Munters
Q1 report 2021
Klas Forsström, President and CEO
Annette Kumlien, GVP and CFO

AgendaHighlights Q1 2021
Implementation of strategy
Q1 2021 financial highlights
SummaryGrowth in first quarter driven by business area AirTech
Strong growthOrder intake

Net sales

MSEK
2500

MSEK
2000

+8%

2000
1500
1000

•
•

+3%

1500

1,849

1,995

1000

1,566

1,612

500

5000•

Q1 2020 Q1 2021

0

Q1 2020 Q1 2021

Improved market conditions••••••

Order intake increased FX-adj. by +20% (-8)
- Driven by continued strong development in the Industrial segment in AirTech
Order backlog increase FX-adj. by +11%
Net sales increased FX-adj. by +14% (-7)- AirTech strong increase in Industrial segment; FoodTech good development in China
Adj. EBITA improved to MSEK 198 (130), with an EBITA-margin of 12.3% (8.3)- AirTech improved margin significantly driven by higher net sales, lower indirect costs
Leverage at 1.9x, down from 3.1x at end of March 2020
Market conditions improved, especially in industrial segment
Major effect from Covid-19 pandemic from shortages in supply chain, expect challenges insecuring this will remain for the coming months
The execution of our strategy continued, with optimization of our footprint with a move andexpansion of a production site for the Data Centers operation
Strategy defined for business area FoodTech in the quarter. Going forward we aim at accelerate
the implementation of the strategy in both the equipment and digital areas of the businessOrder intake Q1 – Growth in China and in the USAmericas• AirTech - growth driven by Industrial segment, primarily pharma andsecondarily battery sub-segment, offsetting negative effect from exit ofnon-core Commercial segment. Data Centers and Services also showgrowth• FoodTech – slight growth driven mainly by the swine, layer and dairy
segments offset by weak broiler market

EMEA• AirTech – weak development driven by marine sub-segment in Mist
Elimination partly offset by good development in battery sub-segment• FoodTech – in general good growth in several areas, with good growthin the greenhouse segment

Asia• AirTech – strong growth in APAC driven by the battery and pharma subsegment the Industrial. Also, the Component business and Services
grew, partly offset by a weak development of Mist Elimination• FoodTech - strong development driven by the swine segment in China,
partly offset by some weaker markets in the region due to Covid-19

4*As reported, not currency adjusted.

Regional splitAmericas

EMEA

APAC

Share of total order intake

38%

33%

30%

Y/Y change in %*

-8%

1%

52%

Y/Y FX-adj. change in %

7%

7%

66%

Recent market trends 2021 - AirTech
Customer segment% of net sales
FY 2020
Recent trends Market comments
37%

Battery and Pharma pulling ahead with major investments

Lithium batteries

6%

Battery strong demand primarily in Asia

Food processing

8%

Modest activity during Covid pandemic

Others23%

Pharma businesses driving demand growth

Data Centers

17%

Solid continuous growth driven by digitalization

Components

11%

Data Centers and Lithium Battery drive demand

Mist Elimination

7%

Recovery as large projects come back – still weak in Marine

Commercials

9%Market is moving, but rather soft

Services

20%

Supported by strong Industrials – in spite of travel restrictions

Industrials

Recent market trends - FoodTech
Customer segment% of net sales
FY 2020

Recent trends

Market commentsBroiler~50%

US market temporarily slow

Swine

~30%

High growth in ChinaLayer~15%

Stable market with high interest in cage-freeGreenhouse~5%

Growth driven by increased demandDairy<5%

Low growth in most markets

AgendaHighlights Q1 2021
Implementation of strategy
Q1 2021 financial highlights
Summary7

Strategic priorities – first quarter 2021
Focus areas

Q1 achievement

Customers

Improve go-to-market models and pricing strategies

Further steps taken to ensure implementation of value
selling and pricing strategies.

Innovation

Focus investments in R&D and product portfolioalignment and adjustment

Increased headcount in R&D, research lab inauguration inSweden, and continued focus on product portfolio alignment.

Markets

Growing in prioritized markets and strengthen
Services

Growth in prioritized areas, such as Batteries, Data Centersand Services.

Excellence ineverything we doContinuous improvements, lean activities in complete
value chain, manufacturing footprint and working
capitalActions taken to further optimize footprint, ie decision about
new production location Data Centers in the US.

PeopleLeadership and competence development in line withstrategic priorities

Munters mentorship program launched.

Strategic priorities:

8

Innovation – driving force for increased customer value• Munters deliver smart energy efficient climate &dehumidification solutions and products used in mission
critical processes with the highest quality andsustainability standards• Often climate control systems account for a large shareof energy consumption in many customers operations• Our priorities are:‒ Develop modular concept platforms; to enable
standardization as well as fast and cost efficient products
development‒ Increase energy efficiency for our products and solutions‒ Develop connected equipment supported by common smart
control platforms and IoT ecosystems

Q1 2021:• Expanded AirTech R&D organization to ensure
implementation of strategic priorities• New lab opened in Kista, Sweden‒ Shorten time to market and increased testing capabilities‒ Tests carried out for products adapted for global market• Continued efforts towards assortment reduction

Munters develop climate-friendly greenhouse solution• Munters designed and realized the first climate-friendly
solution dedicated semi-closed greenhouse in Italy• Ensure an optimal climate throughout the year andmonitor the greenhouse climate in a uniform way andleveraging solar radiations and outside air intake• Increased yield, while helping growers to optimize thedevelopment of the crop in the best way

Munters is supplying Azienda Agricola Fratelli Lapietra
with a mechanical ventilation management system; resulting in a maximizedenergy efficiency, increased productivity and excellent product quality.

10Increased focus on Sustainability• Sustainability is one of the most important drivers for Munters’ strategy
today and in the future• Initiatives in 2020 in resulted in improvements in several key areas:‒ Increased use of electricity from renewable sources‒ Expanded scope of suppliers required to sign our Code of Conduct to also
include indirect material suppliers, achieved 100%
‒ Roll out of Safety Observation Program Stop, continuing in 2021

• Focus 2021:

Munters sustainability framework is divided
into three areas
Example of KPIs FY 2020 (2019):
Resource
efficiency

Electricity from renewable sources:
50% (40)

Responsible
Code of Conduct for Suppliers:
business

100% (92)‒ Complete the process of integrating Sustainability in overarching strategy‒ Set clearer goals in priority areas‒ Strengthen management, analysis and reporting of sustainability indicators‒ Continue to improve and expand Green House Gas reporting and work on
actions to reduce our carbon footprint‒ Continue to roll out training in priority areas
11People &Society

Total Recordable
Incident Rate*:*Only applicable to production locations

1.2 (2.7)

AgendaHighlights Q1 2021
Implementation of strategy
Q1 2021 financial highlights
Summary12

Q1 2021 vs. Mid-term targets and Q1 2020
1Net sales growthOrg. growth p.a. over abusiness cycle

Mid-term
targets

Q12020Q12021

5%

-7%

14%

14%

8.3%

12.3%

1.5x2.5x

3.1x

1.9x

2

Adjusted EBITAmargin
3

Capital structure(LTM*)(Leverage: Net debt / adj.
EBITDA)*LTM = Last Twelve Months
13

1

Net sales growthGroup: Strong growth driven by AirTech
Order intake
MSEK+8%

2000

MSEK

1000

1,995

1500

2,808

2,769

1000

500
02000

Q1 2020

Q1 2021

Q1 2020

Q1 2021

Order intake, Q1: +8%, FX-adjusted +20%
• AirTech: Strong increase driven by the industrial segment. Both the battery andpharma sub-segment had good growth. Data Center US increased, offset by
decline in Mist Elimination. Excluding the non-core Commercial business US, FX
adj. order intake was appr. +27%.
• FoodTech: All regions had growth in currency adjusted order intake. Continued
strong growth in the swine segment in China. Growth in EMEA was driven bygreenhouse segment, in the US swine, layer and dairy segments grew offset by aweak broiler market.
Order backlog, Q1: -1%, FX-adjusted +11%1402%1500

1500
1000

4%

2000

+3%

1,566

1,6120%-2%

1000-4%500

500

5000MSEK

2000

2500

1,849

Quarterly net sales

MSEK-1%

3000

1500

Net sales

Order backlog

0Q1 2020

Q1 2021-6%

Q1 Q2 Q3 Q4 Q12020 2020 2020 2020 2021

-8%

Net sales, Q1: +3%, FX-adjusted +14%
• AirTech: Strong growth in battery, pharma sub-segments in industrial
segment as well as in Services. Data Centers US grew, offset by a weakdevelopment in Mist Elimination. Excluding the non-core Commercial USbusiness, FX adj. net sales was appr. +24%.
• FoodTech: Currency adjusted increase in net sales driven by a very strong
growth in the swine segment in China. EMEA experienced weaker controller
sales for the US broiler market• Services net sales amounted to 14% of total net sales.

1

Net sales growth

AirTech: Strong growth driven by batteries and pharma sub-segment
Order intake
MSEK

MSEK

+10%

1500

750

1,483

1500

2,186

2,129

250

500

00

Q1 2020

Q1 2021750

Order backlog, Q1: -3%, FX-adjusted +10%

1250

1,127

1,195

Q1 2020

Q1 20210%750-5%

250

250
05%

1000500500

Order intake, Q1: +10%, FX-adjusted +23%
• Excluding order intake to non-core Commercial US business in Q1 2020 OI
increased appr. +15% (FX-adj. +27%)• Increase driven by strong growth in the Industrial segment, where thebattery sub-segment in APAC had strong growth as well as the pharma
sub-segment in the US had significant growth• Components grew strongly driven by demand for rotors in the battery subsegment mainly in APAC. Data Centers US grew, offset by Mist Eliminationthat was continued weak
• Service increased OI in APAC and Americas
15100010%

1500+6%

1250

1000

500

MSEK

1500

2000

1,343

Quarterly net sales

MSEK-3%

2500

1250
1000

Net sales

Order backlog

0Q1 2020

Q1 2021

Q1 Q2 Q3 Q4 Q12020 2020 2020 2020 2021-10%Net sales, Q1: +6%, FX-adjusted +17%
• Excluding net sales to exited non-core Commercial US business, net sales
increased appr. +12% (FX-adjusted +24%)• Services represented 18% of net sales• Strong growth in Industrials, driven by battery and pharma sub-segments.
Data Centers grew strongly, whereas Mist Elimination declined• Services grew strongly, especially in Americas and APAC whereas EMEAflat• APAC and EMEA grew and Americas flat

1Net sales growth

FoodTech: Strong growth in China
Order intake
MSEK

MSEK+1%600300515300200
1000

Q1 2020

Q1 2021400622640

200

100100Q1 2020

Q1 2021

Order intake, Q1: +1%, FX-adjusted +12%
• In general, Covid-19 have had some negative effects on the market, forexample customers in the broiler market postponing investments into newbroiler houses• In APAC China had strong growth driven by the swine segment. Also,
development should be seen on the back of a weak Q1 2020
• In Americas the swine, layer and dairy segments had some growth,whereas the broiler market was weaker in the US• EMEA had growth driven mainly by orders in the greenhouse segment
16300

2000

• Order backlog, Q1: +3%, FX-adjusted +15%-5%

500

500
400

MSEK

600

600

520

Quarterly net sales

MSEK+3%

700

500
400

Net sales

Order backlog

0449

425

600

15%

500

10%

400

5%

3000%

200

Q1 2020

Q1 2021100-5%

0-10%

Q1 Q2 Q3 Q4 Q12020 2020 2020 2020 2021

Net sales, Q1: -5%, FX-adjusted +5%• In general, NS was negatively impacted by delayed deliveries due totransportation squeezes in the supply chain• APAC: good growth driven by China where the swine segment had a strong
development• Americas: the equipment NS had good growth, driven by the swine, layerand dairy business whereas the SW-business in MTech was flat
• EMEA: weak development, partly due to weaker sales our Israeli businessdue to weaker demand in the US broiler market

2 Adjusted EBITA-margin

Solid improvement adjusted EBITA Q1 2021
AirTechGroupMSEK

220
200
1801601401201008060
40200

MSEK

+53%

12.3%
8.3%

198

130
Q1 2020

Q1 2021

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

Adjusted EBITA, Q1: Improved margin• Adjusted EBITA increased to MSEK 198 (130),
corresponding to an improved adjusted EBITAmargin of 12.3% (8.3).

22020018016014012010080
6040200FoodTech
MSEK

+81%

15.1%
8.8%

181

100
Q1 2020

Q1 2021

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

11.5%

9.1%-25%

52

Q1 2020

39

Q1 2021

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

AirTech: Strongly improved margin

FoodTech: Decline in margin• Margin improvement was mainly driven byhigher net sales and high utilization rates
resulting in improved gross margins• Margin decline in Q1 on the back of a strong
margin in 2020
• Lower net of sales of controllers impacted
margins slightly negative
199176• Somewhat
increasedtransportation costs as aresult of Covid-19• The exit of the non-core Commercial business
contributed to improved margins• Efficiency improvement measures led tocontinued lower indirect costs

17220200180160
140120100806040200

2 Adjusted EBITA-margin

Delivering on our strategic journey
Sharpening measures - status first quarter:• Program announced in June 2020 aiming at sharpening the customer
offering and footprint optimization. Program timeline to be delivered by end
2021• Implementation is progressing according to plan, with expected closure asplanned by year end• Total cost for measures estimated at MSEK 176; MSEK 68 has beenrealized per end of March 2021:• MSEK 24 realized in the first quarter, mainly related to footprint
optimization and various other measures taken to ensure executionof the strategy

Sharpening measures• Exit non-core part of the commercial business in the USwithin business area AirTech• AirTech to expand Data Centers US manufacturing inTexas• In the Netherlands, operations to be consolidated• In addition, several other measures to be taken to ensure
execution of the strategy

Run-rate savings end of 2021
MSEK70• Savings, as earlier communicated, estimated to about MSEK 70, to reachfull annual run-rate at year endTotal
183

Capital structure

Strong cash flow development
Cash flow development, LTM*

Cash flow for the period, Q1 2021

Cash flow from operating activities

MSEK

Cash flow for the period

1200

350
300
250
200
150
100
500-50-100

1000
800
600
400
2000

Apr-Mar2019

Jul-Jun2019

Oct-Sep
2019

Jan-Dec
2019

Apr-Mar
2020

Jul-Jun
2020

Oct-Sep
2020

Jan-Dec
2020

MSEK

Apr-Mar2021

63-6

222-53-138
88-58-101

Operating Reversal Changes
of nonprofit
incash items provision

Cash flow development:

Cash flow development:• The improvement in cash flow from operating activities was mainly
an effect of a positive operating profit development• Cash flow from operating activities at MSEK 88*LTM = Last Twelve Months
Cash flow development includes discontinued operations
19-71

Finance Changes Cash flow Investing Financing Cash flow
items in working from activities activities for theperiod
capital operating
activities• Improved profits more than compensated for a negative effect fromchanges in working capital. This is a result of build-up of projects. Also,
inventory levels in FoodTech increased as a consequence of delayedtransportation due to Covid-19 challenges in the supply chain• MSEK 100 was amortized of the Revolving Credit
Facility (RCF) in the quarter3

Capital structure

Leverage in line with mid-term financial target range
Development of leverage

Cash conversion (LTM OCF*/Adj. EBITA)
Net debt / adj. EBITDAx, LTM

120%

5100%

480%

360%
40%

220%

10%

Jul-Jun2019

Oct-Sep
2019

Jan-Dec
2019

Apr-Mar
2020

Jul-Jun
2020

Oct-Sep
2020

Jan-Dec
2020

Apr-Mar
2021• Cash conversion continued to be at a high level mainly as a result ofintense work to improve cash management and working capitalmanagement• In the first quarter operating cash flow was at a higher level than thefirst quarter 2020. The relative improvement was higher in adj. EBITAand hence the conversion rate came down slightly*Operating cash flow
200

Apr-Mar2019

Jul-Jun2019

Oct-Sep
2019

Jan-Dec
2019

Apr-Mar
2020

Jul-Jun
2020

Oct-Sep
2020

Jan-Dec
2020

Apr-Mar2021• Net debt at the end of March amounted to MSEK 2,208 compared toMSEK 2,116 at the end of December 2020. The increase in net debt
was mainly driven by a negative exchange rate effect on outstandingborrowings related to USD/SEK of MSEK -134 in the quarter• The leverage ratio per end of March was 1.9x which is the same ratio
as per end of December 2020 as the strong cash flow from operations
was offset by the negative FX-rate effect relating to USD/SEKAgendaHighlights Q1 2021
Implementation of strategy
Q1 2021 financial highlights
Summary21

Solid first quarter with improved market conditions• Mixed impact from Covid-19, with major impact from shortages
in the supply chain. We expect that challenges in securing thesupply chain will remain for the coming months• Strong growth in prioritized areas, improved profitability andgood cash generation• Our implementation of the long-term strategy progressed‒ Footprint optimization measures taken‒ Continued increased focus on innovation and R&D‒ Strategy defined for FoodTech - implementation to start in coming
quarter both the equipment and digital areas of the businessWe are well positioned in a long-term growing market driven by
an increased need for sustainability, energy efficiency and digitalization
22

Questions & Answers