Q4
2018

Munters Group AB (publ)“Munters towards full potential
Fourth quarter 2018•

Order intake decreased by 4% to SEKm 1,753 (1,821). The fourth
quarter 2017 included a SEKm 450 Data Center order.

•

Net sales increased by 1% to SEKm 1,834 (1,811).

•

Operating profit (EBIT) amounted to SEKm -256 (127).

•

January – December 2018•

Order intake decreased by 4% to SEKm 6,914 (7,197).

•

Net sales increased by 8% to SEKm 7,122 (6,604).

•

Operating profit (EBIT) amounted to SEKm 134 (453) and included a
SEKm -323 write-down of goodwill in Data Centers.

EBIT included a SEKm -323 write-down of goodwill related toData Centers.

•

Adjusted EBITA was SEKm 676 (675), corresponding to an adjusted
EBITA margin of 9.5% (10.2).

•

Adjusted EBITA decreased by 11% to SEKm 154 (174), corresponding
to an adjusted EBITA margin of 8.4% (9.6).

•

Net income amounted to SEKm -94 (173).

•

Net income was SEKm -321 (152).

•

Cash flow from operating activities was SEKm 441 (235).

•

Cash flow from operating activities was SEKm 441 (-8).

•

Earnings per share amounted to SEK -0.57 (1.45).

•

Earnings per share amounted to SEK -1.78 (0.83).

•

John Peter Leesi has left his position as President and CEO. Johan Ek
has been appointed interim President and CEO.

•

Magnus Lindquist and Johan Ek replaced Christopher Curtis and Joakim
Karlsson in the Board. Magnus Lindquist was appointed Chairman.

•

The board proposes no dividend to be paid for 2018.

FINANCIAL SUMMARY

Events after period end•

Program launched for progression towards Munters full potential
incl.management intention to close down European Data Centerfactory*. Non recurring charges of SEKm 350 will be incurred with
60% taken in H1 2019, and remaining 40% in H2 2019. In total a positive Group adjusted EBITA effect is expected of SEKm 105 in 2019
and SEKm 210 in annual effect from 2020.

•

Jonas Ågrup, CFO, will leave by end of 2019. Recruitment of new
CFO initiated. Further, Peter Lindquist has been appointed interim
President of Business Area Air Treatment, replacing Scott Haynes
from 13 February 2019.

•

Revised mid-term financial target for organic net sales growth of 5%(previously 7-10%) reflecting the new business mix.

•

Review of strategic alternatives for the Data Centers and Mist Elimination businesses including potential partnerships or divestment.

Q4

Jan-Dec

SEKm

2018

2017

∆%

2018

2017

∆%

Order intake

1,753

1,821

-4

6,914

7,197

-4

Net sales

1,834

1,811

1

7,122

6,604

8

Operating profit (EBIT)

-256

127

134

453

-70

Adjusted EBITA

154

174

676

675

0

-11

Adjusted EBITA margin, %

8.4

9.6

9.5

10.2

Net income

-321

152

-94

173

Earnings per share before and after dilution, SEK

-1.78

0.83

-0.57

1.45

Cash flow from operating activities

441

-8

441

235

88

Net debt

2,843

2,661

2,843

2,661

7

3.7

3.5

Net debt/adjusted EBITDA, LTM

7* Subject to information and consultation with the relevant employee representative bodies.

Munters Group AB, fourth quarter 2018

1

Q4
2018

Comments from the CEO
Munters has not performed as expected since the IPO in May 2017. As the interim CEO and President of Munters since mid-December 2018, I have led the work toanalyse the business and to implement a program to increase Munters’ focus on delivering an improved performance in line with our objectives, and shareholders’expectations. Munters has exciting growth opportunities based on very strong fundamentals and solid technology, great people and team spirit, deep application
knowledge and globally strong market positions in a number of attractive segments. All aimed at delivering the perfect climate to our customers around the world. Ourlegacy of industry leadership will continue, accelerated by the measures we are now presenting.
Strong fourth quarter order intake in key segments but loss in Data Centers
The fourth quarter performance was characterized by encouraging trends in many of our activities, but also ongoing disappointments in the Data Center business. Air
Treatment, AgHort and Mist Elimination all reported order intake and net sales growth in the quarter, ahead of our expectations in some cases. Air Treatment andMist Elimination showed solid earnings increases year over year while earnings in AgHort were somewhat lower, affected by less favorable product mix and investments in the SonarEcho offering. As expected, cash flow was strong in the quarter. However, Data Centers continued its negative trend, reporting a significant loss inthe quarter, mainly derived in the European business. The continued losses in Data Centers, as well as the Group earnings for full year 2018 being at the same level
as last year, are unsatisfying.
Three phase plan to capture the full potential of Munters
The Board of Directors and the management team are fully committed to strengthen the performance of Munters. During the past two years, net sales growth has
been at a fairly good level whereas earnings and margins have been below expectations in all of Munters business areas, and most notably in Data Centers. The root
causes have been identified and we have designed a comprehensive and ambitious plan to increase the overall performance of the company. Today we launch athree-phase plan to capture Munters full potential to improve Group earnings.
The first phase – stability
The first phase begins immediately to secure a stable and profitable platform. We have designed a new organizational structure and new leadership team. Munterswill consist of two business areas, Air Treatment and AgHort. Data Centers and Mist Elimination, currently run as separate business areas, will be integrated into Air
Treatment during the first quarter 2019. The new organizational set up will create a simplified, leaner, more decentralized and more performance oriented Munters.
The new structure will allow us to better take advantage of our resources, increase transparency and accountability. The set up includes a significantly leaner Groupoverhead. In the Munters Full Potential Program, we will also review strategic alternatives for the Data Centers and Mist Elimination businesses including potential
partnerships or divestment.
As part of the first phase of the program, we have the intention to close down our European Data Center factory in Dison, Belgium. This is subject to union negotiations. Our analysis of our Data Centers operations has convinced the Board of Directors and the management team, that the prospects for establishing a profitable
Data Center business in Europe are limited in a market with overcapacity and ongoing price pressure. Our focus going forward will mainly be on the US Data Center
market where we have a more commercially viable base for achieving profitable growth. This include established customer relations and proven record of accomplishment in the US market, which provides a good platform.
The second phase – profitability
During 2019, we will gradually shift focus to the second phase of the program to capture Munters full potential. Activities include driving business mix towards most
attractive applications, focused Product Development to create higher value for customers, driving continuous improvements to fine tune buiness area organisations
and manufacturing footprint, further improvements of go-to-market models and pricing practices and driving cost of goods savings through product design cost-out
and material purchasing practices.
The third phase – growth
The third and final phase in the program is to accelerate growth with focus on attractive segments where we see solid long-term demand and where we have or canestablish strong market positions. Growth themes include continued development of our digital offering such as SonarEcho connecting farms and optimizing foodchains and Munters Connected Climate for Air Treatment customers as well as pursuing further growth in Asia and selective M&A. We also see continued significant
opportunities for profitable growth in Services through increased penetration of our installed customer base and an enhanced service offering.
Financial impact of the Munters Full Potential Program
The overhead cost saving from the program are SEKm 160. In addition, the intended closure of our Data Center factory in Europe, subject to union negotiations, will
give an estimated profit improvement of SEKm 50, this in spite of Data Center net sales drop of SEKm -600 of which approximately 80% in 2019. In total, we expect a
positive Group adjusted EBITA effect of SEKm 105 in 2019 and SEKm 210 in annual effect from 2020.
Nonrecurring charges for the Munters Full Potential Program of SEKm 350 will be incurred, with 60% to be taken during the first six months of 2019, and the remaining 40% in the last six months of the year. The Munters Full Potential Program will temporarily increase the leverage during 2019 and necessary consent from thelending banks have been received. We expect Group leverage to be in line with our mid-term financial leverage target in 2020. The Board proposes no dividend to be
paid for 2018 with consideration taken to the costs for the restructuring initiatives.
OutlookGlobal trends continue to support long-term solid demand for Munters climate solutions in key segments. 2019 will be a year where we reset the business for significantly improved performance. Adjusted EBITA in the first quarter 2019 is expected to be lower year on year due to a continued loss in Data Centers in the first quarter. As a result of the now started program, we expect significantly improved Group adjusted EBITA for full year 2019.
The Munters Full Potential Program provides a firm path towards increased earnings over the following years and we are confident that we will be able to get back on
track towards achieving our mid-term growth target of annual organic net sales growth of 5% (previously 7-10%) an adjusted EBITA margin of 14%, significant deleverage into our net debt/adjusted EBITDA target and normalized dividend payments of 30-50% of net income.
Johan Ek, President and CEO

Munters Group AB, fourth quarter 2018

2

Q4
2018

Financial performance
Q4

Jan-Dec

SEKm

2018

2017

2018

2017

Order intake

1,753

1,821

6,914

7,197

Growth

-4%

22%

-4%

13%

Net sales

1,834

1,811

7,122

Growth

1%

-1%

8%

of which organic growth

-5%

5%

of which currency effects

6%3%

of which structural effects

0%

Order intake (SEKm)
2,000

8,000

1,500

6,000

6,604

1,000

4,000

9%

500

2,000

0

0%

Quarter

Operating profit (EBIT)

-256

127

134

453

Adjusted EBITA

154

174

676

675

Net sales (SEKm)

-11%

-36%

0%

-14%

2,500

8.4

9.6

9.5

10.2

2,000

GrowthAdjusted EBITA margin, %0

Q4 Q1 Q2 Q3 Q4

LTM

8,000
6,000

1,500

ORDER INTAKE

Order intake for the fourth quarter decreased by 4% to SEKm 1,753 (1,821) and decreased by 9% organically. The
order intake was positively affected by currency translation effects.
Air Treatment, AgHort and Mist Elimination all reported strong organic growth in the quarter while Data Centers
showed negative organic growth (the fourth quarter 2017 included a SEKm 450 Data Center order). Air Treatment
signed large orders (order value of SEKm 120) in the Industrial sub-segment for Lithium battery production in
China. Orders in Food, Other Commercial and Services also showed organic growth. AgHort showed good orderintake growth in both China and in the US. In Data Centers order intake declined in Europe while order intake in
the US grew. In Mist Elimination order intake was strong, driven by the Marine sub-segment. The order intake forServices was also strong in the quarter.

2,000

500
0

0

Q4 Q1 Q2 Q3 Q4Quarter

LTM

Adjusted EBITA (SEKm)
250

800

200

Order intake for the full year decreased by 4% to SEKm 6,914 (7,197) and decreased by 7% organically due tolower order intake in Data Centers.

150

NET SALES50

Net sales for the fourth quarter increased by 1% to SEKm 1,834 (1,811) and decreased by 5% organically. Net
sales were positively affected by currency translation effects. Organic growth was reported for Air Treatment,
AgHort and Mist Elimination while Data Centers showed a decrease. Services net sales increased by 15% in thequarter, supported by 6% positive currency translation effects.

4,000

1,000

600
400

100

0

200

Q4

Q1

Q2

Quarter

Q3

Q4

0

LTM

Net sales for the full year increased by 8% to SEKm 7,122 (6,604) and 5% organically driven by growth in all business areas except Mist Elimination.
Services net sales increased by 12% during 2018, supported by 3% positive currency translation effects.

OPERATING PROFIT (EBIT)

Operating profit (EBIT) in the fourth quarter amounted to SEKm -256 (127), including depreciations of SEKm -26 (-22) and amortizations and write-down of
SEKm -380 (-47), whereof SEKm -29 (-42) was related to amortization of surplus values derived through acquisitions and SEKm -323 (0) was related towrite-down of goodwill in Data Centers. The operating profit was also negatively impacted by SEKm -31 (items affecting comparability) of which CEO severance costs was SEKm -22.
Operating profit (EBIT) for the full year amounted to SEKm 134 (453), including depreciations of SEKm -99 (-79) and amortizations and write-down of SEKm
-503 (-209), whereof SEKm -133 (-189) was related to surplus values derived through acquisitions and SEKm -323 (0) was write-down of goodwill in Data
Centers.

ADJUSTED EBITA

Adjusted EBITA in the fourth quarter decreased by 11% to SEKm 154 (174), corresponding to an adjusted EBITA margin of 8.4% (9.6). Business area Air
Treatment reported significantly higher adjusted EBITA in the quarter, mainly driven by efficiency improvements in the Mexican production facility and afavorable product mix. For AgHort the adjusted EBITA was down slightly versus prior year mainly caused by low volumes of controllers as well as investments in the software and digital offering. Adjusted EBITA for Data Centers was significantly lower, which was caused by declined production volumes andhigh project related costs. In Mist Elimination, adjusted EBITA increased due to higher volumes.
Adjusted EBITA in the full year amounted to SEKm 676 (675), corresponding to an adjusted EBITA margin of 9.5% (10.2).

Munters Group AB, fourth quarter 2018

3

Q4
2018

FINANCIAL ITEMS

Financial income and expenses for the fourth quarter amounted to SEKm -31 (-28). Increased USD interest rates was the main factor behind the increase
compared to the same quarter last year. The total average weighted interest rate including fees per end of the quarter was 4.6% (3.5).
Financial income and expenses for the full year amounted to SEKm -127 (-301). The first part of previous year was affected by interest cost on the former
shareholder loan and large one-off cost at the termination of the previous loan arrangement.

TAXES

Income taxes for the fourth quarter amounted to SEKm -34 (53). In Q4 2017, there was a positive one-off effect of SEKm 74 related to the US tax reform(Tax Cuts & Jobs Act), deriving from revaluation of deferred tax liability, mainly related to prior acquisitions.
Income taxes for the full year amounted to SEKm -101 (21). The tax cost for the full year was positively impacted by SEKm 4 related to 2017 tax reform
adjustments in the US. In addition, tax rate change in Sweden has affected tax cost positively with SEKm 7 due to revaluation of deferred taxes.

EARNINGS PER SHARE

Net profit per ordinary share, before and after dilution, in the fourth quarter 2018 amounted to SEK -1.78 (0.83). Income attributable to Parent Company’s
ordinary shareholders amounted to SEKm -324 (153) for the fourth quarter.
Net profit per ordinary share, before and after dilution, for the full year amounted to SEK -0.57 (1.45). Income attributable to Parent Company’s ordinary
shareholders amounted to SEKm -105 (174) for the full year.
The number of outstanding ordinary shares as per December 31, 2018, was 183,597,802 before and after dilution, whereof 1,467,000 was held in own
custody.

DIVIDEND

The Board proposes no dividend to be paid for 2018.

CASH FLOW AND CAPITAL EMPLOYEDCash flow from operating activities amounted to SEKm 441 (-8) in the fourth quarter and was positively affected by a decrease of working capital corresponding to a SEKm 339 (-174). The main decrease in working capital originated in Data Centers Europe.
Cash flow from operating activities for the full year amounted to SEKm 441 (235), where cash flow from working capital amounted to SEKm -67 (-210).
Cash flow from financing activities in the fourth quarter amounted to SEKm -297 (-6). Cash flow from financing activities for the full year amounted to
SEKm -180 (205). Munters repurchased own shares during the third quarter (1,467,000) with the purpose to hedge the share price exposure in the employee stock option program.
Average capital employed for the last twelve months amounted to SEKm 7,022 (6,501). Return on capital employed (ROCE) for last twelve months
was 2% (7).
Return on capital employed (ROCE), where EBIT is adjusted for items affecting comparability and capital employed adjusted for goodwill, for the last twelve
months was 7% (21).

FINANCIAL POSITION AND LIQUIDITY

Munters primary financing facilities consist of a term loan of USDm 250 and a multi-currency 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.
Available unutilized credit facilities as of December 31 amounted to SEKm 918 (811). Interest-bearing liabilities amounted to SEKm 3,013 (2,855). Cash andcash equivalents amounted to SEKm 404 (402) as of December 31, 2018.
At quarter end, the term loan was fully drawn and EURm 96 of the multi-currency revolving credit facility were utilized in EUR, USD and SEK. Along with themain loan facility, an amount of SEKm 13 in local debt is outstanding in China, India, and Brazil.

ITEMS AFFECTING COMPARABILITY (IAC)

In the fourth quarter, costs amounting to SEKm 31 (0) were reflected as items affecting comparability. SEKm 22 incurred due to the CEO change and SEKm
8 were costs related to a profit improvement program within Data Centers. During the full year, IAC amounted to SEKm 39 where the additional SEKm 8
related to costs for the Data Centers improvement program in the third quarter 2018.
There were no IAC’s in the fourth quarter 2017. Items affecting comparability 2017 referred to exit preparation costs amounting to SEKm 73, a gain of SEKm
7 related to a property sale and settlement of the HB Group acquisition earn-out, which resulted in a gain of SEKm 53. In total 2017 included IAC items of
SEKm -13.

NEW CHAIRMAN OF THE BOARD AND NEW INTERIM PRESIDENT AND CEO IN MUNTERS

At the extraordinary general meeting of Munters Group AB at December 18, 2018 Magnus Lindquist and Johan Ek were elected ordinary Board members to
replace Christopher Curtis and Joakim Karlsson. Further, Magnus Lindquist was elected Chairman of the Board of Directors.
John Peter Leesi left his position as President and CEO at December 18, 2018. The recruitment of a new CEO has commenced. The Board of Directors
appointed at December 18, 2018 the newly elected Board member Johan Ek as interim President and CEO.

Munters Group AB, fourth quarter 2018

4

Q4
2018

PARENT COMPANY AND OWNERSHIP

Munters Group AB offers group supporting functions. The Company holds shares in subsidiaries, cash and accounts payables. The Parent Company does
not engage in sales of goods and services to external customers. Cash and cash equivalents at the end of the period amounted to SEKm 77 (134).
As of December 31, Nordic Capital was the biggest shareholder (50.1%) followed by FAM (11.4%), AMF (7.9%), Första AP-fonden (6.2%) and Alecta(5.0%).

EVENTS AFTER PERIOD END
Management changes

Jonas Ågrup will leave his position as CFO at end of 2019 and the recruitment of new CFO has been initiated. Further, Peter Lindquist has been appointed
interim President of Business Area Air Treatment, replacing Scott Haynes from 13 February 2019. The new Group Management team will consist of 6 members (previously 13 members); CEO, CFO, President Air Treatment, President AgHort, President Global Operations and Vice President HR.

Three phase plan to capture the full potential of Munters

The Board of Directors and the management team are fully committed to strengthen the performance of Munters. During the past two years, net sales
growth has been at a fairly good level whereas earnings and margins have been below expectations in all of Munters business areas, and most notably in
Data Centers. The root causes have been identified and we have designed a comprehensive and ambitious plan to increase the overall performance of thecompany. Today we launch a three-phase plan to capture Munters full potential, to increase customer focus and to improve Group earnings.
As part of the first phase of the program, we have the intention to close down our European Data Center factory in Dison, Belgium. This is subject to unionnegotiations. Our analysis of our Data Centers operations has convinced the Board of Directors and the management team, that the prospects for establishing a profitable Data Center business in Europe are limited in a market with overcapacity and ongoing price pressure. Our focus going forward will mainly beon the US Data Center market where we have a more commercially viable base for achieving profitable growth. This include established customer relations
and proven record of accomplishment in the US market, which provides a good platform.
The overhead cost saving from the program are SEKm 160. In addition, the intended closure of our Data Center factory in Europe, subject to union negotiations, will give an estimated profit improvement of SEKm 50, this in spite of Data Center net sales drop of SEKm -600 of which approximately 80% in 2019.
In total, we expect a positive Group adjusted EBITA effect of SEKm 105 in 2019 and SEKm 210 in annual effect from 2020.
Nonrecurring charges for the Munters full potential program of SEKm 350 will be incurred, with 60% be taken during the first six months of 2019, and theremaining 40% in the last six months of the year. The Munters full potential program will temporarily increase the leverage during 2019 and necessary consent from the lending banks have been received. We expect Group leverage to be in line with our mid-term financial leverage target in 2020. The Board
proposes no dividend to be paid for 2018 with consideration taken to the costs for the restructuring initiatives.

Revised mid-term financial target for net sales growthMunters has revised its mid-term financial target for organic net sales growth to 5% (previously 7-10%), reflecting the new business mix.
Munters mid-term financial targets are:
Net sales growth – Munters’ objective is to achieve an annual organic sales growth of 5%, supplemented by selective acquisitions.
Adjusted EBITA Margin – Munters’ objective in the medium-term is to have an adjusted EBITA margin of 14%.
Capital structure – Munters aims to maintain a ratio of net debt to adjusted EBITDA of 1.5x to 2.5x, and may temporarily exceed this level (e.g., as a resultof acquisitions).
Dividend policy – Munters aims to pay an annual dividend corresponding to 30–50% of its consolidated income for the period. The pay-out decision will bebased on the financial position, investment needs, acquisitions and liquidity position. There can be no assurances, however, that in any given year a dividend will be proposed or declared.

Munters Group AB, fourth quarter 2018

5

Q4
2018

Air Treatment•

Strong order intake in the quarter with large orders won in the Industrial sub-segment for Lithium battery
production in China•

Net sales increased by 8%, supported by favorable currency effects•

Adjusted EBITA grew by 25%, driven by increased efficiency in Munters’ Mexican production facility andfavorable product mix

FINANCIAL SUMMARY

Q4

Jan-Dec

SEKm

2018

2017

2018

2017

Order intake

979

862

3,798

3,787

Growth

14%

3%

0%

12%

Net sales

1,064

988

3,752

3,588

Growth

8%

3%

5%

9%

of which organic growth1%

2%

of which currency effects

6%3%

of which structural effects

0%0%Operating profit (EBIT)

176

129

496

511

Order intake (SEKm)

Adjusted EBITA

170

136

497

466

1,200

25%

-23%

7%

1%

1,000

16.0

13.8

13.3

13.0

800

GrowthAdjusted EBITA margin, %

4,000
3,000

600

2,000

400

Order intake

Order intake in the fourth quarter increased by 14% and 7% organically. Three large orders were signed in the
Industrial sub-segment for lithium battery production in China (order value SEKm 120). Order intake in the foodindustry were solid, driven by region Americas. The Commercial sub-segment grew organically in the quarter,
Supermarket end-market orders in the US declined, but orders from other commercial customers were strong.
Services orders increased in the quarter while demand for components from OEMs was somewhat weaker.
Order intake for the full year was flat and declined by 3% organically as a function of low investment level within
the Supermarket end-market in the US, along with the strategic exit of general air handling solutions impacting
order intake in other Commercial applications. Order intake in Services continued to grow in 2018.

Net sales

Net sales grew by 8% and by 1% organically in the quarter. Net sales in the Industrial sub-segment as well as in
Services increased, but declining deliveries to the Commercial sub-segment limited the growth in the quarter.

0

Adjusted EBITA increased by 25% in the quarter. The improvement in EBITA margin was mainly driven by substantial year-over-year efficiency improvements in the Mexican production facility and a favorable product mix.
For the full year, adjusted EBITA increased by 7%. Favorable development of gross margins, including the improved results in the Mexican production, increased profitability for the year.

Q4 Q1 Q2 Q3 Q4Quarter0
LTM

Net sales (SEKm)
1,200

4,000

1,000

3,000

800
600

2,000

400

1,000

200
0

For the full year, net sales increased by 5% and by 2% organically. The Industrial sub-segment, component
sales to OEMs and Services grew but the low demand in the Supermarket end market and the exit of the general
air handling solutions had a negative impact on net sales in 2018.

Adjusted EBITA

1,000

200

Q4 Q1 Q2 Q3 Q4Quarter0
LTM

Adjusted EBITA (SEKm)
200

600
500

150

400

100

300
200

50
0

100
Q4

Q1

Q2

Quarter

Q3

Q4

0
LTM

Munters Group AB, fourth quarter 2018

6

Q4
2018

AgHort•Order intake increased by 15% in the quarter, with growth in both Americas and Asia•

Net sales grew by 11% in the quarter, with majority of the growth in Americas and Asia•

Adjusted EBITA was slightly lower than last year, partly due to a larger share of sales in Asia and investments in the MTech software and digital offering

FINANCIAL SUMMARY
SEKm

Q4

Jan-Dec

2018

2017

2018

2017

Order intake

452

394

2,107

1,866

Growth

15%

3%

13%

10%

Net sales

497

450

2,018

1,837

Growth

11%

9%

10%

8%

of which organic growth6%

7%of which currency effects

5%3%

of which structural effects

0%

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

53

1%

51

244

225

49

52

249

236

-6%

23%

6%

-10%

9.9

11.6

12.4

12.8

Order intake (SEKm)
800

2,400
2,000

600

Order intake

Order intake in the quarter increased by 15% and by 10% organically. Asia and Americas showed growth while
third-party sales from EMEA was at same level as previous year. The growth in Asia was primarily driven bycontinued growth in China, but at a slower pace than in the first half of 2018 due to negative effects from thetrade war and African Swine Fever. Orders for controllers, that have been slow in Q2 and Q3, picked up again
and returned to growth in the quarter.
Order intake for the full year increased by 13% and by 10% organically. The growth was primarily driven bystrong performance in the Swine sub-segment in China, but also by two large orders for SonarEcho. Order intake in EMEA and Americas were at the same level as last year. Order intake in the biggest market US was
down, primarily due to low sales of cooling pads.

Net sales

Net sales in the quarter increased by 11% and by 6% organically. The growth was primarily driven by growth in
US and China, but due to the trade war and the African Swine Fever the market situation remain uncertain.
Sales in EMEA were sligthly lower than previous year, primarily caused by lower sales to distributors exporting
outside the region.
Net sales for the full year increased by 10% and by 7% organically. The growth was primarily driven by the
Swine sub-segment in China.

Adjusted EBITA

Adjusted EBITA in the fourth quarter was slightly lower year on year, and the EBITA margin decreased. The
margin decrease was primarily attributable to low volumes of controllers as well as investments in the MTech
software and digital offering.
The adjusted EBITA margin for the full year was slightly lower year on year. The margin was positively impacted
by higher volumes but burdened by less favorable product mix, fewer large projects as well as investments in thesoftware and digital offering. In addition, the majority of the growth in 2018 have been in Asia and the increased
volume have required investments in the local organization.

1,600

400

1,200
800

200
0

400
Q4

Q1

Q2

Q3

0

Q4

QuarterLTM

Net sales (SEKm)
600

2,500

500

2,000

400

1,500

300

1,000

200

500

100
0

Q4

Q1

Q2

Q3

Quarter

0

Q4

LTM

Adjusted EBITA (SEKm)
100

300

80

250
200

60

150

40

100

20
0

50
Q4

Q1

Q2

Quarter

Q3

Q4

0

LTM

Munters Group AB, fourth quarter 2018

7

Q4
2018

Data Centers
Order intake decreased in the quarter due to a decline in Europe••

Net sales decreased due to lumpy order intake and phasing of large projects, particularly in Europe•

Earnings were negatively impacted by lower volumes, particularly in Europe as well as provisions forlosses on a large contract

FINANCIAL SUMMARY
SEKm

Q4
2018

Jan-Dec
2017

2018

2017

Order intake

225

519

660

1,261

Growth

-57%

178%

-48%

37%

Net sales

173

288

1,068

856

Growth

-40%

-18%

25%

25%

of which organic growth

-47%

21%

of which currency effects

7%4%Operating profit (EBIT)

-427

-9

-440

-13

Adjusted EBITA

-80

-8

-80

-9

Adjusted EBITA margin, %

-46.0

-2.6

-7.5

-1.0

Order intake

Order intake during the quarter decreased by 57%, primarily due to lower order intake in Europe. Order intake inEurope decreased by SEKm 492 year on year. The fourth quarter 2017 included a SEKm 450 order. The decrease in Europe was partially offset by an increase in Americas of SEKm 203.
Order intake for the full year decreased by 48%, primarily due to lower order intake from a digital customer inEurope. The decrease in Europe was partially offset by higher order intake in Americas and Asia during the year.

Net sales

Net sales in the quarter decreased by 40%, due to significantly lower volumes in Europe as well as a slightdecrease in Americas.
Net sales for the year increased by 25%, due to higher volumes from two large orders from a digital customerin Europe, partially offset by lower volumes in the US compared to 2017.

Adjusted EBITA

Adjusted EBITA in the quarter decreased to SEKm -80 (-8), primarily due to lower volumes and anticipated onetime losses of SEKm 21 on the commissioning portion of larger contracts in Europe. Lower volumes in Americas
compared to the fourth quarter 2017 also affected adjusted EBITA.
Adjusted EBITA for the full year decreased to SEKm -80 (-9). Increased volumes in Europe were offset by
margin deviations and a loss on the commissioning of a large contract, as well as by lower volumes in Americas
during the year compared with 2017.

Order intake (SEKm)
600

1,500

500

1,250

400

1,000

300

750

200

500

100

250

0

Q4

Q1

Q2

Q3

0

Q4

QuarterLTM

Net sales (SEKm)
400

1,500

300

1,000

200
500

100
0

Q4

Q1

Q2

Q3

Q4

Quarter0
LTM

Adjusted EBITA (SEKm)
30

100

10
-10

Q4

Q1

Q2

-30

Q3

Q4

50
0

-50

-50

-70
-90

-100
QuarterLTM

Munters Group AB, fourth quarter 2018

8

Q4
2018

Mist Elimination•

Order intake increased by 41% in the quarter. The growth was driven by Marine EGC (Emission Gas
Cleaning), with flat development in Process and a minor decrease in the Power sub-segments.

•

Net sales increased by 17% due to increased volumes in the Marine and Process sub-segments, partially offset by low volume in the Power sub-segment for Coal FGD (Flue Gas Desulphurization) in China
and US.

•

Adjusted EBITA increased to SEKm 22 (15), due to the increased revenue

FINANCIAL SUMMARY
SEKm

Q4
2018

Jan-Dec
2017

2018

2017

Order intake

117

83

445

394

Growth

41%

-13%

13%

-5%

Net sales

128

110

403

406

Growth

17%

-5%

-1%

-7%

of which organic growth

12%

-6%

of which currency effects

5%3%

of which structural effects

0%2%Order intake (SEKm)

Operating profit (EBIT)

22

14

52

34

Adjusted EBITA

22

15

52

36

45%

-35%

44%

-49%

16.8

13.5

12.9

8.9

GrowthAdjusted EBITA margin, %Order intake

Order intake increased by 41% and by 35% organically. The growth was mainly driven by a large increase in the
Marine sub-segment for emission gas cleaning using scrubbers on ships. The Process sub-segment was moreor less flat and the Power segment continued to decline.
Order intake for the full year increased by 13% and by 8% organically. Large increases were seen in the subsegments Marine in Europe and Process in APAC and Americas.

Net sales

Net sales in the quarter increased by 17% and by 12% organically, mainly as an effect of strong growth in Marine
in EMEA and growth in Process in APAC and Americas. The FGD business continued to decline in China but
also in Americas with strong comparison numbers in Power in Q4 2017.
Net sales for the full year declined by 1% and declined by 6% organically, impacted by lower volumes for FGD
projects in China but largely compensated by growth in both the Marine and Process sub-segments. Europe
showed increased net sales across several sub-segments, with the largest increase in Marine.

Adjusted EBITA

Adjusted EBITA increased to SEK 22 (15) in the quarter driven by increased net sales.
Adjusted EBITA for the full year increased by 44% versus last year, mainly related to lower overhead costs andby reduced warranty accruals.

140

500

120

400

100
80

300

60

200

40

100

20
0

Q4

Q1

Q2

Q3

Quar ter

Q4

0

LTM

Net sales (SEKm)
140

500

120

400

100
80

300

60

200

40

100

20
0

Q4

Q1

Q2

Q3

Quar ter

Q4

0

LTM

Adjusted EBITA (SEKm)
25

60

20

50
40

15

30

10

20

5
0

10
Q4

Q1

Q2

Quar ter

Q3

Q4

0

LTM

Munters Group AB, fourth quarter 2018

9

Q4
2018

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

2018
Q4

Q3

Q2

2,317
1,753
1,834
-256
-31
-34
-321

2,388
1,701
1,748
144
-49
-32
62

2,477
1,826
1,939
170
-19
-29
122

2,516
1,635
1,601
76
-27
-6
42

380
31
154
8.4

43
8
195
11.1

41
−
211
10.9

39
−
115
7.2

Air Treatment
SEKm
External order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down (incl.
surplus values)
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %Q1 Jan-Dec

Q4

Q3

Q2

2,317
6,914
7,122
134
-127
-101
-94

2,365
1,821
1,811
127
-28
53
152

2,332
1,489
1,552
108
-32
-26
51

2,449
2,234
1,723
143
-134
2
11

1,998
1,654
1,519
75
-106
-9
-41

503
39
676
9.5

47
0
174
9.6

54
2
164
10.6

56
-9
190
11.0

53
20
147
9.7

2018

Q4

Q3

2,365
7,197
6,604
453
-301
21
173

1,741
1,491
1,823
228
-116
-8
105

2,040
1,577
1,560
126
-106
-22
-2

209
13
675
10.2

49
-3
274
15.0

47
20
193
12.3

Q1 Jan-Dec

2017

Q4

Q3

Q2

1,158
979
1,060
4
176

1,291
906
924
4
121

1,332
951
963
17
126

1,300
963
775
3
73

4
0
-10
170
16.0

3
−
−
124
13.3

2
−
−
129
13.1

2
−
−
75
9.6

AgHort2016

2017

Q1 Jan-Dec

2016

Q4

Q3

Q2

1,158
3,798
3,723
29
496

1,079
862
983
5
129

1,205
938
872
4
115

1,171
1,037
927
5
173

1,097
950
787
6
94

11
0
-10
497
13.3

3
0
5
136
13.8

2
0
−
116
13.3

3
-53
−
123
13.2

3
-7
−
90
11.4

2018

Q1 Jan-Dec

Q4

Q3

1,079
3,787
3,569
19
511

959
840
959
2
162

1,076
848
842
0
102

10
-60
5
466
13.0

3
−
11
177
18.4

3
−
−
105
12.4

2017

2016

SEKm

Q4

Q3

Q2

Q1 Jan-Dec

Q4

Q3

Q2

Q1 Jan-Dec

Q4Q3External order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down (incl.
surplus values)
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %

518
452
491
6
53

552
524
510
8
73

557
610
548
7
77

498
520
442
6
41

518
2,107
1,991
27
244

368
394
443
7
51

442
442
473
9
74

490
561
500
1
75

454
469
391
13
25

368
1,866
1,808
30
225

249
382
399
11
66

267
374
459
12
81

3
−
-7
49
9.9

3
−
−
76
14.7

3
−
−
81
14.5

3
−
−
43
9.7

12
−
-7
249
12.4

2
−
-0
52
11.6

3
−
−
77
16.0

3
−
−
78
15.6

3
−
−
28
7.0

11
−
-0
236
12.8

3
-30
4
43
10.4

3
−
−
85
18.0

Munters Group AB, fourth quarter 2018

10

Q4
2018

Quarterly overview Group and Segments
Data Centers

2018

2017

2016

SEKm

Q4

Q3

Q2

Q1 Jan-Dec

Q4

Q3

Q2

Q1 Jan-Dec

Q4Q3External order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down (incl.
surplus values)
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %

470
225
160
13
-427

368
188
224
11
-24

418
167
341
10
7

581
80
294
15
5

470
660
1,019
49
-440

792
519
278
10
-9

538
20
114
1
-22

643
558
192
8
-14

321
165
249
4
32

792
1,261
833
23
-13

412
187
352
0
51

558
255
156
0
9

344
8
-5
-80
-46.0

1
8
−
-15
-6.4

1
−
−
8
2.4

1
−
−
6
2.1

349
16
-5
-80
-7.5

1
−
0
-8
-2.6

2
−
−
-20
-17.4

1
−
−
-13
-6.6

1
−
−
32
12.8

4
−
0
-9
-1.0

0
−
−
51
14.6

0
−
−
9
5.8

Mist Elimination

2018

2017

2016

SEKm

Q4

Q3

Q2

Q1 Jan-Dec

Q4

Q3

Q2

Q1 Jan-Dec

Q4Q3External order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down (incl.
surplus values)
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %

171
117
123
6
22

178
106
91
3
15

170
125
86
4
9

137
97
89
2
6

171
445
389
14
52

127
83
106
4
14

146
100
92
4
6

145
111
104
3
8

126
101
92
1
6

127
394
395
11
34

121
95
113
3
21

140
115
103
3
12

0
−
-1
22
16.8

0
−
−
15
16.3

0
−
−
9
9.9

0
−
−
6
6.7

1
−
-1
52
12.9

0
−
1
15
13.5

0
−
−
6
6.5

1
−
−
8
7.9

0
−
−
6
6.9

1
−
1
36
8.9

0
−
1
23
19.8

0
−
−
13
11.8

Other and eliminations

2018

2017

2016

SEKm

Q4

Q3

Q2

Q1 Jan-Dec

Q4

Q3

Q2

Q1 Jan-Dec

Q4

Q3

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

-20
-29
-80

-24
-25
-41

-26
-38
-48

-26
-26
-48

-96
-118
-217

-36
-25
-58

-11
-18
-64

-34
-17
-99

-31
-24
-82

-112
-83
-303

-13
-17
-73

-15
-15
-78

28
22
23
-7

36
−
−
-5

33
−
−
-15

32
−
−
-16

130
22
23
-43

41
−
-5
-22

47
2
−
-16

48
44
−
-7

46
27
−
-10

182
73
-5
-54

42
27
-16
-20

40
20
−
-18

Munters Group AB, fourth quarter 2018

11

Q4
2018

Consolidated accounts
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Q4

Jan-Dec

SEKm

2018

2017

2018

2017

Net sales
Cost of goods sold
Gross profit

1,834-1,257577

1,811-1,268542

7,122-4,851
2,271

6,604-4,4582,146

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

-591
-171
-74
3
-256

-248
-129
-42
4
127

-1,362
-567
-217
8
134

-978
-588
-167
39
453

Financial income and expenses
Profit/Loss after financial items

-31
-287

-28
99

-127
7

-301
152

Tax
Net income for the period

-34
-321

53
152

-101
-94

21
173

Attributable to Parent Company shareholders

-324

153

-105

174

3

-1

11

-1

182,130,802
182,130,802

183,597,802
183,597,802

183,165,852
183,165,852

119,658,011
119,720,995

-1.78
-1.78

0.83
0.83

-0.57
-0.57

1.45
1.45

Attributable to non-controlling interests
Average number of outstanding shares before dilution
Average number of outstanding shares after dilution
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK
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 not to be reclassified to profit or loss
Other comprehensive income, net after tax

17

76

193

-89

-17
4
3

-13
3
66

-17
4
179

-13
3
-99

Comprehensive income for the period
Attributable to Parent Company shareholders
Attributable to non-controlling interests

-317
-321
4

218
220
-2

85
75
10

74
75
-2

Munters Group AB, fourth quarter 2018

12

Q4
2018

Consolidated accounts
CONDENSED STATEMENT OF FINANCIAL POSITION
SEKm

2018/12/31

2017/12/31

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

4,251
1,456
155
219
142
48
14
242
6,526

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

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

386
135
243
16
18
1,204
106
2
35
126
402
2,672

TOTAL ASSETS

9,268

9,198

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

Munters Group AB, fourth quarter 2018

9

13

Q4
2018

Consolidated accounts
CONDENSED STATEMENT OF FINANCIAL POSITION
SEKm

2018/12/31

2017/12/31

Shareholders' equity
Non-controlling interests
Total equity

3,720
-4
3,716

3,748
0
3,748

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

3,002
230
16
137
421
3,805

2,848
207
22
137
394
3,607

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

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

7
382
581
486
2
52
212
8
114
1,843

TOTAL EQUITY AND LIABILITIES

9,268

9,198

2018/12/31

2017/12/31

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

3,748
85
−
−
−
0
−
-4
-55
-59
1
3,716

767
74
2,803
18
100
-10
-23
19
−
−
−
3,748

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

3,720
-4

3,748
0

EQUITY AND LIABILITIESEQUITYCONDENSED STATEMENT OF CHANGES IN EQUITY
SEKm

Munters Group AB, fourth quarter 2018

14

Q4
2018

Consolidated accounts
CONDENSED CASHFLOW STATEMENT
Q4
SEKm

Jan-Dec

2018

2017

2018

2017

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

-256

127

134

453

406
16
19
185

69
4
15
215

602
-15
19
740

288
13
-24
730

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

-27
-47

-27
-22

-109
-123

-176
-109

111

166

507

445

Cash flow from changes in working capital

329

-174

-67

-210

Cash flow from operating activities

441

-8

441

235

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

-1
1
1
−
-42
-24
-64

0
-0
0
0
-29
-19
-47

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

-268
1
1
-27
-127
-44
-464

FINANCING ACTIVITIESNew share issue
Warrants
Loan raised
Amortization of loans
Repurchase of shares
Dividends paid
Cash flow from financing activities

−
−
−
-297
−
−
-297

−
−
10
-17
−
−
-6

−
−
407
-472
-59
-55
-180

100
18
3,747
-3,659−−205

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

80
322
3
404

-61
451
12
402

-5
402
8
404

-25
432
-6
402

OPERATING ACTIVITIES

Munters Group AB, fourth quarter 2018

15

Q4
2018

Parent company
CONDENSED INCOME STATEMENT
Q4
SEKm

Jan-Dec

2018

2017

2018

2017

Net sales
Gross profit/loss

−
−

−
−

−
−

−
−

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

-5
-5

-3
-3

-11
-11

-77
-77

Financial income and expenses
Profit/Loss after financial items

0
-5

-1
-4

-0
-11

-84
-161

Group contributions
Profit/Loss before tax

−
-5

86
82

−
-11

86
-75

Tax
Net income for the period

0
-5

-15
67

0
-11

−
-75

CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Q4
SEKm
Profit/Loss for the period
Other comprehensive income, net after tax
Comprehensive income for the period

Munters Group AB, fourth quarter 2018

Jan-Dec

2018

2017

2018

2017

-5
−
-5

67
−
67

-11
−
-11

-75
−
-75

16

Q4
2018

Parent company
CONDENSED BALANCE SHEET
SEKm

2018/12/31

2017/12/31

4,086
4,086

4,086
4,086

−
0
0
−
77
77

0
0
−
86
134
220

4,163

4,306

2018/12/31

2017/12/31

6
4,074
87
-11
4,155

6
4,074
276
-75
4,281

0
2
3
2
8

1
2
20
2
25

4,163

4,306

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

Munters Group AB, fourth quarter 2018

17

Q4
2018

Notes
ACCOUNTING POLICIESThis report has been prepared, with regards to the Group, in accordance with IAS 34 Interim Financial Reporting, recommendation RFR 1 of the Swedish
Financial Reporting Board and the Swedish Annual Accounts Act and, with regards to the Parent Company, in accordance with recommendation RFR 2 of
the Swedish Financial Reporting Board and the Swedish Annual Accounts Act. The accounting principles applied correspond to those presented in the
Annual Report 2017 (Note 1). Since January 1, 2018, IFRS 15 Revenue from contracts with customers is applicable. The new revenue recognition principles
under IFRS 15 are described in Note 1, section Revenue recognition principles going forward. Munters used the full retrospective approach for the transition
to the new standard, however the transition to IFRS 15 did not have a material impact on Munters historical consolidated financial statement based on thefact that the Group did not have any open contracts of material values that would have been treated differently should IFRS 15 been applied on priorperiods. For that same reason Munters has not restated the 2017 comparative numbers in this interim report. As of January 1, 2018 IFRS 9 Financial
Instruments is also applicable. The new standard to recognize and measure financial instruments has not had any significant effect on the accounting
principles of the Groups financial instruments.
The Group presents certain financial metrics in the Interim report that are not defined in accordance with IFRS. The Group is of the opinion that these
metrics provide valuable complementary information for investors and the Group’s management, in that they enable an evaluation of the Group’s
performance. The financial metrics are calculated in accordance with the definitions presented on page 129 of the Annual Report 2017, however, adjusted
EBITA has been re-defined to exclude a yearly tax-driven adjustment of internal cost allocation between the segments.

IMPLEMENTATION OF NEW ACCOUNTING PRINCIPLESIFRS 16 Leases

IFRS 16 Leases is the new standard on accountng for leases and will go into effect for fiscal years beginning January 1, 2019, and have not been applied in
the preparation of this Interim report.
IFRS 16 was issued in January 2016 and the new standard will result in almost all leases being recognised on the balance sheet by lessees, as thedistinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to
pay rentals are recognised. The only exceptions are short-term and low-value leases. Munters will apply the standard from its mandatory adoption date ofJanuary 1, 2019, and will apply the simplified transition approach and therefore not restate comparative amounts for the year prior to first adoption. Right-ofuse assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). Munters will apply thetransition exempt rule under IFRS 16 not to make a new assessment if a contract is or contains parts that constitute a lease and will therefore apply thestandard for all contracts that have previously been identified as leases, or parts that constitute leases under IAS 17 and IFRIC 4. Munters will use theincremental borrowing rate to discount the lease liability. The incremental borrowing rate will be decided based on contract length and contract transaction
currency. Munters will also apply the exemption rule to exclude intitial direct costs when calculating the right of use asset when applying IFRS 16 at the first
application date
In preparation for the new lease standard, a project team was set up to review all of the Group’s leasing arrangements over the last year in light of the new
accounting rules in IFRS 16. The standard will affect the accounting for the Group’s operating leases. As at the reporting date, Munters has non-cancellable
operating lease commitments of SEKm 451. Of these commitments, approximately SEKm 94 relate to short-term and low value leases which will both berecognised on a straight-line basis as expense in profit or loss. For the remaining lease commitments Munters expects to recognise right-of-use assets ofapproximately SEKm 481 on January 1, 2019, lease liabilities of SEKm 463 (after adjustments for prepayments and accrued lease payments recognised as
at December 31, 2018) and provision for dismantling expenses of SEKm 18.
Net profit after tax expects to decrease by approximately SEKm 13 for 2019 as a result of adopting the new rules. EBITDA is expected to increase withapproximately SEKm 109 as the operating lease payments were included in EBITDA but the depreciation of the right-of-use assets and interest on the leaseliability are excluded from this measure. Adjusted EBITA is 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 this measure. Cash flow timings will not be affected.
Munters activities as a lessor are not material and hence the Group does not expect any significant impact on the financial statements.

TRANSACTIONS WITH RELATED PARTIESThe annual general meeting resolved in accordance with the Board’s proposal on the implementation of a long-term incentive program. The program shallcomprise no more than 1,257,000 employee stock options to be granted to members of the group management and certain other key employees, approximately 75 employees in total. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or toreceive any guaranteed benefits. Options are granted under the plan for no consideration and carry 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 equivalent to 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 thevolume-weighted average price paid for the company’s shares at Nasdaq Stockholm during a period of ten business days immediately prior to the exerciseof the option, with deduction of an 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 anniversaryof the allotment. Exercise of the employee stock options shall, as a principal rule be conditional upon the program participant still being employed with thegroup. The costs of the program are estimated to SEKm 7.4 that will be incurred over the three-year period.

Munters Group AB, fourth quarter 2018

18

Q4
2018

At the Extraordinary General Meeting on May 7, 2017, it was resolved to issue warrants as part of an incentive program for certain members of the Groupmanagement. In total, the incentive program comprises 8 individuals and not more than 5,222,000 warrants. The participants may subscribe for warrants at
a market value corresponding to in total not more than SEKm 17.99. The maximum number of warrants that may be subscribed for by the participants corresponds to approximately 2.77% of the Company’s share capital following completion of the offering and assuming full exercise of the warrants. For further
information of transactions between Munters and related parties, see the Annual Report 2017.

EMPLOYEESThe number of permanent employees at December 31, 2018 was 3,518 (3,496).

ENVIRONMENTAL IMPACT AND ENVIRONMENTAL POLICY

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

RISKS AND UNCERTAINTIESThe Group’s significant risks and uncertainties can be divided into four categories; strategic, operational, financial and regulatory risks. In these categories,
there are both risks due to political and macroeconomic trends and specific risks directly linked to the business carried out by the Group. A risk assessment
is carried out on an annual basis and the purpose is to identify and address the most important risks.
Munters’ products are used in complex customer processes. Quality and contract obligations are critical and could result in claims for damages. The volatility in order intake in the Data Centers business may result in unpredictable production costs. Alternative technologies could constitute a risk of increased
competition that could have a negative impact on the Group’s profitability. The Group depends to some extent on key customers and key personnel. Considering that Munters is a company with geographically widespread operations and many small organizational units, there is a risk of failure to comply with
relevant regulations in the business ethics area, e.g. anti-bribery rules. Financial risks mainly consist of currency, interest and financing risks.
Munters works actively with insurance solutions, and group-wide insurances are governed by central guidelines. This includes for example coverage forgeneral liability and product liability, property, business interruption, transportation, the liability of Board members and the CEO and employment practices
liabilities. A more detailed description of the Group’s risks and how they are managed can be found in the Annual Report 2017.

AQUISITIONSOn July 2, 2018, Munters UK acquired 100% of the issued share capital of Humi-Tech Services Ltd, a company registered in the UK providing services andmaintaining 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 with knowledge 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. We have estimated the full earn out to be paid out and provided for it fully. The surplus values arising from the acquisition relates to customer relationships. In 2017 Humi-Tech Services Ltd generated revenues of SEKm 14 with a reported EBITDA of SEKm 5. Acquisition costs incurred
amounted to SEKm 0.5.
In addition, a part of the put option in Mtech was exercised where another 6.4% was acquired for SEKm 23.

ALLOCATION OF NET SALES

The majority of customer contracts within Munters business areas Air Treatment, AgHort and Mist Elimination fulfill the requirements to recognize net sales
at a point in time, however there are a number of customer contracts within these business areas that requires to recognize net sales over time, which isreflected in the below matrix. In contrast, the majority of customer contracts within the Data Centers business requires to recognize net sales over time. In
addition to unit/equipment sales Munters also provides different kinds of services to customers such as installation, commissioniong, startup andmaintenance. Net sales from services are recognized over time as these services are performed. The services transferred over time in the matrix below is
not equivilent to the net sales from Services mentioned on the business area pages earlier in this interim report. This is due to the fact that part of Services
net sales are recognized at a point in time, such as spare parts, in the matrix below.

Munters Group AB, fourth quarter 2018

19

Q4
2018

Q4 2018

Jan-Dec 2018

SEKm

AirT

DC

AgH

ME

Total

AirT

DC

AgH

ME

Total

Allocation timing of revenue recognition
Goods transferred at a point in time
Goods transferred over time
Services transferred over time
Total

776
195
89
1,060

5
149
6
160

452
0
39
491

121
−
2
123

1,353
344
137
1,834

2,787
628
309
3,723

13
985
22
1,019

1,851
1
139
1,991

385
−
4
389

5,035
1,614
473
7,122

Q4 2017

Jan-Dec 2017

SEKm

AirT

DC

AgH

ME

Total

AirT

DC

AgH

ME

Total

Allocation timing of revenue recognition
Goods transferred at a point in time
Goods transferred over time
Services transferred over time
Total

737
173
74
983

−
271
7
278

397
−
46
443

106
−
0
106

1,240
444
127
1,811

2,726
592
251
3,569

−
804
28
833

1,670
−
137
1,808

394
−
1
395

4,790
1,397
418
6,604

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Group’s derivatives, recognized at fair value in the statement of financial position, are measured according to IFRS 9 and are categorized in level 2 in
the fair value hierarchy. The derivatives amounted to SEKm 3 (2) in financial assets and to SEKm 1 (2) in financial liabilities.
The Group’s contingent earn-outs and put/call acquisition options, recognized at fair value in the statement of financial position, are measured according to
IFRS 9 and are categorized in level 3 in the fair value hierarchy. The opening balance for the period was related to the acquisition of MTech Systems in
2017, the additional fair value of contingent consideration of SEKm 8 (0) was related to the acquisition of Humi-Tech Services Ltd in July 2018 and the fairvalue of the exercised part of the put/call option amounted to SEKm 24 (0) and related to the acquisition of an additional 6.4% of the shares in MTech Systems.

SEKm
Contingent price considerations and put/call options
Opening balance
Fair value of put/call acquisition option
Fair value of contingent consideration
Fair value excersied put/call option
Changes recognized in other operating income
Discounting
Exchange-rate differences for the period
Closing balance

2018/12/31

2017/12/31

136
−
8
-24
−
2
14
137

51
162
−
−
-53
-13
-11
137

Munters deems that the interest rate on interest-bearing liabilities are in line with market terms at December 31, 2018, and the fair value at the end of thereporting period therefore in all material aspects corresponds to the carrying amount.

Munters Group AB, fourth quarter 2018

20

Q4
2018

This report has not been subject to review by the company’s auditors.

INFORMATION AND REPORTING DATESContact persons:Johan Ek, President and CEO, Phone +46 (0)8 626 63 01
Jonas Ågrup, CFO, Phone +46 (0)8 626 63 01
John Womack, IR, Phone + 46 (0)70 678 24 99
Additional information may be obtained from Munters Investor Relations at phone +46 8 626 63 01 or by e-mailing info@munters.com.
The report will be presented at a webcast/teleconference on 13 February at 09:00 CET via https://tv.streamfabriken.com/munters-q4-2018

This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets
Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on 13 February 2019.
Munters Group AB, Corp. Reg. No. 556819-2321
Financial calendar:
17 April, publication of Annual Report 201824 April, Interim report, first quarter 201908 May, Annual General Meeting held at 15.00 at Kista Entré Konferens, Knarrarnäsgatan 7 in Kista, Stockholm
18 July, Interim report, second quarter 201924 October, Interim report, third quarter 2019

About Munters Group
Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate forcustomers in a wide range of industries, the largest being the food, pharmaceutical and data center sectors. Munters has been defining the future of air
treatment since 1955. Today, around 3,700 employees (including temps.) carry out manufacturing and sales in more than 30 countries. Munters reports
annual net sales above 7.1 billion SEK. For more information, please visit www.munters.com.
Every care has been taken in the translation of this interim report. In the event of discrepancies, the Swedish original will supersede the English translation.
The addition of the totals presented may result in minor rounding differences.

Munters Group AB, fourth quarter 201821