Munters

Capital Markets Update
28 May 2020

Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A2

We are part of the solution to meetchallenges caused by climate change
Our purpose:
For Customer Success anda Healthier PlanetWe make a difference for the world
Munters enables farms to
reduce poultry infection and useof antibiotics, with stronger yield
and animal welfare*Volatile Organic Compounds (VOC)
4

Munters VOC* systems canabsorb 99% of targetedhazardous substances fromindoor air

Munters equipment cleans appr.
20% of the world’s electricity
production

A truly global company•

Munters is a global leader in innovative, energyefficient and sustainable climate solutions formission-critical processes•

Founded in 1955•

~ 3,100 employees•

2 business areas: AirTech & FoodTech*•

25% (20) women in senior positions•

Manufacturing and sales offices in appr. 30
countries•

17 plants and 4 assembly hubs

*Net sales in 2019 for AirTech represented 72% of total net sales and FoodTech 28%.
5

Manufacturing site

AirTechAssembly site

FoodTechMunters creates value in many industries

AirTechFoodTech•

Munters offers climate solutions tocustomers in many different industries•

Complete systems and solutions yieldhigher quality, increased productivity andlower energy consumption•

Munters products and solutions promotecleaner air, increased resource efficiency
as well as reduced carbon emissions

6

FMCG* & Retail

Data Centers

Electronics

Aviation & Defense

Pharmaceuticals

Shipping & Marine

Food & Beverages

Livestock

Greenhouses*Fast Moving Consumer Goods (FMCG)
Note: These industries represent examples of industries Munters operate in.

Core technologies – Dehumidification and evaporative cooling
Shared Product Platforms

AirTech offering

Evaporative cooling pads

Indirect evaporative Dedicated outcoolers (Oasis)
door air systems

Controllers

Dehumidifiers

The above products are examples of products in the Munters offering.
7

Retrofit / Upgrades

FoodTech offering
High-efficiency fans Cooling Systems

Air inlets

Sensors and softwareStable profitability, challenging business environment• In the first quarter order intake and net sales impacted
by the Covid-19 outbreak‒ Order intake declined organically by -8%‒ Net sales declined organically by -7%• Adj. EBITA-margin in first quarter 2020 slightly
improved 8.3% (8.1%)‒ Continuous focus on streamlined indirect costs and an
active mitigation of the effects from the Covid-19 outbreak• Focus on cash flow and continuous improvements iscentral to the ongoing refined strategy implementation• Continued challenging business environment for 2020

Net sales

MSEK
8000
7000
6000
5000
4000
3000
2000
1000
2015

2016

2017

2018

Net sales per region, Q1 2020
35%

EMEA
43%
APAC
Americas
22%

8

2019

Q1 2020, LTM

Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A

9Munters – unique application knowledge
Market trends:• Climate change• Population growth• Digitalization

10

Customer needs:• Increased energy
efficiency with higher
yields, less waste,
improved animal andhuman healthMunters offering:•

Proven energy efficient
products and solutions•

Unique application knowledge•

Strong global market position,with local presence•

Large installed base•Global Services offeringRefined strategy enabler for reaching mid-terms targets
Refined strategic priorities

Mid-term
targets

Net sales growth

Annual growth in organic net sales
starting in 2019, supplemented with addon acquisitions.

Adjusted EBITA-margin

An adjusted EBITA-margin in the medium
term.

Capital structure (LTM*)

A ratio of net debt to adjusted EBITDA,
which may temporarily exceed this level(e.g. as a result of acquisitions.)*Last Twelve Months (LTM )
11

5%

14%

1.5x-2.5x

Munters strategic priorities

For customer
success and ahealthier planet12

Customers

Customers
Munters ambition:
Be the customers trusted adviser for energy efficient production processes
related to climate control
Focus areas

Customer value

Pricing strategies

Go-to-market models

13

2020

• Commercial excellencerole in Munters• On-going analysis ofpricing strategies, go-tomarket models andevolving customers
needs

Beyond• Commercial excellence
throughout the value
chain• Value selling an
integrated part of
Munters culture –delivering minimum
additional annual+0.5-1.0% net pricechangeCustomers

Framework agreement in China – FoodTech• Frame agreement with a Chinese customer in the Swine
segment (valued at MSEK >100)• Munters will supply ventilation and climate control system tolarge-scale farms; delivered over two years• Improvement in the market after the previously weak demand in
the Swine segment due to the following the African Swine Flu(ASF) last year

14

Innovation

Innovation
Munters ambition:
Create the solutions of tomorrow, today
Focus areas
Focused R&D
investments
Product portfolioalignment and adjustment
Innovation process andmanufacturing
technology alignment

2020• Focus on coretechnologies andsustainability• Continued work onalignment and adjusting• Continued focus on
modularization• Digitalization journey*Stock keeping units are included in the definition of product assortment
15

Beyond• Strengthened market
position in coretechnologies• Target to reduce productassortment by 40% in
2022*• Core product offering
modularized• Offering for customers
connected value chains

Innovation

Modularization and digitalization enables SKU* alignment
Munters target reduce product assortment by 40% from start of 2019 to end of 2022.
*Product assortment defined as Stock Keeping Units = SKUs

AirTech examples:

AirC controller• Modularized platform for small units. Reduction of product families.
Estimated SKU reduction of 50%• Modularized controller for all standard DH units (AirC). Reduction ofcontrollers. Estimated SKU reduction of 60%• Modularized large system units. Aim to reduce customization and shorten
the lead time from RFQ** to delivery
FoodTech examples:• Controller platform (Trio) – ~70% SKU reduction (products & accessories)• Exhaust fan platform. 40% SKU reduction target.
**Request For Quote (RFQ)
16

Trio controller
Controller
1

Controller
2

Controller
3

Controller
4

Controller5etc.

Innovation

Munters – Air treatment technology• Adsorption dryers• VOC abatement

DEC• Evaporative humidifiers• Adiabatic cooling (evaporative humidifiers/coolers)‒ Direct (DEC) or indirect systems (IEC)IEC• Purification of air flows with mist eliminators removes droplets, soot and dust

VOC = Volatile organic compounds
17

Innovation

Moisture matters (examples)With reduced humidity
lower or no corrosion

Reduced humidity reduces riskof short circuits

Risk of mold and fungiincreases with higher
humidification

Over insulation material
Crawl space
under house18

MarketsMarkets
Munters ambition:
Market leader in our prioritized markets and segments.
Focus areas

Prioritized markets

Services

19

2020• Prioritized markets includes
several segments, products
and regions• Data driven products andsolutions• Complete solutions• Services

Beyond• Market position 1-3 inprioritized markets• Higher degree of data
driven products andsolutions• Services represent morethan 30% of net sales

Markets

Remote assistance to ensure safety and efficiency• Munters uses IFS Remote Assistance™ in Service
operations to ensure safety of field staff while delivering
increased efficiency• Merged Reality (MR) solution that enables fieldtechnicians, engineers or customers to share real-lifesituational context with remote product experts so thathands-on service and repair instructions can be visuallydemonstrated and acted upon
• Health and safety of our employees and customers• User-friendly tool for remote assistance a priority• Great potential in connecting back-office product experts tofield technicians and even directly to our customers• Efficiency gains

20

Excellence ineverything we do

Excellence in everything we do
Ambition:
Never settle for good, constantly improve and strive for excellence in every stepof the value chain.
Focus areas

2020

BeyondBest practices processes• Action plan forstrengthening allprocesses in value
chain• Focus on working
capital, Quality andmanufacturing footprint
efficiency• Aligned processes
throughout the wholevalue chain• Optimized working
capital efficiency• Efficientmanufacturing
footprint

Lean and Quality focus
throughout the wholevalue chain
Optimize manufacturing
footprint

21

Excellence ineverything we do

Successful improvements in Monterrey plant• Munters manufacturing plant in Monterrey, Mexico produces
mainly evaporative cooling pads
• Previously struggled with deliveries and quality issues• A new management team and motivated employees have,through systematic Lean-improvements, created efficiency
and stability in the plant

Employee turnover (percentage)
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

• Drastically lowered employee turnover, from 15.5% to 0.9%
• Higher output from the factory but reduced with electricity
consumption• Waste disposal has gone down -24% driven by efficiency andfocus on sustainability

15.5%

7.3%
3.4%
0.9%
2016

2017

2018

2019

Electricity consumption (Kilowatt)
12 000 000
11 000 000

10,838,720

10 000 000
9 000 000

8,730,431

8,554,871

2018

2019

8 000 000
7 000 000
6 000 000

22

2017

PeoplePeople• People are at the heart of our strategic priorities• Developing people and leaders are essential to drive ourpriorities and achieve our goals• Munters promotes multiple career opportunities, both indifferent disciplines and regions• Driving diversity is important for innovation and growth‒ Goal to have 30% women and women leaders in theworkforce by 2025 (up from 25% at the end of 2019)23

PeopleOrganizational redesign and people development
The organizational structure adapted to be morebusiness oriented and customer focused, with:• Clearer business ownership, aligning value chain within
Business Areas, capturing logical synergies and value
drivers across the Group‒ As of 2020 Head of Business Area has full P&L
responsibility for respective area
Functional process responsibility for implementation andcoordination of:• Strategic operations• Innovation• Commercial excellence
People development - Initiatives identified to strengthen
leadership and competence development in line with refined
strategic direction
24

Organizational structure as of March, 2020
CEO, Klas Forsström
FoodTechInterim Johan Ekeström
Pia Brantgärde Linder, 16 Aug.

AirTechPeter Gisel-Ekdahl
Strategic Operations
Interim Stefan MåhlInnovation
TBD

HR, Comm. & Sustainability
Sofia Gellar

Commercial Excellence
TBD
Finance & Strategy
Annette Kumlien

Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A

25

Sustainability strategic driver for Munters• Sustainability is incorporated into everything wedo, covering:• Design our products• How we operate our business• The energy efficiency and yield provided tothe customers through our products• Munters has defined a Sustainability Agenda with
3 major areas and eight priorities• KPIs for all three areas defined and reported• Munters supports UN Global Compact and theSustainable Development Goals• As of 2019, Munters reports to the Carbon
Disclosure Project (CDP)

26

Munters Sustainability agenda - eight prioritized areas:Sustainability in 2020 and beyond
2019• Analysis of current situation,
including short- and long term
financial and strategic ambitions• Decision to prioritize
sustainability issues and to more
ambitious goals

2020• Analysis and deep-dive into allareas defined during fall of 2019
• Discussions and alignment aroundtarget and ambitions• Set targets and start journey

Beyond• Strong ambition to become moretransparent around energyefficiency of our products andsolutions• Ambitions and targets defined forvarious steps in the value chain• Start to report on CO2 emissions

27

Munters contributes to more sustainable agriculture• Munters products and solutions increase efficiency of farms as well asanimal welfare• Munters contribute to more sustainable livestock keeping by developing
full farm solutions, providing a perfect climate for the animals and a highfarm productivity• Chicken meat accounts for about 24% of the global meat production• Broilers & layers are estimated to emit 0.55 giga tonnes CO2-eq,
representing 8% of the livestock sector’s emissions
We develop a fully connected food chain, optimize animal welfare,climate and energy & resource consumption with high productivity

28

Munters contribution to the emission reduction
Indirect contribution:

Emission breakdown poultry house• Feed conversion ratio improvements• Feed delivery & production planning optimization• Reducing the manure quantity per kg of meat
• Higher meat quality & reduced mortality
Direct contribution:•

Improved animal welfare•

Munters products and solutions reduces energy
consumption significantly

Considering a Munters installed based of 57,000 broiler houses in
the world, we estimate that Munters equipment contributes tosavings equal to 3.42 megaton CO2 over 12 years
29

Feed, CO₂
Applied & deposited manure, N₂O
LUC: soybean, CO₂

6,30%

1,30%

6,40%
25,50%

8,90%

Manure, N₂O, CH4
Fertilizer & crop residues, N₂O
Postfarm, CO₂

11,30%
22,20%
18,10%

Direct energy, CO₂
Other
Source: FAO - Animal Production and Health Division - Global Livestock Environmental
Assessment Model.
LUC = Land-Use Change
Postfarm, CO2 = Green House Gas emissions related to fuel combustion and energy
use in transports, procession and refrigeration of products and packaging material.

Journey ahead supported by strong market drivers• Strong market drivers support long-term demand for
Munters products and solutions• Sustainability important, current business environment
highlights the importance even more
• High demand for clean air in many industries withmission critical processes• Increased data traffic drives investments in data
centers• Strong potential in Services and data driven solutions

30

Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A

31

Q1 2020 vs. Mid-term targets

Net sales growth

Annual growth in organic net sales
starting in 2019, supplemented with addon acquisitions.

Adjusted EBITA-margin

An adjusted EBITA-margin in the medium
term.

Capital structure (LTM*)

A ratio of net debt to adjusted EBITDA,
which may temporarily exceed this level(e.g. as a result of acquisitions.)*LTM = Last Twelve Months
32

Mid-term
targets

Q1
2020

5%

-7%

14%

8.3%

1.5x-2.5x

3.1x

Strengthened financial position•

Initiative to improve working capital efficiency has led to decreased leverage and increased focus on cash
management•

Continued focus on cash conversion (improving profits and working capital)

Development of leverage
4,5

20%

4,0

18%

3,5

16%

3,0

14%

2,5

12%

2,0

Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020

Leverage = Net debt / EBITDA

33

Cash conversion (OCF/Adj. EBITA)

Operating working capital as % of net sales

10%

80%
70%
60%
50%
40%
30%
20%
Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020

10%

Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020

OCF = Operating Cash Flow

Performance management• Plan and set aligned objectives• Integrate all steps of the value chain• Drive timely execution and close gaps

Analyze &Mitigate
Strategy

Operations

Sales and marketing
Finance & Strategy
R&D

Profitable, Cash-generating, Growth

34

Plan

HR

Manage &MonitorIT

Execution

World-class processes throughout the value chain• Excellence in everything we do requires strengthened ways of working;work initiated to ensure world-class processes throughout the value chain• Aiming at ensuring scalability and contribute to profitable, cash-generating growth
All processes throughout the value chain addressed, e.g.:‒ Research & Development‒ Product Management‒ Sales-to-Order‒ Sourcing‒ Order-to-Delivery‒ Delivery-to-Repurchase‒ Finance processes‒ Core HR processes
35Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A

36

Global leader in dehumidificationand cooling solutions fordemanding industrial applications

37
37#1 position in markets
representing majority of AirTech net
sales

72% of Group net sales in 2019

Munters part of the global Covid-19 pandemic response
Since March 14th, Munters has supported several Covid-19 response applications.
Supporting Indoor climate application:• Clean rooms• Cooling chambers• Storage rooms

38

Supporting critical production:• Covid-19 test kits
• Plastics parts used in test kits
• Active Pharmaceutical Ingredient (API)AirTech – For Customer Success and a Healthier Planet
Blue-chip customer base

We reduce global energy consumption every
year by the equivalent of the usage of more than

1 million households

We support the transition from combustion-driven
cars to electric cars powered by Lithium batteries

Solid growth over time (Net sales, MSEK)1
We connect the world by securing Data Centers
operate efficiently and more sustainably.

MSEK
6.000

CAGR: +10%

5.000
4.000

We create a healthy climate indoor by reducing virus
spread in hospital and public places and outdoor by reducing
air pollution.

3.000
2.000
1.000
0
Adj EBITA%:

39

1. Includes Discontinued EU DC business until 2017

2014
10%

2015
12%

2016
13%

2017
10%

2018
12%

2019
13%

AirTech - Core competences in high performance dehumidification
AirTechTECHNOLOGIES

Cooling andother HVAC

DC
Humidification

MECore DH:High performance
dehumidification1

Humidification

Commercial

Pollution control
and air quality
VOC

Non high
performance dehumidification
Core

40

Systemssales

1 I.e. approx. DP < ~5°C and high precision

Expansionfrom core

Adjacent to core –stand alone

APPLICATIONS

Core
DH

Rotor-based high-performance
dehumidification (DH)Industrial manufacturing, preservation
areas and various other applications

Commercial

Rotor-based dehumidification anddedicated outdoor air systems (DOAS)
solutions for human climate

Supermarkets and other commercial andpublic spaces

Humidification

Components based on evaporative
cooling and humidification technology

Industrial processes, indoor climate control
and data center cooling

VOC

Air filtration using rotors to remove volatileorganic compounds (VOC) from the air

Typically used in chemical processesDC

Dry and wet cooling technologies(including humidification components)

Data Centers (DC)ME

Mechanical droplet separation and Mist
Elimination for filtering of polluted air andmass transfer substance separation

Energy production, marine engines andprocess industry applications

We provide a broad offering of sustainable solutions
ME

DC

Mist Eliminators

Core
DH

Core
DH

VOC

VOC elimination rotors
Core
DH

Core
DH

Dehumidification rotors
Humidification

DC

GlasDek humidification
pads and sub-systems

Components

41

DC

Heat Exchangers
DC

Portable / Small
dehumidification
Stand-Alone
Dehumidification andhumidification

Core
DH

Commercial

Core
DH

Mobile (rental)

Products

Dry Coolers - eg
Thermosyphon (SyCool)
Indirect Evaporative
Coolers (Oasis)
Dedicated Outdoor Air
Systems
Dehumidification
Systems with/without
pipingCore
DH

RentalCore
DH
DC

Spare parts

Commercial

Core
DH
Commercial

PrimaCaire
maintenance contracts

Core
DH
DC

Retrofits / Upgrades

Commercial

Systems

Sold to OEMs

Typically sold to end customers – or via engineering firms~20% of NS~60% of NS

Services~20% of NS

Munters leader across prioritized markets
Markets

Size inMunters

Data Center
Cooling

L

Strong growth driven by increased usage of cloudbased solutions

Core
DH

Lithium Battery
Dehumidification

M

Strong growth driven by electrical vehicle transition

Core
DH

General Industrial
Dehumidification

XL

Growth typically ahead of GDP as awareness ofbenefit of controlling humidity is raising

ME

Marine, Power and Process
Mist Elimination

M

Solid growth driven by sustainability trends - sensitive
to regulatory environment

Supermarkets & Commercial
Dedicated Outdoor Air Solutions

M

Weak growth – however Munters has a large installedbase to maintain and refurbish

Services

L

Solid growth as installed base grow and customer see
benefits of expert services

DC

Commercial

Core
DH
Commercial
DC42Long-term market outlook

AirTech to strengthen, expand and build
STRENGTHENING••

Stabilize, improve and innovate to grow our core dehumidification business for mission-critical applications
Prioritize fast-growing Food and Battery markets and Services – while serving many other customer segments
as well

EXPANDING••

Provide extended offerings and customer value – based on our core dehumidification
technologies
Drive our digital offering and full systems solutions

BUILD
•

Pursue opportunities in Data Center cooling, other humidification and Mist
Elimination

Objective

Enabler themes

Initiatives enabling growth
Alignment andGovernancePeople andKnowledge

Innovation

Commercial
Excellence

Processes andTools

Efficiency

Secure that governance
Ensure that key
Drive innovation to
Secure ways of working
Develop processes andFocus on actions toand follow up structure are knowledge is mapped support strategic ambition, and support that improves
tools to improve
improve cost efficiency
with mid/long termaligned with strategic and retained, and improvecommercial efficiency
and profitability
organizational efficiency
skills through training
perspective
ambitionand successPriority growth markets are Battery, Services, Food, Humidification and DC**DC = Data Center

44How important is proven CO2 savings?
What is the cost of water andwater discharge?
How much is 30% energy savings
worth for you?

Munters make the difference in Data Center solutions, improving total
cost with reduced use of energy and water
Data Center USPs

Selling on customer value‒ Reliability – no need to exchange the pads every 2-3 years‒ Low pressure drop – 20 pa pressure drop costs 0.5 kW / fan.
‒ Ability to withstand most water qualities – no need to invest in watercleaning‒ Ability to disinfect using low pH or very strong disinfectants Legionella

Sustainability values‒ Every kWh equals 0.5 kg CO2 in USA‒ Our solution can save up to 100 L of water/h which equals to
10,000 L of water / data center /h  30,000 m3/year
Cost Saving€ 1,500,000

Savings CO2

Up to 300 tonnes / year

Savings on Water and Discharge46

Up to 30% reduct.

Share of Munters’ sales 2019
28%

4747

FoodTech – We help to feed the world
For customer

Create the perfectclimate•success and ahealthier planet –Offer equipment and solutions
to create the optimal climate forlivestock and greenhouseproduction, including hardwareand know-how/design

We help to feed
the world bychanging the way
we farm

48

Connect and digitalize
the supply chain•

Offer services and software to
support food producers to
optimize their whole value
chain, including both live
operations and processing

Our contribution to
our customers andthe planet – safeand healthy foodusing less resources

FoodTech’s equipment offering
Heaters
Coolingsystems

Air inlets

Broiler houseFans

Air cleaners andHeat recovery units

ClimateControllers
49

Air
circulators
Sensors

FoodTech’s software offering
Integrator
End-customer

Management software for poultry andswine producers

Feed millCloud-based management software forsmall and medium-sized producers

Retailer

Production planning powered by AI

Breeder farmReal time data collection from farms

Broiler farm

50

Processing facility

HatcheryFoodTech overview
Sub-segments (Share of Net sales 2019)

Selected customers

6%

51

CAGR +1%

1 705

1 837

2 018

2 032

2015

2016

2017

2018

2019

13%

16%

13%

12%

14%

1 363

Adj EBITA
marginCAGR +14%

42%

16%

Financial performance
Net sales (MSEK)

5% 3%

28%

Broiler
Swine
Layer
DigitalGreenhouse
Dairy

Market leader in several geographical markets

52

Markets

Size in Munters

Long-term market outlook

Broiler (Chicken)

L

Solid growth driven by developing markets

Layer (Eggs)

M

Demand for cage-free production to drive growth, especially in US

Swine

M

Strong growth in Asia medium-term driven by recovery after African
Swine Fever (ASF), long-term global market outlook weak

Dairy

S

Weak growth driven by lower consumption

Greenhouse

S

Strong growth driven by increased demand and more advanced
greenhouses

DigitalS

Strong growth driven by digitalization of the industry

Looking ahead - The FoodTech strategy
Customer Focus

Excellence in everything we doInnovation

Excellence in everything we doMarketExcellence in everything we doCreate the Perfect
ClimateThe base

Grow in growing
markets53

PeopleGrow our People

Make it easy to dobusiness with us

Collaborate withpartners

Optimize our supply
chain and production

Focus areas

Our direction

Connect our customers
supply chain

Agenda Munters Capital Markets Update
Introduction
Strategy
Sustainability roadmap
Performance management
Business Areas
Q&A

54

Q&A

55

56