
2

Provisions
forwarranties

Restructuring

Other
provisions

Total

Opening balance

88

0

35

123

Additional provisions
Reversals of unutilized
provisions
Utilized during theyear
Exchange-ratedifferences

66

192

34

292

Closing balance

Deferred revenue mainly refers to subscription agreements within
Munter's software business.

2019 Group

-22

0

-22

-45

-12

-54

-4

-69

2

-2

2

2

December 31,
2019

122

137

44

302

2018 Group

Provisions
forwarranties

Restructuring

Other
provisions

Total

Opening balance

115

3

17

136

Additional provisions
Reversals of unutilized
provisions
Utilized during theyear
Exchange rate
differences

26

0

27

53

December 31,
2018
Provisions consist of:Current portion
Non-current portion
Closing balance

Audit and lawyers fees
Other

NOTE 27.

PLEDGED ASSETS,CONTINGENT ASSETS AND
CONTINGENT LIABILITIESWithin Munters there are no pledged assets.
Group
Contingent liabilities
PRI guarantees
Guarantees from banks andinsurance companies
Total

-45

0

-4

-49

-14

-3

-5

-23

6

0

0

7

88

0

35

123

2019
278
24
302

2018
107
16
123

Provisions for guarantees amounted to SEKm 66 (26) during theyear, a significant increase driven mainly by a number of specificproject deliveries, where replacement of critical components andrepair work on site will be required. In total, higher quality costs,
mainly in the US, also contributed to higher guarantee provisions
compared with the previous year.
Provisions for restructurings amounted to SEKm 192 (0) during
the year and related to restructurings tied to the three-phase plan
launched at the beginning of the year to capture Munters’ full potential to improve the Group’s earnings. This has meant layoffs invarious parts of the Group as well as the closing of the European
Data Centers factory in Dison, Belgium. Some severance pay was
settled during the year, but the remaining reserve will not be settled
until 2020.
Other provisions increased by SEKm 34 (27), where SEKm 19
was provisions for decommissioning costs related to leased production facilities.

Parent Company

2019
-

2018
-

2019
2

2018
2

324
324

205
205

204
206

53
55

PRI guarantees refers to pension liabilities in Sweden. Other guarantees are operational guarantees, such as advances and completion guarantees.
Litigation
Munters is involved in a small number of commercial disputes.
None of these disputes are deemed to have any major negative effect on the Company’s financial position or earnings.
Hunter New England Health District has sued Munters’ Australiansubsidiary, Munters Pty Ltd., for breach of contract in relation toservices provided to John Hunter Hospital in the spring of 2008.
The services were provided as part of Munters Pty Ltd.’s MoistureControl Services, which were later discontinued in 2010. Munters
Pty Ltd. disputes the claim. Furthermore, Munters Pty Ltd is of theopinion that the plaintiff’s demands are greatly exaggerated, andthat the plaintiff through carelessness and negligence contributed tothe damage they are claiming compensation for. In the event
Munters Pty Ltd. is considered liable for the damage, a not significant adjustment will be made of the amount of damages
Munters Pty Ltd is protected under local liability insurance and forsurplus amounts up to the limit in effect at the time under Munters
AB’s insurance. In the event Munters Pty Ltd. is held liable for thedamage, there is a risk that the company will have to bear thatpart of the damage that exceeds the part covered by insurance.
Other significant legal proceedings are attributable to Munters’
subsidiary in the United States, Munters Corporation. The company
is currently named as co-respondent in 2 (3) asbestos-related cases.
In the past few years, Munters Corporation has in a number ofcases won through summary judgments, and these are no longer in

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019

NOTES

43

FINANCIAL REPORTS | Notes
progress. Munters Corporation is of the firm opinion that the remaining claims are unfounded and intend to strongly dispute every
claim. Munters Corporation has coverage for the asbestos-related
claims through several insurance policies. Subject to certain reservations, the insurance companies have confirmed that, until further
notice, they will pay a significant portion of the expenses for legal
defense.
The company is currently party to a dispute in New Jersey, in theUS, regarding environmental damage to a property that had previously been leased by a company acquired by Munters and later
merged with one of Munters’ subsidiaries in the US. Although potential environmental liability is difficult to estimate, Munters is of
the opinion that the Group’s position in the case is good. The company also believes that it has insurance protection for any environmental liability. Moreover, Munters has contractual protection for
any costs from the previous owner.
In connection with the closure of Dison, specific components of apreviously sold system solution needed to be exchanged at a customer site, which entailed a one-time cost of SEKm 116. Munters
has insurance for these types of events but has not completed discussions with the current insurer and thus no asset has been reported.

NOTE 28.

TRANSACTIONS WITH RELATEDPARTIESThe shares in Munters Group AB are by FAM AB by 21.1% and indirectly by Nordic Capital through the companies Cidron Maximus
Limited and Cidron Maximus S.a.r.l, by 14.7%.
Other related parties to Munters include other portfolio companies managed by FAM AB and Nordic Capital, associated companies as well as Munters Board of Directors and Group Management.
There has been no transactions or outstanding dealings during
2019 with other FAM AB or Nordic Capital portfolio companies.
The Chairman of the Board of Directors, Magnus Lindquist, andthe Interim CEO, Johan Ek, acquired in total 6,000,000 call options (3,000,000 call options per person) for shares in Munters fora value of SEKm 13.8, from a company controlled by Nordic Capital Fond VII.
The Parent Company has a related party relationship with its subsidiaries. Information about participations in subsidiaries is provided in note 16. Transactions between Munters Group AB and its
subsidiaries have been carried out on market terms.
Remuneration for senior executives and individual members of
the Board is presented in note 31. Munters has not provided guarantees or securities to or on behalf of Board members or senior executives. Munters has not identified any transactions with other related parties, besides those specified in this Note and those towhich reference is made.

NOTE 29.

AVERAGE NUMBER OFEMPLYOEES AND GENDER
2018

2019
Average number of
employeesof whichmen, %

Number

898

82

1,007

82

361
351
262
233
201
174
160
157
100
97

79
71
69
82
92
90
83
78
88
85

390
353
295
226
222
175
159
129
148
65

79
73
71
82
90
90
83
78
85
88

79
60
55
34
33
25

80
85
28
86
82
80

87
63
67
33
34
24

79
86
88
85
82
79

South Africa
Denmark
Korea

20
19
19

80
71
74

21
43
19

81
68
74

Spain
TurkeyFinlandOther
CanadaAustria
PolandVietnamUnited Arab Emirates
Switzerland

13
12
11
10
5
5
4
3
3
1

77
67
82
200
60
80
100
67
80
0

14
12
12
6
5
4
4
3
4
3

79
67
83
50
60
75
100
67
86
67

0
0
0
3,406

0
0
0
79

21
4
2
3,653

67
50
50
81

Group
United States

NumberChina
SwedenMexicoGermany
Belgium
India
Italy
IsraelBrazilCzech Republic
United Kingdom
Japan
Netherlands
Australia
FranceSingapore

Thailand
Colombia
Taiwan
Total

Gender distribution – Board of Directors and Group management
At year-end, the Board of Directors consisted of six men and two
women. Group management, including the CEO, consisted of three
men and three women.

NOTE 30.

WAGES, SALARIES, OTHER
REMUNERATION AND SOCIALSECURITY EXPENSES

Group
2019
2018
Wages, salaries and other remuneration
1,719
1,550
Social security expenses
Pension expenses - defined
contribution
Pension expenses - defined
benefit
Total

118 

of whichmen, %

Parent Company
2019
2018
22
5

431

396

7

2

63

69

5

1

10
2,223

8
2,023

34

9

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MUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019NOTES

NOTE 31.

REMUNERATION TO
THE BOARD AND SENIOREXECUTIVES

Guidelines
The remuneration to the management may consist of fixed salary,variable compensation, long-term incentive programmes, pension
and other benefits. The total remuneration package should bebased on market terms, be competitive and enable the company torecruit and retain the managers the company needs to meet its
short-term and long-term targets.
Fixed salary
The fixed salary for the CEO and the other members of the senior
management shall mirror the demands and responsibility that theposition entails as well as individual performance. The fixed salary
for the CEO and the other members of the senior management is tobe reviewed on a yearly basis. To the extent a member of theBoard of Directors carries out work for the company or for anothergroup company, in addition to the board work, consulting fees
and/or other remuneration for such work may be payable.
Variable salary
Variable compensation in cash is conditional upon the fulfilment ofdefined and measurable criteria and should be maximised to 140
per cent of the annual fixed salary for the CEO and 70 per cent forthe other members of senior management.
The criteria for variable compensation in cash are determined forthe promotion of the company’s and the group’s short-term andlong-term targets, long-term development, value creation and financial growth and shall be designed not to encourage excessive risktaking. Terms and conditions for variable compensation in cash
should be designed so that the Board of Directors, if exceptional
economic circumstances prevail, has the option of limiting or refraining from payment if such a measure is considered reasonable.
In this context, fixed annual salary means cash salary earned during the year, excluding pension, supplements, benefits and similar.
Long-term incentive programs
The aim of having long-term incentive programmes is to create along-term commitment to the company, to attract and retain members of the senior management and key employees and to alignthe interests of the participants with the interests of the shareholders.

44Long-term incentive programmes, if any, should constitute a complement to the fixed salary and the variable compensation in cash,with participants to be nominated based on, among other things,
competence and performance.
PensionPension benefits should be defined contribution. For senior executives outside Sweden, pension benefits may vary due to legislationor practice in the local market.
Other benefits and compensation
Fixed salary during notice periods and severance payment, including payments for any non-compete restrictions, shall in aggregate
not exceed an amount equivalent to the fixed salary for two years
for the CEO and 18 months for the other members of senior management. Other compensation may consist of other benefits thatare customary and in line with market practice, such as healthcare
insurance, which shall not constitute a material portion of the total
remuneration. Additional compensation may after decision by the
Board of Directors be paid out in extraordinary circumstances, provided that such arrangement is made for management recruitment
or retention purposes and is agreed only in individual cases. Suchextraordinary arrangements may for example include a one-off
cash payment, or a support package including relocation support
or similar.
Deviation from the guidelines
The Board of Directors may resolve to deviate from the guidelines if
the Board of Directors, in an individual case, is of the opinion that
there are special circumstances justifying that. Below is a summaryof remuneration to the Board of Directors and senior executives
during the current and previous years.
Termination of employment
Between the company and the CEO the notice period shall not exceed 12 months. Upon termination by the company, severance ispaid and amounts to 12 monthly salaries of basic salary. The notice period between the company and other senior executives shallnot exceed a maximum of 6 months. If the termination is made by
the company, severance pay of 12 months is paid on the basic salary. Severance pay is not entitled for pension. In the event of termination by the CEO and other senior executives, no severance pay
is payable.

2019
Board
fee/BasesalaryVariable
remuneration

Other
benefits*

Pensionexpenses

Share
based
payments

Total

Magnus Lindqvist, chairman
Helen Fasth Gillstedt, board member and chairman of audit committeAndreas Näsvik, board member
Lena Olving, board member

1,298
550
550
500

-

-

-

-

1,298
550
550
500

Joachim Zetterlund, board member and chairman of remcom until May 7, 2019
Per Hallius, board member
Kristian Sildeby, board member
Johan Ek, board member
Juan Vargues, board member
CEO Johan Ek, until Aug 11, 2019
CEO Klas Forsström, as of Aug 12, 2019
Other senior executives, until Feb 13, 2019 (3 women and 10 men), from Feb
14, 2019 (3 women and 3 men)

125
400
438
183
300
4,210
2,708

5,399

75

948

127

125
400
438
183
300
4,210
9,257

15,696

2,582

12,6854,566

461

35,990Total

26,958

7,981

12,7605,514

588

53,801

Amounts in SEK 000s
Members of the Board:(2 women and 6 men)

* Out of total other benefits for senior executives severance amounts to SEK 11,500k.

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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 201945

FINANCIAL REPORTS | Notes

2018
Board
fee/BasesalaryVariable
remuneration

Other
benefits*

Pensionexpenses

Share
based
payments

Total

Members of the Board:(2 women and 6 men)
Christopher Curtis, chairman until Dec 18, 2018
Magnus Lindqvist, chairman as of Dec 18, 2018

927
63

-

-

-

-

927
63

Helen Fasth Gillstedt, board member and chairman of audit committe
Joakim Karlsson, board member until Dec 18, 2018

538
342

-

-

-

-

538
342

Andreas Näsvik, board member
Lena Olving, board member

513
475

-

-

-

-

513
475

Joachim Zetterlund, board member and chairman of remcom
Per Hallius, board member

488
400

-

-

-

-

488
400

Kristian Sildeby, board member
Johan Ek, board member as of Dec 18

392
-

-

-

-

-

392
-

CEO John Peter Leesi, until Dec 18, 2018

6,529

-

18,683

2,574-

27,786CEO Johan Ek, as of Dec 18, 2018
Other senior executives* (3 women and 10 men)

306
27,217

2,924

5,148

5,649

293

306
41,231

Total

38,191

2,924

23,8318,223

293

73,462

Amounts in SEK 000s

* Other benefits for CEO John Peter Leesi consisted of costs associated with notice period (when John Peter Leesi was laid off) and severance pay.

Up until February 13, 2019, senior executives refer to the Chief Executive Officer, Chief Financial Officer, Group Vice President Air
Treatment, Group Vice President AgHort, Group Vice President
Mist Elimination, Group Vice President Data Centers, Group Vice
President Global Services, Group Vice President Munters China,
Group Vice President Operations, Group Vice President Human Resources and Corporate Communication, Group Vice President CSR,
and Group Vice President Innovation & Technology.
As of February 13, 2019, senior executives refer to the Chief Executive Officer, Chief Financial Officer, Group Vice President AirTech, Group Vice President FoodTech, Group Vice President Operations, Group Vice President Human Resources, Communicationand Sustainability.
Variable remuneration refers to the period’s proportional shareof variable remuneration for the fiscal year 2019, which was expensed in 2019. For former CEO Johan Ek, no variable remuneration was paid for the period. For Klas Forsström, the new CEO asof August 12, 2019, the variable remuneration, as per his contract, was capped at 140% of fixed annual salary. For other senior
executives, the variable remuneration corresponds to 40–70% of
fixed annual salary.
Munter's annual incentive program for senior executives is basedon two predetermined and measurable financial criteria,
operating income and working capital. The criteria are linked tothe medium-term goals that Munters has (adjusted EBITA andOperating Capital Turnover), and the needs the company sees as
essential to pursue during the year. During 2019, the variable remuneration was linked to two predetermined and measurable financial criteria, which are based on Munter's medium-term goals.
One of the targets is related to Munter's working capital, which
was met during the year. During the year, Munters has been actively focusing on cash flow and strengthening the balance sheet,with a clear improvement in 2019.
During 2018, variable remuneration was linked to several predetermined and measurable financial criteria. The criteria were linked
to Munter's medium-term goals. None of the targets in the incentive

120 

program for senior executives were met during the year, which resulted in no variable salary being paid to senior executives.
In addition to Munter's annual incentive program, it includes thereported variable salary for the President and CEO, Klas Forsström,
special bonus goals that were agreed upon employment. The bonus goals were linked to qualitative goals that were met during theyear (SEKk 2,500). In addition to bonuses, compensation was also
made for lost income. The compensation for lost income is related
to long-term incentive programs with the former employer andamounted to a total of SEKk 2,500 for the year 2019.
Johan Ek (former CEO) has had a fixed salary of SEK 500,000 per
month, the agreement gives no right to variable remuneration andno provision for pension is made. Under the agreement, there wasa notice period of 3 months for both parties, and no severance pay
is payable.
Other benefits refer to company cars and meal benefits, as well as
housing benefits. The amount specified under other benefits also includes housing for three senior executives based outside Sweden.
Pension expenses include costs for disability pension insurance, survivor annuity policies and the like. The amounts are stated excluding special employer’s contribution pension expenses.

NOTE 32.

INCENTIVE PROGRAM

2019
The Annual General Meeting in May 2019 resolved in accordancewith the Board’s proposal to introduce a performance based longterm employee stock option program to members of Group management and certain other key employees (“LTIP 2019”), totaling
approximately 72 employees. The program shall comprise no morethan 1,595,000 employee stock options divided in three series.
No more than 100,000 of these employee stock options may be
cash settled (also called synthetic options) and the remainder shallentitle the right to acquire one share in the company. A total of 68
employees accepted the offer, totaling 1,498,000 employee stock
options, whereof 80,000 cash settled. The employee stock options
have been allotted for no consideration.
Exercise of the employee stock options of Series A and Series B
is dependent on the extent to which certain performance targets

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NOTESMUNTERS|ANNUAL AND SUSTAINABILITY REPORT 2019are satisfied during the fiscal years 2019-2021 (the “performance
period”). The performance conditions determine the extent to which(if any) the employee stock options in each series may be exercisedto acquire shares or receive a cash amount at the conclusion of thethree-year period from the grant date 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 of SEK 50.27. Each cash settled employee
stock option shall entitle the holder to a cash amount equivalent tothe value of one share in the company, calculated as the volumeweighted average price paid for the company’s shares on Nasdaq
Stockholm during a period of ten business days immediately prior
to the exercise of the option, with a deduction of the exercise priceof SEK 50.27.
The participants shall be able to exercise the employee stock options during a one-year period as of the last date of the vesting period. The costs of the program are estimated at SEKm 13 and will
be recognized over a three-year period.
The assessed fair value on the grant date, July 19, 2019, wasSEK 8.62 per option. The fair value on the grant date was estimated is independently determined using an adjusted form of theBlack-Scholes model, which includes a Monte Carlo simulation
model that takes into account the exercise price, the term of the option, the impact of dilution (where material), the share price on the
grant date and expected price volatility of the underlying share, theexpected dividend yield, the risk-free interest rate for the term of
the option, and the correlations and volatilities of peer group companies. During the year, the program entailed costs, including social security contributions, of SEKm 2 (-).

Options were granted under the plan for no consideration andcarry no dividend or voting rights.
Each employee stock option that is not cash settled shall entitle
the holder to acquire one share in the company at an exercise
price of SEK 55. Each cash settled employee stock option shall entitle the holder to a cash amount equivalent to the value of one
share in the company, calculated as the volume-weighted average
price paid for the company’s shares on Nasdaq Stockholm during
a period of ten business days immediately prior to the exercise of
the option, with a deduction of the exercise price of SEK 55.
The participants shall be able to exercise the employee stock options from the third anniversary of the allotment up to and including
the fourth anniversary of the allotment. Exercise of the employee
stock options shall, as a rule, be conditional upon the program participant still being employed by the Group. The costs of the program are estimated at SEKm 7.4 and will be incurred over thethree-year period.
A total of 1,239,190 options were accepted and distributed in
the program. At December 31, 2018, a total of 5,090 equity settled and 12,720 cash settled options were forfeited due to terminated employment. Outstanding options at December 31, 2018equaled 1,226,470, whereof 99,280 cash settled and 1,127,190
equity settled.
The assessed fair value on the grant date, June 27, 2018, wasSEK 5.97 per option. The fair value on the grant date is independently determined using an adjusted form of the Black-Scholesmodel, which includes a Monte Carlo simulation model that takes
into account the exercise price, the term of the option, the impact
of dilution (where material), the share price on the grant date andexpected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option, andthe correlations and volatilities of peer group companies. During
the year, the program entailed costs, including social security contributions, of SEKm 2.6 (1.3).

2018
The Annual General Meeting on May 17, 2018 resolved in accordance with the Board’s proposal on the implementation of along-term incentive program. The program should comprise no
more than 1,257,000 employee stock options to be granted tomembers of Group management and certain other key employees,
approximately 75 employees in total. Participation in the plan wasat the Board’s discretion and no individual had a contractual rightto participate in the plan or to receive any guaranteed benefits.

Following is a summary of allotted options (including synthetic) inboth plans:

2018

2019
Amounts in SEK 000s
As at 1 January

46

Average exercise
price per share option

Number ofoptions

Average exercise priceper share option

Number ofoptions

55.00
50.27

1,221,380
1,513,000

55

1,239,190

54.56
52

-160,020
2,574,360

55
55-17,810
1,221,380

Share options
December 31, 2019

Share options
December 31, 2018
1,221,380

Granted during the year

Forfeited during the year
As at 31 December

Outstanding stock options (including synthetic) at year-end have the following maturity dates and exercise prices:

Grant date

Maturity

Exercise price

June 27th, 2018

June 27th, 2021

55.00

1,076,360

July 19th, 2019

July 19th, 2022

50.27

1,498,000-

2,574,360

1,221,380

Total

Fair value of allotted options
The estimated fair value on the grant date was SEK 8.62 per option (5.97). The fair value on the grant date is estimated using an
adjusted form of the Black-Scholes model, which includes a Monte
Carlo simulation model that takes into account the exercise price,
the term of the option, the impact of dilution (where material), theshare price on the grant date and expected price volatility of theunderlying share, the expected dividend yield, the risk-free interest
rate for the term of the option, and the correlations and volatilitiesof peer group companies. The inputs in the model for options allocated allotted during the year were:• the options are allotted for no consideration and vested over athree-year period. Vested options can be redeemed within one
year after vesting• exercise price: SEK 50.27 (55.00)• allotment date: July 19, 2019 (June 27, 2018)• maturity date: July 19, 2022 (June 27, 2021)• share price on the grant date: SEK 42 (47)
• expected price volatility of the company’s share: 36% (26)
• expected dividend yield: 0 (0)• risk-free interest rate: -0.36% (0.24)

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FINANCIAL REPORTS | Notes
MUNTERS|ÅRS- OCH HÅLLBARHETSREDOVISNING 2019FÖRSÄKRANNOTE 33.

FEES TO AUDITORSNOTE 34.

Fees and remuneration recognized as an expense to the Group’s
auditors during the period are shown below. Audit engagement refers to the statutory audit of the annual report and accounts, as wellas the administration of the Board of Directors and the President,
other tasks which the Company’s auditors are responsible for performing, and advice or other assistance occasioned by observations in such audits or the performance of other similar tasks. Tax
advice is consulting on fiscal issues. Other services are advice thatcannot be attributed to any of the above-mentioned categories.
Amounts in SEK 000s

Group
2019
2018

Parent Company
2019
2018

Ernst & Young
Audit engagements

11,086

10,724

1,118

514

Tax advice

537
840

737
873

-

-

Other services

1,156

968

-

21

126
480
67
14,292200
75
20
13,5981,118

535

Audit business beyond
audit engagements

Other auditors
Audit engagements
Tax advice
Other services
Total

122 

47

SIGNIFICANT EVENTS AFTERTHE END OF THE REPORTING
PERIOD

Strategic evaluation of Data Center US and Mist Elimination
In 2019, a strategic evaluation was conducted of Data Centers,
which is reported as continuing operations, and Mist Elimination.
In February 2020, this resulted in a decision to keep these businesses in Munters. Both businesses serve markets with good growthpotential, driven by digitization and high demand for sustainable
solutions. In addition, both units made significant progress in
2019, and we see a good strategic fit considering our strategic direction.
Organizational change
In February 2020, Munters also announced an organizationalchange. The change aims to create clearer business ownership andcapture local synergies and value drivers across the Group byaligning the value chain within the business areas. The changemeans that the business areas have full responsibility for their respective area. The previous role of Global Operations in the Groupmanagement team will be changed to Strategic Operations with afocus on driving lean practices, manufacturing excellence, shared
tools and processes, and overall footprint optimization. Two roles
have been added in the management team: Innovation, with a focus on driving R&D processes, including shared technologies coordination between the business areas and product introduction development; and Commercial Excellence, with a focus on coordinating sales training, driving the practice of value selling, pricing strategies and go-to-market methods.
In February 2020, it was also announced that Pia Brantgärde
Linder, currently Business Unit Manager of High Voltage Products
in Northern Europe at ABB, has been appointed President of business area FoodTech as of August 16, 2020. Pia has had a longcareer at ABB. She is currently Senior Vice President and the Business Unit Manager for High Voltage Products in Northern Europe.
Pia has a Master of Science in Mechanical Engineering from
Chalmers University of Technology and an Executive Master inBusiness Administration (EMBA) from Stockholm School of Economics.

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48

FINANCIAL REPORTS | Assurance 2019

ASSURANCE 2019
Assurance
2019
The undersigned assures that the Annual Report has been prepared in accordance with generally accepted accounting principles, and that the consolidated accounts have been preparedin accordance with international accounting standards as referred to in Regulation EC 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the applicationof international accounting standards, provide a true and fairview of the Company’s and the Group’s financial position andearnings, and that the Board of Directors’ report and the Boardof Directors’ report for the Group provide a fair view of the development of the Company’s and the Group’s operations, financial position, and earnings and describe material risks anduncertainties to which the Company and the companies in theGroup are exposed.
Stockholm, March 17, 2020

Magnus Lindquist

Chairman of the Board

Helen Fasth Gillstedt

Klas Forsström

Johan Ek

President CEO

Board Member

Board Member

Board Member

Per Hallius

Andreas Näsvik

Lena Olving

Kristian Sildeby

Juan Vargues

Simon Henriksson

Pia Nordqvist

Board Member

Board Member,
employee representative

Board Member

Board Member

Board Member

Board Member,
employee representative

Our Auditor’s report was submitted on

March 20, 2020
Ernst & Young AB

Rickard Andersson
Authorized Public Accountant

M U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019 123FÖRSÄKRAN

FINANCIAL REPORTS | Auditor’s report

MUNTERS|ÅRS- OCH HÅLLBARHETSREDOVISNING 2019

49

AUDITOR’S REPORT

Auditor’s Report

To the general meeting of the shareholders of Munters Group AB(publ.), corporate identity number 556819-2321
REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS
Opinions
We have audited the annual accounts and consolidated accounts of Munters Group AB (publ.) for the financial year 2019.
The annual accounts and consolidated accounts of the company
are included on pages 76--123 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in allmaterial respects, the financial position of the parent company asof 31 December 2019 and its financial performance and cash
flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in allmaterial respects, the financial position of the group as of 31 December 2019 and their financial performance and cash flow for
the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual
Accounts Act. The statutory administration report is consistent withthe other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the statements of comprehensive income and the statement of financial position for the parent company and the group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article
11.
Basis for Opinions
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards
in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance withprofessional ethics for accountants in Sweden and have otherwise
fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge
and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited
company or, where applicable, its parent company or its controlled companies within the EU with the exception for one serviceof limited extent. The service has been terminated and has beencommunicated to the company’s Audit Committee
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period.
These matters were addressed in the context of our audit of, and informing our opinion thereon, the annual accounts and consolidated
accounts as a whole, but we do not provide a separate opinion onthese matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report, including in relation to these matters. Accordingly, ouraudit included the performance of procedures designed to respond124 

to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including theprocedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying financial statements.
Timing of revenue recognition
Description
As described in note 1, revenues from sale of goods are recognized at a point in time when risks and rewards are transferred tothe buyer in accordance with the delivery terms. Revenues fromlarger project assignments are recognized over time in proportion
to progress of completion using an output method at the reportingdate.
The company´s customer agreements contain several different
performance obligations, as described in note 1 and 4. In order toallocate revenue to different performance obligations, and to determine the progress of completion of performance obligations withinproject assignments, certain estimates have to be made which effects the timing of revenue recognition.
As a result of the above, we have assessed that the timing of revenue recognition is a key audit matter.
How our audit addressed this key audit matterIn our audit of the fiscal year 2019, we have evaluated the company´s principles of revenue recognition in accordance with applicable GAAP. We have reviewed the company´s processes for revenue recognition and evaluated key controls within these processes. Also, we have audited revenue transactions close to theyear-end by reviewing customer agreements and delivery notes toverify that revenue is recognized in the correct period. Furthermore, we have evaluated the company´s estimates for determining
percentage of completion and revenue recognition related to larger
project assignments.
We have assessed whether the disclosures in the annual report isappropriate.
Valuation of goodwill and trademarks
Description
Goodwill and trademarks amounts to SEKm 4,348 and SEKm
1,111 respectively in the consolidated statement of financial position. As described in note 15 the company annually, or when indicators of impairment are identified, performs an impairment test toverify that the carrying values do not exceed the recoverable
amount. Recoverable amount is determined by calculating thevalue in use for the respective cash generating unit using a discounted cash flow model. As also described in note 15, forecastsof future cash flows for the next five years are based on financial
plans approved by the board of directors. The financial plans include assumptions of future sales growth and operating margin, as
well as utilization of operating capital employed. Furthermore, assumptions of discount rates and growth beyond the five year period are required.
The impairment test of the fiscal year did result in any impairment. As shown in note 15, changes in significant assumptions andestimates could have an effect on the carrying value.
Due to the assumptions and estimates made in conjunction withthese impairment tests, and due to the total amount of the carrying
value, we have considered valuation of goodwill and trademarks
as a key audit matter.
How our audit addressed this key audit matterIn our audit of the fiscal year 2019, we have evaluated the company’s process for preparing impairment tests. We have audited
the cash flow models used for the impairment tests and evaluated
how cash generating units are identified. We have also evaluatedM U N T E R S | A N N U A L A N D S U S T A I N A B I L I T Y R E P O R T 2 019

FÖRSÄKRAN

the assumptions related to future cash flows by comparing to historical outcome and forecasts, as well as performing sensitivity analyzes. Furthermore, we have assessed the discount rate and the assumption of long term growth rate after the forecast period by comparisons to peers.
We have assessed whether the disclosures provided in the annual report is appropriate.
Other Information than the annual accounts and consolidated
accounts
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–75.
The Board of Directors and the Managing Director are responsible
for this other information. Our opinion on the annual accounts andconsolidated accounts does not cover this other information and
we do not express any form of assurance conclusion regarding thisother information
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In
this procedure we also take into account our knowledge otherwise
obtained in the audit and assess whether the information otherwise
appears to be materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated
accounts and that they give a fair presentation in accordance with
the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Boardof Directors and the Managing Director are also responsible forsuch internal control as they determine is necessary to enable thepreparation of annual accounts and consolidated accounts that are
free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the Managing Director are responsible forthe assessment of the company’s and the group’s ability to continue
as a going concern. They disclose, as applicable, matters related
to going concern and using the going concern basis of accounting.
The going concern basis of accounting is however not applied if
the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether
the annual accounts and consolidated accounts as a whole arefree from material misstatement, whether due to fraud or error, andto issue an auditor’s report that includes our opinions. Reasonableassurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual accounts andconsolidated accounts.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:

MUNTERS|ÅRS- OCH HÅLLBARHETSREDOVISNING 201950

• Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud
or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher thanfor one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.
• Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal
control.
• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures
made by the Board of Directors and the Managing Director.
• Conclude on the appropriateness of the Board of Directors’ andthe Managing Director’s use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence
obtained, as to whether any material uncertainty exists related toevents or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosuresin the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual
accounts and consolidated accounts. Our conclusions are basedon the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company
and a group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient and appropriate audit evidence regarding thefinancial information of the entities or business activities within
the group to express an opinion on the consolidated accounts.
We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our
opinions.
We must inform the Board of Directors of, among other matters,
the planned scope and timing of the audit. We must also inform ofsignificant audit findings during our audit, including any significant
deficiencies in internal control that we identified
We must also provide the Board of Directors with a statementthat we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of
the annual accounts and consolidated accounts, including the mostimportant assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes disclosure about thematter.

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FINANCIAL REPORTS | AUDITOR’S REPORTFÖRSÄKRAN

Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board of
Directors and the Managing Director of Munters Group AB (publ)
for the financial year 2019 and the proposed appropriations of thecompany’s profit or loss.
We recommend to the general meeting of shareholders that the
profit be appropriated (loss be dealt with) in accordance with theproposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year
Basis for opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group inaccordance with professional ethics for accountants in Sweden andhave otherwise fulfilled our ethical responsibilities in accordancewith these requirements.
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and thegroup’s type of operations, size and risks place on the size of theparent company's and the group’s equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s
and the group’s financial situation and ensuring that the company'sorganization is designed so that the accounting, management ofassets and the company’s financial affairs otherwise are controlled
in a reassuring manner. The Managing Director shall manage theongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures thatare necessary to fulfill the company’s accounting in accordancewith law and handle the management of assets in a reassuring
manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, andthereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing Director in any material respect:

126 

MUNTERS|ÅRS- OCH HÅLLBARHETSREDOVISNING 201951

• has undertaken any action or been guilty of any omission which
can give rise to liability to the company, or• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association
Our objective concerning the audit of the proposed appropriationsof the company’s profit or loss, and thereby our opinion about this,is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with generally
accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or thatthe proposed appropriations of the company’s profit or loss are notin accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment andmaintain professional skepticism throughout the audit. The examination of the administration and the proposed appropriations of
the company’s profit or loss is based primarily on the audit of theaccounts. Additional audit procedures performed are based on our
professional judgment with starting point in risk and materiality.
This means that we focus the examination on such actions, areas
and relationships that are material for the operations and where
deviations and violations would have particular importance for thecompany’s situation. We examine and test decisions undertaken,
support for decisions, actions taken and other circumstances thatare relevant to our opinion concerning discharge from liability. Asa basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined the Board of
Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
Ernst & Young AB, Box 7850, 111 44, Stockholm, was appointed auditor of Munters Group AB (publ.) by the general meeting of the shareholders on the 26th of May 2016 and has been
the company’s auditor since 2010.

Stockholm 20 March 2020
Ernst & Young AB

Rikard Andersson
Authorized Public Accountant

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MUNTERS|ÅRS- OCH HÅLLBARHETSREDOVISNING 201952

FINANCIAL REPORTS | Definitions of key financial indicators

DEFINITIONS OF KEY FINANCIAL INDICATORSDefinitions of key financial indicators

In this annual report as well as in the quarterly interim reports,
there are references to a number of performance measures. Someof the measures are defined in IFRS, others are alternative performance measures and are not disclosed in accordance with applicable financial reporting frameworks or other legislations. The performance measures are used by the Group to assist both investors
and management in analyzing Munters’ business. Below are theperformance measures found in this annual report described, defined and the reason for use disclosed.

Return on capital employed (ROCE) is also presented applying EBIT
adjusted for IAC and Capital employed adjusted for goodwill for
improving comparability against other industrials.
Cash and cash equivalents
Cash and bank balances plus investments in securities and the likewith maturity periods not exceeding three months. This is a measure that highlights the short-term liquidity.

Organic growth
Change in order intake and net sales compared to the previous period, excluding currency translation effects and contributions to order intake and net sales from businesses that were acquired
and/or divested during the current period and/or any comparison
period. The measure is used by Munters to monitor order intake
and net sales growth driven by changes in volume and price between different periods.

LTM
LTM (last twelve months) after any key indicator means that the KPI
corresponds to an accumulation of previous twelve month reported
numbers. The measure highlight trends in different KPIs, which isvaluable in order to gain a deeper understanding of the development of the business.
Net debt
Net debt calculated as interest bearing debt and pension liabilities,
deducted by cash and cash equivalents. This is a measure of theability to repay the debt if it was all due.

Order backlog
Received and confirmed sales orders not yet delivered and accounted for as net sales. Order Backlog is a useful measure to indicate the efficiency of the conversion of received and confirmed
sales orders into net sales in future periods, and is used by Munters
to monitor business performance and customer demand, and adjust
operations.

Average number of employees
Average number of employee is calculated as the sum of permanent employees at the end of each of the last 13 months divided by
13. The calculation of average number of employees is based on
full time equivalents in respective county.

Order intake
Received and confirmed sales orders during the reporting period.
The order intake is an indicator of future revenues and, consequently, an important KPI for the management of Munters’ business.
Operating profit (EBIT)
Earnings before interest and tax. Munters believes that EBIT shows
the profit generated by the operating activities.
Adjusted EBITA
Operating profit, adjusted for amortizations, write-downs of intangible assets and items affecting comparability. Munters believes
that using adjusted EBITA is helpful in analyzing our performanceas it removes the impact of items considered not to be of recurringcharacter and therefore do not reflect our core operating performance.

Operating cash flow
Earnings adjusted for depreciation, amortization, and impairments,
as well as for investments and operating capital.
Operating working capital
Accounts receivables, inventories, accounts payables and advances from customers.
Earnings per share
Net income adjusted for the right of preferential shares to dividend, divided by the weighted average number of ordinary
shares.
Equity/assets ratio
Equity (including holdings with non-controlling interests) divided bytotal assets.

Adjusted EBITA margin
Adjusted EBITA as a percentage of net sales. Munters believes that
Adjusted EBITA margin is a useful measure for showing the Company’s profit generated by the operating activities.
Items affecting comparability (IAC)
Items affecting comparability relates to income statement items thathave an impact on operating profit and are, in our opinion, considered not to be of recurring character.
Capital employed
Capital employed is calculated as the balance sheet’s total assets,
excluding interest-bearing assets and deferred tax assets, less total
liabilities, excluding interest-bearing liabilities, pension liabilities
and deferred tax liabilities.
Return on capital employed (ROCE)
Operating profit (EBIT), divided by the average capital employed.
The average capital employed for each year consists of an average of the closing capital employed in the last 13 months.

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Munters’ employees
in the world

The average number of employees* in 2019 distributed per country
USA

898

Czech Republic

97

Spain

13

China

361

Great Britian79

Turkey12

Sweden

351

Japan

60

Finland11

Mexico262

Netherlands

55

Canada5Germany

233

Australia

34

Austria5

Belgium

201

France33

Poland

4

India

174

Singapore

25

United Arab Emirates

3

Italy

160

South Africa

20

Vietnam3

Israel157

Denmark

19

Switzerland

1

Brazil100

South Korea

19

Other countris

10* The average number of employees is calculated by the sum of permanent employees over the past 13 months divided by 13.
Design and production: Narva
Photography: Hans Alm et al.

Average number of
employees in theworld, 20193,406

munters.com