Q3”Strong order intake andprofitable growth”

July-September 2020

January-September 2020■

Order intake increased 14%, currency adjusted 21%. The growth was driven bypharma, lithium batteries and services for business area AirTech. Business area
FoodTech had strong growth in the swine segment in China.

■

The outbreak of Covid-19 had a mixed impact on Munters in the first ninemonths. All production units, except for one minor unit, have been operational
throughout the period with only minor disturbances.

■

Net sales increased 1%, currency adjusted 8%, mainly driven by good growth inbusiness area AirTech’s Data Center US operations and the swine segment in
China for business area FoodTech. This was partly offset by a weakdevelopment in business area AirTech’s Mist Elimination operations.

■

Order intake increased 3%, currency adjusted 4%. This was mainly driven by astrong order intake in the third quarter, driven by good growth in both businessarea AirTech and FoodTech.

■

The adjusted EBITA-margin improved 8% to 14.8% (13.7). Both business areas
improved their profitability in the quarter through a strong focus on cost control
and efficiency improvements.

■

Net sales declined -3% ,currency adjusted -2%, mainly due to Covid-19 relateddelays, mainly experienced in the first half year. Also, the Mist Elimination
operations in business area AirTech had a weak development in the period.

■

Leverage (net debt/adjusted EBITDA, LTM*) decreased to 2.5x from 2.7x end ofJune 2020, reaching the mid-term financial target range of 1.5x-2.5x.

■■

The measures for implementing a sharpening of the customer offering andfootprint optimization is going according to plan. The main focus during the third
quarter has been to prepare for execution of the measures. Costs and expenses
related to the measures were estimated at MSEK 188 at the end of June. In thethird quarter, MSEK 17 of these has been realized, mainly related to the exit of
the non-core part of the commercial business in the US as well as theconsolidation of operations in Netherlands.

The adjusted EBITA-margin improved to 12.8% (12.1). The improvement was
mainly because of production efficiency improvements and a tight cost control.
Also mitigating actions related to the Covid-19 outbreak contributed to theimprovement.

■

Leverage (net debt/adjusted EBITDA, LTM*) decreased to 2.5x from 2.9x at theend of December 2019. The decrease was mainly driven by a strong cash flow
development and a positive exchange rate effect on outstanding borrowings
related to USD/SEK of MSEK 90.

Financial summary

Q3

Jan-Sep

LTM*

Full year

MSEK

2020

2019

∆%

2020

2019

∆%

Oct-Sep

2019

Order intake

1,919

1,680

14

5,638

5,457

3

7,482

7,302
7,153

Net sales

1,833

1,813

1

5,173

5,311

-3

7,015

Operating profit (EBIT)

245

174

41

457

397

15

616

556

Adjusted EBITA

271

248

9

661

641

3

890

871

12.8

12.1

12.7

12.2

260

207

1.41

1.12

Adjusted EBITA margin, %

14.8

13.7

Net income

163

100

Earnings per share before dilution, SEK

0.89

0.54

Earnings per share after dilution, SEK

64

25

336

283

1.84

1.55

0.89

0.54

1.41

1.12

1.84

1.55

Average number of outstanding shares before dilution

181,292,993

181,929,746

181,595,988

182,063,783

181,582,069

181,983,219

Average number of outstanding shares after dilution

181,524,860

181,929,746

181,595,988

182,063,783

181,582,069

181,983,219

The KPI´s below includes discontinued operations **Net income

161

-238

256

-176

267

-164

Earnings per share before dilution, SEK

0.87

-1.32

1.39

-0.98

1.46

-0.91

Earnings per share after dilution, SEK

0.87

-1.32

1.39

-0.98

1.46

-0.91

Cash flow from operating activities

242

177

561

388

843

669

Net debt

2,694

3,368

2,694

3,368

2,694

3,062

2.5

3.5

2.5

2.9

Net debt/Adjusted EBITDA, LTM* Last twelve months** The income statement has been restated for 2019 to reflect the discontinued operation in line with IFRS 5, Non-current 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 during fall 2019 but minor installation services remains at customer sites during 2020. All income statement items in this report refers to Munters continuing operations, if nototherwise stated. See more information on page 23.

Third quarter, 2020»

CEO comments
Strong order intake, profitable growth and continued strengthening of balance sheet

We had strong order intake in the third quarter. This was mainly driven by good growth in the Industrial segment
in Americas for business area AirTech as well as the swine segment in China for business area FoodTech. We
experienced some delays in the market related to the Covid-19 outbreak. At the same time we continued to see
a general increased demand in industries such as lithium batteries and pharma. All our production units, except
one minor unit, upheld production with only minor disturbances in the first nine months.

Focus onstrategy
execution yields
good results.

Net sales increased in the third quarter, mainly driven by good growth in Data Centers US in business area AirTech and a continued strong increase in the swine segment for business area FoodTech in China.
The adjusted EBITA-margin improved in the third quarter. Both business area AirTech and FoodTech contributed
to the results through a strong focus on strategy execution, including operational efficiency improvements andstreamlining of indirect costs. Our leverage, net debt to adjusted EBITDA, was reduced to 2.5x which is in linewith our mid-term financial target of reaching a level of 1.5x-2.5x.
Focus on strategy execution yields good results

At the beginning of 2020, we presented our strategic priorities. Since then we are constantly working on executing these and in the third quarter, we achieved growth in the markets we have highlighted as prioritized areas.
In July 2020 we announced measures aiming at driving a sharpening of our customer offering and optimize ourfootprint, in line with the strategy. These are progressing according to plan. In the quarter we have proceededwith preparing for the exit of the non-core part of the commercial business of business area AirTech in the US
and the consolidation of the operations in the Netherlands. The growth in the Data Center US business has led
to a need of expanding the production capacity in Texas for a standardized part of our offering.

Klas Forsström, President and CEO

Going forward, our work with product rationalization, increasing standardization and to modularize our offering is
key to strengthen Munters. It is an important part of the strategy execution in order to be able to combine low
complexity with high customization capabilities.
Market improvement but still low visibility of market demandMarket conditions improved in the third quarter. Still, the visibility of market demand is low due to the lingering
Covid-19 outbreak.
I am proud of our employee’s capability to balance the management of daily challenges with a constant focus ondelivering on our mid-term targets. I truly want to thank our employees for their dedication in executing a verystrong performance in the third quarter.
Klas Forsström, President and CEO

Mid-term financial targets

Net sales growth: Annual growth in organic net sales of 5 per
cent, as of 2019, supplemented with selected add-on acquisitions.
Adjusted EBITA-margin: An adjusted EBITA-margin of 14 per
cent.
Capital structure: A ratio of net debt to adjusted EBITDA of
1.5x to 2.5x, and may temporarily exceed this level (e. g. as a result of acquisitions.)
Dividend policy: Munters aim to pay an annual dividend corresponding to 30-50 per cent of its consolidated income after tax
for the period.
For full description of the dividend policy, see the Annual and Sustainability report
2019, page 18.

2

Sustainability

Throughout 2020 Munters will prioritize sustainability issues aiming at setting more ambitious goals in 2021.
The framework for Munters’ sustainability agenda is divided into
three parts:•••

Resource efficiency,
Responsible business practices andPeople & society.

Please see the Munters Annual and Sustainability report 2019, page 46-55, for further information on goals and outcome.

Third quarter, 2020

Financial performance
During the third and fourth quarter 2019, Munters reported the business within the Data Centers operations in Belgium as a
discontinued operation. Therefore all income statement has been restated for 2019 to reflect the discontinued operation in linewith IFRS 5, for information see page 23. All income statement items in this report refers to Munters continuing operations, if
not otherwise stated.

Q3

Jan-Sep

LTM Full year

MSEK

2020

2019

2020

2019 Oct-Sep

2019

Order intake

1,919
1,354
575
-10
1,833
1,280
572
-18
271
198
95
-21
14.8
15.4
16.5

1,680
1,179
513
-13
1,813
1,288
534
-9
248
167
85
-3
13.7
12.9
15.9

5,638
3,928
1,746
-37
5,173
3,614
1,595
-36
661
478
244
-62
12.8
13.2
15.3

5,457
3,892
1,596
-31
5,311
3,777
1,563
-29
641
476
217
-52
12.1
12.6
13.9

7,302
5,253
2,087
-38
7,153
5,159
2,032
-38
871
662
278
-69
12.2
12.8
13.7

AirTechFoodTech
Other and eliminations

Net sales

AirTechFoodTech
Other and eliminations

Adjusted EBITA

AirTechFoodTech
Other and eliminations

Adjusted EBITA margin, %AirTechFoodTech

7,482
5,290
2,237
-45
7,015
4,995
2,065
-45
890
664
305
-79
12.7
13.3
14.8

Order intake,currency adjusted change

21%
Adj. EBITA-margin

14.8%

ORDER INTAKE

July-September 2020

Order intake in the quarter increased by 14%, currency adjusted increase of 21%. This was driven by a strong
increase in both AirTech and FoodTech. The impact on demand from the Covid-19 outbreak was mixed, with
only smaller delays in deliveries. We have seen increased demand for services and in industries such as lithium
batteries, pharma and food.
Business area AirTech order intake increased by 15%, currency adjusted increase of 22%. The increase wasdriven by demand for services and in the lithium battery and pharma sub-segment in the Industrial segment. Mist
Elimination had a weak development mainly due to the low demand from the marine market globally. Data Centers US had a weak order intake, however still has a strong order backlog. Due to AirTech exiting the non-core
Commercial segment, this area had a weak order intake.
Business area FoodTech order intake increased by 12%, currency adjusted increase of 20%, primarily becauseof a strong increase in the swine segment in China. Investments in sustainable production capacity in China continued to increase in the swine segment on the back of a weak 2019 when it was negatively impacted by the African Swine Fever (ASF). Also, good growth was achieved in the broiler segment in China. Europe had softer order intake on the back of the Covid-19 outbreak, partly offset by good growth in our German operations, driven
by good demand from Russia. In Americas, the US had a weaker development mainly due to a decline in theswine segment that still experienced an overcapacity in the market.

January-September 2020

Order intake Q3, 2020 (MSEK)
2,500

8,000

2,000

6,000

1,500

4,000

1,000

2,000

500
0

Q3

Q4

Q1

Q2

QuarterBusiness area FoodTech order intake increased by 9%, currency adjusted increase of 11%. The increase wasmainly because of a very good development of order intake in Asia, driven by the swine segment in China. Also,

3

0

LTM

Order intake Q3, 2020 (MSEK)

27%

The order intake in the first nine months increased 3%, currency adjusted increase of 4%. This was driven by anincrease in both business area AirTech and FoodTech. The impact on demand from the Covid-19 outbreak was
mixed in the first nine month. Delays in deliveries related to the outbreak were seen mainly in the first half year.
Business area AirTech order intake was flat, currency adjusted increase of 2%. This was mainly due to a weaker
order intake in Mist Elimination, which was partly offset by a strong development in Data Centers US. The Industrial segment had stronger order intake in the period driven by lithium batteries, food and pharma. Services also
had a positive development of order intake.

Q3

44%

29%
Americas

EMEA

APAC

Third quarter, 2020

good growth was achieved in the broiler segment in China. In Europe, demand was softer, despite a good development in our German operations, driven by demand from Russia. In Americas order intake was softer mainly
due to a weak swine segment.

NET SALES

July-September 2020

Net sales in the quarter increased 1%, currency adjusted increase of 8%, driven by an increase in the swine segment in China in business area FoodTech. Services net sales amounted to 13% of total net sales.
Net sales in business area AirTech declined -1%, currency adjusted increase of 6%. Data Center US had strong
growth in the quarter, offset by a decline in Europe as well as Asia. Net sales declined in these regions mainly
driven by a weak development in Mist Elimination as the marine sub-segment was continued weak in all regions.
Also, the Industrial segment was weak in Europe and Asia, impacted by the Covid-19 outbreak. Services had aflat development in the quarter.

Net sales Q3, 2020 (MSEK)
2,000

8,000

1,500

6,000

1,000

4,000

500

2,000

0

Q3

Net sales in business area FoodTech increased by 7%, currency adjusted increase of 14%, driven by a good
growth in the swine segment in China. The US had a weak development due to a weak swine segment where
we still see an overcapacity in the market. The lingering Covid-19 outbreak had a continued negative impact on
demand in both Americas and Europe in the quarter. The negative development in Europe was partly offset by agood development in our German operations, which had a good growth in net sales, mainly driven by Russia.

January-September 2020

Net sales in the first nine months decreased by -3%, currency adjusted of -2%. The decrease was mainly due toa weak development in Mist Elimination in business area AirTech. Services net sales amounted to 13% of total
net sales.

Q4

Q1

Q2

Quarter

40

LTM

Net sales Q3, 2020 (MSEK)

23%

Net sales in business area AirTech declined -4%, currency adjusted decrease of -3%. The decline was mainly
due to a weak development in Mist Elimination where the marine sub-segment had a weak development. Also,
the Industrial segment was weak, impacted by the Covid-19 outbreak. This was partly offset by a strong growthin Data Center US. Services had a positive development.
Net sales in business area FoodTech increased 2%, currency adjusted increase of 4%, with a good growth in
Asia, offset by a decline in the Americas and Europe. Net sales in all regions was negatively impacted from theCovid-19 outbreak. It affected net sales negatively in Asia early in the year and later in Europe and Americas.

Q3

46%

31%
Americas

EMEA

APAC

Third quarter, 2020

RESULTS
Adjusted EBITA excludes Items Affecting Comparability, IAC, see page 6 for disclosure of the IACs.

July-September 2020

The gross margin increased to 32.9% (32.5) with a strengthened gross margin in business area FoodTech driven
by continued efficiency improvements.
Adjusted EBITA increased to MSEK 271 (248), corresponding to an improved adjusted EBITA-margin of 14.8%(13.7). Depreciation amounted to MSEK -55 (-60), whereof depreciation of leased assets was MSEK -28 (-56).
Adjusted EBITA for business area AirTech amounted to MSEK 198 (167) corresponding to a EBITA margin of
15.4% (12.9). The stronger EBITA-margin was a result of a stable gross margin, efficiency improvements as wellas continued lower indirect costs.
Adjusted EBITA in business area FoodTech increased to MSEK 95 (85), corresponding to an improved adjusted
EBITA margin of 16.5% (15.9). The improvement was driven by increased net sales, a slightly improved grossmargin and continued lower indirect costs.
Operating profit (EBIT) in the third quarter was MSEK 245 (174), corresponding to an operating margin of 13.3%(9.6). Amortization and write-downs on intangible assets in the third quarter was MSEK -30 (-32), where MSEK
-10 (-24) was related to amortization of intangible assets from acquisitions.

January-September 2020

The gross margin was slightly above 2019 at 33.7% (33.1) with a flat margin development in AirTech and a slight
improvement in FoodTech.
Adjusted EBITA increased to MSEK 661 (641), corresponding to a higher adjusted EBITA-margin of 12.8%(12.1). Depreciation amounted to MSEK -165 (-162), whereof depreciation of leased assets was MSEK -84(-113).
Adjusted EBITA for business area AirTech amounted to MSEK 478 (476), corresponding to an improved
adjusted EBITA margin of 13.2% (12.6). The higher EBITA-margin was a result of slightly improved grossmargin, driven by efficiency improvements as well as lower indirect costs.
Adjusted EBITA in business area FoodTech increased to MSEK 244 (217), corresponding to an improved
adjusted EBITA margin of 15.3% (13.9). The improvement was driven by increased net sales in combination witha slightly improved gross margin and lower indirect costs.
Operating profit (EBIT) for the first nine months was MSEK 457 (397), corresponding to an operating margin of
8.8% (7.5). Amortization and write-downs on intangible assets for the first nine months was MSEK -70 (-105),
where MSEK -31 (-73) was related to amortization of intangible assets from acquisitions.

5

Gross margin development
40%
35%
30%
25%

Q3

Q4

Q1

Q2

Q3

Adjusted EBITA (MSEK)
300
200
100
0

Q3

Q4

Q1

Q2

Q3

Operating profit (EBIT) (MSEK)
300
200
100
0

Q3

Q4

Q1

Q2

Q3

Third quarter, 2020

ITEMS AFFECTING COMPARABILITY (IAC)
During the second quarter 2020 Munters decided upon a further step in the implementation of the strategy, focused on sharpening the customer offering and footprint optimization measures. At the end of June, 2020
Munters incurred a total of MSEK -136 in IACs, mainly within business area AirTech. The major part of the cost
was recorded as a restructuring provision and related to severance costs, warranty claims and winding down activities related to the exit of the non-core part of the commercial business in the US. A part of the cost related towrite-downs of inventory. The full amount was expensed to other operating expenses. Another MSEK -52 associated with the strategy are to be recognized and reported as IACs when incurred, during Q3 only minor additionalcosts has been incurred and reported as IAC, which is offset by smaller positive FX-impacts. Of the provision of
MSEK 136 reported in June, a total of MSEK 17 has been realized during the third quarter mainly related to theexit of the commercial business in the US as well as the consolidation of operations in the Netherlands.
During the second quarter a provision of MSEK 6 was reported for regulatory fines and fees related to a ten year
old dispute regarding a potential liability under ISRA (Industrial Site Recovery Act), and the full expense was regarded as an IAC. There has been no change in the provision during the third quarter and the year to date IACs
are MSEK -6.
Due to the current Covid-19 related pandemic Munters has incurred Covid-19-related IACs, which comprises of anet of sanitation and hazard pay expenses and received government grants/government assistance for e.g. salary payments and social security contributions. The net of Covid-19 related IACs amounts to MSEK 2 for thethird quarter, and MSEK 6 year to date, i.e. Munters has received more government grants/government
assistance than incurred expenses. The received government grants/government assistance amounted to MSEK
5 in the third quarter and MSEK 15 year to date.
During the third quarter 2019 Munters Full Potential Program (FPP), launched in February 2019, resulted in in
IACs of MSEK -42 and MSEK -139 September year to date last year.

Continuing operations

Jan-Sep

Q3

LTM

2019

MSEK
AirTechMunters Full Potential Program

2020
3
-

2019
-11
-11

2020
-121
-

2019
-48
-48

Severance costs
Consulting fees and other
Covid-19 related items
Implementation refined strategy
Other items affecting comparability
FoodTech
Munters Full Potential Program

2
2
0
0
-

-11
-1
-6
-6

6
-122
-6
-5
-

-39
-9
-33
-33

-13
-6
6
-122
-6
-8
-3

-52
-15
-36
-36

Severance costs

-

0

-

-10

-0

-10

Consulting fees and other
Covid-19 related items
Implementation refined strategy
Other items affecting comparability

0
0
-

-7
-

-0
-5
-

-24
-

-2
-0
-5
-

-26
-

Other
Munters Full Potential Program
Severance costs
Consulting fees and other
Covid-19 related items
Implementation refined strategy
Other items affecting comparability
Total
Munters Full Potential Program
Covid-19 related items
Implementation refined strategy
Other items affecting comparability

-0
-0
4
2
2
0

-24
-24
-16
-8
0
-42
-42
0

-7
1
-8
-134
6
-135
-6

-57
-57
-21
-36
-139
-139
-

-28
-21
-6
-15
1
-8
-176
-42
6
-135
-5

-78
-78
-27
-51
-181
-181
0

6

Oct-Sep Full year
-140
-67
-19
-67

Third quarter, 2020

FINANCIAL ITEMS
Financial income and expenses for the third quarter amounted to MSEK -30 (-40). The financial expenses werepositively impacted by a lower USD interest rate compared to same quarter last year. Interest expense on leaseliabilities amounts to MSEK -4 (-5). The average weighted interest rate including fees per end of the quarter was
3.0% (4.4).
Financial income and expenses for the first nine months amounted to MSEK -110 (-134).

TAXES
Income taxes for the third quarter was MSEK -51 (-34) and the effective tax rate was 24% (26). Income taxes forthe first nine months was MSEK -87 (-56) and the effective tax rate was 25% (21).

Effective tax rate, %EARNINGS PER SHARE

Net income, including the discontinued operation, attributable to Parent Company’s ordinary shareholders
amounted to MSEK 159 (-241) for the third quarter. Earnings per share, before and after dilution, in the third
quarter 2020 was SEK 0.87 (-1.32).
Net income, including the discontinued operation, attributable to Parent Company’s ordinary shareholders
amounted to MSEK 253 (-178) for the first nine months. Earnings per share, before and after dilution, for the firstnine months was SEK 1.39 (-0.98).
The average number of outstanding ordinary shares in the third quarter, for the purpose of calculating earnings
per share, was 181,292,993 before dilution and 181,524,860 after dilution.

FINANCIAL POSITION
Interest-bearing liabilities amounted to MSEK 3,188 (3,623). Cash and cash equivalents amounted to MSEK 790(496) as of September 30.
Munters primary financing facilities consists of a term loan of MUSD 250 and a revolving credit facility (RCF) of
MEUR 185. These facilities have no mandatory amortization requirement. The final maturity date of the facilities
is May 2022. In July 2020, Munters established a new revolving credit facility of MSEK 750 secured by a guarantee from EKN (The Swedish Export Credit Agency) with maturity in 2023. The purpose of the MSEK 750 RCF is
to serve as a back-up facility. It was established as a precautionary measure in the challenging business environment due to the Covid-19 outbreak.
The loan agreements have one financial covenant, consolidated net debt in relation to adjusted EBITDA, withsome adjustments. The accounting standard for leases, IFRS 16, does not affect the covenant calculation according to the loan agreement definition and neither does the net pension liability. In the second quarter, Muntersproactively re-negotiated the current financing. As part of this agreement with the bank group the financial covenant is temporarily eased and until the first quarter 2021 the leverage ratio, as mentioned above, is set to 5.5x.
Net debt as of September 30 amounted to MSEK 2,694 compared to MSEK 2,895 at the end of June 2020. The
decrease in net debt was driven by a continued positive cash flow development and a positive exchange rate
effect on outstanding borrowings related to USD/SEK of MSEK 90. See more information about reconciliation of
net debt and leverage on page 24.
The leverage ratio per end of September was 2.5x compared to 2.7x at the end of June and 2.9x at the year-end
2019.
At quarter end the term loan was fully drawn with MUSD 250 and MEUR 70 of the total revolving credit facility
were utilized in EUR, USD and SEK. Available unutilized credit facilities as of September 30 amounted to MEUR
115 (115). Along with the main loan facility, an amount of MSEK 23 (25) in local debt is outstanding in i.e. Brazil
and India. In the third quarter a repayment of outstanding RCF drawings of MSEK 150 was made.
Average capital employed for the last twelve months was MSEK 7,557 (7,590). Return on capital employed, including the discontinued operation, (ROCE) for last twelve months was 7.3% (-3.1). EBIT plus financial income
was affected by a restructuring provision related to the closure of the Data Center operation in Dison, Belgium, inthe third quarter of 2019, impacting the last year period return. Return on capital employed, where EBIT plus financial income is adjusted for items affecting comparability (IAC) and average capital employed adjusted for

7

24%
EPS, SEK

0.87

Third quarter, 2020

goodwill, for the last twelve months was 24.4% (8.2). Munters has changed the definition of the ROCE in thethird quarter, see more information on page 21.

CASH FLOW
Cash flow from operating activities was MSEK 242 (177) in the third quarter and MSEK 561 (388) for the first 9
months of 2020. Cash flow improved as a consequence of a good improvement in EBIT as well as the ongoing
focus to improve operating working capital.
Cash flow from changes in working capital had a negative impact on the cash flow with MSEK -6 (-11) in the third
quarter and positive impact with MSEK 22 (-65) in the first nine months. The negative effect on cash flow fromworking capital in the third quarter is mainly due to negative cash flow from accounts receivables relating to AirTech and the positive effect on cash flow for the first nine months is mainly relating to increased advances from
customers both in business area AirTech and FoodTech.
Cash flow for the period for the third quarter amounted to MSEK -28 (-33) and MSEK 86 (74) for the first ninemonths of 2020. Cash flow for the period was negative mainly due to a repayment of outstanding RCF drawingsof MSEK 150.

PARENT COMPANY AND OWNERSHIPThe parent company for the Group is Munters Group AB. All Group supporting functions within Munters is accounted for within Munters Group AB. 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 MSEK 0 (35).

EMPLOYEESThe number of permanent FTEs (Full Time Equivalents), at September 30, 2020 was 3,202 (3,247). The amountof FTEs at September 30, 2020 in business area AirTech was 2,281 (2,324), in FoodTech 850 (845) and at
Group functions 70 (78).

SHARE REPURCHASES
Munters held 2,537,000 treasury shares as of September 30, 2020 of the total outstanding shares of
183,597,802. The Annual General Meeting in May 2020 authorized the Board of Directors to repurchase ofshares in the company in relation to the Long Term Incentive Programme 2020 (LTIP 2020). Acquisitions could
be made of no more than 685,000 shares in order to secure the delivery obligations of shares to participants in
the LTIP 2020 and for subsequent transfers on a regulated market to cover cash-flow effects associated with theProgramme, primarily social security charges and cash settled employee stock options. The shares could only
be acquired on Nasdaq Stockholm and be acquired at a price per share within the from time to time registeredtrading interval. In July and August 2020 Munters repurchased a total number of 685,000 shares at an average
price of SEK 63.25.

8

Ten largest shareholders%
FAM AB
Swedbank Robur Funds
First Swedish National Pension Fund
ODIN Funds
Fourth Swedish National Pension Fund
Handelsbanken Funds
Columbia Threadneedle
La Financière de l'EchiquierC WorldWide Asset Management
Norges Bank

Source: Modular Finance

30 Sep
Total
26.1
8.8
8.6
8.0
5.3
3.9
3.5
2.5
2.4
1.7

Third quarter, 2020

OTHER EVENTSStrategic evaluation of the Data Centers and Mist Elimination operations - During 2019 a strategic evaluation of the Data Centers and Mist Elimination operations was conducted. In February 2020, this resulted in a decision to keep these businesses in Munters. Both businesses made significant progress during 2019. Considering Munters strategic direction we see a good strategic fit. Both businesses operate in markets with good growthpotential, driven by digitalization and high demands for sustainable solutions. The businesses are today part ofbusiness area AirTech.
Organizational change – In February, Munters announced an organizational change. The change aims at creating a clearer business ownership and capture local synergies and value drivers across the Group, by aligning
the value chain within the business areas. The change means that the business areas have full profit and loss
responsibility for their respective area. The role Global operations in the Group management team changed intoa Strategic operations role with focus on driving lean practices, manufacturing excellence, shared tools and processes and overall footprint optimization. Two roles were 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-tomarket methods.
New President business area FoodTech announced – In February, it was announced that Pia Brantgärde
Linder, previously Senior Vice President and Business Unit Manager of High Voltage Products in Northern Europe at ABB, had been appointed President of Business Area FoodTech. Pia started her position at Munters on
August 16, 2020.
2020 Annual General Meeting - The Annual General Meeting of Munters Group AB was held on 7 May in Kista,
Stockholm. In accordance with the Nomination Committee’s proposal the following Board members were reelected as ordinary members proposal: Magnus Lindquist, Helen Fasth Gillstedt, Per Hallius, Lena Olving,
Kristian Sildeby and Juan Vargues. In addition, Håkan Buskhe and Anna Westerberg were elected as new Board
members and Magnus Lindquist was re-elected as Chairman of the Board of Directors.
Order received for lithium battery production in the US – In August Munters announced it had received anorder to provide desiccant dehumidification solutions for a Lithium Battery production facility in the US. The total
value of the order; including equipment and services was approximately MUSD 12. Munters will deliver ICA (Integrated Custom Airhandlers) and IDS (Industrial Desiccant Dehumidification) systems, utilizing our GreenPowerPurge technology. Delivery is expected to start in Q4 2020 and continue through mid-2021.
Nomination committee for the 2021 Annual General Meeting – In October Munters announced the nomination committee for the 2021 Annual General Meeting. The Nomination Committee shall be composed of the representatives of the four largest shareholders in terms of voting rights listed in the shareholders’ register maintained by Euroclear Sweden AB as of 31 August each year, and the Chairman of the Board, who will also convene the first meeting of the Nomination Committee. The committee comprises: Magnus Fernström, FAM AB,
Chairman of the Nomination Committee, Jan Dworsky, Swedbank Robur Funds, Mats Larsson, First Swedish
National Pension Fund, Jonathan Schönbäck, Odin Fund Management and Magnus Lindquist, Chairman of theBoard of Munters Group AB.

9

In August, Munters announced it hadreceived an order to provide desiccantdehumidification solutions for a Lithium Battery production facility in the
US. We will deliver ICA (Integrated
Custom Airhandlers) and IDS (Industrial Desiccant Dehumidification) systems, utilizing our GreenPowerPurge
technology.

Third quarter, 2020

AirTechBusiness area AirTech is a global leader in energy-efficient air treatment for industrial and commercial applications. We offer solutions formission-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.

■ Order intake increased in the third quarter mainly because of a good development of the Industrial segment in Americas and growth in services.
Specifically lithium batteries and pharma had a positive development. This was partly offset by weaker development in Data Centers US, Mist
Elimination and in the non-core Commercials business.
■ Organic net sales increased mainly driven by a strong growth in Data Centers US, offset by a decline in Europe as well as Asia. The decline was mainly
driven by a weak development in Mist Elimination and in Industrials in Europe and Asia. Services had a flat development in the quarter.
■ The adjusted EBITA-margin improved as a result of a stable gross margin, efficiency improvements as well as continued lower indirect costs.

Q3
MSEK
Order intake
GrowthNet sales
Growthof which organic growthof which currency effectsof which structural effects

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

2020
1,354
15%
1,280
-1%
6%
-6%
185
198
19%
15.4

Jan-Sep

LTM Full year

2019
1,179
10%
1,288
23%

2020
3,928
1%
3,614
-4%

2019 Oct-Sep
5,290
3,892
17%
14%
3,777
4,995
20%
13%

2019
5,253
14%
5,159
17%

151
167
44%
12.9

331
478

406
476

13.2

12.6

565
662
27%
12.8

490
664
0%
13.3

FoodTechBusiness area FoodTech is one of the world’s leading suppliers of innovative, energy-efficient climate systems for livestock farming andgreenhouses, 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.

■ Order intake increased in the third quarter primarily because of a strong increase in the swine segment in China. Europe had softer order intake, partly
offset by a good development in Russia . In Americas, the US continued to see a weaker development mainly due to a decline in the swine segment.
■ Net sales grew driven by a continued good growth in China with a strong development in the swine segment. The US had a negative development
driven by a weak swine segment. In Americas and Europe, we continued to see a negative effects from the Covid-19 outbreak.
■ The EBITA-margin improvement was driven by higher net sales, a slightly higher gross margin and lower indirect costs.

Q3
MSEK
Order intake
GrowthNet sales
Growthof which organic growthof which currency effectsof which structural effects

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

10

2020
575
12%
572
7%
14%
-7%
90
95
11%
16.5

LTM Full year

Jan-Sep
2019
513
-2%
534
3%

2020
1,746
9%
1,595
2%

2019 Oct-Sep
1,596
2,237
-4%
9%
1,563
2,065
3%
0%

2019
2,087
-1%
2,032
1%

75
85
12%
15.9

224
244

172
217

15.3

13.9

226
278
11%
13.7

279
305
15%
14.8

Third quarter, 2020

About Munters
Munters is a global leader in energy-efficient and sustainable climate solutions. The solutions guarantee
temperature and humidity control, which is mission-critical for customers. Munters offers solutions to 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 contributeto cleaner air, higher efficiency and reduced carbon emissions. Sustainability is an important part of Munters’
business strategy and value creation.
Short facts

■
■
■
■
■

3,200 employees
30 countries with sales and manifacturing
18 production units
25% female leaders
Two business areas: AirTech and FoodTech

In 2019 AirTech generated 72% of the total net
sales of Munters and FoodTech 28%.

PurposeFor customer success and a healthier planet
Curiosity and a drive to create pioneering
technologies are part of our DNA. Our climate
solutions are mission-critical to our customers’
success and contribute to a more sustainable
planet.
MissionMunters is a global leader in innovative, energyefficient and sustainable climate solutions formission-critical processes.

The strategy of Munters
Munters has a strong position in most of our markets. We see major opportunities to improve and strengthen our market position and to achieve our mid-term
financial targets and deliver on our strategy. The key to success is how we respond in working toward our goals. Our overarching strategic priorities show whichareas 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 apriority issue reflected in every strategic priority.
People - The employees at Munters are the hub of our business. Through collaboration and a passion for creating sustainable solutions for our customers andpartners, 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 and above our customers’ expectations.
Innovation - We at Munters work in a structured way to optimize innovation in the organization. We continuallymonitor technological developments in the market and work closely with our customers to understand theirneeds. We also work with other institutions that strengthen our competence and create value for customers. By
continuously questioning and improving how we work, we create sustainable solutions, technologies andbusiness models for the future.
Market - Munters 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 work with continuous improvements in every area. We prioritize
and focus on selected investments and areas of improvement. We follow up, learn, correct and improve.
Sustainability
Sustainability is one of the most important drivers for Munters’ strategy today and in the future. Everything we do has to be sustainable for all our stakeholders
and the environment. Our medium-term financial targets are important to create room for investments in the future. As we work toward these targets, we makevarious decisions and act in the best way to achieve our ambitions. These ambitions contain priorities on resource efficiency, responsible business practices andpeople & society. These three parts today constitute the framework for Munters’ sustainability agenda.
.

11Third quarter, 2020¨

12Third quarter, 2020

Quarterly overview
Group and Segments
Group
MSEK
Order backlog
Order intake
Net sales
Operating profit (EBIT)
Financial income and expenses
Tax
Net income
Amortization and write-down
Items affecting comparability (IAC)
Adjusted EBITA
Adjusted EBITA margin, %AirTechMSEKExternal order backlog
Order intake
External net sales
Transactions between segments
Operating profit (EBIT)
Amortization and write-down
Items affecting comparability (IAC)
Re-allocation of internal services
Adjusted EBITA
Adjusted EBITA margin, %FoodTech

2020

2018

2019

2019

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Full year

2,664
1,919
1,833
245
-30
-51
163
-30
4
271
14.8

2,660
1,870
1,773
103
-50
-13
39
-20
-138
260
14.7

2,808
1,849
1,566
110
-31
-22
57
-20

2,307
1,845
1,842
159
-55
-27
76
-29
-42
229
12.5

2,440
1,680
1,813
174
-40
-34
100
-32
-42
248
13.7

2,496
1,840
1,877
185
-51
-30
104
-41
-36
262
13.9

2,554
1,938
1,620
38
-43
8
3
-32
-61
131
8.1

2,170
1,735
1,757
158
-31
-34
93
-36
-31
225
12.8

2,222
1,590
1,559
136
-49
-7
80
-43
-8
186
12.0

2,227
1,748
1,686
161
-19
-29
114
-40

2,307
7,302
7,153
556
-189
-83
283
-134
-181
871
12.2

130
8.3

2020

2019

201
11.9

2019

2018

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Full year

2,025
1,354
1,270
9
185
-16
3
−
198
15.4

2,003
1,231
1,205
2
51
-5
-125
−
181
15.0

2,186
1,343
1,127
0
94
-5
−
−
100
8.8

1,780
1,361
1,378
4
159
-9
-19
-1
186
13.4

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

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

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

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

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

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

1,780
5,253
5,151
8
565
-31
-67
-1
662
12.8

2020

2019

2019

2018

MSEK

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Full year

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

640
575
563
9
90
-5
0
−
95
16.5

656
656
568
7
87
-5
-6
−
98
17.1

622
515
440
9
47
-5
−
−
52
11.5

526
491
464
5
55
-4
-3
−
61
13.0

554
513
527
7
75
-4
-6
−
85
15.9

570
582
554
8
74
-4
-8
−
85
15.2

561
500
456
9
24
-4
-19
−
46
9.9

518
452
491
6
53
-3
−
-7
49
9.9

552
524
510
8
73
-3
−
−
76
14.7

557
610
548
7
77
-3
−
−
81
14.5

526
2,087
2,002
31
226
-15
-36
−
278
13.7

Other and eliminations

2020

MSEK

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Full year

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

-10
-18
-31
-10
-0
−
-21

-17
-8
-36
-10
-7
−
-19

-10
-9
-32
-10
−
−
-22

-8
-9
-55
-16
-21
1
-17

-13
-9
-52
-24
-24
−
-3

-7
-9
-62
-24
-14
−
-23

-11
-11
-67
-23
-18
−
-25

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

-8
-8
-41
-36
−
−
-5

-7
-8
-48
-33
−
−
-15

-38
-38
-236
-88
-78
1
-69

13

2019

2018

2019

Third quarter, 2020

Discontinued operation
2020

2018

2019

2019

MSEK

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Full year

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

−
-1
13
-3
−
−
-3

−
1
3
-1
−
−
-1

−
−
-0
0
−
−
0

2
4
9
-65
0
-45
-20

8
-3
38
-341
3
-325
-19

43
3
87
-20
-0
-3
-17

111
11
42
-24
0
-0
-24

147
18
78
-414
-344
−
-71

166
111
190
8
-1
−
8

−
79
252
9
-1
−
10

164
15
176
-450
3
-373
-80

14

Third quarter, 2020

Condensed income statement
Q3

Jan-Sep

LTM

Full year

MSEK

2020

2019

2020

2019

Oct-Sep

2019

Net sales
Cost of goods sold
Gross profit

1,833-1,231603

1,813-1,223590

5,173-3,4301,743

5,311-3,5501,760

7,015-4,701
2,314

7,153-4,822
2,331

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

-193
-118
-54
7
245

-222
-147
-46
-1
174

-622
-394
-145
-125
457

-763
-462
-144
6
397

-830
-542
-198
-129
616

-970
-610
-197
2
556

Financial income and expenses
Profit/Loss after financial items

-30
215

-40
134

-110
347

-134
263

-165
450

-189
367

Tax
Net income for the period from continuing operations

-51
163

-34
100

-87
260

-56
207

-114
336

-83
283

Net income from discontinued operations

-3

-338

-4

-383

-69

-448

Net income for the period

161

-238

256

-176

267

-164

Attributable to Parent Company shareholders
Attributable to non-controlling interests

159

-241

253

-178

265

-166

2

2

3

2

2

2

181,292,993
181,524,860

181,929,746
181,929,746

181,595,988
181,595,988

182,063,783
182,063,783

181,582,069
181,582,069

181,983,219
181,983,219

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

0.89
0.89

0.54
0.54

1.41
1.41

1.12
1.12

1.84
1.84

1.55
1.55

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

0.87
0.87

-1.32
-1.32

1.39
1.39

-0.98
-0.98

1.46
1.46

-0.91
-0.91

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

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 orloss 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

-77

133

-93

250

-221

122

-15
4
-88

133

-5
1
-96

-1
249

-49
11
-259

-44
9
87

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

72
72
0

-105
-107
2

159
157
2

74
71
2

9
7
2

-77
-79
2

*Excluding shares held in own custody.

15

Third quarter, 2020

Condensed balance sheet
MSEK

2020-09-30

2019-09-30

2019-12-31

4,258
1,427
239
515
158
43
19
242
6,902

4,537
1,529
258
561
181
67
17
240
7,389

4,348
1,469
248
554
162
55
19
249
7,103

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

389
154
264
7
14
1,044
403
−
48
92
790
3,206

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

350
107
296
7
12
1,050
288
5
56
96
722
2,989

TOTAL ASSETS

10,107

10,402

10,093ASSETSNON-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

16

9

Third quarter, 2020

Condensed balance sheet
MSEK

2020-09-30

2019-09-30

2019-12-31

Shareholders' equity
Non-controlling interests
Total equity

3,744
0
3,744

3,775
-2
3,773

3,628
-0
3,627

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

3,076
298
35
138
397
3,944

3,491
237
26
153
426
4,333

3,371
282
24
134
409
4,221

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

112
550
605
694
6
45
151
9
246
2,419

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

126
374
556
716
−
32
153
9
278
2,244

TOTAL EQUITY AND LIABILITIES

10,107

10,402

10,093

EQUITY AND LIABILITIESEQUITYCONDENSED STATEMENT OF CHANGES IN EQUITY
MSEK

2020-09-30

2019-09-30

2019-12-31

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

3,627
159
−
-3
-43
4
3,744

3,716
74
-0
-3
-16
2
3,773

3,716
-77
0
0
-16
4
3,627

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

3,744
0

3,775
-2

3,627
-0

17

Third quarter, 2020

Condensed cash flow statement
Q3
MSEK

Jan-Sep

LTM

Full year

2020

2019

2020

2019

Oct-Sep

2019

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

242

-168

453

11

547

105

85
32

141
14

236
44

326
26

318
81

408
63

-37
322

276
263

-15
718

292
656

-150
797

158
735

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

-34
-41

-35
-41

-114
-65

-125
-79

-165
-97

-177
-111

248

187

539

452

534

448

Cash flow from changes in working capital

-6

-11

22

-65

308

221

Cash flow from operating activities

242

177

561

388

843

669

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

1
-0
0
-24
-21
-43

-0
0
0
-32
-16
-48

-6
0
0
-85
-60
-150

-0
3
1
-95
-47
-138

-9
15
1
-108
-88
-189

-0
18
2
-118
-76
-174

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

4
-156
-32
-43
-227

1
-115
-31
-16
-160

326
-511
-97
-43
-325

114
-183
-91
-16
-175

496
-660
-129
-43
-335

284
-332
-123
-16
-185

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

-28
826
-8
790

-33
521
9
496

86
722
-17
790

74
404
19
496

319
499
-28
790

310
404
7
722

OPERATING ACTIVITIESCash flow from the discontinued operations is disclosed in a separate note, see page 23.

18

Third quarter, 2020

Parent company
CONDENSED INCOME STATEMENT
Q3
MSEK

Jan-Sep

LTM

Full year

2020

2019

2020

2019

Oct-Sep

2019

Net sales
Gross profit/loss
Administrative costs
Other operating expenses
Profit/Loss before interest and tax (EBIT)

−
−
-3
1
-2

−
−
-15
0
-15

−
−
-17
-3
-20

−
−
-36
0
-36

−
−
-25
-3
-28

−
−
-44
0
-44

Financial income and expenses
Profit/Loss after financial items

-0
-2

-0
-15

0
-20

0
-36

-0
-28

-0
-44

Group contributions
Profit/Loss before tax

−
-2

−
-15

−
-20

−
-36

43
15

43
-1

Tax
Net income for the period

−
-2

−
-15

−
-20

0
-36

0
15

0
-1

CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Q3
MSEK
Profit/Loss for the period
Other comprehensive income, net after tax
Comprehensive income for the period

19

Jan-Sep

LTM

Full year

2020

2019

2020

2019

Oct-Sep

2019

-2
−
-2

-15
−
-15

-20
−
-20

-36
−
-36

15
−
15

-1
−
-1

Third quarter, 2020

Parent company
CONDENSED BALANCE SHEETMSEK

2020-09-30

2019-09-30

2019-12-31

4,096
0
4,096

4,086
0
4,086

4,086
0
4,086

−
0
0
47
0
48

1
0
0
−
35
36

−
0
0
45
28
74

4,144

4,122

4,160

2020-09-30

2019-09-30

2019-12-31

6
4,074
26
-20
4,086

6
4,074
60
-36
4,104

6
4,074
60
-1
4,139

NON-CURRENT LIABILITIESProvisions for pensions and similar commitments
Total non-current liabilities

1
1

0
0

0
0

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

0
15
39
3
−
57

1
5
0
3
9
18

3
11
0
2
5
21

4,144

4,122

4,160

ASSETSNON-CURRENT ASSETS
Participations in subsidiaries
Other financial assets
Total non-current assets
CURRENT ASSETS
Other current receivables
Prepaid expenses and accrued income
Current tax assets
Receivables from subsidiaries
Cash and cash equivalents
Total current assets
TOTAL ASSETSMSEKEQUITY AND LIABILITIESEQUITY
Share capital
Share premium reserve
Profit brought forward
Income for the period
Total equity

TOTAL EQUITY AND LIABILITIES

20

Third quarter, 2020

Other disclosures
ACCOUNTING POLICIESThis report has been prepared, with regards to the Group, in accordancewith IAS 34 Interim Financial Reporting, recommendation RFR 1 of theSwedish Financial Reporting Board and the Swedish Annual Accounts
Act and, with regards to the Parent Company, in accordance withrecommendation RFR 2 of the Swedish Financial Reporting Board andthe Swedish Annual Accounts Act. The accounting principles appliedcorrespond to those presented in the Annual- and Sustainability report2019 (Note 1).
Munters has received government grants to cover e.g.salary payments,
in order to reduce the financial effects of the current Covid-19 pandemic.
When it is reasonably certain that this grant is being received, the grantis recognised as other operating income in the period in which therelated costs arise. These grants, together with other governent
assistance, e.g. social security contributions, are reported as items
affecting comparability.

DEFINITION OF KEY FINANCIAL
INDICATORSThe Group presents certain financial metrics in the Interim report thatare not defined in accordance with IFRS. The Group is of the opinion
that these metrics provide valuable complementary information, in thatthey enable an evaluation of the Group’s performance. The financial
metrics are calculated in accordance with the definitions presented on
page 127 of the Annual- and Sustainability report 2019, except for the
ROCE, where the definition has changed during the third quarter 2020.
The background to this is the fact that the capital employed used in the
denominator in the former definition was closer to invested capital, used
for ROIC, than capital employedto be used for ROCE. Also, the former
definition used EBIT, instead of EBIT plus financial income in the
numerator. With the change, the capital employed definition goes from“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” to “total equity plus interest-bearing liabilities”. Average capital employed is
calculated based on the last 12 months, instead of last 13 months usedin the old definition. Return on capital employedis from now on defined
as “average operating profit (EBIT) plus financial income, divided by theaverage capital employed, where capital employed is total equity plus interest-bearing liabilities. This change of definition has had only insignificant impact on ROCE for the last twelve months prior year. Under theold definition ROCE was -3.3% and under the new definition -3.1%.
ROCE adjusted for IAC and goodwill was 8.8% under old definition and
8.2% under the new definition.

TRANSACTIONSWITH RELATED PARTIESAt the annual general meeting in May 2020 it was resolved in accordance with the Board’s proposal on the implementation of a performancebased long-term incentive programme (“LTIP 2020” or the “Programme”). The programme was to comprise no more than 1,699,000
employee stock options to be granted to members of the group management and certain other key employees, approximately 74 employees intotal. A total of 69 employees has accepted the offer comprising

21

1,513,000 employee stock options, whereof 90,000 cash settled. Each
employee stock option that is not cash settled shall entitle the holder toacquire one share in the company at an exercise price equivalent to110% of the volume-weighted average price paid for the company’s
shares at Nasdaq Stockholm during a period of ten business days immediately following the date of the 2020 annual general meeting. Eachcash-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 at
Nasdaq Stockholm during a period of ten business days immediately
prior to the exercise of the option, with deduction of an exercise pricedetermined according to the method mentioned above. The employee
stock options vest during a three year period and the programme participants shall be able to exercise employee stock options during a one
year period as from and including the date of the expiry of the vesting
period. Exercise of the employee stock options shall as a principal rule
be conditional upon the programme participant still being employed withthe group at the time of exercise and has been employed with the groupduring the whole vesting period. The employee stock options are divided
in three series. Exercise of employee stock options of all series is dependent on the extent to which performance targets, linked to the compound annual growth rate in adjusted EBITA for Munters, the compound
annual growth rate in Munters net sales and a compounded sustainability goal consisting of three sub-components, respectively, are satisfied
during the financial years 2020-2022. The costs of the programme,
based on the assumptions stated in the notice of the annual general
meeting, is estimated to MSEK 8.
At the extraordinary General Meeting on May 7, 2017, it was resolved toissue warrants as part of an incentive program for certain members of
the Group Management at that time. The warrants were issued in two
separate series. The first series has expired, however the series
2017/2020 is still exercisable and comprises 2,611,000 warrants that
may be exercised up until November 19, 2020. The exercise price forseries 2017/2020 corresponds to 131% of the price in the IPO (SEK 55),
subject to standard adjustments and recalculations. The maximum number of warrants that could be subscribed for by the participants corresponds to approximately 1.44% of the Company’s share capital following
completion of the offering and assuming full exercise of the outstanding
warrants.

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 and finished products to and from Munters factories. Munters iscommitted to constant vigilance regarding the environmental impact of
its operations. Munters is committed to complying with all laws and tocontinuously promoting improvements in all Environment, Health &Safety (“EHS”) aspects, wherever Munters conducts business. Muntersconstantly seeks opportunities to reduce risk and to create a safer,
healthier, more diverse and more environmentally friendly workplace forour 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, and reduce the impact that our business has on the environment.

Third quarter, 2020

LEGAL CASES

Since 10 years, Munters US has been party to a dispute with the New
Jersey Department of Environmental Protection (“NJDEP”) regarding a
potential liability under ISRA (Industrial Site Recovery Act). This relates
to environmental conditions on a property previously leased by a company subsequently acquired by and merged into Munters US. In the firsthalf year 2020, this case was resolved and further appeal denied by theSupreme Court in New Jersey, resulting in Munters US being responsible to conduct investigative and remedial activities on the property.
Munters US has insurance cover for the expected costs associated with
the investigative and remedial activities. Since Munters will likely haveto bear approximately MSEK 6 in regulatory fines and fees issued by the
NJDEP, however subject to ongoing discussions with the NJDEP, a provision of the MSEK 6 has been booked as of Q2 2020, which is reported
as an item affecting comparability.

RISKS AND UNCERTAINTIESThe Group’s significant risks and uncertainties can be divided into four
categories; strategic, operational, financial and regulatory risks. In thesecategories, there are both risks due to political and macroeconomic
trends and specific risks directly linked to the business carried out by theGroup. 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 andcontract obligations are critical and could result in claims for damages.
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 offailure to comply with relevant regulations in the business ethics area,
e.g. anti-bribery rules.
Munters has made a provision for warranty costs of estimated MSEK 3.5
in the third quarter 2020 related to a limited number of customer claims
where Munters have not fulfilled agreed specifications. The estimatedcosts will be incurred as a result of certain components having to be replaced at the relevant customer installations. Although the company’s
current assessment is that the risk is limited, it cannot be excluded that
additional customer claims may arise.

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 for general liability and product liability, property, business interruption, transportation, the liability of Board members and the CEOand employment practices liabilities.
In late 2019, a corona virus was found in China that can spread to humans, referred to as Covid-19. In early 2020, the global spread of thecorona virus escalated. During the first nine months the Covid-19 outbreak had a mixed impact on Munters. Throughout the first nine months,
all our production units, except one minor unit, upheld production with
only minor disturbances. We have continuously been implementing mitigating actions and adjusting our cost base and investments as well as
our supply chain. So far, we have not had any major disturbances.
Even though the market conditions improved in the third quarter, the visibility of market demand is still low due to the lingering outbreak.
A more detailed description of the Group’s risks and how they are managed can be found in the Annual- and Sustainability report 2019.

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

Q3 2020MSEK
Allocation timing of revenue recognition
Goods transferred at a point in time
Goods transferred over time
Services transferred over time
Total
whereof related to the discontinued operation
Total net sales from continuing operations

Jan-Sep 2020

AirTechFoodTech

Total

AirTechFoodTech

Total

716
470
98
1,283
13
1,270

505
17
41
563
−
563

1,221
486
139
1,846
13
1,833

2,229
1,143
246
3,619
16
3,602

1,410
52
109
1,571
0
1,571

3,639
1,195
355
5,190
16
5,173

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

22

Jan-Sep 2019

AirTechFoodTech

Total

AirTechFoodTech

Total

754
362
208
1,324
38
1,286

443
44
39
527
−
527

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

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

1,384
47
106
1,537
−
1,537

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

Third quarter, 2020

FAIR VALUE OF FINANCIAL
INSTRUMENTS

January, 2023 and is based on EBITDA for the 12 months prior to execution. The earn-out in Humi-Tech Services Ltd was based on EBITDA
for the fiscal years of 2018 and 2019 and has been paid during the year.
The remaining change relates to a discounting effect and currency translations on the put/call option in MTech.

The Group’s derivatives, recognized at fair value in the statement of financial position, are measured according to IFRS 9 and are categorizedin level 2 in the fair value hierarchy. The derivatives amounted to SEKm
0 (0) in financial assets and to SEKm 6 (3) in financial liabilities.
The Group’s contingent earn-outs and put/call acquisition options, recognized at fair value in the statement of financial position, are measured
according to IFRS 9 and are categorized in level 3 in the fair value hierarchy. The opening balance for the period was related to the put/call option from the acquisition of MTech Systems in 2017 and a contingent
consideration related to the acquisition of Humi-Tech Services Ltd in
July 2018. The put/call option related to MTech Systems matures in
MSEK

Munters deems that the interest rate on interest-bearing liabilities are inline with market terms at September 30, 2020, and the fair value at theend of the reporting period therefore in all material aspects corresponds
to the carrying amount. Munters deems that the interest.

2020-09-30 2019-09-30

2019-12-31

Contingent considerations
and put/call options
Opening balance

142

137

137

Payments
Discounting
Exchange-rate differences forthe period
Closing balance

-9
3

−
4

−
1

-5
131

12
152

5
142

DISCONTINUED OPERATIONSOn September 9, 2019 Munters decided to close its European Data
Center factory in Dison, Belgium, following the finalization of negotiations with the unions. The production has ceased but minor installation
services remains at customer sites. Therefore, this business was classified as a discontinued operation in Q3, 2020. The table below shows theincome statement for the discontinued operation as well as the cash flowfrom operating activities, since the discontinued operations has mainly
had cash flows from operating activities.
The net sales for the third quarter and the first nine months 2020 relates
to installations done at customer site, with associated costs.

Q3
MSEK

Jan-Sep

LTM

Full year

2020

2019

2020

2019

Oct-Sep

2019

Net sales
Cost of goods sold
Gross profit

13
-5
8

38
-234
-196

16
-9
7

167
-371
-204

26
-65
-40

176
-427
-251

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

-9
-1
0
−
-3

-13
-14
-2
-116
-341

-9
-1
0
−
-4

-27
-30
-9
-116
-386

-21
-10
-1
3
-68

-39
-39
-9
-113
-450

Financial income and expenses
Profit/Loss after financial items

-0
-3

-1
-342

-1
-4

-3
-388

-3
-71

-5
-455

Tax
Net income for the period from discontinued
operations

−

4

−

6

2

8

-3

-338

-4

-383

-69

-448

Cash flow from operating activities

-33

-57

-35

-255

-211

-431

23

Third quarter, 2020

RECONCILIATION OF NET DEBT
AND LEVERAGE
MSEK
CURRENT ASSETS
Cash and cash equivalents
NON-CURRENT LIABILITIESInterest-bearing liabilities, excluding leases
Interest-bearing lease liabilities
Provisions for pensions
CURRENT LIABILITIESInterest-bearing liabilities, excluding leases
Interest-bearing lease liabilities
Accrued expenses
Provisions for pensions
TOTAL NET DEBT
Operating profit (EBIT)
Depreciations
Amortization and write-down
EBITDA
Items affecting comparability
Adjusted EBITDA, LTM
Net debt/Adjusted EBITDA, LTM

242020-09-30

2019-09-30

2019-12-31

-790

-496

-722

2,799
277
281

3,178
313
222

3,057
314
268

23
89
9
6
2,694
547
-219
-99
865
-219
1,085
2.5

24
107
13
6
3,368
-245
-250
-483
487
-470
958
3.5

24
102
12
6
3,062
105
-277
-131
514
-525
1,039
2.9

Third quarter, 2020

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

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

Introduction

We have reviewed the condensed interim report for Munters Group AB (publ.) as per September 30, 2020 and for the nine months period then ended. The
Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and theSwedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
Stockholm, October 22, 2020
Ernst & Young AB

Rickard Andersson
Authorized Public Accountant

25

Third quarter, 2020

INFORMATION AND REPORTING DATESContact person:

Ann-Sofi Jönsson, Vice President, Investor Relations and Enterprise Risk Management
Phone: + 46 (0)730 251 005
Email: ann-sofi.jonsson@munters.com
On October 22, at 9:00 the President and CEO, Klas Forsström, together with the Group Vice President and CFO, Annette Kumlien will present the report ina live webcast together with a telephone conference.
Webcast: https://tv.streamfabriken.com/munters-q3-2020
Dial-in number for the telephone conference:
SE: +46 8 50558365
UK: +44 3333009031
US: +1 8335268381
This interim report, presentation material and a link to the webcast will be available on https://www.munters.com/en/investor-relations/____________________________________________________________________________________________________________________________
Financial calendar:
February 4, 2021, Full year report 2020
April 22, 2021, Interim report January-March 2021
May 19, Annual General Meeting 2021 in Stockholm, Kista, Sweden.
July 16, Interim report January-June 2021
October 22, Interim report January-September 2021____________________________________________________________________________________________________________________________
This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets
Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on October 22, 2020.
Munters Group AB, Corp. Reg. No. 556819-2321
About Munters Group
Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate forcustomers in a wide range of industries. Munters has been defining the future of air treatment since 1955. Today, around 3,200 employees carry out manufacturing and sales in more than 30 countries. Munters Group AB reported annual net sales of more than SEK 7 billion in 2019 and is listed on Nasdaq
Stockholm. For more information, please visit www.munters.com.
Every care has been taken in the translation of this interim report. In the event of discrepancies, the Swedish original will supersede the English
translation. The addition of the totals presented may result in minor rounding differences.

26