ANNUAL ANDSUSTAINABILITYREPORT 2018

FINANCIAL CALENDAR
Munters will release its financial reporting for
financial year 2019 according to the following schedule:
24 April, Interim Report Q1 2019.
8 May, Annual General Meeting; 3:00 p.m. at Kista Entré
Konferens, Knarrarnäsgatan 7, Kista, Sweden.
18 July, Interim Report Q2 2019.
24 October, Interim Report Q3 2019.
Because all amounts in this report are rounded, rounding­differences can occur.
This English version of the Annual Report is a translation of theSwedish original. The Swedish text is the binding version andshall prevail in the event of any discrepancies.

Design and production: Narva
Photography: Jann Lipka.
Tryckeri: Elanders

CONTENTS

INTRODUCTION

OFFERING

	This is Munters................................................................ 2

Munters Business Areas:

INFORMATION FOR
THE CAPITAL MARKET	A Group driven by innovation........................................... 4

	Air Treatment................................................................ 18

Events in 2018................................................................ 6	Data Centers................................................................ 24	Munters as an investment............................................... 66

Comments from CEO....................................................... 8	Mist Elimination............................................................ 28

The share..................................................................... 67

	AgHort........................................................................ 32

CORPORATE GOVERNANCE

STRATEGY

Statement from the Chairman of the Board........................ 69

Trends......................................................................... 10

Corporate Governance Report....................................... 70

Strategy: Three-phase plan............................................ 12

Board of Directors and Group Management..................... 78

Business model for sustainable value creation................... 13

Auditor’s Report ........................................................... 81

Targets and outcomes.................................................... 14

FINANCIAL REPORTS
Board of Directors’ Report ............................................. 82	Services...................................................................... 38

Financial statements ..................................................... 87
Notes.......................................................................... 92
Assurance.................................................................. 130

SUSTAINABLE OPERATIONS	Innovation.................................................................... 42
Operations..................................................................44
Employees................................................................... 48
Sustainability report...................................................... 52
Risks and risk management............................................ 62

Auditor’s Report.......................................................... 131
Definitions.................................................................. 134
The formal annual report for Munters Group AB (publ), corp. reg. no.
556819-2321, refers to pages 82-130.

INTRODUCTION THIS IS MUNTERS

A leading global supplier
Munters is a global leader in energy-efficient and sustainable
air treatment solutions. Using innovative technologies, Munterscreates the perfect climate for demanding industrial applications,the largest being the food, pharmaceutical and agriculture
sectors. Munters has been defining the future of air treatment
since its founding in 1955, and has been listed on Nasdaq
Stockholm since 2017.

NET SALES

SEK

7.1 BILLIONNET SALES GROWTH

NET SALESNET SALES PER REGIONOPERATING PROFIT/LOSSAND MARGIN

SEK M

SEK M

%

8,000

600

15

6,000

400

10

4,000

200

5

2,000

0

0

0

2014 2015 2016 2017 2018-200

Americas 37%
EMEA 43%APAC 20%2		

2014 2015 2016 2017 2018

Operating profit
Margin-58%
INNOVATIVE SOLUTIONS SINCE1955
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

Tobo
HorstmarDison

Lansing
Selma

HruskyChiusaveccia& Pieve de Teco

Amesbury
Buena Vista

Beijing
Jiang Yin

Tel Aviv

Fort Myers
ChashanMonterrey
Mumbai(Ambernath)Araucaria

NUMBER OF EMPLOYEES~3,700M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NUMBER OF PLANTS

MANUFACTURING AND SALES, COUNTRIES

18

>30
3

INTRODUCTION A GROUP DRIVEN BY INNOVATION

Munters creates value
in many industries
Munters offers innovative, efficient and sustainable climate
solutions to customers in many different industries, in which
control of moisture content and temperature are mission-critical.
Customised systems yield higher quality, increased productivity
and lower energy consumption.
Munters’ products and solutions promote cleaner air, increased
resource efficiency as well as reduced carbon emissions. At
Munters, we see sustainability issues as an important part ofstrategy, and one of our most fundamental values is sustainablevalue creation. In all our business areas, we furnish productsthat reduce customers’ climate and environmental impact, witha focus on our products’ energy efficiency.

4			

THE DRUG INDUSTRY

FOOD AND DRINKFARMING

Munters offers customised
dehumidification solutions forthe drug industry that protect
raw materials and finishedproducts during production, storage and transport.
Careful control and monitoring keeps humidity constant,and drugs in the form oftablets, capsules, granules
and powder maintain their
quality and shelf life.

Our solutions control climate
conditions the entire way“from farm to table,” ensuring
hygiene and optimal productquality while saving energy
and increasing productivity.
We deliver to customers in,for example, the dairy andmeat industries, breweries,
bakeries and restaurants.

Munters develops andmanufactures ­energy-efficient
climate control systems forsustainable farming. By­creating the perfect climate
for poultry farming, egg
production, pork farming
and milk farms, we enable
increased production andminimise resource waste
while meeting strict requirements for quality, animal
health, and food safety.

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ELECTRONICSDATA CENTERS

GREENHOUSE

FMCG AND RETAILAVIATION AND DEFENCE

Our solutions provide an­optimal environment for
demanding customers in
the electronics industry.
Manufacturers of lithium-ion
batteries, monitors, components and LEDs obtain a­perfect air environment for
their sensitive processes,
lower energy costs andreduced carbon emissions.

Digitalisation and global data
traffic continue to increase,and an ever increasing
number of data centers arebeing built around the world.
A data center needs to workaround the clock, year in andyear out. Advanced climate
solutions for cooling are
crucial for reliability; theyalso enable reduced energy
consumption and carbon
emissions.

By providing the perfectclimate for growing plants,
Munters solutions provide
growers with the opportunity
to produce under optimal
conditions. The ­innovative
product range covers­ventilation, evaporative­cooling and heating.

Retail and grocery stores
achieve higher sales andlower operating costs when
Munters’ efficient, high-­
performance HVAC systems
are installed. Heating andventilation systems work
better, as do ­refrigeratorsand freezers. Both ­customers
and employees can enjoya ­pleasant, healthy
environment.

In the defence and aviationindustries, dehumidificationis critical for protecting­sensitive equipment,
electronic systems andcomponents from technicalfaults. Climate control in
hangars and supply depots
keeps vehicles and materials
intact. At the same time,
maintenance costs for thebuildings also decrease.

SHIPBUILDING AND
MARINE
Munters’ mist eliminators
remove 95 per cent of theharmful sulphur found inemissions from ships. Motors
and ventilation systems on
ships and offshore platforms,
also need to be protectedfrom everything that causes
rust and soggy filters.
Munters offers modern air
intake systems that stoprain and snow, sea salt andharmful particles.

””

Munters is a global leader ininnovative, energy efficient andsustainable climate solutions
for mission-critical processes

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5INTRODUCTION EVENTSCHANGES FOR INCREASEDPROFITABILITY IN DATA CENTERS

Events in 2018

Looking over the past several years, the business area has
shown a strong net sales growth but has not achieved satisfactory profitability. Michael Gantert was recruited as the
new head of Data Centers in October 2018 and tasked withmanaging the work on improving profitability.
As of Januari 2019, Data Centers will form part of the Air
Treatment business area.

SONARECHO — LINKING THE ENTIREVALUE CHAIN TO FOOD PRODUCTION
In 2018, Munters launched a
new solution whose innovative technology allows customers to control and optimise
their entire value chain inpoultry farming. The solution
consists of two parts: Echo,comprising a series of sensors
for use in chicken coops; andSonar, software that analyses

information and presents itin an easy-to-grasp format.
SonarEcho can easily be integrated with other softwarein the product portfolio, suchas that used to optimise feed
and logistics management.
By linking the entire value
chain and creating possibilities for real-time monitoring

and analysis of informationfrom the coops, Munters’
customers can increase theanimals’ well-being as well as
efficiency in production. The
first contracts were signed in2018 with customers in China
and the US.

NEW CHALLENGES, NEW LEADERSHIPIn December 2018, the Board of Directors elected Johan Ek asinterim President and CEO. The decision is in line with the ambitionof the Board to improve growth and to increase profitability bydelivering results and value to Munters’ customers. Recruitment of
a new CEO is in progress.

6			

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”MAJOR ORDERS FOR
LITHIUM-ION BATTERIES IN CHINA
In 2018, Munters received several orders for climate solutions
in lithium-ion battery manufacturing, including three orders witha total order value of approximately SEK 120 million from aleader in the vehicle and electronics industries in China. Wolf
Frank, President Munters China: “It is a privilege to be part ofthis project, in which the switch to sustainable transport throughour climate solutions for lithium-ion battery production meets thetremendous demand for electric vehicles in China.”

Munters climate systems
facilitate 45 per centof lithium-ion battery
production in the world

SERVICE A GROWING PARTOF OUR OFFERING
Munters’ service offering is a growing — and profitable —part of the Group that accounted for 11 per cent of sales in2018. Through our in-depth knowledge of energy-efficient air
treatment and applications, we offer our customers continuous service and support as well as valuable upgrades. The
objective is to reduce customers’ energy consumption, ensure
quality and environmental performance, and extend theeconomic service life of our products. Our service organization offers everything from installation and monitoring tomaintenance, spare parts and upgrades that ensure Munters’
solutions are optimized for the customer’s needs.

FORWARD FOR SUSTAINABILITY
After having conducted an internal self-assessment of our
subsidiaries’ regulatory compliance in the areas of the environment, human rights and business ethics, Munters adopted
the UN Global Compact during the year and thereby committed to supporting and implementing the ten principles.
Munters’ sustainability initiatives garnered attention in the
Sustainable Companies 2018 ranking in Sweden’s leading
financial paper, Dagens Industri. Munters placed 11th out of
57 in the “Capital Goods” category.

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STRONG GROWTH IN
THE MARINE INDUSTRY
The International Maritime Organization (IMO) has set
limits on sulphur emissions of 0.5 per cent in international waters. During the year, it became clear that theguidelines would be implemented in 2020, which iswhy shippers in countries such as China are investingheavily in scrubbers that clean exhaust gases. This led
to an approximately 600 per cent increase in orderintake for Munters from the marine industry in 2018,with mist eliminators being one of the products indemand.
7

INTRODUCTION
BUSINESS AREASCOMMENTS FROM THE CEO

A year of challenges
for Munters2018 was a challenging year for Munters. Net sales increased
8 per cent, but despite this growth the Group reported anadjusted EBITA with a lower margin, in line with last year.
Both of the major business areas, Air Treatment and AgHort,
showed healthy growth in net sales during the year, driven bystrong market positions and new innovations. Business Area
Mist Elimination’s refocused operations resulted in a healthy
improvement to profitability, while order intake and profitability
in Business Area Data Centers was lower than expected. To
utilise Munters’ full potential, a three-phase plan for stability,
profitability and growth has been initiated.

8			

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Munters has not performed as expected during the year. As
the interim CEO and President of Munters since mid-December
2018, I have led the work to analyse the business and to implement a program to ensure improved performance in line with
our objectives, and shareholders’ expectations. Munters has
exciting growth opportunities based on strong fundamentals andsolid technology, great people and team spirit, deep application
knowledge and globally strong market positions in a number of
attractive segments. All of this is focused on providing solutions
to our customers around the globe. Our legacy of industry leadership will continue, accelerated by the measures now being
launched.

STRONG ORDER INTAKE IN KEY SEGMENTS,
BUT LOSS IN DATA CENTERS
Performance in the second half of 2018 was characterized byencouraging trends in many of our operations, but also ongoing
disappointments in the Data Center business. Air Treatment,
AgHort and Mist Elimination all reported positive trends in orderintake and net sales, ahead of our expectations in some cases.
Air Treatment, AgHort and Mist Elimination showed solid earnings increases year-on-year. However, Data Centers continued
its negative earnings trend at the end of the year, mainly derived
in the European business. The Group’s net sales increased 8 percent. However, the continued losses in Data Centers, as well as
the Group earnings for full year 2018 being at the same level aslast year, are unsatisfying.

THREE-PHASE PLAN TO CAPTURE
THE FULL POTENTIAL OF MUNTERS
The Board of Directors and the management team are fullycommitted to strengthen the performance of Munters. During thepast two years, net sales growth has been at a fairly good level
whereas earnings and margins have been below expectations inall of Munters business areas, and most notably in Data Centers.
The root causes have been identified and we have designed
a comprehensive and ambitious plan to increase the overall
performance of the company. We have therefore launched athree-phase plan to capture Munters full potential to improveGroup earnings.

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Global trends continue to support
long-term solid demand for Munters
climate solutions in key segments

The first phase — stability
The first phase will focus on establishing a stable, profitable
platform. We have designed a new organisational structure andnew leadership team. Munters will consist of two business areas,
Air Treatment and AgHort. Data Centers and Mist Elimination,
currently run as separate business areas, will be integrated into
Air Treatment during the first quarter 2019. The new organizational set up will create a simplified, leaner, more decentralized
and more performance-oriented Munters.
As part of the first phase of the program, we have the intention to close down our European Data Centers factory in Dison,
Belgium. This is subject to union negotiations. In our opinion, theprospects for establishing a profitable Data Centers business in
Europe are limited. Our focus going forward will mainly be on
the US Data Centers market where we have a more commercially viable base for achieving profitable growth.
The second phase — profitability
During 2019, we will gradually shift focus to the second phase of
the program to capture Munters full potential. Activities include
driving business mix towards most attractive applications,focused Product Development and driving continuous improvements to fine-tune business area organisations. This phase also
includes continued development of our go-to-market models andpricing, more efficient purchasing and improved product design.
The third phase — growth
The third and final phase is to accelerate growth with focus on
attractive segments where we see solid long-term demand andwhere we have or can establish strong market positions. Growth
themes include continued development of our digital offeringsuch as SonarEcho in business area AgHort, connecting farms
and optimizing food chains and Munters Connected Climate
for Air Treatment customers as well as pursuing further growthin Asia and selective M&A. We also see continued significant
opportunities for profitable growth in Services through increased
penetration of our installed customer base and an enhanced
service offering.

OUTLOOK
Global trends continue to support long-term solid demand for
Munters climate solutions in key segments. 2019 will be a year
where we reset the business for significantly improved performance. Adjusted EBITA in the first quarter 2019 is expected to belower year on year due to a continued loss in Data Centers in thefirst quarter. As a result of the now started program, we expect
significantly improved Group adjusted EBITA for full year 2019.
An important asset for Munters is the great deal of competencies among its many employees around the globe. I would like tothank all employees for your efforts in 2018. I would also like tothank our customers, our suppliers and our partners. And finally,
thanks to all our shareholders.

Stockholm April 2019

Johan Ek
Interim President and CEO

9

STRATEGY TRENDSSUSTAINABILITY – AN INTEGRATEDPART OF THE BUSINESS

Megatrends
Munters benefits from strong global driving
STRICT REGULATIONS
forces and trends, in all our markets, that
support the use of advanced solutions forMore rigorous laws and environmental standards drive demand
for solutions to reduce pollution from exhaust and flue gases.
climate control.
Moreover, the requirements for efficient dehumidification in
public buildings, in the US for example, are being tightened up.
Munters has many solutions to meet customers’ needs forcomplying with new regulations:

ENERGY AND RESOURCE EFFICIENCY
Increased focus on climate and environmental impact, scarcity
of resources as a consequence of global population growth, anda growing urban middle class that consumes more protein anddrives demand for energy and resource-efficient solutions.
On the whole, Munters has the most energy-efficient solutionsin the market:
	Exact climate control in livestock farming optimizes resource
consumption in the form of food and water and improves
animal health.
	Munters’ solutions for data centers can provide significant
energy savings compared with traditional cooling.
	Energy-efficient coolers in supermarkets lower energy
consumption by up to 40 per cent.
	Environmentally friendly and energy-efficient air treatment ­systems, which recycle heat energy and transform it
into ­cooling used in office properties, supermarkets and­production facilities.

10				Requirements for purifying emissions from coal-fired power
plants and vessels with Munters mist eliminators.
	Stricter requirements from ASHRAE* and an increased useof energy-efficient HVAC (Heating, Ventilation, and Air
Conditioning) solutions are driving demand for Munters
DOAS technology.

There is an increasing demand globally for sustainable, energyefficient solutions. Achieving the UN’s Sustainable Development
Goals requires major efforts; an increasing number of companies
are taking responsibility for sustainability throughout the value
chain with a focus on the environment, ethics, and social issues.
Many are promoting sustainability as an integrated part of theiroperations.
Munters offers solutions that in general strengthen our­customers’ sustainability profile:	Major players prioritize separation of ecologically hazardous
substances in flue gases.
	Many customers now have sustainability programs that
Munters can contribute to fulfilling through energy-efficient
climate solutions.
	Increased focus on sustainability issues has created great
demand for electric cars. Munters promotes this transformation through sales of climate equipment to companies that
manufacture lithium-ion batteries. Munters facilitates
45 percent of lithium-ion battery production in the world by
delivering ultra-dry air.

*ASHRAE is an organization whose purpose is to advance the arts and sciencesof heating, ventilating, air conditioning and refrigerating to serve humanity andpromote a sustainable world.

“

Munters delivers ultra-dry
air for global lithium-ion
battery production

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“

Munters’ solutions
for data centers canprovide significant
energy savings
compared withtraditional cooling

STRICT REQUIREMENTS FOR
PRODUCTION ENVIRONMENTS
Heightened standards for quality, intensified competition, andincreased understanding of the impact of indoor climates on
productivity and product quality, increase the demand foradvanced climate solutions.
Munters offers exact control of the climate, which meets ourcustomers’ requirements for better control of their environment:
	The food industry needs cost-efficient solutions for mist, ice
formation, condensation and other moisture-related problems
to meet zero-tolerance guidelines and avoid discrepancy
reports. Munters’ portfolio of Dedicated Outdoor Air Systems(DOAS) solutions is the most efficient in the industry withregard to moisture removal efficiency.
	A good climate in livestock farming is important both for the
animals’ well-being and for the employees’ work environment.

INCREASED DIGITALIZATION
Increasing data traffic, greater use of cloud services and a larger
number of connected devices are driving growth in industries
that are exposed to digitalization. Digitalization also opens
doors to new ways of creating value, interacting with customers,
and offering connected service and support.
Munters’ services support digitalization through, for example,
efficient data center cooling and IoT solutions.
	Munters offers connection of devices, which enables newservices and long-term potential for selling climate control asa service.
	SonarEcho, Munters’ IoT solution for connecting farms
and food plants, optimises the logistics chain and thereby­minimises use of resources.
	Increasing demand for cooling of data centers.

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11

STRATEGY THREE-PHASE PLAN

Three-phase plan to utilise
Munters’ full potential
Over the last two years, growth in net sales has been at a­relatively healthy level, whereas profits and margins in all
Munters Business Areas — above all in Data Centers — havecome in under expectations. The primary causes of this weaktrend have been identified, and we are bound and determined
to improve the Group’s profitability. In February 2019, an extensive and ambitious three-phase plan — stability, profitability andgrowth — was launched to utilise Munters’ full potential and to
improve the Group’s earnings.

Stability

Profitability

GrowthINCREASE GROWTH
IN ATTRACTIVESEGMENTS
Focus on rapidly growing segments
and markets where Munters hasleading positions

IMPROVE EARNINGS
Actively drive the business mix
towards the most attractive segments

Pursue digitalisation of the customer
offering
Carry out selective acquisitions toincrease growthPursue continual improvements tofine-tune the business area organisations and production units

ESTABLISH A STABLE,PROFITABLE BASE
Strengthen the Management Team

Further improve our go-to-market
models and our pricing models
Create cost savings through more
efficient materials sourcing

Simplify the Munters organisation into
two decentralised business areas
Create an easier, more efficient organisation and improve capital efficiency
Pursue earnings improvements in
Data Centers
12			

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Business model for sustainable value creation
Our mission: A global leader in innovative, energy-efficient and sustainable climate solutions for mission-critical processes.
1. PLATFORM AND BASISCOMPETITIVEADVANTAGES	Deep technical expertise and market-leading
components	Extensive understandingof customer applications& production conditions

2. A STRONG SUSTAINABILITY AGENDA

GLOBAL
REACH
3,700 employees
Sales in 180 countries
18 production facilities

CORE
TECHNOLOGIES
Cooling

RESOURCEEFFICIENCYRESPONSIBLE
ENTREPRENEURSHIPPEOPLE& SOCIETY

Energy and resource
efficiency

	Sustainable products andofferings

	Sustainable, profitable
operations

	An equal and inclusive
work environment

Sustainability — an integrated part of our business

Sustainable production

Business ethics

Community involvement

Sustainable transportation

	Like-minded
collaboration

Increased digitalization
Strict requirements for
production environments

	Close relationships withcustomers and theirdecision makers
3. PRODUCTS & SERVICES

EXTERNAL
FACTORS

Strict regulations
5. CREATED VALUE

4. STRATEGY AND STRENGTHSSTRENGTHS
Key technology areas

Humidification

In-depth application
knowledge

Energy recovery

Wide range of products

HeatingService and support

Pollution control
Dehumidification
Mist elimination
Ventilation
Building comfort systems
Control equipment
Data analysis/visualisation

STRATEGY
Three-phase plan to utilise
Munters’s full potential:
Stability
Establish a stable,
profitable baseProfitability
Improve earnings
GrowthIncrease growth inattractive segments

CUSTOMERS
Facilitates 45% of global
lithium-ion battery
production
Energy-efficient coolers insupermarkets lower energy
consumption by up to 40%
40% fan energy savings forforced ventilation at farms
99% reduction of sulphuroxides from coal-fired
power plants
Helps customers comply
with laws and environmental
requirements
Major energy savings
related to data centercooling

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EMPLOYEES
Employee and skills
development throughprogrammes such as
Munters United
Career opportunities,
salaries and benefits
Programs forincreased
diversity and genderequality

SOCIETYOWNERS
Total return	Sustainability integrated
into operations

SUPPLIERS& PARTNERS
	Commitment tosustainability in the
supply chain
Long-term relationships

	Solutions that help toreduce climate impact
Innovation
Job opportunities

13

STRATEGY TARGETS AND OUTCOMES

Financial targets

Future objectives
Both financial and sustainability goals benefit our strategy
for profitable growth. Responsible operations with stablefinances and efficient use of resources is the foundation thatenables Munters to carry out its strategy.

NET SALES GROWTHCAPITAL STRUCTURE

Annual growth in organic net salesof 5 per cent starting in 2019 (previously 7–10 per cent), supplemented
with selected add-on acquisitions.

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).

%

multiple

15

5
4

10

5
4

3
2

5

1
0

0

2015

3

2016

2017

2018

Target as of 2019

2

2015

2016

2017

2018

Target1
0

ADJUSTED EBITA MARGIN
2015

2016

2017

2018

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

%
15

10

5

DIVIDEND POLICY
According to the dividend policy
decided by Munters Board of
Directors, Munters should aim to pay
an annual dividend corresponding
to 30–50 percent of its consolidated
income after tax for the period. The
pay-out decision will be based on
the company’s financial position,
investment needs, acquisitions andliquidity position. There can be
no assurances, however, that inany given year a dividend will be
proposed or declared.
The Board of Directors proposes thatno dividend be issued for 2018.

0
2015

2016

2017

2018

Target14			

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Sustainability goals
Resource efficiency
ENERGY EFFICIENCYGREEN ELECTRICITY

RATE OF RECYCLING

A continuous reduction of theelectricity consumption in our
production units.

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

We strive to continually increase ourrate of recycling (i.e. the proportionof waste reused or recycled out of
the total amount of waste).

MWh/KSEK

%

%

1.5

60

60

50

50

40

40

30

30

1.0

0.5

0.0

2016

2017

2018

20

20

10

10

”

Increase productivity andreduce climate impact
and food waste

0

0
2016

2017

2018

2016

2017

2018

People & society
PROPORTION OF WOMENACCIDENTS

We strive to increase the proportionof women in the workforce and of
women executives. The goal is 23
per cent by 2020 and 30 per centby 2025.

Continuously reduce the number of accidents in our production and we measure
Total Recordable Incident Rate (TRIR), which we calculate as the number ofaccidents where the employee has had to seek medical attention multipliedwith 200,000 / number of hours worked.

%

SEK M

% Number of:

30

4,000

4

100

3,000

3

75

2,000

2

50

1,000

1

25

25
20
15
10
5
0
2017 20182017 2018

Workforce

Executives

2020 target

0

2014

2015

2016

2017

2018

0

Production value, SEK M
Number of accidents
Number of accidents/production value, %M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

15

OFFERING BUSINESS AREAS

Our business areas

NET SALES PER
BUSINESS AREA, 2018

In 2018, Munters conducted operations in four business areas:
Air Treatment, AgHort, Data Centers and Mist Elimination.
As of January 2019, Data Centers and Mist Elimination will
form part of the Air Treatment business area.
Air Treatment, 52%
Mist Elimination, 5%
Data Centers, 14%
AgHort, 28%

28% AGHORT

AgHort is one of the world’s leading suppliersof innovative, energy-efficient climate control
solutions for livestock farming and greenhouses,
as well as, software for controlling and optimizing
the entire food production value chain. Munterssolutions increase productivity while enablingsustainable food production in which strict
requirements are placed on quality, animal health,and food safety.

16			

14% DATA CENTERS
Munters is a leader in energy-efficient climate systems for large and medium-sizeddata centers where capacity, reliability
and availability are mission-critical.
Munters systems provide precise control
of temperature, humidity and air quality.

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52% AIR TREATMENT

We are a global leader in energy-efficient
air treatment for industrial and commercial fields of application. The businessarea offers climate solutions for mission-critical processes that require exact
control of moisture and temperature, witha focus on sustainable climate systems. Our
climate systems also provide better indoor quality
and comfort.

5% MIST ELIMINATION

Munters is a global leader in providing solutions formechanical gas and liquid separation, as well as masstransfer. Our mist eliminators are key components in
scrubbers that clean emissions from coal-fired power plants
and ships across the world. Munters also creates optimal
operating conditions and protects equipment in processing
industries, windmills, gas turbines and ships.

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

17

OFFERING

AIR TREATMENT“Munters climate systems facilitate 45% of world
lithium-ion battery production”

MARKETSSUB-SEGMENTS

Air Treatment is a global leader in energy-efficient
air treatment for industrial and commercial fields ofapplication. We offer climate solutions for missioncritical processes that require exact control ofmoisture and temperature, with energy efficiency
and sustainable climate systems in focus. Our climate
systems also provide better indoor quality and comfort,
as well as increased production capacity.

NET SALES

3,752
Americas 42%
EMEA 22%APAC 36%

NET SALES AND
OPERATING PROFITSEK M

ORDER INTAKE,
ROLLING 12 MONTHS
SEK M

4,000

800

SEK M

2,000

400

1,000

200

200

0

0

Net sales
Operating profit

SEK M
6,000

800

600

2014 2015 2016 2017 2018

OPERATING PROFIT

1,000

3,000

0

SEK MILLION

Industrial 51%
Service 24%
Components 15%
Commercial 10%

4,000

600
400

2,000

Q4 Q1
2017

Q2

Q3

Q4
2018

496
SEK MILLION

0

Order intake, per quarter
Order intake, 12 months rolling18			

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IMPORTANT EVENTS 2018
The strong underlying growth continued in priority segments
including food, drugs and electronics.
Three major procurements with a total order value of approximately SEK 120 million won from a leading automotive andelectronics company in China with production facilities forlithium-ion batteries. The climate solutions will be delivered in
the first half of 2019.
Continued high level of growth in Services in all regions.
Improved production efficiency at the manufacturing plant in
Mexico.
Launch of DryCool® Focus, a flexible and energy-efficient commercial Dedicated Outdoor Air Systems (DOAS) unit aimed atcustomers with higher airflow levels who use our DryCool®
technology. A combination of sorption rotor-based dehumidifiers and complete energy recovery leads to reduced need forcooling and reheating.
Launch of Munters Connected Climate® which connects our
products to the Internet and creates opportunities for remotely
monitoring, controlling and optimising all of a customer’s units,
which results in greater reliability and better control over the
climate in the application. MCC comprises data logging,alarms, positioning and much more.
Order intake was unchanged but declined 3 per cent organically after strong growth in 2017. Weak demand in the end
customer market, in combination with a strategic exit from general
air handling solutions resulted in a reduction of order intake in
the Supermarket segment. Order intake in the Industrial segment
remained strong, with major orders in a lithium-ion battery
project. Demand from OEM components was stable, and Services
generated strong order intake during the year.
Net sales increased 5 per cent, and 2 per cent organically. The
Industrial sub-segment, sales of components to OEM manufacturers and Services grew, but low demand from the end market forSupermarkets and our exit from general air handling solutions
had a negative impact on net sales for 2018.
Operating profit decreased to SEK 496 million (511). A favorable trend in the gross margins, including improved results in
production in Mexico, could not fully compensate for a weaker
trend in the Supermarkets segment.
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MARKETS AND TRENDS
The market is driven by global factors such as growth in population and GNP, industrialization and an increased standard ofliving. The demand for advanced air treatment is also supported
by regulations and industry standards, a strong focus on production and energy efficiency, and stricter requirements placed on
quality and sustainability.
Air Treatment has a leading position in its core markets,
which are characterized by a current consolidation with asmall number of global participants. Growth is stable and themarket is expected continue to grow. Munters focuses heavily onenergy-efficient climate systems that can reduce the customer’s
electricity consumption and enables sustainable production environments. The demand for lithium-ion batteries, which are usedin electric cars, electric tools and medical equipment, remains
very strong and offers possibilities of increased business opportunities, including complete climate systems. Climate systems are
mission-critical in the production of lithium-ion batteries in orderto produce at a high level of quality. Munters’ unique technological and application knowledge plays an important role here.
Fast Moving Consumer Goods is currently undergoinga transformation as e-commerce increases. As a result, newconstruction of stores decreased in 2018, which in turn resulted
in significantly lower demand in the Supermarket segment. New
construction is expected to remain at a lower level, and Munters is
shifting focus to service, upgrades and replacement of the Group’s
major installed base of climate systems in Supermarkets, whichis expected to display strong demand over the coming years.
We have also boosted our investments in Dedicated Outdoor
Air Systems products for the commercial sub-segment. DOAS
products are an energy-efficient technology that pre-treats air
before it is brought into the premises and can promote up to 40
per cent energy savings for grocery stores and other applications
compared with conventional air conditioning systems.
Stricter requirements from ASHRAE* and an increased
use of energy-efficient HVAC (Heating, Ventilation, and Air
Conditioning) solutions are driving demand for Munters DOAS
technology. We believe that this technology, which is very
energy-efficient, has the potential to expand both geographically and into other areas such as schools, hospitals, offices andrestaurants where the requirements for indoor air quality andenergy efficiency are increasing.

The NHL has named Munters a“Preferred Supplier”. The Group’s
patented desiccant dehumidifiers
have been installed in more than
1,000 ice rinks in North America.

*ASHRAE is an organization whose purpose is to advance the arts andsciences of heating, ventilating, air conditioning and refrigerating to serve
humanity and promote a sustainable world.

19

OFFERING AIR TREATMENTCUSTOMERS
Munters prioritized customer segments for the business area are
the food industry, the pharmaceutical industry and lithium-ion
battery manufacturers, as well as supermarkets and commercial
venues, with a particular focus on energy savings and sustainable solutions. Markets with lower priority are being monitored
and classified as potential areas of future growth; the aerospaceand chemical industries, for example, are currently at this stage.
With its strong technology and solid application knowledge,
Munters is well positioned to help existing and new industrial
and commercial customers with complete systems of climate
and energy-related solutions. Continued development of new
applications and skills development provide good opportunities
for growth.
Approximately 15 percent of sales relate to OEM components, for customers who use Munters products and technology
as part of their solutions. Munters targets the OEM industry ingrowing markets, such as lithium-ion battery manufacturing,pollution control and direct evaporative cooling.

PRODUCTS, INNOVATION AND SERVICE
Our solutions check climate conditions for foodproduction, which guarantees hygiene andoptimal product quality.

Munters offers customised
dehumidification solutions forthe drug industry.

20			

Air Treatment offers innovative solutions that provide a numberof different climate control functions. We combine different
technologies and components, and customize solutions that are
optimized based on the customer’s specifications and needs.
This work often takes place with Air Treatment’s applications
experts working with the customer’s process owners. The mostimportant product groups are dehumidifiers, VOC abatement
systems and direct evaporative cooling.
Service of the major installed base of climate systems is
becoming increasingly important; 2018 was a year of good
growth. The broad selection of service products — everythingfrom installation and startup of equipment to complete service contracts, spare parts sales and upgrades for increased
energy efficiency — make it possible to better meet its customers’ demands and to improve the long-term return on theirinvestments.
We are seeing increased interest in real-time data collection
and climate data analysis, and we are developing connected
solutions such as results analysis and remote monitoring forour product portfolio. The goal is to further enhance our
product development and services we can offer our customers. Advanced IoT (Internet of Things) solutions also promoteincreased productivity and energy efficiency, better customer
service, and lower costs for service and maintenance.
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LEADING TECHNOLOGIESThe business area’s solutions cover several central technologicalfields, mainly in dehumidification rotors and evaporative media.
Dehumidification systems use Munters rotor technologies,
dehumidification rotors and patented sorption rotor technologies
designed to offer energy-efficient, customized and mission-critical solutions that can be used in a range of different applications. VOC abatement systems remove harmful volatile organic
compounds (VOCs) such as chemicals and petroleum products
from indoor air.
Munters VOC systems can absorb 99 per cent of targetedhazardous substances, which are then heated up and converted
to water vapor and carbon dioxide using a small amount ofoxidizer.
Direct evaporative cooling is based on Munters core technologies, in which warm air is cooled when it is passed through highcapacity evaporator cooling pad designed to be weather-,algae-, and mold-resistant and to tolerate extreme wear. These
solutions yield high efficiency in cooling while they manage
high-speed conditions and changes in pressure, with minimal
cleaning and maintenance.

RESEARCH AND DEVELOPMENT
Focus in R&D operations is currently on further improving dehumidification efficiency, as well as developing system softwareand adaptation to the Internet of Things (IoT). With our customer’s continued focus on the environment and sustainability, R&D
is currently working with patented Munters technologies that will
increase the dehumidification system’s efficiency and enable
more sustainable products. We are also continuing to further
develop the Genesys configuration tool, which allows Munterssales engineers to select complete solutions for our customers inminutes (instead of weeks).
DryCool® Focus is a flexible and energy-efficient commercial
Dedicated Outdoor Air Systems (DOAS) unit aimed at customers
with higher airflow levels who use our DryCool® technology, acombination of sorption rotor-based dehumidifiers and complete
energy recovery leads to reduced cooling and reheating.
Munters Connected Climate® connects our products to theInternet and creates opportunities for remotely monitoring,
controlling and optimising all of a customer’s units, which resultsin less downtime and better control over the climate in the application. MCC comprises data logging, alarms, positioning andmuch more.

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8“

Munters VOC systems can absorb 99% oftargeted hazardous substances, which arethen heated up and converted to water vapor
and carbon dioxide

21OFFERING AIR TREATMENT
Case study: American AgCredit (US)

Better air and lessexpensive coolingFounded in 1916, American AgCredit is a specialist in providing
financial services to farmers and rural customers in the US.
The new head office in Santa Rosa, California, has won
several awards for design and construction. The three-storey,
11,000 m2 building is cased in glass and has a view of thesurrounding vineyards. Great importance was placed on asustainable design and energy efficiency.
Munters evaporative cooling technology drives the air
conditioning system and delivers a total of 5,700 m3 of outdoor
air per minute. The total cooling capacity is over 730 tonnes, or
8,760,000 BTU per hour on the hottest summer day when thetemperature reaches 40°C. The combination of indirect evaporative cooling and direct evaporative cooling uses only 10–20
per cent of the energy consumption required in traditionalcooling to cool the outdoor air.
With Munters evaporative cooling in the form of DOAS technology, American AgCredit’s energy costs are reduced while theindoor air quality is improved.
Better ventilation can have a major impact on the healthand productivity of employees. William Fisk, staff scientist at
Lawrence Berkeley National Laboratories, has conducted studies showing that employee productivity can increase up to 4 percent when the flow of outdoor air increases from the minimum
requirement of 0.4 m3 to 3 m3 per minute per person. Anotherstudy showed that an increase in outdoor air flow from 0.7 m3 to
1.4 m3 per minute per person resulted in a 33 per cent decreasein sick leave.

Santa Rosa, California

22			

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Case study: By-Health (China)

Business-critical air treatment
improves Chinese dietary
supplements
By-Health is a Chinese company specialising in research, production and sales of various dietary supplements. The company
was founded in 1995, and its share was listed on the GEM in
Shenzhen Stock Exchange in 2010. Its products are sold aroundthe globe. Since 2008, By-Health has been using Munters customised air treatment solutions to increase energy efficiency andproduction quality.
By-Health uses Munters rotor dehumidification equipment in
the production of, for example, gelcaps. The equipment is usedprimarily to dry the capsules by controlling the moisture in the
air. Munters solution has shortened the production process from
40 hours to around 12.
Munters rotor dehumidification also ensure that By-Healthmeets the stringent good manufacturing practice (GMP)
requirements placed on humidity in the production of probiotics
and certain effervescent tablets. The equipment’s high level of
performance and reliability as regards temperature and humidity stabilises the production process, thereby also guaranteeing
uniform high production quality.
Munters also supports By-Health with technologicallyadvanced service: installation, tests and start-up, as well as
inspections and maintenance.

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23

OFFERING
AFFÄRSOMRÅDEN

DATA CENTERS“Data center cooling represents nearly 4% of global
electricity consumption. Munters products provide
significant energy savings and are highly reliable”
MARKETSSUB-SEGMENTS

Data Centers is a leader in energy-efficient climate
systems for large and medium-sized data centers where
capacity, reliability and availability are mission-critical.
Munters systems provide precise control of temperature,humidity and air quality.
As of January 2019, Data Centers will form part of the
Air Treatment business area.

NET SALES

1,068
EMEA 68%
Americas 29%
APAC 4%NET SALES AND
OPERATING PROFIT
SEK M

SEK MILLION

Digital operators 79%
Co-location providers 16%
Enterprise operators 5%

ORDER INTAKE,
ROLLING 12 MONTHS
SEK M

SEK M

1,200

100

600

1,500

1,000

0

500

800

-100

400

600

-200

300

400

-300

200

200

-400

100

-500

0

0

SEK M

OPERATING PROFIT

2014 2015 2016 2017 2018

Net sales
Operating profit

1,000

500

Q4 Q1
2017

Q2

Q3

Q4
2018

0

-440

*

SEK MILLION*INCLUDES A SEK -323 M
WRITE-DOWN OF GOODWILL.

Order intake, per quarter
Order intake, rolling 12 months

24			

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IMPORTANT EVENTS IN 2018
The Data Centers business area did not furnish the expected
profitability and order intake during the year, particularly in
the EMEA region. That is why at the end of 2018 an earnings
improvement programme was launched to cover: expanding
and customising the product portfolio, improving the sales andorder system, and implementing more flexible and cost-efficient operations.
Michael Gantert was elected the new President of Business
Area Data Centers in October 2018.
A large order from NTT Facilities in Japan was won at the endof the year; delivery will take place in early 2019.

Order intake decreased 48 per cent, due primarily to a lower
order intake from a major customer in Europe. The downturn in
Europe was partially compensated by a higher order intake in
the Americas and in Asia.
Net sales increased 25 per cent owing to higher volumes
through two major deliveries to a customer in Europe, which waspartially counteracted by lower volumes in the US compared to2017.
Operating loss fell to SEK -440 M (-13) and included a goodwill
write-down of SEK -323 M as future economic outlooks haveworsened. Increased volumes in Europe were counteracted by
reduced gross margins and a loss on the start-up portion of amajor contract, as well as lower volumes in the Americas compared to the preceding year.

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MARKETS AND TRENDS
Global data traffic is increasing significantly, driven by theincreased use of cloud services, video consumption, and linked
services (the Internet of Things, or IoT). The introduction of newtechnologies such as autonomous vehicles, AI, VR/AR and blockchain further increase the demand for data center capacity.
Society is becoming increasingly IT dependent, which has led toa global growth of data centers. With data centers now thought
to be consuming around four percent of the world’s electricity,
a combination of cost pressures and environmental concerns isdriving a growing demand for energy-efficient cooling solutions.
Cooling is typically responsible for up to 40 percent of the total
electricity consumption for a data center and is the largest single
operating expense.
Up-time availability is business critical for a data center andservice interreuptions can lead to major problems. Electronic equipment is sensitive, and exact control of temperature and humidity is
crucial for reliability, functionality and availability. Servers mustalso be protected against pollutants such as salt, dust, or pollen.
The new generations of IT equipment require ever more efficient
forms of cooling, which in the last few years has led to a shift intechnology towards heat exchangers. Munters is recognized as aleading innovator in this field.
Heat exchangers accounted for over 90 per cent of the sales
in the business area for 2018. These solutions use outside air toprovide at least some of the cooling effect, either by passing theoutside air directly through the data center, or indirectly through aheat exchanger that cools a separate flow of air that then passes
through the facility. In both cases, the cooling effect can be boosted
by incorporating the evaporation of water.
Depending upon the climate, direct evaporative cooling is
generally recognized as the most cost effective way to cool a data
center. Indirect systems, while marginally less energy efficient, havethe advantage of keeping the outside air away from the servers,
eliminating the risk of contamination from air pollen and otherpollutants.

25

OFFERING DATA CENTERSCUSTOMERSPRODUCTS AND SERVICES

R&D NEWS

Data Center operators can be categorized into three segments:
Digital operators – comprises large corporations for whom
computing in its various forms is the core business, including
many global digital brands such as Google, Facebook,
Microsoft, and so on.

Data Centers focuses on the growing market segment foradvanced air-side heat exchangers. High capacity, reliability,and energy efficiency are business critical for the customer, andthe systems Munters offers provide exact control of air volume,
temperature, humidity and air quality. Alongside a range of standard units, we are developing customized solutions that meet
specific requirements, in close collaboration with the customers.
Data Centers intends to further expand its product portfolio of
cooling solutions in 2019 in order to include several products with
the new, patented SyCool technology for indirect and direct coolingwith the air-side heat exchanges and technologies for coolingsystems that combine the energy efficiency in our thermosiphon
technology with more traditional fan cooling.
Beyond product supply, the business also provides a range ofon-site services, including installation, start-up, commissioning,routine maintenance and breakdown support.

Another example of the type of patented technical solutionthat has helped Munters position itself as a leading innovatorin data center cooling, is the Mineral Removal Media (MRM)
System. This system uses an anodic portion of Munters media toevaporate waste water that would otherwise drain off. The result
is a small extra cooling effect that reduces total water consumption and has the potential to separate particles from waste water
before draining.
Munters intends to further develop its SyCool technology in
2019, offering a cooling system that combines different technologies to support customers’ needs and demands. We also intend to
expand our cooling solutions with patented cooling technology aspart of a strategic partnership.

Co-location providers – for whom building and running data
centers is a core activity. These firms build and operate data
centers for enterprise customers, providing advantages that
can include economies of scale, flexibility and operational
expertise.
Enterprise operators – comprises large organizations forwhom computing is not a core activity, but are of such a scalethat their IT requirements can justify building and running theirown data centers.
Of these, the digital operators account for the largest share of
Munters data center revenue, closely followed by the co-location
providers. Enterprise operators tend to have only occasional
needs for additional cooling capacity and are not, therefore,
generally targeted on a pro-active basis.
Sales and service personnel in the business area work at
multiple locations worldwide, while manufacturing has typicallytaken place at two regional production units in Dison, Belgium andVirginia in the US.
Munters’ Data Center plant in Dison, Belgium will be shut down
as part of the Full Potential Program. This is contingent on information disclosure and negotiations with the relevant trade union
organisations. Our analysis of Data Centers operations is thatthe prospects for establishing profitable operations in Europe arelimited, in a market characterised by overcapacity and ongoingpricing pressure. Going forward, Munters will focus primarily on the
US Data Centers markets, where from a business perspective there
is a much more stable base for achieving profitable growth. This
includes established customer relations and previously achieved
performances in the US market, which constitutes a strong foundation for future growth.

26			

TECHNOLOGIES AND INNOVATIONS
Data Centers products and solutions incorporate a range of coretechnologies, including Munters’ patented EPX polymer heatexchanger, GlasDek® evaporative media and dehumidification
through sorption rotors. These technologies are incorporated
into air treatment modules and sub-assemblies, ready for on-site
installation.
Munters is one of the pioneers in the market for indirect evaporative cooling. According to independent studies, the Munters Oasis
system can provide significant energy savings when compared to
traditional compressor-based cooling systems.
In the market for direct evaporative cooling, Munters provides
a variety of solutions, ranging from loose media, through self-contained cooling modules with framed media and water circulation
circuit, to a range of complete packaged air treatment units. For
dry cooling systems that use no water, Munters offers a rangeof different products including heat exchanger technology andthermosiphon technology, which are included in a complete air
treatment unit.

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Case study: The DigiPlex data center (Norway)

Sustainable cooling at
DigiPlex data center
The DigiPlex data center in Fetsund, Norway uses the latest technology and industry-leading functions for energy conservation.
The innovative infrastructure, which was constructed specially tomeet the digital requirements of the future, contains an energy-efficient system for indirect lighting designed specifically to makeuse of Norway’s cool climate.
This groundbreaking solution allows the system to deliver ahigh level of cooling with extremely low energy consumption.
The facility consists of two air-cooled three-storey buildings,
each with a capacity for 20,000 servers. Each building has a
net floor area of 2,100 m2 data halls with three server rooms,
one on each floor. The facility has a Power Usage Effectiveness(PUE) factor of only 1.1 due to the unique Air-to-Air coolingtechnology.

The core of the cooling system is Munters Oasis® indirect evaporative cooling system, designed to give a partial PUE (pPUE) ofan ultra-low 1.06.
DigiPlex and Munters prize-winning method uses natural,
cost-free cooling to create significant environmental advantages
through Oasis IEC, which reduces energy consumption andoffers a safe, stable data hall climate.

“
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

According to independent studies, the Munters
Oasis system can provide significant energy
savings when compared to traditional compressorbased cooling systems

27

OFFERING
AFFÄRSOMRÅDENMIST ELIMINATION“Munters’ mist eliminators remove 95% of theharmful sulphur found in emissions from ships”

MARKETSSUB-SEGMENTS

Mist Elimination is a global leader in providing solutions
for mechanical gas and liquid separation, as wellas mass transfer. Munters mist eliminators are key
components in scrubbers to filter flue gases primarily
from coal-fired power plants and ships across theworld. Our mist eliminators create optimal operating
conditions and protect equipment in processing
industries, windmills, gas turbines and ships.
As of January 2019, Mist Elimination will form part of
the Air Treatment business area.

NET SALES403
SEK MILLION

Americas 41%
EMEA 23%APAC 36%

Power 47%
Process 38%
Marine 13%
Other 1%NET SALES AND
OPERATING PROFITSEK M

ORDER INTAKE,
ROLLING 12 MONTHS
SEK M

SEK M

OPERATING PROFIT

SEK M

500

80

150

400

60

120

400

40

90

300

200

20

60

200

100

0

30

100

-20

0

300

0

2014 2015 2016 2017 2018

Net sales
Operating profit

Q4 Q1
2017

Q2

Q3

Q4
2018

500

52
SEK MILLION

0

Order intake, per quarter
Order intake, rolling 12 months

28			

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IMPORTANT EVENTS 2018
The planned reorganization of Mist Elimination continues,
in which new business opportunities in the marine segment(emissions purification for vessels) and processing industries
are showing strong improvement, while projects for desulphurization of flue gases from coal-fired power plants continue totrend downward.
Kevin Enterprises, acquired in 2017, was successfully
integrated during the year and promoted growth in the­processing industry.

“

Munters equipment cleans
1/5 of the world’s electricity
production

Mist Elimination exceeded earnings expectations by profitably
re-focusing operations from weakening markets to growing
markets and segments.

Order intake increased 13 per cent, and 8 per cent organically.
The growth was primarily due to a large increase in the Marine
segment for emissions purification with scrubbers on vessels,
mainly in Europe. Even the process segment increased during theyear, in APAC and the Americas. The power segment, with projects for flue gas desulphurization projects, decreased in 2018.
Net sales decreased 1 per cent, and decreased 6 per centorganically. Net sales impacted healthy growth in the marine
and process segments, but this could not fully compensate forlow volumes in flue gas desulphurization projects in China.
Region Europe reported increased net sales in several sub-­segments, with the largest increase in the marine segment.
Operating profit increased to SEK 52 million (34), primarily
attributable to lower overhead costs.

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 829

OFFERING MIST ELIMINATIONMARKETS AND TRENDS
Power: Around the world, stricter environmental requirements to
reduce hazardous emissions are being introduced. Coal-fired
power stations that cannot meet the new requirements risk being
shut down; this is why the technology that Mist Elimination offers
to remove sulphur oxides from flue gases has become mission
critical for customers of this business area. The mature markets inNorth America and Europe are driven primarily by replacement
installations, while newer, stricter laws affect both new construction and after-market installations in China and India. Munters
is the leading player in North America in terms of supplying
mist eliminators used to separate SOx in FGD systems, and also
enjoys strong positions in Asia and Europe.
The competitive landscape in terms of mist elimination for
Coal FGD consists of a small number of global players andmany smaller manufacturers locally, the latter especially in
Asia. A weaker market situation in China regarding projects

for flue gas desulphurization (FGD) has been noted, with fewer
after-market installation projects in Super-Clean segment, as well
as a low level of market activity in Europe.
Wind turbines require clean air to function efficiently, andMunters mist eliminators purify intake air of dust and particles
thereby protecting and prolonging filter lifetime. The proportion of wind power in electricity production is increasing, andthe underlying wind power market is expected to show stable
growth in the foreseeable future, supported by a strong global
focus on climate and environmental issues. Munters enjoys astrong position, especially in the European market where a set oflarger wind turbine manufactures are located.
Process: Pulp and paper, steel and metal, the chemical andpetrochemical, as well as, refining industries, constitute a stable
growth market with regional variations driven by increased
streamlining and stricter environmental requirements. Munters

mist eliminators are used to manage a range of problems
that drops of fluid would otherwise cause, such as reduced
efficiency, damage to components, and loss of product andprocessing fluids. Munters is focused on a set of specific nicheapplications, where it holds strong positions.
Marine: The marine market is driven by growth in international
shipping traffic and increasingly stricter regulation of marine
emissions. The UN’s shipping agency, the IMO, has decided
that by 2020, shipping must limit sulphur emissions and reduce
the sulphur content of fuels from 3.5 percent to 0.5 percent, or
alternately filter emissions to an equivalent degree. This has
resulted in an increase in shipping companies’ investments inmodern scrubber systems in order to become compliant, which
in turn will have a positive impact on the marine market for mist
eliminators.

By purifying the flue gases with Munters
mist elimination technology, the amountof environmentally hazardous emissions
can be greatly reduced.

30			

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CUSTOMERSThe power industry – primarily coal-fired power plants in China
and the US – accounted for 47 per cent (65) of business area
sales in 2018. The processing industry, including the new
mass transfer operations, accounted for 38 per cent (28), andthe marine industry for 13 per cent (5) of external sales. Thechanged mix between segments was caused by strong growth in
the marine and process segments, and a less favourable market
trend in flue gas desulphurization.
Mist Elimination is focused on continued expansion in China
and India through a broadened product portfolio and expansion in selected areas of application such as wind power, theprocessing industry, and marine scrubber systems. The main
strategic reason for the acquisition of Kevin Enterprises was toenable accelerated growth in the process segment by broadening the product portfolio with mass transfer components. The
acquisition also strengthened Munters footprint in the fast-growing Indian market.

PRODUCTS AND SERVICES
Mist Elimination offers products for different types of applications, all with a high degree of precision and performance.
The product offering consists of a large set of different types ofvane mist eliminators available in various materials such as steel
and plastics. These are mainly used for emission gas scrubbing
applications and for protecting equipment downstream from the
air intake.
Munters also offers a full set of so-called mass transfer components and services used mainly in mass transfer and separation processes in refining and chemical plants. All products andsolutions are durable and dependable, and can be designed tohandle extreme operating conditions where needed. They are
customized for specific industries and customer needs, and areoften critical for customers’ operations.

“

TECHNOLOGIES AND INNOVATIONSMist elimination: Regardless of application, vane-type mist elimination is a process in which droplets are removed from a gas
stream passing through a set of stacked profiles.
In essence, the entering gas is forced to make a sharp bend
and the droplets in the gas form a liquid film on the profile surface when they collide with it, after which the liquid is drainedby gravity.
The Munters offering contains approximately 50 different
profiles for vane-type mist elimination, each optimized for specific operating conditions and drop sizes.

Munters system can achieve morethan 99 % reduction of sulphuroxides from coal-fired power plants

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Munters has been the leading provider of vane-type mist
eliminators for many years, setting the industry standards interms of developing and tailoring optimal mist eliminator configurations for customers in a variety of industries.
Mass transfer: Munters provides a complete range of masstransfer solutions and equipment typically found within towers/
columns at petroleum refining, chemical, petrochemical and fertilizer plants world-wide. Components are typically divided into
various component types, fractionation trays, mist eliminators,
and all other column internals.
By selecting and installing the optimal set of mass-transfer
equipment, the distribution of the liquid flowing down, and thegas flowing up, inside the column can be controlled. By controlling these flows, the interaction and mass transfer between
the two phases can be improved and the process efficiency
enhanced.
Munters will continue developing and delivering the latest
technology of mass-transfer solutions in order to meet customer
requirements as regards energy efficiency, sustainability andprocess results.

31

OFFERING

AgHort is one of the world’s leading suppliers ofinnovative, energy-efficient climate control solutions forlivestock farming and greenhouses, as well as software
for controlling and optimizing the entire food production
value chain. Munters solutions increase productivity
while enabling sustainable food production in which
strict requirements are placed on quality, animal health,and food safety.

AGHORT“40% fan energy savings forforced ventilation in farming”

MARKETSSUB-SEGMENTS

NET SALES

2,018
Americas 31%
EMEA 24%APAC 45%

Broiler 43%
Swine 31%
Layer 14%NET SALES AND
OPERATING PROFITORDER INTAKE,
12 MONTHS ROLLING

SEK M

SEK M

2,500

300

2,000
200

1,500
1,000

100

500
0

2014 2015 2016 2017 2018

Net sales
Operating profit

Greenhouse 5%
Dairy 4%
Other 3%

0

SEK M
800
700
600
500
400
300
200
100
0

SEK MILLIONOPERATING PROFIT

SEK M
2,500
2,000
1,500
1,000

244
SEK MILLION

500
Q4 Q1
2017

Q2

Q3

Q4
2018

0

Order intake, per quarter
Order intake, 12 months rolling32			

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IMPORTANT EVENTS 2018
Rapid growth in the swine sub-segment in China.
The trade war between China and the US has created uncertainty and decreased willingness to invest in many markets.
Outbreak of swine fever in China has caused concern anddecreased willingness to invest in the short term, but over thelong term drives demand for advanced climate solutions.
Successful pilot installations with our IoT solution, SonarEcho,paves the way for more business.
Order intake increased 13 per cent, of which 10 per cent organically. The increase was driven mainly by strong order intake
from the swine segment in China but also by two large orders forSonarEcho. Order intake in EMEA and the Americas remained
unchanged compared with the preceding year. Order intake
decreased in the largest market, the US, primarily owing to low
sales of cooling pads.
Net sales increased 10 percent, of which 7 percent organically.
Growth in 2018 was driven primarily by the swine segment in
China. Outbreaks of African swine fever weakened demand in
China during the second half of the year, and the market situation remains uncertain. The trade war between China and the
US dampened the willingness to invest in several markets. Sales
in EMEA were stable compared with the preceding year.

MARKETS AND TRENDS

Demand in AgHort’s various customer segments is driven by
GDP and population growth, as well as increased protein consumption, but also by increased demand for advanced climate
control solutions. The latter is driven by factors such as demandfor decreased use of antibiotics and for relocating vegetableproduction closer to the consumers, which increases the demand
for advanced greenhouses. An increasing number of consumers care about the well-being of animals and are placing strict
demands on proper livestock farming. This has resulted in ashift towards more free-range chickens, which together withincreased demands for food safety, sustainability, and increased
production, drive the need for new or upgraded stalls withadvanced ventilation solutions.
Increased traceability of food is a rapidly-growing need that
leads to increased demands for data collection and analysis
throughout the entire food chain, including feed production,
stalls, production facilities and transportation all the way to thestore. Together with increased demands for productivity, this has
led to rapid development of the software used by food producers to plan, control and optimise the entire production chain fromfeed to finished product. Munters is a world leader in this area,
above all in the broiler segment, through its Group company
MTech Systems.

Operating profit was SEK 244 million (225). The margin was
impacted positively by higher volumes but weighed down
by a less favourable product mix, fewer large projects andinvestments in software and the digital offering. The majority ofgrowth took place in Asia, and the increased volume required
investments in the local organisation.

“

Munters products improve
livestock farming and increase
efficiency in food production

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OFFERING AGHORTCUSTOMERSAgHort is one of the world’s leading suppliers of advanced
climate control for various agricultural segments, with a particularly strong position in the layer and broiler markets in the
US and Europe. AgHort is also one of the leading players on
the swine farming market, with a strong position in the US andgrowing sales in China. In the Chinese market, a switch is taking
place from smaller farms without climate control equipment tolarger farms with advanced technology, which also includes
advanced climate control. This development is driving demand
for the business area’s products. AgHort is also active in thedairy and greenhouse segments.
Efficient climate control is one of the most important factors in
profitable, sustainable production. International companies andindependent growers are among AgHort’s customers. Throughthe Group company MTech Systems, AgHort has many of theworld’s largest food producers in the broiler segment as customers, since they use our software for planning and monitoring
their operations.
Sales are primarily through distributors with a presence inlocal markets. Software solutions are most often sold directly
to food producers. In certain geographic markets and segments, climate control products are also sold directly to the end
customer.

PRODUCTS AND SERVICES
AgHort offers complete systems for controlling the environment
in stalls, including equipment for ventilation, cooling, andheating, as well as, various types of control systems. The productportfolio also includes software, aimed mainly at food producers active along large parts of the value chain. Our offering
is built on long experience and innovative products that are
reliable and sustainable. We collaborate with end customers
and resellers to optimize and tailor our units for customers withregard to moisture content, temperatures, emissions and energy
consumption.
We are seeing great interest in data collection and analysis
in real time. Digitalized processes are becoming an importantfactor for being able to optimize production, increasing the
integration among various players, and strengthening the foodproduction value chain. A new solution was launched in 2018:
SonarEcho, comprising sensors and software for collecting,presenting and analysing data. We see great potential in theseInternet-based solutions, but competition is stiff and requires
continued investments in organisation and technology.
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A new heat exchanger, Heat-X Rotate, was launched in 2018;
it is used to reclaim heat from animal stalls. The product hasreceived a very positive reception, especially in northern Europe
where there is significant interest in energy efficiency and sustainability. Heat-X Rotate is a product that addresses a smaller
portion of the market but can make a difference in total energy
consumption on a farm.

TECHNOLOGIES AND INNOVATIONSAgHort’s offering covers a range of different products for climate
control and data analysis. For example:
Controllers and advanced software regulate climate and otherfunctions such as feeding, lighting, the animals’ weight, water
consumption and air quality. Status updates are provided inreal time.

Circulation and extraction fans especially developed foranimal stalls and greenhouses. The latest generation of fanswith Munters Drive motors can reduce energy consumption
and increase productivity by adapting ventilation in a moreexact manner than was previously possible with traditional
motors. Examples of other equipment that AgHort offers areheaters, air intakes, and cooling systems.
The portfolio also includes software for food producers,
primarily in the broiler and swine segments. The products areused to monitor, plan and optimise operations in such areas
as animal health and feed management, as well as logistics
and production. The introduction of technologies in 2018 has
opened up new possibilities and further increased precision in
the forecasts and plans that the software makes possible.

“

Munters is one of the world’s leading suppliersof advanced climate control for various farming­segments, with a particularly strong position in thelayer and broiler markets in the US and Europe

Munters can provide the perfect climate
for growing crops, which provides
growers the opportunity to produce under
optimal conditions.

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OFFERING AGHORT

Munters helps tofeed the world“

Munters climate solutions contributeto more than 1 of 7 meals aroundthe world

The biggest challenge agriculture is facing is that the populationof the world is growing but there is no more land to cultivate. By
the year 2050, we need to produce 60 per cent more food. But
there is only land available to produce 20 per cent of that need.
To produce the other 80 per cent, we need to be more efficient,and this is where Munters can help.
Munters delivers complete climate solutions for agriculture.
We offer a full line of fans, air intake, humidifiers, coolingsystems and air treatment systems for livestock and greenhouses.
We stand on a solid basis of cutting-edge research, with production and distribution networks across the globe.
Livestock farmers often encounter problems in their stalls withheat stress, low feed efficiency and various illnesses among theirlivestock. This is often related, directly or indirectly, to climate
conditions in the stalls and can quickly affect production andanimal health.
The weather outdoors may vary drastically, but the indoor
climate in stalls must be kept constant, within strictly defined
limits for warmth and humidity.

WE ARE ALWAYS IMPROVINGOne of our core values is “There is always a better way.” Wework closely with our customers, and continually endeavour
to improve and refine our products to increase efficiency andreduce energy consumption. By creating the perfect climate,
our solutions make livestock farming possible under optimal
conditions. Farmers achieve better animal health, higher productivity and increased profitability. For end consumers, this means
high-quality, healthy food.

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EFFICIENCYKTIVITET

“

20%

20%

In 2050, we need to produce 60
percent more foodstuffs to supply
the world’s population with goodquality food. Of that increase,
only 20 per cent can come from
more arable land. The remaining
increase must come from increased
efficiency.
Munters products and solution play
an important role in enhancing theefficiency of food production.

I chose 100% to use Munters for their broad
product offering, and also because of our
excellent dialogue. Many of their engineers
are farmers themselves and they understandmy daily work

William Nofziger runs Nofziger Farms in the US,
which produces over two million chickens every year.

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OFFERING SERVICES

Service is afundamental part of
the Munters offering
Our ambition is to make the perfect climate sustainable.
To realise it, we are building a world-class global
service organisation.

With solutions based on each customer’s specific needs, weensure that Munters equipment functions sustainably and­efficiently. Service represented 11 per cent of the Group’s net
sales in 2018. At the end of the year, Munters had 40 own
service centers around the world; we also offer services using alarge global service network. With our local presence, we haveclose relationships with our customers and can offer quick support for the installed base of approximately 220,000 products.
Our knowledge of applications and in-depth product knowledge allows us to deliver a high standard of service and support.
Alongside valuable upgrades, Munters can enable reductions inenergy consumption, ensure quality and environmental performance, and extend the economic service life of our products.

38			

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NEW SERVICES PROVIDE UPSELLING FOROUR EXISTING CUSTOMERSSERVICE OFFERING— EIGHT CATEGORIES
Installation – installation
services for all products andequipment.
Commissioning/Start-up –usually offered and frequently
sold in the original sales
contract.
Performance checks andinspections – to assess thecondition of the equipment
and to optimize the results.
Reconditioning/Repairs –either at a specialized service
center or on-site.

SERVICE CONTRACT
ServiceCaire – contracts thatcover, for example, maintenance, performance checks
with trend tracking and on-sitetraining of personnel.
PrimaCaire – contracts with anextended warranty period. All
our contracts are tailored tomeet the customer’s needs.
Maintenance – our service
engineers are also available
for customers who choose
not to sign a service contract
but are only requesting
maintenance as agreed.

Upgrades/Retrofits – component and system upgrades givethe customers access to latest
technology, and can thereby
improve energy efficiency andequipment performance.
Spare parts – original partsand spare parts kits for all
types of installations.
Training – of customers’
technicians, both on-site andin training centers.
Munters Flex Rental –solutions for customers who
have temporary needs, are
not willing to stop operations
during a maintenance period,
want to test that the equipment
works or wish to rent insteadof purchase.

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Our goal is to guarantee our brand promise “Your Perfect
Climate” by increasing sales of services to our existing­customers. That is why we are focusing on developing service
contracts that offer customers attractive solutions that optimise
their operations and reduce stoppages in production as well as
operating costs.
We develop our offering with new solutions intended toincrease sustainability in our products. We are also continuing
the work on offering more complex services in close collaboration with our customers.

BROAD SERVICE OFFERING
Installation monitoring or commissioning support is included in
the majority of our sales agreements, and in connection withnew sales Munters offers the customer a service contract withpreventive maintenance and inspections.
ServiceCaire and PrimaCaire, our service contracts andextended warranty, are tailored to the customer’s needs. They
are usually multi-year and cover a range of services such as
on-site training, planned maintenance, and monitoring of
performance.

REGULAR INSPECTIONS GUARANTEEEFFICIENT, SUSTAINABLE OPERATIONS
Munters products are manufactured and installed with high-quality components and undergo comprehensive testing. Our
solutions are often mission-critical, and certain components —sorption rotors, for example — require regular capacity checks
to ensure efficient performance.
Our service technicians have the knowledge, the technology,
and the tools needed to measure and analyze equipment performance. Special equipment and software is required to carry out
capacity testing and to calibrate and optimize performance.

DEVELOPMENT OF SERVICES
In 2018, we developed our service offering in Data Centers andprepared for an expansion of services in AgHort. We have also
enjoyed continued success with upgrade solutions that broaden
our offering to customers with equipment other than Munters
so that they can benefit from energy savings and more stable
operation as well.

DIGITALISATION AND CONNECTED SERVICES
To increase the capacity of the service organisation, we began
to introduce a shared management system for field service andthe installed base in 2018. The system will constitute the backbone of the organisation globally.
Many years of experience in combination with modern technology allows us to diagnose and optimise the performance of
our equipment remotely. The launch of the Munters Connected
Climate platform facilitates monitoring and troubleshooting.
The work on broadening and improving the selection ofconnected services continued during the year.

39

OFFERING SERVICES
Case study: Heathrow (UK)Upgraded fans from
Munters save 15 GWh
at Heathrow Airport
With over 80 million passengers in 2018, Heathrow has morepassengers than any other airport in Europe. It houses four
enormous passenger terminals that take up nearly 600,000 m2of space; creating a pleasant indoor climate requires tremendous amounts of energy.
One of Heathrow’s goals is a completely carbon dioxidefree airport infrastructure by 2050. Such an ambitious goal toreduce environmental impact requires serious energy savings
initiatives. Since 2016, energy project manager Andy Dobbs,
together with Munters climate control specialists, have beenworking on extensive upgrades to the air treatment equipmentin the terminals.
By replacing older, often belt-driven air conditioning units
such as exhaust and process fans with smaller, more energyefficient and maintenance-free EC fans in a wall bracket fan
configuration, Heathrow has been able to reduce its energy
consumption in these air conditioning units by 30 to 60 per
cent. In total, Munters has upgraded more than 150 air conditioning units, which has resulted in the installation of approximately 500 EC fans. The energy savings from these projects
total an impressive 15 GWh, equivalent to the annual energy
consumption of no less than 3,700 households.

40			

OTHER ADVANTAGESTO UPGRADING THE
AIR CONDITIONINGSYSTEM:
Improved reliability: If a fan
breaks down, a high level ofairflow can still be maintained
despite this owing to theother fans, thus avoiding an
emergency situation.
R educed maintenance: Since
EC fans are 100 per centmaintenance-free, the wall
bracket fan solution saves onsuch maintenance costs as
lubricating stock and replacing
V-belts.
R educed need for spare partsstorage: No need to store
different kinds of stock andV-belts for the various air
conditioning units.
L ower noise and vibrationlevels: Both technical staff andpassengers experience lower
noise and vibration levels
thanks to the smooth, quiet
operation of the EC fans.

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“

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With Munters’ experience and modular systems
for the fans, an upgrade can be completed overnight. For Heathrow, this also means that the
upgrade work itself has no negative impact ondaily operations; passengers and partners at the
airport are thus not affected.

41

SUSTAINABLE OPERATIONS INNOVATION

Innovation for smarter and more
efficient climate treatment
Munters was founded over 60 years ago by one of Sweden’s foremost innovators of
all time. We are proud to carry on Carl Munters’ tradition, and we work continually
to improve our products so we can provide our customers with smarter, more efficient
climate control solutions. In a crucial way, we promote more sustainable operations
and a more sustainable world.
Munters’ products and solutions are often part of mission-criticalprocesses, where they create a perfect climate with exact control
of temperature and moisture. This yields guaranteed climate control in the customers’ processes, with lower energy consumption
and fewer emissions.
Our goal is to understand our customers’ needs better thanthey themselves do. We have in-depth knowledge of specificapplications and access to unique technology we often develop
ourselves. During 2018, we invested SEK 217 million (167) inresearch and development.

INNOVATION

We have a long tradition of technical advances and innovations; Munters occupies a leading position in our central areasof technology. Over the last year, we have focused on suchareas as the further development of SyCool, VOC systems andlow dewpoint technology, the service life and performance of
our evaporative cooling products and improvements to overall
energy efficiency. We keep ourselves up to date on, and we
experiment with, potentially disruptive technologies as part ofour daily work.
42			

In addition to these basic technologies, Munters has beendeveloping software for several years that enables our technicians and partners to quickly configure optimised solutions.
One example is Genesys, which collects technical specifications
for specific projects and permits more exact calculations and ahigher level of process quality.

INNOVATION BASED ON CUSTOMER NEEDSThe orientation of our research and product development isgoverned by changed customer needs, as well as our knowledge and Munters’ position in various areas of application.
Each business area is responsible for research and development
within their respective product areas, with technology centres
close to our customers.
We use a shared development model: the Munters ProductDevelopment Model (MPDM), which is a multidisciplinary modelwith clear control points. This model leads to the development
process being based on individual creativity, disciplined innovation, and direct insight into customer needs.

CENTRAL AREAS OF INNOVATIONINNOVATION FOR INCREASED SUSTAINABILITY

Close collaboration between teams from Munters and our customers both increases the precision and enhances the efficiencyof our innovation efforts. Research, sales, and production alsocollaborate closely so as to improve our ability to develop products that meet specific customer needs. New technologies andinsights are thus quickly introduced into more product groups
and applications.

Our products allow our customers to attain the perfect climate
for production while reducing climate impact. Sustainability is
one of the driving forces in our product development efforts.
During the year, we increased our focus on proactive
maintenance and improving installed products. We provide ourcustomers with information and a basis for decisions, rather thansimply a product. This expanded service is extremely important.
It creates new business models where our innovative products
and services enable us to collaborate closely with our customers
on delivering “Your Perfect Climate”.

OUR BASIC TECHNOLOGIES INCLUDE:
Dehumidification rotors
Systems for direct evaporative cooling
Heat exchangers with indirect evaporative technology
Mist eliminators
Controllers for monitoring the production climate
Agricultural fans
Air humidifiersControl equipment
Data analysis/visualisation

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SONARECHODRYCOOL® FOCUS

Munters IoT technology is used
to connect chicken farms withfood producers’ data systems,
guaranteeing complete control
throughout the supply chain. This
leads to improved animal healthand increased efficiency inproduction using wireless sensor
technology and an innovative
software solution.

A flexible and energy-efficientcommercial Dedicated Outdoor
Air Systems (DOAS) unit aimed
at customers with higher airflow
levels who use our DryCool®
technology. A combination ofsorption rotor-based dehumidifiers and complete energy recovery leads to reduced cooling andreheating. This offers various
alternatives based on dewpoint
requirements, and is a leading
product on the market.

INNOVATIONS IN 2018
Several new products were launched during the year. The
focus was on optimising the climate while reducing energy
consumption.
A few examples:
DryCool® Focus
MCC – Munters Connected Climate®
DSS – Dessicant System Solution
SonarEcho

MCC – MUNTERS CONNECTED CLIMATE®
The latest addition to the digital world, from Munters. Internet connections
for our products creates the possibility of remotely monitoring, controllingand optimising all of a customer’s units, which results in less downtime andbetter control over the climate in the application. MCC comprises data
logging, alarms, positioning and much more.

DSS – DESSICCANT SYSTEM SOLUTION
A new, improved sorption system with a broad selection of pre- andpost-treatments. The system comes in a range of sizes and alternatives forheating, with various types of housing, rotors and completely configurable
controllers to suit the needs of individual customers for dry air.

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SUSTAINABLE OPERATIONS OPERATIONS

Efficient production andsustainable delivery chain
One of the mainstays of Munters is the work on efficiency
in production and the supply chain. Central to this work,
which we call Operational Excellence, is our employees’
focus on the customer. We must guarantee the customer’s
need for high quality, precision in delivery, cost efficiency
and sustainability at every step. Our goal is to build aworld-class production and supply chain.
Katarina Lindström,Group Vice President
Global Operations

EFFICIENCY IN RELATION TO
THE CUSTOMER IS CRUCIAL
A high degree of innovation and a strong focus on quality indeliveries is the basis for long and trusting relationships with customers and suppliers. Our employees’ cross-functional approach,with representatives of R&D, product management, production
technology, purchasing, sales and service generates the improvements to products and production that will benefit our customers.
Now, we’re taking it a step further. To increase precision indeliveries, shorten lead times, reduce stockholding and ensure
the cost efficiency that permits a competitive offering, we haveinitiated development toward several standardised products andscalable production processes.
44			

We routinely evaluate our supplier chain to safeguard thedemands for proximity to customers, which facilitates adaptationand service and reduces lead times. At the same time as it means
lower logistics costs and less of an impact on the environment
and the climate.

STRATEGICALLY LOCATED FACILITIES
Munters has 18 manufacturing plants and six facilities for final
assembly and customisation, strategically located near its mostimportant markets. In general, Munters facilities in the US andEurope specialize in products within one of its business areas,
whereas facilities in other parts of the world manufacture
and assemble products for more than one business area. This

reduces the Group’s exposure to changes in local, regional or
global trade policies. We are continually developing our production structure based on changing market conditions.

CONTINUAL IMPROVEMENTS
Our entire production platform is built on the Munters Production
System (MPS), which is largely based on Lean principles. The
aim is to improve safety, efficiency, quality and delivery precision. MPS enhances the efficiency of our entire supply chain bymonitoring, organising, controlling and documenting processes
for production, purchasing, distribution and after-market.
To strengthen the implementation of MPS in our plants, a VP
Global Quality was appointed in October 2018, as well as a
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Global Director Production Development who will take office inJanuary 2019. The goal is for all divisions to be working under
this system by the end of 2021.

INVESTMENTS FOR INCREASED CUSTOMER BENEFIT
In 2018, Munters made significant investments with a total valueof around SEK 100 million to increase the capacity of its existing
facilities.
In Tobo, Sweden, the capacity for rotors has increased at thesame time as we invested in a more efficient production flow. In
Italy, the plant in Pieve began production of CELdek evaporative
cooling pads during the year.
The new plant in Jiang Yin, China, which produces goods for
AgHort and Data Centers, went into operation during the year.
Meanwhile, we are building a testing facility adjacent to theplant in order to ensure quality and deliveries.
Systematic improvement efforts have created efficiency and stability in Monterey, Mexico. Previous production problems havebeen resolved, and the delivery of evaporative cooling pads —exported primarily to the US market — has been working well.

SUSTAINABILITY IN PRODUCTION
All Munters plants are quality certified under ISO 9001, andseven facilities are also certified under the ISO 14001 environmental management system. The environment, health and safety
are priorities, and our EHS policy applies to all divisions in theGroup.
We are working on systematic risk evaluation of our production units for the purpose of preventively reducing environmental
impact while increasing focus on health and safety. Other
areas covered by the risk evaluation include fire safety, waste
and chemical management, as well as an overhaul of electrical installations. All units are assessed on a rolling three-year
schedule.
In 2018, risk evaluations were conducted at 10 manufacturing plants, which resulted in a number of measures focused on
fire prevention.

of workplace accidents by working proactively. We believe thepreventive work has yielded results; in 2018, fewer accidents
were reported than in the preceding year*. The safety initiatives
remain a high priority, and we are working hard to reduce thenumber of accidents. For more information, refer to pages 58
and 61.
All accidents are reported immediately to Group Management,
and each individual case is followed up by the head of Operations,who ensures that the cause is analysed and measures are taken
locally.

ENERGY
Climate impact from our manufacturing units comes mainly
from energy for heating, ventilation, cooling and production
processes. We are working actively on enhancing the efficiencyof our production processes through increased availability
and new, energy-efficient production equipment, using wasteenergy and installing LED lighting and sensors. We are also
reviewing the possibility of increasing the share of renewableenergy sources; our facilities in Belgium and Germany changed
electricity contracts during the year and are now purchasing
only renewable electricity.
The objective is to continually reduce energy use and to makethe manufacturing plants and processes more energy-efficient.
Munters monitors its energy efficiency by putting the electricity consumption in relation to production value. In 2018, thistotalled 1.11 per cent (1.15). Renewable electricity made up 31
per cent (29) of the electricity used by our production facilities.

WASTE
Munters is working continually to reduce waste from its manufacturing plants and to improve the recycling rate. A linchpin in thiswork is continual quality work that reduces cassation and saves
on costs and the environment.
In 2018, the rate of recycling was 60 per cent (57). The
objective is to continually reduce the portion of waste thatcannot be re-used or recycled.

WORKPLACE ACCIDENTS

WATER

Munters has a Vision Zero plan concerning serious workplace
accidents, and reducing the number of accidents is one of ourhighest priorities.
Systematic health and safety work is part of MPS. This
includes incident reporting, continual inspections, and mitigatingareas of risk. The objective is to continually reduce the number

Reduced water consumption and water purification in Muntersproduction processes is an important part of the company’scontribution to reduced environmental impact. Munters separates both chemicals and particles in the waste water from its
facilities. The objective is to gradually reduce water consumption
in the company’s manufacturing plants and processes.

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Questions for Katarina
What do you think of the possibilities for Munters
to enhance production efficiency?
At Munters, we have numerous opportunities for improvement. By setting clear goals and monitoring them at thework team level, we drive work forward.
For Munters, efficient production based on continual
improvements — as well as a stable, sustainable delivery
chain — are important success factors. We are building
our culture through a cross-function approach, eliminating
losses and improving our operations and ability to deliver.
What are the biggest challenges for production
and sourcing at Munters today?
Munters has customers in over 100 countries, production
facilities in 11 and suppliers of raw materials and components in 28 countries. An efficient, sustainable delivery
chain allows us to meet customers’ varying needs with anexcellent offering and valuable service.
What role do your employees have in this transformation?
Our employees’ skills, commitment and involvement in our
improvement efforts are the key to meeting and exceeding
our customers’ needs and expectations every day.

KATARINA LINDSTRÖMGroup Vice President
Global Operations*We measure the number of accidents where the employee needed to seek
medical treatment, in relation to the number of hours worked.

45

VERKSAMHETENSUSTAINABLE
OPERATIONS OPERATIONSA STRONG SUPPLIER CHAIN
Our supplier network is valuable to us; it is built on mutual trust
and many years of partnership. Munters sources goods andservices from approximately 2,000 suppliers in 28 countries.
A global sourcing organisation coordinates and enhances
the efficiency of sourcing, the purpose of which is to achieve
increased standardisation and consolidation of the sourcing
volume to fewer suppliers. At the same time, sourcing is becoming increasingly regional, a trend driven by increased protectionism and new barriers to trade.
Direct material represents approximately two thirds of thetotal cost of a product. We place strict requirements on quality,
efficiency and sustainability. Margin improvements and shorter
lead times are also priority areas. Together with our suppliers,
we are finding new technical solutions that reduce costs. A largepart of the sourcing volume is negotiated annually, but we areendeavouring to increase the proportion of multi-year agreements to secure deliveries and shorten lead times, as well as toensure quality and stable price levels.
The 25 largest direct material suppliers by volume represented 26 per cent of the total sourcing volume. The goal set in2015 was to reduce the number of suppliers by 10 per cent per
year over a business cycle. In 2018, the number of suppliers was
reduced 8 per cent. A new goal of halving the number of suppliers has been set for the period from 2019 to 2021.

MUNTERS PRODUCTIONSYSTEM
Our approach, the Munters
Production System (MPS), islargely based on Lean principles
and world-class manufacturing.
This approach is used in
Munters’ global supply chain— production, sourcing andtransportation — to standardise
and improve the procedures
through continual improvement
efforts. The goal is a competitive
customer offering and the best
customer service. We have a
Vision Zero plan as regards
safety, quality and workplace
accidents.
By involving employees at alllevels, we guarantee a culturethat promotes innovation,exchange of experience among
plants and functions, andsystematic improvement efforts.

46			

New trade barriers The year was characterised by trade wars,
above all between the US and China; tariffs on steel, aluminium
and other raw materials increased production costs in the US.
To ensure quick and secure deliveries, Munters has several
main suppliers in each product group, and a detailed plan isdrawn up for each individual plant.

PARTNERSHIP FOR INNOVATION

Safety is now a standing itemat the quarterly meetings inGroup Management.

Munters sourcing organization is focused on creating innovative power together with the company’s strategic partners. In
2018, seven Supplier Innovation Summits were conducted inwhich suppliers from around the world gathered to find valuable
improvements that enable increased efficiency and sustainability
throughout the supply chain.

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RESPONSIBLE SOURCING
We are working to ensure sustainability throughout the entire
supply chain and all suppliers are expected to comply withMunters ethical guidelines. In 2018, 66 per cent of our suppliers– who represented approximately 80 per cent of our directly
sourced material – had signed the revised Code of Conduct.
The Code has also been signed by the Group’s IT and shipping
suppliers.
Observance of the Code of Conduct will be monitored
through visits and audits carried out by Munters or a third party.
In the event the supplier does not meet the requirements, an action
plan will be drawn up. If the schedule is not followed, the relationship will be terminated. No follow-ups were conducted in 2018.
We are evaluating different digital tools to facilitate this work.

SOURCED RAW MATERIAL
Direct material represents approximately two thirds of the total
cost of a product – and raw materials represent 30 per cent ofthat. Copper, the most important raw material, is part of electronic components and fan motors. Munters has tools that theGroup uses to minimise the impact of price fluctuations.

SUSTAINABLE TRANSPORTATION ALL THE WAY
In 2018, we continued our efforts to find cost-efficient andsustainable logistics solutions that shorten lead times while
endeavouring to reduce climate and environmental impact fromtransport throughout theentire chain, from suppliers to
our facilities, distribution cenOHS — OUR APPROACH
ters and out to the customer.
The Occupational Health andWe are just beginning this
Safety Program (OHS) is ourwork, in which we see great
approach to promoting healthand safety at our workplaces.
opportunities for improveThis includes:
ment. A stable production
A global health andflow provides the possibility
safety program.
of coordinated transports,
Visual standards for workand a better process andfunctions based on a safetycontrol reduces the need forand risk analysis.
rapid air transport.
Audits in which the safety of
We actively select suppersonnel is a key component.
Munters will supplement OHS
pliers who offer sustainablethrough education and traintransport solutions and switch
ing in order to build safety intofrom road and aviation transall company processes.
port to ships and trains where
possible.
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8“The theme for the autumn workshop in Amesbury(US) was transportation, energy and sustainability,with a large number of important suppliers

NON PRODUCT-RELATEDSOURCING
Munters spends approximately
SEK 1 billion per year on
non-product related materials
and services (indirect material).
The Group has grown quickly
through acquisitions, andour work is now focused on
guaranteeing that, through joint
sourcing and advantageous
contracts, we will make use ofvolumes and other financial
economies of scale, with a focus
on shipping and IT.

47

VERKSAMHETENSUSTAINABLE
OPERATIONS EMPLOYEES

Increased commitment
and better leadership
Our culture is characterised by our confidence in each other’sabilities and collaboration across boundaries in multicultural
teams. A colorful mix of engaged, competent employees makes
Munters an innovative company focused on quality. Munters has
manufacturing and sales operations in more than 30 countries,and 3,700 employees.

AVERAGE NUMBER OFEMPLOYEES PER REGIONGENDER DISTRIBUTION

AGE STRUCTURESOUR VALUESSustainable value
creation
Passion for results
There is always
a better way
Team spirit

EMEA 40%AMERICAS 40%
ASIA 20%

Men, 80%
Women, 20%<30 yrs, 17%
30–50 yrs, 57%>50 yrs, 26%
Sofia Gellar
Group Vice President HR,
Communications and CSR48			

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“The culture in Munters is based on our confidence in each other’s abilities and collaboration across boundaries in multicultural teams

The Munters culture is built on shared values to ensure we deliver
the promise of our brand – “Your Perfect Climate” – to every
customer, and that all our employees are engaged, enjoy theirwork, and can develop professionally.
We work on the basis of four values: Sustainable Value
Creation, Passion for Results, There is Always A Better Way, andTeam Spirit.
Our values must permeate everything we do. Together with
our Code of Conduct, they govern our attitude towards eachother and in our relationships with our customers and otherstakeholders.
All Munters products and solutions result in major environmental and economic advantages for our customers, thereby
promoting a long-term sustainable society. We also strive forour own operations to have as little environmental impact as possible, to offer our employees a safe, inclusive work environment,
and to ensure that we act responsibly and ethically.

EQUAL AND INCLUSIVE
We welcome and encourage diversity and individuality;
Munters has a broad mix of employees with individual strengths
and motivational factors. We know that different perspectives
provide us with valuable insights which help us improve ourcompany and our offering.
We strive for a more equitable gender distribution, and weplace great emphasis on gender issues in our recruitment process. In 2018, the number of women employees was 20 per cent(18) and the number of women executives was 20 per cent (17).
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

The goal for 2020 is 23 per cent women and women executives.
In 2025, the number of women employees must total 30 per centand the number of women executives must also total 30 per cent.
Our sustainability efforts are built on the UN’s Global
Compact and prescribe matters such as how all employees mustbe treated equally, having equal rights and opportunities. Ourleadership program has included training around unconscious
biases, so that we all become more aware of them and know
how to identify and handle them. Naturally, salaries and compensation must be objective and fair.
In 2018, only a handful of cases of discrimination orharassment were reported, but the results from the employee
survey show that 4 per cent of our employees feel that they havebeen subject to discrimination and 6 per cent to harassment.
Preventing this is, therefore, an area of focus in the activity planning from the employee survey. Our goal is to be a workplace
100 per cent free of discrimination and harassment.
Our employees can also anonymously raise an alarm
regarding serious improprieties in the Group through a special
whistleblower channel provided by an external supplier.

Questions for Sofia
What are you most proud of in 2018?
I was quite pleased when we received the results of ourannual employee survey. In all my years with HR, I havenever seen such positive results. It showed a positive trend
in nearly every area, especially in commitment, leadershipand teamwork. In a comparison with two hundred organisations, we are above average on every question.
What were the most important global initiatives
carried out during the year?
At Munters, we want to support our employees’ development in different ways, and to strengthen our culture andinter-function collaboration. One example of this is ourglobal mentor programme, in which 322 people from22 countries participated during the year.
Another global initiative aimed at knowledge sharing
and collaboration across borders is Munters United. Several
successful activities were conducted in 2018, including nine
workshops with discussions on shared strategies.
We have also implemented a global policy that permits
more flexible working hours.
In 2018, we signed the UN Global Compact, thereby
committing to supporting and implementing its ten
principles.
Munters is a multicultural, committed and driven company. I look forward with confidence to continued development and many new exciting activities in 2019.

SOFIA GELLARGroup Vice President HR,
Communications and CSR

DEVELOPMENT AND CAREER PATHS
Munters has a strong focus on innovations and continual
improvement, and we encourage our employees to take responsibility and challenge themselves in new work tasks that promote
their development.
We are always looking internally for talent; we support
individual career paths and our positions are announced
49

VERKSAMHETENSUSTAINABLE
OPERATIONS EMPLOYEES
internally. The annual performance review with an immediate
supervisor is the foundation of every employee’s development.
Personal objectives are monitored here and a development planis produced. 100 per cent of our employees had a performance
review with their immediate supervisor in 2018.

MANAGERS WITH SKILL AND ABILITY
We expect that managers at Munters will promote an inclusive
work environment in which all the employees’ differences arewelcomed and utilised. Our managers must create trust, andmotivate and inspire their employees to form effective workgroups. They must also support employees’ development by
setting clear goals directly linked to our business strategy andthrough regular feedback. Most of our managers are internally
recruited and we offer various development programs for improving their skills and strengthening important leadership abilities.
All new managers participate in a two-day“Manager at Munters” introduction program. As a next step,
there is the Munters Leadership Development Program, which
particularly emphasizes inclusive leadership and reinforcing thevisibility, self-esteem and networks of women managers.
For first-line managers, above all in production and services,
there is a special Supervisor Development Program. The programme strengthens the ability of these managers to engage
their employees by creating a good work environment with clear
goals and expectations.

HEALTH AND WELL-BEINGMUNTERS UNITED — TRUST AND
COLLABORATION ACROSS BORDERS
Munters operations are built on confidence and collaborationin global teams, to reach shared goals. We need to continuallyadapt ourselves and develop so that we remain successful in a
dynamic market. Working with people who have different perspectives and knowledge leads to better ideas and results — ofcourse, this requires positive collaboration, knowledge transfer50			

and conflict management as well as clear goals, strategies,
and procedures.
To achieve this, we have begun a global initiative: Munters
United, with activities such as improved measurement methods, work rotations, sharing success stories and workshops
focusing on mutual trust and shared strategies.
In 2018, nine successful Munters United workshops wereconducted in the US, Mexico, Japan, Australia, Germany,
Belgium, the Netherlands and Sweden.

Munters has an environmental, health and safety (EHS) policythat applies to all employees. We have a Vision Zero plan forwork-related accidents and strive to continuously improve safetyat our work sites. As part of our sustainability efforts, we monitor
the Total Recordable Incident Rate (TRIR), which is calculated
by putting the number of accidents in relation to the number ofhours worked. For additional information, refer to pages 58 and61.
For performance and development, a good balance between
private life and working life is important. In 2018, we implemented a global policy that encourages managers to offer theiremployees the possibility of flex work, such as working fromhome and using flexible working hours.

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MUNTERS LEADERSHIPDEVELOPMENT PROGRAM

MANY ADVANTAGESTO FLEXTIME”The Munters Leadership Development Program is exactly
what it says it is: it really helps you understand how theirleadership style needs to change to reach the next level. The
programme doesn’t focus just on turning managers into leaders; it’s also building inclusion, diversity and collaboration.”In the US, a pilot program was conducted in 2018 tomonitor the use and results of a flexible approach. The
results were positive for both managers and employees,
including increased trust and communication. Stressdecreased, concentration improved and employees
became more productive. A full 83 per cent of theemployees felt they were more productive when they
worked flexibly compared to when they did not.

Punit Nahar, Director ofStrategic Sourcing APAC,
Beijing, China

EMPLOYEE SURVEY			
The annual employee survey provides us with a very good overview of the organization’s strengths and areas of improvement.
Most important, however, is not the result itself, but the actions
for improvement each group and executive take based on the
results. Over 1,000 actions are taken every year and haveresulted in the following improvements:
Benchmark

2016

2017

2018

Response rate

82

97

98

97

Employee index

74

77

77

80

Leadership index

76

79

78

82

Engagement index

77

80

80

81

Net Promoter Score

9

16

10

15

Above benchmark
Every executive receives a report with the results for their own division, and support from
HR for working on the most important areas for improvement.
The employee survey is conducted by our external partner, Netsurvey.
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51

SUSTAINABLE OPERATIONS SUSTAINABILITY REPORT

Sustainability report 2018
Resource efficiency, Responsible business practices and People & society
are all parts of Munters's sustainability agenda. The following pages
describe the three areas of the Munters Sustainability Agenda in detail,the opportunities and challenges we see, activities conducted during theyear and our plans going forward.

RESOURCE EFFICIENCYPAGE 54

Munters is covered by the requirements of the Annual Accounts Act
for sustainability reporting; this report is an integral part of our Annual
Report. See pages 52–61; Risks and risk management, pages 62–65;
and diversity, page 73. These pages also constitute our Communication
on Progress under the UN Global Compact. With this Sustainability
Report, we wish to create transparency around our priorities, ouractivities, our challenges and our aims in the field of sustainability. This
Report covers the operations of the entire Group.
5 2 			M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

RESPONSIBLE
BUSINESS PRACTICESPAGE 56

PEOPLE & SOCIETY

PAGE 58

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53

“SUSTAINABLE
VERKSAMHETENOPERATIONS SUSTAINABILITY REPORTRESOURCE EFFICIENCYIn 2018, our production facilities
in Belgium and Germany signed
green electricity contracts

Goals and outcomes
ENERGY EFFICIENCYGREEN ELECTRICITY

RATE OF RECYCLINGEMPLOYEES’ ASSESSMENT

ENVIRONMENTAL FINESElectricity consumption in our production facilities is to continually decrease.
(MWh/production value, TSEK).

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

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

The proportion of Munters employees in the employee survey whobelieve that Munters is a sustainable
and environmentally responsible
company. The goal is 100 per cent.

Fines received owing to insufficientcompliance with environmental laws
and regulations. The goal is to haveno such fines.

OUTCOME 2018

OUTCOME 2018

OUTCOME 2018

OUTCOME 2018

OUTCOME 2018

OUTCOME 2017: 1.15%

OUTCOME 2017: 29%

OUTCOME 2017: 57%

NEW MEASUREMENTOUTCOME 2017: 0 SEK

1.11% 31%SUSTAINABLE DEVELOPMENTGOALS (SDG)
The activities that Munters carries
out in the area of resource efficiency
support the following areas in the
UN’s 2030 Agenda for Sustainable
Development.

59% 96% 0 SEKaa

GOVERNANCE
Policy for the environment, healthand safety: Munters commitments forenvironmentally friendly and safe
production.
ISO 14001: seven of eighteen
facilities are certified under
ISO 14001.

Code of Conduct for suppliers:
describes the requirements Munters
imposes on its partners (e.g. suppliersand distributors) in the areas ofenvironmental and social responsibility,
as well as business ethics.

Review process: governance forachieving Munters sustainability
goals, see page 60.

54			

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Areas of Focus
SUSTAINABLE PRODUCTS AND OFFERINGSSUSTAINABLE PRODUCTIONSUSTAINABLE TRANSPORTATION

We strive to offer our customers
energy- and resource-efficientsolutions so that they can reduce theirenvironmental impact.

1

We reduce our own environmental
impact through energy- and resourceefficient production units.

2

3

Resource efficiency, and energy efficiency in particular, havebeen catchwords for Munters product development since thecompany was founded. Energy-efficient products and solutions
are not only good for the environment and the climate, butalso result in lower operating costs for the customer. Successin providing the most energy-efficient solutions gives us greatcompetitive advantages. We also see more of our customers producing their own sustainability agendas with a focus on energy
efficiency, which provides us with new business opportunities.
The challenges revolve around prioritising the projects to be
pursued in order to make our products even more energy-efficient and also more sustainable from a broader perspective.
Choice of materials and eco-design, for example, are somethingcustomers will likely demand more of, going forward.

The climate changes currently taking place are something
we must all confront, and at Munters we want to minimise theenvironmental and climate impact of our operations. The Grouphas 18 production facilities in 11 countries. Success in making
production more energy efficient also means lower costs. We
receive numerous questions from customers regarding how wework on environmental and safety issues; in addition, we have
many committed employees who want to make a difference andinvolve themselves in this work by implementing the sustainability
agenda. Taken together, all this creates a natural internal focus
on the issues.
Among the challenges, we see that access to electricity fromrenewable sources such as water and the sun are limited in mostof the areas where we conduct production.

Munters has customers and suppliers in large parts of the world,and shipping materials and products — as well as our businesstravel — entail a significant environmental impact. For businesstravel, new improved technology for virtual meetings provides us
with opportunities to meet without travelling. We made some serious efforts in the area in 2018, which we hope will lead to fewer
business trips going forward. For shipping, we have identified
opportunities to improve our internal processes and governanceto ensure, for example, that we minimise the amount of goods
transported by air.
One challenge we see is that electric and hybrid technology forvehicles needs to be improved so that switching over completely tothese vehicle types is justified. Since the range of these batteries isstill relatively short, it is difficult to find models that suit our service
engineers and vendors. Shipping of material and products is
procured from various shipping companies, and we need to place
clear requirements on these suppliers concerning the environmental impact of their transport. This is an area we can work on more.

ACTIVITIES 2018
CO2 calculations have been madeto understand the current situation at
three of our facilities (Australia, Italy
and Sweden).
A Supplier Summit with a focus onsustainability was held for suppliersof electricity and transport services
in the US.

We limit the environmental impactof all the transportation we utilize by
selecting low-emission alternatives andthrough logistics planning.

PLANNED ACTIVITIES 2019
Munters production facilities in
Italy, China and Sweden underwent
ISO 14001 audits during the year.
The production facilities in Belgium
and Germany switched electricity
contracts during the year so thatthey now purchase electricity fromrenewable sources.

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8The continued work on CO2
measurements and investigating thepossibility of setting relevant goals.

Continued focus on renewableenergy and the opportunity to switch
to electricity contracts with green
electricity.

Review of the policy for the environment, health and safety (EHS).

55

“
RESPONSIBLE BUSINESS PRACTICESSUSTAINABLE
VERKSAMHETENOPERATIONS SUSTAINABILITY REPORT

Munters adopted the UN Global
Compact in 2018

Goals and outcomes
CODE OF CONDUCTFOR SUPPLIERS

ONLINETRAININGEMPLOYEES’ASSESSMENT

Our largest suppliers account for 80
per cent of purchases. The goal for2018 was that 66 percent of thesewould sign the Code of Conduct,
which was achieved.

Proportion of Munters salaried
employees who have undergone
online training concerning our Codeof Conduct, and other importantinternal governing documents.
Goal: 100 per cent.

The proportion of Munters employees in the employee survey whostated that they consider Munters to
be an ethical company.
Goal: 100 per cent.		

Number of whistleblower cases via
the external reporting channel.

OUTCOME 2018

OUTCOME 2018

OUTCOME 2018

OUTCOME 2018

NEW MEASUREMENTNEW MEASUREMENTNEW MEASUREMENTNEW MEASUREMENT

66% 97%97%

WHISTLEBLOWER CASESSUSTAINABLE DEVELOPMENT GOALS (SDG)
The activities that Munters carries out
in the area of responsible businesspractices support the following
areas in the UN’s 2030 Agenda for
Sustainable Development.

7aGOVERNANCE
Code of Conduct: defines Muntersfundamental view of issues in theareas of the environment, ethics andhuman rights.

56			

Review process: governance forachieving Munters sustainability
goals, see page 60.

Whistleblower policy:
see description in the section on
People & society.

Code of Conduct for suppliers:
see description in the section on
Resource efficiency.

Data protection policy: provides
guidance on how personal datais to be processed correctly, incompliance with the law.

Anti-corruption policy: Munterscommitment that employees andpartners will comply with anti-corruption laws and regulations.

Compliance with competition
rules: explains the foundation ofcompetition legislation to prevent
violations.

Compliance with sanction regulations: defines the checks employees
need to carry out in conjunction withmovement of goods, services andtechnology across national borders
to ensure that we do not violate any
sanctions.
Insider policy: provides guidancefor employees on insider regulations;
intended to reduce the risk of insider
trading.

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Areas of Focus
SUSTAINABLE, PROFITABLE OPERATIONSBUSINESS ETHICS

LIKE-MINDED COLLABORATION

4

5

6

We create value for our stakeholders,such as shareholders and employees,
by carrying out sustainable and profitable
operations.
The exhaustive debate in progress concerning climate change
and ethical questions is here to stay; this presents Munters not
only major opportunities but challenges as well. The companies
that succeed in weaving long-term sustainability thinking into
their business model will be rewarded with more — and moresatisfied — customers, employees and shareholders. In 2018,
management worked on launching Munters updated strategy
internally; one clear message has been that sustainability anddigitalisation must permeate our strategic work over the coming
years.
Conducting operations sustainably often requires a more
long-term perspective on many issues, which can be challenging
both internally and externally. This places great demands on uniform, clear communication concerning the value of sustainablelong-term operations.

We conduct our operations ethically,honestly, and in abidance of the law.
Sound decisions and ethical choices inour daily work build confidence in eachother, as well as among our customers andcollaborating partners.

Complying with laws and regulations is the foundation of ethicaland sustainable operations. We expect our employees and partners to understand how important this is for the Munters brandand reputation, and that they do not put this at risk for short-term
personal gain. Acting ethically results in credibility and strong
relationships that create opportunities for fruitful collaborationand profitable business.
Munters conducts operations in many countries, and the viewson what is moral and ethical differs among various cultures. A
number of countries in which Munters operates rank relatively low
on Transparency International’s annual Corruption Perception
Index. In these countries, we place extremely strict requirementson having a functional procedure for ensuring compliance withlaws and regulations and that human rights are not put at risk.

ACTIVITIES 2018
After having conducted aninternal self-assessment of our subsidiaries’ regulatory compliance inthe areas of the environment, humanrights and business ethics, Munters
adopted the UN Global Compact,
thereby committing to support andimplement the ten principles.
Munters published a position
paper in accordance with the UK
Modern Slavery Act.

We require our collaborating partners– such as suppliers and distributors – toobserve the same business ethics guidelinesthat we have pledged ourselves to.
If our partners do not act in abidance of the law and in an ethicalmanner for business, it could affect Munters negatively in many
ways — for example, in the form of negative publicity and that thequality of our products and services suffers. This is why we place
clear requirements on our partners in the Code of Conduct, requiring them to read through it and affirm that the understand and willcomply with its content. Routine dialogue with our partners concerning these issues yields several advantages and opportunities
for in-depth, long-term relationships and prevents risk in the area.
Munters uses a large number of suppliers scattered throughout
many countries in which the cultures and attitudes towards questions concerning human rights and the environment differ widely.
This requires effective tools, a clear procedure and training by
the organisation in order to check that suppliers are meeting our
extremely strict requirements. We have come a long way, but thework on refining the process and the tools is still in progress.

PLANNED ACTIVITIES 2019
The Code of Conduct has been
sent to our most important suppliers,
and they have been encouraged toaffirm that they are in compliancewith it. Suppliers who do not
accept the Code of Conduct will bepromptly phased out. Moreover,
we have evaluated various digital
tools to facilitate administration andmonitoring of the our suppliers’
self-assessments of routines andprocedures in the areas covered by
the Code of Conduct.

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Follow-up work on online training
was conducted during the year; thefocus was on ensuring that even
newly hired personnel were includedin the process.
An Ethics Advisory Board wascreated to manage various ethicalquestions as they arise. The forum
consists of people from Munters
Group Management.

Further development of theprocedure for supplier self-assessment and our evaluations on site at
our suppliers of the areas covered by
the Code of Conduct. The goal is toinvest in and implement software thatfacilitates and automates this work,and to produce a checklist that canbe used when our purchasers are out
on site visits to suppliers.

Initiate an evaluation of annual
sustainability checks. The areas
concerned could, for example, bebusiness principles, discrimination,harassment, competition regulations
and bribes.

The sourcing function willcontinue its work on getting all ourmost important suppliers to affirm
their compliance with the Code of
Conduct for suppliers.

57

“SUSTAINABLE
VERKSAMHETENOPERATIONS SUSTAINABILITY REPORTPEOPLE & SOCIETY

All our subsidiaries drewup equality plans in 2018

Goals and outcomes
PROPORTION OF WOMENWOMEN EXECUTIVES

We strive to increase the proportionof women in the workforce. The
target is 23 per cent by 2020 and
30 per cent by 2025.

We strive to increase the proportionof women managers. The target is23 per cent by 2020 and 30 per
cent by 2025.

OUTCOME 2018

OUTCOME 2018

OUTCOME 2017: 18%

OUTCOME 2017: 17%

20% 20%TOTAL RECORDABLEINCIDENT RATE* (TRIR)EMPLOYEES’ ASSESSMENT

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

The proportion of Munters
employees in the employee survey
who considered themselves free of
discrimination at work. Goal: 100
per cent.

OUTCOME 2018

OUTCOME 2018

3.4
OUTCOME 2017: 3.5

SUSTAINABLE DEVELOPMENT GOALS (SDG)
The activities that Munters carries
out in the area of people and society
support the following areas in the
UN’s 2030 Agenda for Sustainable
Development.

96%* The number of accidents where theemployee needed to seek medical
assistance multiplied by 200,000 anddivided by the number of hours worked.

OUTCOME 2017: 95%aGOVERNANCE
Policy for the environment, healthand safety: Munters commitments forenvironmentally friendly and safe
production.
Policy for diversity and inclusion:
Munters commitments for anequitable, inclusive and collaborative
workplace marked by diversity.
Review process: Governancefor achieving Munters sustainability
goals, see page 60.

58			

a

Anti-discrimination and harassment policy: Munters commitment
to protect its employees against
discrimination, harassment andbullying at the workplace.
Policy for flex work:
Encouragement for managers in
Munters, where possible, to offer
employees the opportunity to work
flexibly.

a

Whistleblower policy: defines
Munters view on bad conditions
and impropriety and the procedure
employees can apply to make GroupManagement and the Board of
Directors aware of similar situations.

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Areas of Focus
AN EQUAL AND INCLUSIVE WORK ENVIRONMENTCOMMUNITY INVOLVEMENT

7

8

Ensuring we deliver the promise of our brand — “Your Perfect
Climate” — requires that all employee are committed, enjoy theirwork and can develop professionally. We are convinced thatdiversity provides us with different perspectives and valuable
insights that help us improve our company and our offering.
A few years ago, Munters set a goal that 30 per cent of both
employees and managers must be women by 2025. All aspects
of diversity are equally important, but since we ascertained thatthe proportion of women in the company was low (only 16 percent when measurements began in 2016), management chose tofocus on equality first.
There was a clear focus on safety work at our production
facilities during the year, and all accidents are now routinely
reported to Group Management with a clear analysis of theaccident itself, what caused it and what needs to change inorder to ensure that the same type of accident is not repeated.
As regards both diversity and safety, this is work that will
never be finished and the challenges lie in keeping focus on theissue by routinely conducting various kinds of activities to ensurethat the subject remains of topical interest.

Our collaboration with other players in the locations where we
operate is important so that we can attract both customers andworkers. In addition, many of the projects create a sense ofcommunity and pride among our employees, which also createsvalue for Munters. Examples of activities that are routinely conducted at our facilities are: participation in various type of job
fairs arranged by schools, collaboration with schools in which
we offer such benefits as mentoring and project work, open
houses for members’ families and various forms of support for
sports clubs and relief organisations.
Currently there is no central governance concerning the activities conducted in the area; it is up to each facility to determine
what is suitable there. It could be a challenge to find projects
that are not simply charities but also contribute positive effects
for Munters from a business perspective.

We offer a fair, safe, and inclusive
workplace to a workforce marked bydiversity.

We conduct dialogue with our
stakeholders and with the local
communities where we operate.

ACTIVITIES 2018
A global EHS forum (environment, health and safety) with representatives from Global Operations,Global Services and Group CSR
has been established; safety is now
a standing item at the quarterly
meetings in Group Management.

PLANNED ACTIVITIES 2019
Awareness of the policy for flex
work, for example the opportunityof working from home and applying
flex time, has increased and several
pilot projects are under way aroundthe Group.

All subsidiaries have drawn up
an equality plan to concretise theircontributions to the Group’s equality
objectives.

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8The external and anonymous
whistleblower channel introduced
in 2017 has been established as areliable channel for reporting improprieties. The cases of discriminationor harassment reported through thischannel are extremely important in
the work on creating a safe and justwork environment.

Ensure that the local equality
plans are implemented and kept up
to date through adding a review asa standard item on the agenda at the
local companies’ board meetings.

Revise global guidelines
concerning manager training on
discrimination and harassment andensure a uniform Group message,
as well as continuing to spread themessage about the whistleblower
channel to continue efforts toward
the goal of workplaces that are 100
per cent free of discrimination andharassment.

Further strengthen safety efforts
at the workplace and increase focus
on the number of healthy employees
at work, for example, throughintroducing regular measurements.

59

VERKSAMHETENSUSTAINABLE
OPERATIONS SUSTAINABILITY REPORTSTAKEHOLDER OVERVIEW
Stakeholders

Stakeholder dialogue
and materiality
Sustainability is a fundamental part of Munters long-term strategy and value creation.
To verify that our strategic priorities in the field of sustainability are correct, we get
information and draw inspiration via various channels. For example, we monitor themost important macro-trends – both long and short-term – and the work of the UN,
other countries and other companies on Agenda 2030.

Customers
Distributors
Suppliers

ORGANIZATION AND GOVERNANCE
The Munters sustainability agenda is part of the company’sbusiness strategy. The CEO bears ultimate responsibility for
integrating the sustainability agenda and business strategy, as
well as for achieving the company’s sustainability objectives.
The Management Group is responsible for developing proposals
concerning priorities in the field of sustainability, coordinating
and planning Group-wide sustainability efforts, and monitoring
established goals as well as regularly communicating the resultsof these efforts to the Board of Directors, Group Management
and the parts of the organization concerned.
The Group’s position on various issues in the field of sustainability is described in a number of policies and governing
documents. The two most fundamental documents are the Codeof Conduct and the special Code of Conduct for suppliers.
60			

These documents are built on the ten principles in the UN Global
Compact and describe Munters’ view of issues concerning theenvironment, social responsibility, business ethics and humanrights. We monitor the implementation of our policies every year
at the Board Meetings of the Group’s companies. In 2018, we
also introduced a number of additional measures to guarantee
compliance with laws and regulations, as well as with Munters’internal policy documents. This year’s annual employee survey
was expanded, for example, with a number of questions
concerning the environment, sustainability and ethical businesspractices. A survey of all subsidiaries’ compliance with local
laws and regulations and global conventions regarding humanrights, as well as their community involvement, was conductedin the autumn. Moreover, the majority of our salaried employees
underwent online training dealing with the Code of Conduct andother important policy documents in 2018.
The sustainability risks are surveyed and evaluated as part of
the yearly risk assessment process. For more information on theprincipal risks in the area of sustainability and how we handle
them, refer to pages 62–65.

Important Issues

Question lists from customers
regarding the environment,
health and safety

Compliance in environment, business ethics,
and social issues such as
labour legislation andhuman rights

Annual customer survey
Supplier Summits

Continual improvementin our products’ energy
and resource efficiency

Employees
Current
employees
Potential
employees

Employee surveys

Diversity and inclusion

 urveys conducted in conjuncStion with employee meetingsand conferences

Health and safety

Employment interviews

Further improvementof our products andcustomer offeringfrom an environmental
perspective

Meetings with students,for example at job fairs andexhibitions
Results from various types ofstudies

Discrimination andharassment

The capital market
Shareholders

An important source of information is the routine dialogue
with our stakeholders. In 2018, we discussed the outcome ofthe stakeholder dialogue and materiality analysis in GroupManagement in order to ensure internal and external consensus
around the priorities in the area of sustainability.

Channels for dialogue

Business
partners

Analysts
Investors
Lenders

Compliance in environment, business ethics,
and social issues such as
Information regarding
responsible investments on our labour legislation andhuman rights.
owners’ websites

Individual meetings withowners and Board members

 asdaq’s guide to ESG
Nreporting

Sustainability agenda
and focus areas

Road shows and investor
meetings
Annual General Meeting
Queries from investors

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CPIS WITH EXPLANATION OF TREND DURING THE YEAR
Outcome2017 2016 Comments on the trend
1.15% 1.31% In the production facilities where electricity consumption has been reduced, the switch to LED lighting,preventive maintenance of machinery and sensors forlighting and ventilation are common measures.

Goal
Our objective is to continually reduce
electricity consumption in our
production facilities.
(MWh/production value, TSEK).

2018
1.11%

Our objective is to continually increase
the share of electricity from renewablesources. The measurement includes theelectricity consumed in our production
facilities.

31%

29%

We strive to continually increase ourrate of recycling (i.e. the proportion ofwaste reused or recycled out of the total
amount of waste).

59%

57%

Proportion in per cent of our mostimportant suppliers who have signed
Munters Code of Conduct for suppliers.

66%** 66 per cent of 80 per cent of Munters’ annual sourcingof direct materials from Class 1 and 2 suppliers.
Suppliers of direct materials are divided into three
categories: Classes 1, 2 and 3.
We have also encouraged suppliers of indirect materials
to sign the Code of Conduct for suppliers, and then used
a risk assessment as the basis for determining which
categories were considered most critical. Suppliers ofshipping and IT hardware were selected; 100 per centof these are in compliance with the Code of Conduct,
corresponding to 29 per cent of indirect sourcing.

Number of whistleblower cases via theexternal reporting channel.

7** During the year, we received and handled seven
whistleblower cases through the channel. The cases
pertained to suspicions of discrimination, corruption
and fraud.

We strive to increase the proportion of
women as a percentage of the workforce. The goal is 23 per cent by 2020
and 30 per cent by 2025.

20%

18%

18% Positive trend that was confirmed in the equality plans
prepared locally to promote the Group’s equality objectives. The proportion of women in our production facilities remained constant during the year (11 per cent); theincrease thus took place on the salaried employee side
(28 per cent women at the end of the year).

We strive to increase the proportion of
women managers. The goal is 23 percent by 2020 and 30 per cent by 2025.

20%

17%

17% Positive trend; two women on the Munters Board of
Directors and now a total of three women in GroupManagement, corresponding to 23 per cent. (Since
February 2019 there have been 2 women out of a totalof 6 people in Group Management, equivalent to 30
per cent)

We continually strive to reduce the
3.4
number of workplace accidents andwe measure the Total Recordable
Incident Rate (TRIR), which is calculated
as the number of accidents where theemployee needed to seek medical
treatment multiplied by 200,000 anddivided by the number of hours worked.

3.5* The production facilities in Belgium and Germany
switched electricity contracts during the year sothat they now purchase electricity from renewable
resources. In Brazil and Italy, the share of green electricity in the mix decreased in 2018, which impacted thismeasurement negatively. Currently, there is no renewable electricity at all in Israel, Mexico and the US.
48% Positive trend, but challenges in classification during
the year continued to indicate the need of stricter
definitions for re-use and recycling.

3.1

Our clear focus on safety, in which all accidents are
now routinely reported to Group Management withanalysis, cause and preventive measures has yielded
results, as evidenced in the lower number of accidents
in 2018 (70 accidents compared with 84 in 2017).

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VERKSAMHETENSUSTAINABLE
OPERATIONS RISKS AND RISK MANAGEMENT

Risks and risk management
Risks are a natural element of all business operations, and effective
risk management is crucial for Munters to achieve its business goals
and to pursue long-term profitable and sustainable operations.
Moreover, in certain cases risks can be transformed into opportunities
if they are managed correctly.

A properly defined procedure for identifying, evaluating,­managing and reporting risks enables:
A competitive customer offering
Compliance with laws and regulations
A healthy, safe work environmentLong-term sustainable profitability and performance
The Group’s activities are directed at customers in all industries
and market segments. Munters has production and assemblyplants, combined with sales, in some 15 countries and sales-only
offices in another 15. All together, this provides Munters withfavorable underlying risk diversification, which is positive; atthe same time, a global presence creates challenges linked todifferences in culture, legislation and political climate.

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

ANNUAL RISK EVALUATION
Every year, Munters conducts a Group-wide risk evaluation as alink in its strategy process. Risk evaluations are taken in from thebusiness areas and Group functions, which identify and evaluate
risks based on likelihood and potential impact on the operations.
The evaluations are compiled and then become the subjectof discussion in Group Management. For each risk deemed
to have significant impact on the Group, a person in GroupManagement is given the responsibility of producing and pursuing an action plan. “Significant impact” denotes a risk with a risk
value of 12 or higher. The risk value is calculated by multiplying
the factors for likelihood and impact.

62			

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RISK CATEGORIESSUSTAINABILITY RISKS

Risks are divided into four categories: Strategic, Operational,
Regulatory and Financial. This concerns both general risks due
to political and macroeconomic trends, and specific risks directly
related to the Group’s operations. A number of risks lie outside
Munters’ direct control, while others can be controlled.

The Group is also exposed to risks related to the field of sustainability, for example, risks concerning environmental issues,climate change, health and safety, respect for human rights,
bribery and corruption. These risks are part of — and evaluatedamong — the strategic, operational, and regulatory risks.
Risks associated with regulatory compliance in the areas ofcorruption and bribery, as well as sanctions, were assessed as
being of particular priority in the risk assessment for the year; on
the following pages there is information on how we are working
to manage these risks.
Risks related to the environment, climate change, health andsafety, respect for human rights and a responsible supply chain
were also evaluated, but were not deemed to be particularlyhigh priority risks. For more information on how we are working
on these areas, see the Sustainability Report on pages 52–61.

Strategic risks
Strategic risks are those associated with decisions that management at different levels in the company take concerning strategicorientation, organisational structure and resource allocation,
as well as major investments and acquisitions. This category
also includes risks associated with internal and external
communication.
Operational risks
Operational risks are linked to the company’s internal resources:
systems, procedures and employees. For example, it could be
an issue of interruptions to operations owing to fire, breakdowns
in machinery or extreme weather. Examples of operational risks
concerning staff are risks associated with succession planning,
the ability to retain core competences and the relationships withtrade unions. In the area of IT, it could be an issue of risks associated with information security.
Regulatory risks
Regulatory risks include risk of loss of reputation and costs owing
to violations of laws and regulations. This category also covers
risks resulting from violations of provisions in signed agreementswith employees, customers and other business partners.
Financial risks
Financial risks mainly consist of currency, interest and financing
risks. None of these were deemed to be a particularly major risk inthis year’s risk evaluation. A description of the financial risks andhow they are monitored and managed can be found in Note 3.

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INSURABLE RISKS
Munters works actively with insurance solutions, and Groupwide insurances are governed by central guidelines. This
includes general liability and product liability, property, businessinterruption, transportation, crimes against property, the liabilityof Board members and the CEO, and employment practices
liabilities.

MUNTERS LOSS PREVENTION STANDARD
We are also working preventively to minimize the risks related tofire, the work environment, and health and safety. The Munters
Loss Prevention Standard (LPS) is built on the Group’s standards
but also local laws and other regulations, as well as insurance
requirements. LPS is used in the risk evaluations conducted byour production and assembly facilities. The objective is for all
production plants to be evaluated over a three-year cycle; in
2018, evaluations of ten facilities were conducted. LPS is also
used for evaluations in conjunction with business acquisitions,investments, and construction.

63

SUSTAINABLE OPERATIONS RISKS AND RISK MANAGEMENTSPECIALLY PRIORITIZED RISKS, 2018
In the risk assessment for the year, a total of fourteen risks were deemed as potentially having significant impact on the Group. A brief description of these risks and how they are being monitored andmanaged follows below. The risks are presented grouped by risk category, in alphabetical order.

STRATEGIC RISKS

M&A implementation,planning and integration

Allocation of production capacity

Change management

Trade barriers

Forecasts

Technology changes, IoT

The risk that Munters will not have sufficient production capacity to realise
its business plans, or will experience
overcapacity that negatively affects
the company’s possibility for generating competitive profit margins.

The risk that Munters does not haveeffective procedures and project management for implementing changes in
the organisation.

Political instability and increased customs duties in important markets canaffect the possibility of marketing andselling our products and services.

The risk of not being able to seize
opportunities for acquisition andsales, or not achieving goals set forinvestments and acquisitions alreadycompleted, for example, as regards
synergies.

Risk of forecast errors that negatively
impact allocation of resources andreporting to the market.

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

Management

Management

Management

Management

Management

Management

The work on developing the Sales
and Operations Planning (S&OP)
procedure continued during the year,
and regular S&OP meetings are now
being held with the entire GroupManagement.

The internal project management
organisation (PMO) added further
resources during the year; theseresources are working on supporting
the business areas in implementing
Munters’ strategy and on managing
priority projects for change.

The business areas are working
together with Operations both toroutinely monitor trends in the area
and to guarantee that sourcing andproduction are planned in such a waythat the effect of any trade barriers
are minimised, for example, throughthe most important products being
manufactured at several sites aroundthe world.

One central function responsible formanaging M&A projects has been
established.

Monthly updates and careful reviewsof forecasts enable rapid measures.

PMO, the internal project function,
spent the year working on monitoring
acquisitions carried out over the last
few years.

The forecasts are analyzed on several
levels in the organizations: regional,
business area and Group, before they
are published and reported internallyand externally.

An IoT council with representatives
from all business areas, Global
Services and IT headquarters
meets regularly to discuss andcoordinate development projects
in progress.

Quality control

Employees and key competences

Volatility

One person has been designated responsible for IT security
regarding connected products.

OPERATIONAL RISKS
Dependence on small numberof customers

Dependence on small number ofmanufacturing plants

Risks associated with dependency ona small number of major key customers(applies mainly in the Data Centersbusiness area).

Risks associated with important product components only manufactured in
one or a small number of manufacturing plants leading, for example, tolong lead times.

Risk of insufficiently thoroughprocedures for quality control,
which can result in the company’s
products needing to be recalled or
not functioning as promised, thereby
negatively impacting earnings andcustomer relationships.

Risk that Munters fails to attract andretain employees with the competences needed to implement thecompany’s strategies.

Risk that order volatility in the project-based Data Centers business area
has major effects on both net sales and earnings.

Management

Management

Management

Management

Management

Data Centers management works
actively to broaden its customer
base and increase the proportion ofafter-market business (i.e. spare partsand services).

Operations management works on
guaranteeing that critical products
and components are manufactured
at strategically selected sites witha suitable geographic spread. Thisis coordinated with the work done
to manage the risk associated withtrade barriers (see above under“Strategic risks”).

A Global Quality Manager position
was added during the year. The
purpose was to create an efficient,uniform quality system at Munters.

A long-term incentive programme
was introduced in 2018.

During the year, Data Centers management worked together with Operations
management to investigate the possibilities of, for example, increasing
flexibility on the supplier side, outsourcing parts of production and/or adding
products from other business areas to Data Centers production facilities.

64			

A Global Production Development
position was appointed who willtake office in January 2019. The roleis responsible for developing andimplementing the Munters Production
System.

HR is working on a salary survey
to ensure that Munters is offering
competitive salaries.
New managers, managers in production and experienced managers
who wish to take their leadership to
the next level are offered leadershipdevelopment courses.

In addition, Data Centers management routinely works to increase sales ofspare parts and services, thereby becoming less dependent on product sales.
In conjunction with the release of the Q4 2018 report in February 2019,
Group Management announced the intent going forward to focus primarilyon the US market as regards Data Centers. The intent is also to close down
production in Dison, Belgium.

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REGULATORY RISKS
Agreement routines

Bribery and corruption

Sanctions

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

Risk that the Group’s employees anddistributors do not comply with laws
against bribery and corruption, andthat this results in legal and financial
consequences as well as damaging
the Group’s reputation.

Risk that Munters signs agreements with customers who violate
applicable sanction regulationsin the US, the EU and the UN
and that this results in legal
and financial consequences aswell as damaging the Group’s
reputation.

Management

Management

Management

The internal contract vetting process
was expanded during the year to
apply to all business areas (previously
only to Data Centers). The same
applies to the internal risk committee.

There are policies in the area in theform of the Code of Conduct and a
specific anti-corruption policy.

Sanctions policy and guidance
available.

A checklist for contracts that are notbuilt on standard terms and conditions
has been developed and launched in
the business areas.

Online training for all salaried
employees at Munters implemented
in 2018.
Contract with distributors contains
paragraphs stipulating that the distributors must comply with anti-corruption
laws and regulations.

Online training for all salaried
employees at Munters implemented in 2018.
Routine collaboration withexternal advisers for monitoring
trends in the area.

Whistleblower channel that facilitates
anonymous reporting.
Self-assessment form for evaluating internal control routines at
subsidiaries.

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65

INFORMATION FOR THE CAPITAL MARKET

Strong position in growing
segments create growth in value
Munters has strong customer relationships and products that are market
leaders in advanced climate control solutions. The Group’s position
benefits from a number of strong trends in all our markets that create
good conditions for growth. This provides opportunities for long-term
growth in value for our shareholders.
Increased focus on climate and environmental impact, scarcity
of resources as a consequence of global population growth, anda growing urban middle class that consumes more protein andvegetables and drives demand for energy and resource-efficientsolutions. There is an increasing demand globally for energy-efficient solutions. On the whole, Munters has the most energy-efficient solutions in the market, and we offer climate solutions suchas separation of environmentally hazardous substances, thatstrengthen our customers’ sustainability profile. Increased focus
on sustainability issues has also created great demand for electriccars. Munters contributes to this transformation through, for example, sales of climate equipment to companies that manufacture
lithium-ion batteries.
Strict requirements for production environments and increased
understanding of the impact of indoor climates on productivity
and product quality, increase the demand for advanced climate
systems. Munters offers exact control of climate, which meets ourcustomers’ requirements for better control of their environment.
We see increased demand, for example, from the food industry,where hygiene requirements are being tightened up.
66			

INNOVATIVE AND SUSTAINABLE PRODUCTS MAKE
CUSTOMERS’ OPERATIONS POSSIBLE
Munters products and solutions are often part of mission-criticalprocesses with exact control of temperature and moisture. This
provides guaranteed climate quality in our customers’ processes,with reduced energy consumption and lower emissions. We
have deep knowledge of specific applications, a great deal ofexpertise about the customer’s business, and access to unique
technologies we have often developed ourselves. Our products
guarantee an excellent climate, which is crucial for increased
productivity, improved food safety and — in livestock farming —for the animals’ well-being with a reduced need for medication.
Climate is also important for the employees’ work environment.
Our internal and external global partnerships for developing
new products, our organisation, and our in-depth understandingof the customer’s applications are the foundation for our continued ability to innovate. Examples of new, innovative products
are Munters Connected Climate, DryCool Focus and SonarEcho;
for more information refer to Pages 42–43.

CONTINUAL WORK ON EFFICIENCYIN PRODUCTION
Munters’ entire production platform is built on a shared platformthat is largely based on Lean principles. We continually invest
in increased resource efficiency and safety in the production
process. The current structure is designed to balance the requirements for proximity to customers — which facilitates adaptationand service, and reduces lead times — with global cost advantages and reduced logistics costs.
Munters routinely evaluates its production platform in oureffort to increase efficiency and flexibility in the production process and to improve delivery times. The vast majority of Muntersproducts are manufactured and assembled in our own plants.
Read more about efficient production on Pages 44–47.

STRONG EARNINGS IN STABLE SEGMENTS
Munters has strong earnings and balanced sales, with bothnew sales and after-market, as well as a growing and profitable service business. The after-market segment accounts for alarger part of sales and is stable and less affected by cyclicalfluctuations. New sales and new installations represent a slightly
smaller portion of business. Service, which represents 11 percent of sales, is growing with a high level of profitability in
Munters’ offering.

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The share
The Munters share trended negatively during the year.
In 2018, the share price decreased 38.4 per cent at thesame time as the Stockholm stock exchange as a wholefell 7.8 per cent over the same period and the OMXStockholm Industrials index decreased 14.2 per cent.
The closing price on the last trading day of the year was SEK
34.00 (55.25), which was equivalent to a market capitalizationof SEK 6.2 billion (10.1). The highest price paid in 2018 was SEK
58.50 (84.75), and the lowest price was SEK 31.90 (49.02).

OWNERSHIP DISTRIBUTION
by country

Luxembourg 51%
Sweden 40%
United Kingdom 4%
USA 3%
Belgium 1%
France 1%

DIVIDEND
Under the dividend policy the Board of Directors adopted,
Munters aims to pay an annual dividend corresponding to
30–50 percent of its consolidated income for the period.
Decisions on any dividend proposals are taken by the Board inconsideration of the company’s financial position, investment
needs, acquisitions and liquidity position.
The Board of Directors proposes that no dividend
be issued for 2018.

Number of shares at year-end, millions

184 (184)

Market capitalization at year-end, SEK M

6.2 (10.1)

Number of shareholders

6,673 (6,514)

Share price at year-end, SEK

34.00 (55.25)

Earnings per share, SEK-0.57 (1.45)

Change in share price during the year, %-38.4 (0.45)

Regular dividend, SEK/share

0.00* (0.30)

Dividend as a percentage of earnings per share

00 (21)

Proportion of shares in Sweden, %39.97 (33.20)

Proportion of shares owned by the ten largest shareholder groups, %TRADE IN MUNTERS SHARES
During 2018, a total of 65.8 million shares (63.8) were sold, at
a value of SEK 2.99 billion (4.08). Average sales over the year
totaled 263,155 shares per day (408,781).

KEY FIGURES

86 (86)* Proposed dividend.

THE MUNTERS SHARE
Trading volumes per day

SEK

2,500

90
80

MuntersOMXSPI

2,000

70

1,500

60
50

1,000

40
500
30
0

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Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

20

67

INFORMATION FOR THE CAPITAL MARKET

SHARE CAPITALANALYSTSAt December 31, 2018, the number of shares and votes in
Munters totaled 183,597,802. Each share has a quota valueof SEK 0.03, and share capital totaled SEK 5,507,934.06.
Munters’ share capital is composed of one share class, inwhich each share has the same number of votes and yields thesame right to a dividend. Under the Articles of Association, thenumber of shares may not fall below 150,000,000 and notexceed 600,000,000. The company’s share capital may not fall
below SEK 4,500,000 and not exceed SEK 18,000,000. The
company’s shares are registered with Euroclear Sweden AB,
which administers the Company’s share register and records
the shares for individual persons. Munters Group AB has own
holdings of 1,467,000 shares related to employee incentive
programmes.

Below are the analysts who actively cover the Munters share.

OWNERS
The number of shareholders as at December 31, 2018 totalled
6,673, and the proportion of shareholders outside Sweden at
year-end was 60 per cent. The ten largest individual shareholders had 86.3 per cent of the share capital at that time.
At the end of the year, the members of Munters GroupManagement held a total of 520,211 shares in Munters.
Members of the Board of Directors, excluding the CEO,owned 177,912 shares at the same point in time. Total GroupManagement and Board of Directors holdings in Munters sharescorresponded to 0.4 per cent of total shares outstanding in the
Company. Nordic Capital was the largest shareholder, with50.1 per cent of the share capital.

68			

Bank

Name

THE TEN LARGEST SHAREHOLDER GROUPS

Telephone

Name

Holding

Holding, %91,999,607

50.11

Carnegie

Kenneth Toll Johansson+46 (0) 8 58 86 89 11

Nordic CapitalGoldman Sachs

Jack O’Brien+44 (0) 207 552 2998

FAM AB

20,967,907

11.42

14,530,048

7.91

Danske Securities

Oscar Stjerngren+46 (0) 8 568 806 06

AMF Försäkringar och Fonder

Danske Securities

Max Frydén+46 (0) 8 568 805 23

First Swedish National Pension Fund

11,324,746

6.17

ALECTA Pensionsförsäkring, Ömsesidigt

9,190,000

5.01

JP Morgan Chase Bank N.A.

3,446,931

1.88

Fourth Swedish National Pension Fund

2,127,981

1.16

NordeaAgnieszka Vilela+46 (0) 101 572 870

Kepler Cheuvreux

Mats Liss+46 (0) 8 723 51 18

Jefferies

Peter Reilly+44 (0) 207 029 8632

Jefferies

Graham Phillips+44 (0) 207 029 8346

ParetoAnders Roslund+46 (0) 8 402 52 88

Leesi, John Peter

1,823,829

0.99State Street Bank and Trust CO

1,661,041

0.90

BNY MELLON SA/NV(FORMER BNY), W8IMY

1 339 157

0.70

SHAREHOLDING, BY SIZE
Holding

Number of shareholders

Holding, %Votes, %

1–500

5,346

0.34

0.34

501–1,000

533

0.25

0.25

1,001–5,000

522

0.68

0.68

5,001–10,000

110

0.48

0.48

10,001–15,000

35

0.24

0.24

15,001–20,000

21

0.21

0.21

20,001–

124

97.80

97.80

M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

CORPORATE GOVERNANCE

Comments from
Chairman of the Board
Magnus Lindquist
When, just before Christmas, I was elected chairman of Munters,
I could state that the company needed a restart and changes.
The first step consisted of taking into account what management,
the rest of the Board of Directors and the major shareholders
saw as both the company’s problem and what needed to beachieved in order to improve the situation. There was a verystrong sentiment among Board members that things needed
to be done differently. When I took office, there was thus nocomplete or given agenda; it has its basis in intensive and broad
support work.
My guiding light has always been being part of building
something better, more durable, with a higher level of quality,
and thus better for all stakeholders such as customers, employees, shareholders and society in general. Really striving to bringout the company’s full potential and actually daring to invest in
doing what is required. Often this is just talked about, but it is aquestion of putting it into practice and actually daring to do it
systematically and efficiently. Continually developing businessacumen, allocating clear overall responsibility and always starting from the customer’s needs forms the conditions for creating aworld-class company — which is my ambition for Munters.
Achieving this requires a combination of listening to people— employees as well as colleagues at other companies, but also
people with experience of the same journey I see before me, theone we will now take with Munters.
At present, Munters operates in several segments that arebringing the major trends with them, while the company is not
unaffected by the business cycle. Of course, we are affectedin the short term by political decisions and other uncertainties
linked to the prevailing market conditions. That is why we must
keep our ears to the ground in order to understand the trends
affecting our customers, so as to adapt ourselves more rapidly
than we did previously.
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

Embracing a sustainable approach to our business is also partof belonging to society undergoing change. For a company like
Munters that believes in and works hard for sustainability, this isa natural motivator. Our employees feel both responsible for andproud of being part of this work, and our offering is becoming
even more relevant for our customers. Donning the yellow jersey
for sustainability challenges us all to contribute to a company
that is creating long-term societal value — something that isrequired for Munters to remain competitive.
In Air Treatment, which is the business area at the very heartof Munters, the company has a very strong market position. At
the same time, there is great potential in further strengthening
the area through developing new products and services, andan increased focus on customer segments where the company
is creating clear added value. There is untapped potential inafter-market with service and maintenance. Digitalisation andAI will naturally also lead to more intelligent, smarter solutions
for managing humidity and temperatures in various kinds ofindustrial properties and food processing facilities. In pace withincreased requirements, this will become even more advanced;
here, Munters must be part of leading development.
In our other core operation, AgHort, we see a great deal ofpotential in general — especially for SonarEcho, our connected
solution, which has the potential to fundamentally change thepoultry industry. This software solution provides increased control and efficiency throughout the production chain, and we areseeing a great deal of interest from our customers.
The new business model is not completely ready, but an initial
step is further simplifying the organisation and further decentralisation. As I mentioned earlier, a modern world requiresa customer-focused offering and an understanding of rapidlychanging needs, which is why more decisions will be taken in
the respective business areas with minimal involvement fromthe Group. This increases both transparency and demands forresponsibility, strengthens efficiency and promotes expandedcustomer knowledge.
In conjunction with the year-end report, we launched a threephase plan that will steer Munters back toward clear priorities
and ensure coherent internal objectives with consistent, transparent communication both internally and externally. The mostimportant work for the Board of Directors over the short term will
be following up on the action plan, ensuring that it is implemented in the manner agreed upon with management and that it
leads to the desired results.

As regards the company’s dividend policy, it remains firm, but inlight of the major reorganisations the company is undergoing,
the Board does not deem it suitable to propose any dividend
to the Annual General Meeting. We hope and believe that all
shareholders will consider this the correct approach. Steering
Munters back in a profitable direction requires a strong balance
sheet in order to subsequently increase the pace of the company’s ambition for growth.

69

CORPORATE GOVERNANCE

Corporate Governance Report
The goal of corporate governanceis to guarantee that the company ismanaged as efficiently as possible forthe shareholders. This entails establishingan effective organisational structure,systems for internal control and risk
management, and transparent internaland external reporting.

Munters Group AB (Munters, or “the Company”) is a Swedish
public company listed on Nasdaq Stockholm Large Cap.
Corporate governance is primarily regulated by the Swedish
Companies Act and other Swedish legislation, the Nasdaq
Stockholm rulebook for Issuers, and the Swedish Corporate
Governance Code (“the Code”). Munters has applied the Codestarting from May 19, 2017, when the company’s shares wereadmitted for trade on Nasdaq Stockholm, and hereby submits its
Corporate Governance Report for fiscal year 2018.

CORPORATE GOVERNANCE STRUCTURE
1. Shareholders

2. General Meeting
8. External Auditor

5. Audit Committee

3. Nomination Committee

4. Board of Directors

7. CEO

7. Group Management70			

6. Compensation Committee

COMPLIANCE WITH RULES
External governance systems
The external governance systems that constitute the frameworkfor Munters’ corporate governance consist primarily of theSwedish Companies Act, the Swedish Annual Accounts Act, theNasdaq Stockholm rulebook for Issuers and the Code, as well asother applicable regulations and relevant legislation.
Internal governance systems
The Articles of Association adopted by the Annual General
Meeting (AGM), the Munters Board Rules of Procedure adopted
by the Board, the instructions for the CEO and the instructions
for the Compensation and Audit Committees constitute the key
internal governance systems.
In addition to this, the Group has a number of policies andinstructions with rules and principles for the Group’s operations
and employees. In 2018, the Munters Board of Directors passed
resolutions on the following policies and instructions:
Rules of Procedure for the
Board of Directors

Anti-corruption andbribery policy

Instructions for the CEO

Purchasing policy

Rules of Procedure andinstructions for the Audit
Committee

Communication policy

Rules of Procedureand instructions for theCompensation Committee
Code of Conduct
Steering documents
Certification andAuthorization rules
Treasury policy

Insider Policy
Policy for internal control
IT policy
Risk management policy
Whistleblower policy
Policy for gifts
Policy for conflictsof interest
Sanctions policy

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Deviations from the Code
The Code applies to all Swedish companies whose shares arelisted on a regulated market in Sweden. The Code indicates anorm for good corporate governance at a higher level of ambition than the minimum requirements of the Swedish Companies
Act and other rules.
The Code is built on the “comply or explain” principle. Thismeans that the company does not have to observe every rule in
the Code at all times, but can choose other solutions deemed tobetter address the circumstances in the individual case provided
that the company openly reports every such deviation, describes
the solution chosen instead and indicates the reasons for this in
the corporate governance report.
Munters deviates from Rule 9.7 in the Code with respect tothe warrant programme introduced in connection with listing
the company’s shares on Nasdaq Stockholm. Pursuant to theterms of one of the two warrant series, participants may exercise
such warrants to subscribe for shares after a two-year period, ashorter period than the minimum three years prescribed by theCode. The other warrant series entitles participants to exercise
the warrants to subscribe for shares after a three-year period.
The offering of warrants with terms of exercise after two andthree years, respectively, is considered to be in line with Munters’
long-term business plan, strategy, and financial targets. In future,
Munters intends to implement only three-year programs.
In 2018, Munters deviated from Rule 9.8 of the Code in thatformer CEO John Peter Leesi’s fixed salary during the notice
period and severance pay upon the company’s terminationof his employment amounts to three years’ fixed salary, which
exceeds the two years’ fixed salary prescribed by the Code.
During the notice period (12 months) and the period when severance pay is paid (24 months), the CEO is subject to a non-competition undertaking, which the company considers to be in theinterest of the company and its shareholders, and thus justified
the deviation from Rule 9.8 of the Code.
In 2018, Munters deviated from Rule 1.2 in the Code in that
Christopher Curtis, former Chairman of the Board of Munters,
did not attend the Extraordinary General Meeting on December
18, 2018 which is a requirement under the Code. The deviation
was justified for cost reasons, as the Board did not consider it
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necessary or motivated for Christopher Curtis to travel from the
US to Sweden to attend the General Meeting where it was proposed he be replaced by Magnus Lindquist as Board member
and Chairman of the Board.

MUNTERS’ ARTICLES OF ASSOCIATION
Munters' Articles of Association were adopted at an
Extraordinary General Meeting on May 7, 2017 and contain noparticular provisions on the appointment and dismissal of Board
members or on changes to the Articles of Association. For thecomplete Articles of Association, refer to the Munters website.
1. Shareholders
Shares in Munters have been listed on Nasdaq Stockholm Large
Cap since May 19, 2017. At year-end, share capital totalled
SEK 5,507,934.06 distributed among 183,597,802 shares.
All shares are of the same type, and have equal rights in every
respect. On December 31, 2018, Munters had 6,673 shareholders (compared with 6,514 on December 31, 2017). The largest
shareholders were Nordic Capital (50.1 percent of votes) andFAM (11.4 percent of votes). Additional information on the shareand shareholders can be found in the section on the Muntersshare and on the Munters website.
Buy-back of own shares
For the purpose of guaranteeing delivery of shares to participants in the long-term incentive programme resolved at the 2018
AGM, the Board of Directors was authorised by the AGM to
decide on the acquisition of at most 1,467,000 own shares forthe period up to the next AGM. The Board of Directors decided
to make use of the buy-back authorisation on May 17, 2018, andthe buy-back was conducted between 22 and 28 August 2018.
In total, 1,467,000 shares were bought back at an average
share price of SEK 40.27, which is the total number of own
shares Munters holds and is approximately 0.8 per cent of theshare capital.
2. General Meeting
The right of the shareholders to decide on matters concerning
Munters is exercised at the General Meeting (GM). Shareholders

who are recorded in the share register on the record date andhave registered for the GM within the time period indicatedin the notice to attend have the right to participate in the GM,
either in person or by proxy.
Decisions at the GM are normally taken by simple majority.
On certain issues, however, the Swedish Companies Act prescribes a qualified majority of votes, and in certain individual
cases a certain portion of shareholders present, as well, in orderto achieve a quorum.
The AGM must be held within six months from the end of thefinancial year. Munters AGMs are held in Stockholm, Sweden,
every calendar year before the end of June.
Under the Articles of Association, notices convening General
Meetings are issued through announcement in Post- och Inrikes
Tidningar (the Swedish Official Gazette) as well as on the
Munters website. Announcement to the effect that a notice
convening a GM has been issued shall be made in Svenska
Dagbladet.
Apart from the AGM, Extraordinary General Meetings may
be held if the Board considers it to be necessary, or if Munters’auditor or owners of at least 10 percent of total shares in thecompany requests one.
All shareholders who are directly recorded in the shareregister maintained by Euroclear Sweden five weekdays(Saturdays included) prior to the AGM and who have notified
the company of their intention to participate in the AGM not later
than the date indicated in the notice of the AGM, are entitled toattend the AGM and vote for the number of shares they hold. In
addition to notifying the company, shareholders whose sharesare nominee registered through a bank or other nominee must
request that their shares be temporarily registered in their own
names in the register maintained by Euroclear Sweden, in order
to be entitled to participate in the AGM. Shareholders should
inform their nominees well in advance of the record date.
Shareholders who wish to have an issue brought before theGeneral Meeting must submit a request in writing to the Boardof Directors. The request should normally be submitted to theBoard of Directors seven weeks before the General Meeting at
the latest.

71

CORPORATE GOVERNANCE
2018 Annual General Meeting
At the AGM on May 17, 2018 at the Clarion Hotel Sign in
Stockholm 95 shareholders were represented corresponding
to 87.3 per cent of the share capital. The meeting was held
in Swedish with simultaneous interpretation into English. All
Board members, and the Group’s auditor in charge, were inattendance.
The AGM resolved on issues including the following:
Dividend of SEK 0.30 per share for fiscal year 2017
Re-election of Board members Christopher Curtis, Helen
Fasth Gillstedt, Per Hallius, Joakim Karlsson, John Peter Leesi,
Andreas Näsvik, Lena Olving, Kristian Sildeby and Joachim
Zetterlund
Re-election of Christopher Curtis as Chairman of the Board
Fees to the Board of Directors
Guidelines for remuneration to senior executives
Long-term incentive programme for Group Management
and certain other key employees, containing resolutions on
issuance of employee stock options and hedging measures inconnection with it
Authorisation for the Board of Directors on one or more
occasions, up to the time of the next Annual General Meeting,to decide on issuance of shares and/or convertible instruments and/or warrants totalling 18,359,780 shares that canbe issued, as convertible instruments that can be converted
to shares and be subscribed to through the utilisation of
warrants.
2018 Extraordinary General Meeting
At an extraordinary General Meeting on December 18, 2018,
Magnus Lindquist and Johan Ek were elected as ordinary Board
members for the period up to the end of the next AGM to replace
Christopher Curtis and Joakim Karlsson. In addition, Magnus
Lindquist was elected as the new Chairman of the Board.
2019 Annual General Meeting
The 2019 Annual General Meeting will be held on May 8,
2019, in Stockholm, Sweden. For further information, refer to the
Munters website.
3. Nomination Committee
Nomination Committee activities
The Nomination Committee is charged with preparing and72			

submitting proposals on behalf of the shareholders for electing
the Chairman of the AGM and electing a Chairman of theBoard and other Board members, in addition to a reasonedstatement, election of auditors, decisions on fees to auditors
and to the Board (divided between the Chairman and the othermembers, as well as remuneration for committee work) and,
where necessary, proposing changes to the appointment of theNomination Committee. In addition, the Nomination Committee
also assesses the independence of Board members in relation to
the company and its major shareholders. The company’s Audit
Committee assists the Nomination Committee in its work on
proposing the election of auditors; the Nomination Committee’s
proposals to the GM regarding the election of auditors must
contain the recommendation of the Audit Committee.
Prior to submitting its proposals to the Board, the Nomination
Committee may read through the evaluation of the activities of
the Board and its members and inform itself in general of theBoard’s activities through interviews with the company’s CEO
and selected committees and Board members.
Shareholders who wish to submit proposals to theNomination Committee may do so via the Committee’s e-mail:valberedningen@munters.se or by post: Munters Group AB,
Nomination Committee, Box 1188, SE-164 26 Kista, Sweden.
Composition of the Nomination Committee
Under the Nomination Committee instructions adopted by
the 2017 AGM, which are in force until further notice, theNomination Committee shall be composed of representatives
from the four largest shareholders in terms of voting rights
listed in the share register maintained by Euroclear Sweden AB
as of August 31, each year. The Nomination Committee also
includes the Chairman of the Board, who also convenes the first
Nomination Committee meeting.
The composition of the Nomination Committee for the AGM
shall normally be announced no later than six months before
that meeting. Remuneration shall not be paid to the members of
the Nomination Committee. Changes in the composition of theNomination Committee shall be made public immediately.
Nomination Committee prior to the 2019 AGM
The composition of the Nomination Committee was published on
the Munters website on September 19, 2018. The Nomination
Committee for the 2019 AGM consists of Robert Furuhjelm(Nordic Capital), Lars Wedenborn (FAM AB), Tomas Risbecker(AMF Försäkringar och Fonder), Johan Grip (First Swedish

National Pension Fund) and Magnus Lindquist (Chairman of
the Board of Munters). Magnus Lindquist was appointed as amember of the Nomination Committee in conjunction with his
replacement of Christopher Curtis as Chairman of the Board of
Munters at the Extraordinary General Meeting on December
18, 2018. Prior to this, Christopher Curtis was a member of theNomination Committee. From the time it was constituted up until
the submission of the Annual Report, the Nomination Committee
held five meetings.
4. Board of Directors
Board activities
The duties of the Board of Directors are primarily set forth in the
Swedish Companies Act and the Code. In addition to this, Board
activities are guided by formal rules of procedure that the Board
adopts every year. The rules of procedure govern the division ofwork and of responsibility among the members of the Board, itscommittees, its Chairman and the CEO. The instructions for the
CEO also contain instructions for financial reporting. The tasksof the Board of Directors include adopting strategies, businessplans and targets, and issuing interim reports and year-end
financial statements and managing risks, as well as setting
policies and guidelines. The Board is also required to follow
economic developments and ensure the quality of financial
reporting and the internal controls, and evaluate the Group’s
operations based on the objectives and guidelines set by the
Board of Directors. The Board is also responsible for appointing
the CEO. Finally, the Board of Directors decides on major investments and changes in organization and activities.

NOMINATION COMMITTEE PRIOR TO THE 2019 AGM
Name

Appointed by

Holdings/votes

Robert Furuhjelm,
Chairman, Nomination
Committee

Nordic Capital

50.1%

Lars Wedenborn

FAM AB

11.4%

Tomas Risbecker

AMF Försäkringar och
Fonder7.9%

Johan EkFirst Swedish National
Pension Fund

6.2%

Magnus Lindquist

Chairman of the Board,
MuntersM U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

COMPOSITION OF THE BOARD OF DIRECTORS
Present
Committee
Name
Christopher Curtis, chairman

Board

Audit

Elected inFee, SEK 1

fees

Independent

Meetings

Committee

3)

2015

618,493

45,833

Yes

14/14

-

Helen Fasth Gillstedt

2017

400,000

150,0004)

Yes

14/15

5/5

2)

Compensation
Committee
3/3-

Per Hallius

2013

400,000

Yes

15/15

-

-

Joakim Karlsson6)2010

241,573

No

10/14

-

-

John Peter Leesi, President and CEO16)

2011

-

Andreas Näsvik

2011

Lena Olving

5)

No7)

15/15

-

400,000

150,000

3) 4)

No8)

15/15

5/5

4/4

2017

400,000

100,0004)

Yes

14/15

4/5

-

Kristian Sildeby

2017

400,000

No

8)

15/15

-

-

Joachim Zetterlund

2012

400,000

100,000

3)

Yes

15/15

-

4/4

Magnus Lindquist, Chairman9)2018

431,5074,1673)

Yes

1/1

-

1/1

Johan Ek, interim President and CEO10)

2018

-

No11)

1/1

-

-

Pia Nordqvist

2004

-

-

15/15

Robin Hedén12) 13)

2017

-

-

10/11

Simon Henriksson

2017

-

-

14/15

Robert Wahlgren14)

2009

-

-

13/15

12)

14) 15)

1) Remuneration determined regarding work from the 2018 AGM to the 2019 AGM.
2) Christopher Curtis left the Board of Directors on December 18, 2018. Received pro rata Board fees as of the 2018 AGM up through December 18, 2018.
3) Compensation Committee fee.
4) Audit Committee fee.
5) Per Hallius has a consulting agreement with Nordic Capital Limited and Nordic Capitals Fonder.
6) Joakim Karlsson left the Board of Directors on December 18, 2018. Received pro rata Board fees as of the 2018 AGM up through December 18, 2018.
7) Independent in relation to the company’s major shareholders, but not to the company and Group Management.
8) Independent in relation to the company and Group Management, but not to the company’s major shareholders.
9) Magnus Lindquist elected to the Board of Directors at the Extraordinary General Meeting on December 18, 2018.
Receiving pro rata Board fees as of 18 December 2018 up through the 2019 AGM.
10) Johan Ek elected to the Board of Directors at the Extraordinary General Meeting on December 18, 2018.
Appointed interim CEO on the same day; will receive no Board fees while he is interim CEO.
11) Not independent in relation to the company and Group Management, or in relation to the company’s major shareholders.
12) Employee representative.
13) Robin Hedén left the Board of Directors as ordinary employee representative on November 1, 2018.
14) Employee representative, deputy.
15) Simon Henriksson elected ordinary employee representative on November 1, 2018.
16) President and CEO until December 18, 2018.

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Composition of the Board of Directors
Under the company’s Articles of Association, Munters’ Boardof Directors shall consist of at least three and no more than ten
members elected by the AGM for a term of office until the end of
the next AGM. At the 2018 AGM, all nine Board members werere-elected. Under Swedish law, the trade unions have the rightto representation on the Board; in 2018 they were represented
by two members and two deputies. A presentation of the Board
members can be found in the section on the Board of Directors
on pages 78–79.
The CEO of Munters is part of the Board of Directors, andthe CFO participates as a presenter at Board meetings. Lawyer
Johan Lekholm serves as the Board’s secretary. Other company
officers participate in Board meetings to provide presentations
on specific issues.
The reasoned statement of the Nomination Committee for the2018 AGM states that the Nomination Committee applied Rule4.1 of the Code as its diversity policy in drawing up its proposal
for the Board of Directors. The goal of the policy is for the Board,in consideration of the company’s operations, phase of development and conditions in general, to have a suitable composition
marked by diversity and breadth as regards the competence,experience and background of the members elected by the GM,
and that an equitable gender distribution is desirable. The 2018
AGM resolved to elect Board members in accordance with theproposal of the Nomination Committee. In preparing its proposal, the Nomination Committee stated that the gender distribution of the proposed Board was not satisfactory. In the opinion of
the Committee, however, continuity in the Board’s activities wasof great importance for the time being and in this light proposed
the re-election of all members. In its reasoned statement, theCommittee emphasized the importance of future committees continuing to work actively to achieve greater diversity in the Board,
striving in particular for an equitable gender distribution amongits members. Nine members were elected at the 2018 AGM: two
women and seven men.
Changes to the composition of the Board in 2018
At an Extraordinary General Meeting on December 18, 2018
Magnus Lindquist and Johan Ek were elected as ordinary Board
members for the period up to the end of the next AGM to replace
Christopher Curtis and Joakim Karlsson. In addition, Magnus
Lindquist was elected as the new Chairman of the Board. In apress release dated December 18, 2018 the Board of Directorsof Munters announced that John Peter Leesi was leaving his
73

CORPORATE GOVERNANCE
2018 BOARD MEETINGS
During 2018, the Board of Directors held 15 meetings.
Below is an overview of the most important issues
addressed at these meetings.

February
Decision on dividend proposal
regarding fiscal year 2017.
Decision on approval and releaseof the year-end (Q4) report.

April
Approval of the 2017
Annual Report.
Decision on approval andrelease of the Q1 report.

May
Approval of proposed policies
from management.
Re-election of all members of
the Compensation and Audit
Committees.
Decisions on adoption of therules of procedure for the Boardof Directors, and the rules ofprocedure for the Compensation
and Audit Committees.

AugustDecision on buy-back of own
shares by virtue of the authorisation from the 2018 AGM, tosafeguard commitments under the
incentive programme.

July
Decision on approval
and release of the Q2
report.

SeptemberBusiness area
strategy plansfor 2019–2021.

November
Decision on notice toattend an Extraordinary
General Meeting toresolve on proposals forchanges to the Board.

DecemberElection ofMagnus Lindquist
as new member of
the Compensation
Committee.
Election of Johan Ek
as interim President
and CEO.
2019 financial plan.

OctoberApproval and releaseof the Q3 report.
Updated plan for increased
profitability in Business Area
Data Centers.

Number of meetings74			

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role as President and CEO. In conjunction with this, John Peter
Leesi was also leaving his assignment as Board member. On
November 1, 2018 Robin Hedén left the position as ordinary
employee representative on the Board. In conjunction with this,the IF Metall trade union elected Simon Henriksson, former
deputy employee representative, as the new ordinary employee
representative.
Independence of the Board
The company meets the requirements in the Code through amajority of the members elected by the AGM being independentof the company and company management, and that at least
two of them are independent of the major shareholders. The
independence of the Board members at the time of publication
for this report is shown in the table, “Composition of the Board of
Directors”, on page 73.
Responsibilities of the Chairman of the Board
The Chairman of the Board of Directors leads and governs
the work on the Board, ensuring that its activities are conducted efficiently. The Chairman also ensures that the Swedish
Companies Act and other applicable laws and regulations areobserved, and that the Board is given the training required andthat it improves its knowledge of Munters. The Chairman follows
operations in close dialogue with the CEO, conveys opinionsfrom shareholders to the other Board members, and serves
as spokesperson for the Board. The Chairman of the Board
is responsible for other Board members receiving sufficient
information to perform their work effectively, and for ensuringthat the decisions of the Board are implemented. The Chairmanof the Board is also responsible for the Board evaluating its workon a yearly basis.
Board fees
At the 2018 AGM, it was resolved that fees of SEK 1,050,000
would be paid to the Chairman and of SEK 400,000 eachto the other members elected at the meeting. It was further
resolved that fees of SEK 150,000 would be paid to the chairof the Audit Committee, with SEK 50,000 to each of the othermembers of the Committee; and SEK 100,000 to the chair of theCompensation Committee, with SEK 50,000 to each of the othermembers of the Committee.

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Evaluation of Board activities
Every year, an evaluation must be conducted to ensure the quality of Board activities and to survey the need, if any, for additional competence or experience. The Chairman of the Board is
responsible for conducting this evaluation and for providing itto the Nomination Committee. Upon request of the Nomination
Committee, the Board members must participate in interviews
with the Nomination Committee so as to facilitate the evaluation.
In 2018, the Board conducted a Board evaluation in which themembers of the Board had to respond to a comprehensive questionnaire concerning issues such as strategies and objectives,
investments, reporting and control, organization and directors,
the forms of the Board’s work, the composition and overall function of the Board of Directors, and their competence and theirown work on the Board. The Nomination Committee was notifiedof the outcome of the Board evaluation in December 2018.
Board Committees
The Board of Directors has two committees: the Audit Committee
and the Compensation Committee. Reports to the Board on
issues addressed during the meetings of the Committees areeither in writing or given orally. The work of each committee
is performed in accordance with written policies and the rulesof procedure stipulated by the Board of Directors. Minutes ofcommittee meetings are provided to all Board members.
5. Audit Committee
The overall task of the Audit Committee is to ensure fulfilment of
the Board of Directors’ supervisory duty in relation to internal
control, audit, financial risk management, accounting and financial reporting; to prepare matters regarding the procurement ofaudit and other services provided by the auditor; and to prepare
certain accounting and auditing matters to be resolved by the
Board.
The Audit Committee must review procedures and routines
for the aforementioned areas. The Audit Committee shall submit
recommendations and proposals to ensure the reliability of thefinancial reporting and its compliance with generally accepted
accounting principles, and continually discuss the efficiencyof the company’s accounting principles and financial control
with the auditors and Group Management, and consider any
recommendations regarding improvements to internal control.
In addition, the Audit Committee shall monitor the impartiality
and independence of the auditor, evaluate the audit work anddiscuss collaboration between the auditor and the company’s

internal control function. The Audit Committee shall also assist
the Nomination Committee in preparing nominations for auditor
and proposals in respect of audit fees by submitting recommendations to the Nomination Committee.
The Audit Committee shall, during the period between two
consecutive AGMs, hold at least five meetings, normally in conjunction with ordinary meetings of the Board of Directors.
In 2018, the Audit Committee consisted of Helen Fasth
Gillstedt (chair), Andreas Näsvik and Lena Olving. The Audit
Committee fulfills the requirement in respect of accounting andauditing competence as set forth in the Swedish Companies
Act. The Audit Committee had five meetings during 2018. Board
member attendance is shown in the table, “Composition of theBoard of Directors”, on page 73.
6. Compensation Committee
The task of the Compensation Committee is to prepare issues
relating to compensation for the CEO and Munters’ other senior
management. The Compensation Committee proposes guidelines for, among other things, the relationship between fixed andvariable compensation, the principal conditions for bonuses
and incentive schemes, conditions for non-monetary benefits,pensions, termination and severance pay. The Committee also
makes proposals on individual compensation packages for the
CEO and other executives in the company’s senior management.
Furthermore, the Compensation Committee shall monitor andevaluate the outcome of variable compensation schemes and thecompany’s compliance with compensation guidelines adopted
by the Annual General Meeting.
In 2018, the Compensation Committee consisted of: Joachim
Zetterlund (chair), Christopher Curtis (until December 18,2018), Andreas Näsvik and Magnus Lindquist (as of December
18, 2018). The Compensation Committee held four meetingsin 2018. Board member attendance is shown in the table,“Composition of the Board of Directors”, on page 73.
7. Group Management and CEO
Apart from the President and CEO, Group Management in2018 consisted of four business area Vice Presidents and the
CFO, and seven Group Vice Presidents responsible for thefollowing central functions: Global Operations, Global Services,
Innovation and Technology, HR & Communications, Strategy &Business Development, CSR and Investor Relations.
The CEO is responsible for day-to-day management inaccordance with the guidelines and instructions of the Board of75

CORPORATE GOVERNANCE
Directors. The CEO’s responsibilities include taking all measuresnecessary to ensure that the organization and control of the company’s accounting takes place in accordance with current rules
and regulations. The CEO shall also prepare all necessary information and supporting documentation for Board meetings and,if requested by the Chairman of the Board, to summon the meeting. The CEO reports at the Board meetings and shall submit
motivated proposals for decision to the Board of Directors.
The CEO shall ensure that the Board members continually
receive all information necessary to assess the company’s financial situation. The quality of the report shall be such that it permits the Board of Directors to make a well-grounded assessment.
Changes to Group Management in 2018
Katarina Lindström took office as Group Vice President Global
Operations in May 2018. Sofia Gellar was appointed Group
Vice President HR & Communication in October 2018. She
replaced Per-Arne Håkansson, who retired. Michael Gantert
was appointed Group Vice President Data Centers in October
2018. He replaced Neil Yule, who will be leaving the company
in June 2019. Johan Ek was appointed interim President and
CEO for Munters in December 2018; previously, John Peter Leesi
had been President and CEO.

GROUP STRUCTURE

CEO Munters /GroupAir Treatment

AgHortGlobal Operations

HR, Communications

Finance, IT, IR

and CSRand Strategy

76			

Changes to Group Management in 2019
In conjunction with the publication of the Q4 2018 report,
Munters announced that Jonas Ågrup, CFO, would be leaving
Munters at the end of 2019 and that recruitment of a new CFO
had begun. Additionally, it was announced that Peter Lindquist
had been appointed interim Group Vice President Air Treatment
as of February 13, 2019, replacing Scott Haynes. It was alsoannounced that, as a result of certain structural changes in
Munters, Group Management would consist of six members
compared with the previous 13. The new Group Management
will consist of the President and CEO, Group Vice President and
CFO, Group Vice President Air Treatment, Group Vice President
AgHort, Group Vice President Global Operations and Group
Vice President HR, Communications and CSR.
Guidelines for remuneration to senior executives
Guidelines for remuneration to senior executives are evaluatedand put forward for approval on a yearly basis at the AGM by
the Board of Directors. Compensation for the CEO and CFO isprepared by the Compensation Committee and decided by the
Board of Directors. Compensation for other senior executives
is prepared by the CEO and decided by the Compensation
Committee.
Munters will endeavour to offer total compensation thatis reasonable and competitive in relation to what applies in
the country or region of employment for the respective GroupManagement members and enables Munters to recruit andretain the senior executives needed for the company to reach its
short-term and long-term targets.

8. External Auditor
Munters external auditor is appointed by the AGM. The auditor
reviews the Annual Report and the consolidated financial
statements, as well as management by the Board of Directors
and the CEO. The audit is conducted in accordance with theInternational Standards on Auditing and generally accepted
auditing standards in Sweden.
The audit is reported on a continual basis over the year tothe company’s Audit Committee. Over the year, the auditor
participated in all Audit Committee meetings and in the Board
meeting where the annual accounts were addressed. The auditor participates in the AGM, describing the audit work and theobservations made in the audit report there.
The fee for the auditor for their audit work is paid out on acontinual basis according to approved invoices. Apart fromaudit work, Munters audit firm EY provided other services during
the year, primarily in acquisitions and tax-related issues. For
information on remuneration to EY, refer to Note 30.
EY has been Munters auditor since 2010, and Erik
Sandström, authorized public accountant and member of FAR(the professional institute for authorized public accountants in
Sweden), has been auditor-in-charge since 2012. At Munters
AGM in 2016, EY was re-elected as auditor for a term of officeof four years, up through the 2020 AGM.

Compensation can consist of:
Fixed salary
Variable salary
Other benefits such as pension and insurance
The Board of Directors will evaluate annually whether or not along-term incentive programme is to be proposed to the AGM.
The 2018 AGM resolved to introduce a long-term incentive
programme in the form of an employee stock option programme
for Group Management and certain other key employees.
For additional information on compensation to senior executives, long-term incentive programmes and pension benefits,refer to Note 31 and 32.

Erik Sandström
auktoriserad revisor, EY

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INTERNAL CONTROL OF FINANCIAL REPORTING
Internal control deals with clarity and order, as well as withensuring that what is to be done is done the way it was intended.
Internal control is the collective term for the organization and thesystems, processes, and routines that enable this.
Munters’ internal control of its financial reporting is basedon the framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This
framework covers five different main areas: control environment,risk assessment, control activities, information and communication, and monitoring.
Control environment
Internal control is formed by the overall control environment.
The Board of Directors is responsible for adopting an efficientsystem of internal control and governing the work through theCEO. Group Management sets the tone for the operation,
influencing employees’ awareness regarding control. One
precondition for a strong control environment is that there areclearly defined values in terms of ethics and integrity, and thatthese are communicated through policy documents such aspolicies, guidelines, manuals and codes. For financial reporting,Group Management in Munters issues policies and guidelines
to all its subsidiaries, which are followed up with newsletters,
telephone conferences, and direct control activities. Courses arealso conducted for many areas of accounting, internal reporting
requirements and systems.
Risk assessment
Risk assessment is conducted on a yearly basis pursuant to theGroup’s risk management policy. The purpose is to identify, document and quantify the consequences and likelihood of eventsoccurring that prevent Munters from achieving its objectives.
Risk assessments comprises identifying and evaluating strategic,
operational, financial, legal and regulatory risks. Furthermore,an action plan for the most material risks is prepared. For more
information on Munters' risk assessment efforts, refer to pages
64–67.
Control activities
Controls have been designed based on the risks identified todetect, prevent and correct errors and discrepancies. Controls
can take place at the transaction level, as Group level controls
and as IT general controls. Control activities are carried out

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in the entire organization, at all levels, and for all functions.
Transaction-based controls, which can be either manual or automatic, are performed to manage the risk of errors in financial
reporting. Reconciliation and analysis are examples of this typeof control. Company-wide controls pertain to such actions as
guaranteeing compliance with instructions for payment approvalrights, authorisations and responsibilities in credit granting.
Examples of general IT controls are change management,
back-up routines and authorisations. The company’s CFO is
responsible for ensuring that identified risks relating to financial
reporting at Group level are addressed. In each legal entity,
the accounting staff is responsible for having the necessarycontrol activities in place, and that accounting and the financial
statements are fair and correct. Global controllers, as well as
financial directors, in each legal entity update forecasts and conduct outcome analyses. All business areas present their financial
results in written reports on a monthly basis to the CFO, who inturn presents these to Group Management.
Information and communication
Munters has informational and communications channels that
aim at ensuring that information is identified, collected, andcommunicated in a way and within a time frame that enables
employees and directors to perform their tasks. Instructions
for reporting and accounting guidelines are conveyed to theemployees concerned through monthly newsletters and quarterly
telephone conferences. The Group uses a shared system forreporting and consolidation of financial information.
Governing documents – in the form of policies, guidelines, andmanuals for financial reporting – are communicated primarily
via the intranet and the Group’s financial handbook, which is
updated as needed. Information for external parties is communicated on Munters' website together with other news and press
releases. Quarterly reports are published and supplemented
with presentations and investor meetings. The Annual Report isprovided to shareholders and other stakeholders through publication on Munters' website, and in print upon request.
Monitoring
Monitoring and testing of control activities are routinely conducted throughout the year to ensure that risk has been taken into
account and satisfactorily managed. Testing is carried out by
employees who are independent of the performance of the control and possess the competence to evaluate the performance ofthe controls. Failed controls must be mitigated, which means that
actions must be taken and implemented to correct deficiencies.
Reports are presented to the Audit Committee twice yearly.
The Board of Directors has final responsibility for all decisions
regarding compliance within Munters. The Board reviews andapproves internal control policies on a yearly basis. If needed,
review and approval are conducted more frequently.
Every head of division is ultimately responsible for thefinancial information for their respective divisions. The information is further followed up at the business area level, by GroupManagement and, finally, by the Board of Directors. Munters’
financial position, strategies, and investments are discusses at
every Board meeting. The Board is also responsible for monitoring internal control. This effort encompasses tasks such as
ensuring that measures are taken to manage any deficiencies,
and following up on proposals for measures that were pointed
out in conjunction with the external audit.
Assessment of the need for a separate internal audit function
Munters has no internal audit function, as it is the Board’s
opinion that the company’s internal organization and processes
for monitoring fulfill this function in a satisfactory manner. For
certain special audits, external efforts can also be conducted.

MUNTERS CONTROL ENVIRONMENT

Risk assessment

Improvement

Inform &Communicate

Control activities

Monitoring77

BOARD OF DIRECTORS & MANAGEMENT

Board of Directors
MAGNUS LINDQUISTJOHAN EKPER HALLIUS

HELEN FASTH GILLSTEDTANDREAS NÄSVIKKRISTIAN SILDEBY

Born 1963. Chairman of the Board
since December 2018.1

Born 1968. Interim President
and CEO.2 Board member since
December 2018.

Born 1962. Board member since2013.

Born 1962. Board member since2017. Chairman of the Audit
Committee.

Born 1975. Board member since2011. Member of the Audit
Committee and the Compensation
Committee.

Born 1976. Board member since2017.

Principal education andprofessional experience:
Bachelor in Economics andBusiness Administration, Stockholm
School of Economics. Morethan 20 years of experience in
executive positions with global
industrial companies, primarily asGroup Vice President at Autoliv
and the Perstorp Group. Many
years of experience as SeniorPartner at Triton.
Current assignments/positions:
Chairman of the Board of Ryds
Bilglas.
Selected previous assignments:
Chairman of the Board of Norma,
Ambea, Alimak and Polygon,
and Board member at Bravida,
Mycronic and Ovako.
Holding in Munters Group AB:
3,000,000 call options.3
1

Principal education andprofessional experience:
M.Sc. in Economics from Hanken
School of Economics, Helsinki,
Finland. Broad experience in both
executive positions and Board
activities. President and CEO of
Realcom; President of Powerwave
Technologies Inc. and LGP Allgon.
Current assignments/positions:
Chairman of the Board of Sunrise
Medical. Board member ofHandicare.
Selected previous assignments:
Chairman of the Board of
Handicare, Saferoad and Corob
Engineering; board member ofAcino and Ramirent.
Holding in Munters Group AB:
3,000,000 call options.3

Chris Curtis was Chairman of the Board

until 18 December 2018.

2

Since 18 December 2018. John Peter

Leesi was President and CEO until 18
December 2018.

78			

Principal education andprofessional experience:
MBA, Harvard Business School.
M.Sc. in Economics and Business
Administration, Stockholm Schoolof Economics. Independent adviser,
Board member and investor. Nearly
25 years of experience in the
management consulting industry,
most recently as Senior Partner of the
Boston Consulting Group.
Current assignments/positions:
Chairman of the Board of Nefab
Group AB. Vice Chairman of
the Board of Ruukki Construction
Oy. Board member of PMH
Affärsutveckling AB, Kemetyl Holding
AB, Beowulf AB and Quant AB.
Industrial adviser to the Nordic CapitalFunds. Adviser to senior executives oflarge industrial multinationals.
Selected previous assignments:
Chairman of the Board of United
Minds Samhällsanalys AB and My
Academy Sweden AB.
Holding in Munters Group AB:
84,031 shares.3

Principal education andprofessional experience:
M.Sc. in Finance & Control andInternational Business, Stockholm
School of Economics. Studies
in Sustainable Development at
Stockholm Resilience Center,
Stockholm University and KTH
Royal Institute of Technology. Over
twenty years of experience in
executive positions at Statoil and
SAS Group.
Current assignments/positions:Board member of Handelsbanken
Fonder AB, Samhall AB, Humana
AB and PowerCell AB; CEO of
Blong AB.
Selected previous assignments:
Board member of AcadeMediaAB, Lindorff Group AS, Intrum
Justitia AB, Swedesurvey AB and
Svefa Holding AB.
Holding in Munters Group AB:
3,000 shares.3

Principal education andprofessional experience:
M.Sc. in Economics and Business
Administration, Stockholm Schoolof Economics. Work with corporate
finance, private equity, mezzanine
investing and debt restructuring at
Deutsche Bank, Goldman Sachs
Investment Banking and Goldman
Sachs Capital Partners.
Current assignments/positions:Board member of Ryds Bilglas,
partner of NC Advisory AB,adviser to the Nordic CapitalFunds, and Board member ofIntrum AB.
Selected previous assignments:
Board member of Lindorff AB.
Holding in Munters Group AB: – 3

Principal education andprofessional experience:
M.Sc. in Economics and Business
Administration, Stockholm Schoolof Economics. Investment Manager
and CFO in FAM AB. Former Vice
President, Head of Finance andRisk Management at Investor AB.
Current assignments/positions:
Chairman of the Board of 82an
Invest AB; Board member of
Höganäs AB, Nefab Holding AB,
Sol Voltaics AB, QuNano AB andKivra AB.
Selected previous assignments:
Chairman of the Board of
Blasieholmen 54 Restaurang AB.
Board member of Lindström &Göthberg Executive Development
AB, Power Wind Partners AB, Elk
Holding AB and Mathias Dahlgren
Innovations AB.
Holding in Munters Group AB:
6,000 shares.3

3

No indirect holdings.

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LENA OLVING

JOACHIM ZETTERLUNDPIA NORDQVISTROBERT WAHLGRENSIMON HENRIKSSON

Born 1956. Board member since2017. Member of the Audit
Committee.

Born 1963. Board member

Born 1973. Board member since2004. Employee representative
appointed by Unionen.

Born 1969. Deputy member since2009. Employee representative
appointed by Unionen.

Born 1984. Deputy member since2017. Employee representative
appointed by IF Metall.

Principal education andprofessional experience:
M.Sc. in Mechanical Engineering,
Chalmers University of Technology.
President and CEO of Mycronic AB(publ). Several executive positions,
including Group Management
for Volvo Cars. COO and Deputy
CEO of Saab AB (publ) and CEO
of Samhall Högland AB.

Principal education andprofessional experience:

Position at Munters:
Senior Business Application
Specialist, Munters AB.

Position at Munters:
Customized Project Engineering
Coordinator, Munters Europe AB.
Holding in Munters Group AB: – 3

Position at Munters:
Material supplier, Tobo plant.

Current assignments/positions:
Chairman of the Board of Kungliga
Operan AB. Board memberof ASSA ABLOY AB (publ),
Investment AB Latour (publ), IVA:s
Näringslivsråd, the Associationof Swedish Engineering Industries
and the Swedish Corporate
Governance Board.

Current assignments/positions:

Selected previous assignments:
Board member of Alfa Laval AB(publ), Gunnebo AB (publ), Norsk
Hydro A/S (publ) and Novozymes
A/S (publ).

Chairman of the Board of OfficeHolding in Munters Group AB:
500 shares.3

since 2012. Chairman of theCompensation Committee.

Executive Vice President Europe
Corechange, Managing Director

Holding in Munters Group AB: – 3

Holding in Munters Group AB:
350 shares.3

Preferred Accounts Division Dell
UK, Vice President Northern Europe
Cambridge Technology Partners
and Business Area Manager
Expressen Digitala Medier.
Chairman of the Board of One
Agency AB and FörlagsSystem AB.
Board member of MHI Investments
AB, JZ Business Development AB,
Quant AB and Xpeedio Support
Solutions AB.
Selected previous assignments::
IT-Partner i Sverige AB. Board
member of Basset AB and Tailormade Consulting Group Sweden AB.
Holding in Munters Group AB:
84,031 shares.3

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3No indirect holdings.

79

BOARD OF DIRECTORS & MANAGEMENTGroup Management
JOHAN EKJONAS ÅGRUP

SOFIA GELLAR

PETER GISEL-EKDAHLPETER LINDQUISTKATARINA LINDSTRÖM

Born 1968. Interim President andCEO since December 2018.1

Born 1960. Group Vice President
and Chief Financial Officer since2011.

Born 1971. Group Vice President
HR, Communications and CSR
since 2018.

Born 1970. Group Vice President
AgHort since 2011.

Born 1961. Interim Group Vice
President Air Treatment since
February 2019.

Born 1965. Group Vice President
Global Operations since 2018.

Principal education andprofessional experience:
M.Sc. in Economics from Hanken
School of Economics, Helsinki,
Finland. Broad experience in both
executive positions and Board
activities. President and CEO of
Realcom; President of Powerwave
Technologies Inc. and LGP Allgon.

Principal education andprofessional experience:
BA in Business and Economics,
Stockholm University. Various
positions in ÅF, WM-data, Cardo
and Atlas Copco.

Principal education andprofessional experience:
M.Sc. in Chemical Engineering,
KTH Royal Institute of Technology.
MBA, Copenhagen Business
School. Various positions at
Wedholms and Hackman.

Current assignments:
Chairman of the Board of Sunrise
Medical. Board member ofHandicare.

Holding in Munters Group AB:
319,035 shares and 415,000
warrants.

Principal education andprofessional experience:
B.Sc. in Human Resources
Development and Labor Relations
from Stockholm University. Morethan 20 years of experience inthe HR field, including as Headof Corporate HR and Head of HR
Support at Scania, Head of TalentManagement at SSAB EMEA, and
VP Human Resources at Ruukki
Construction.

Principal education andprofessional experience:
BA in Finance from Schiller
University, London. More than 25
years of experience in executive
positions, including as Executive
Vice President of Handicare AB,
Sales & Marketing; President& CEO of AxIndustries AB and
Human Care HC AB. Experience
as Board member in several
companies.

Principal education andprofessional experience:
M.Sc. in Materials Science, KTH
Royal Institute of Technology inStockholm. Various executive
positions at Volvo since 1988,
including Senior Vice PresidentInternational Manufacturing, Volvo
Group Trucks Operations; andSVP Operations and Supply Chain
Management at Volvo Group
Trucks Operations.

Holding in Munters Group AB: –Current assignments:
Board member of Gränges andmember of the Royal Swedish
Academy of Engineering Sciences.

Selected previous assignments:
Chairman of the Board of
Handicare, Saferoad and Corob
Engineering; Board member ofAcino and Ramirent.

Current assignments:
Board member of Handelsbanken
Kista.

Holding in Munters Group AB:
35,770 warrants.

Current assignments:
Board member of ABECE AB andWedcooling AB.
Previous assignments:
Deputy Board member of Drivec
AB.
Holding in Munters Group AB:
191,176 shares and 295,000
warrants.

Holding in Munters Group AB:
10,000 shares.

Holding in Munters Group AB:
3,000,000 call options.2

1

John Peter Leesi was President and

CEO until 18 December 2018.
280

No indirect holdings.

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

AUDITOR’S STATEMENT ON
THE CORPORATE GOVERNANCE REPORTTo the Annual General Meeting of the shareholders of Munters
Group AB (publ.), corporate registration number 556819-2321

To the Annual General Meeting of the shareholders of Munters
Group AB (publ.), corporate registration number 556819-2321

Engagement and responsibility
It is the Board of Directors who is responsible for the statutory
sustainability statement for the year, for which the extent is presented on page 52 and that it has been prepared in accordancewith the Annual Accounts Act.

Engagement and responsibility
It is the Board of Directors who is responsible for the corporate
governance statement for the year 2018-01-01–2018-12-31 on
pages 70–77 and that it has been prepared in accordance with
the Annual Accounts Act.

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

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

Opinions
A statutory sustainability statement has been prepared.

Opinions
A corporate governance statement has been prepared.
Disclosures in accordance with Chapter 6, Section 6, second
paragraph, Points 2–6 of the Annual Accounts Act and Chapter
7, Section 31, second paragraph of the same law are consistent
with the annual accounts and the consolidated accounts and arein agreement with the Annual Accounts Act.

Stockholm, 12 April 2019
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

Stockholm, 12 April 2019
Ernst & Young AB

Erik Sandström
Authorized Public Accountant
M U N T E R S | A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

81

FINANCIAL REPORTS BOARD OF DIRECTORS’ REPORTBOARD OF DIRECTORS’ REPORTMUNTERS ANNUAL REPORT 201882

Board of Directors’ Report

Board of Directors’ report

The Board of Directors and the CEO of Munters Group AB(publ), corp. reg. no. 556819-2321, with its registered officein Stockholm, Sweden, hereby submits the consolidated
accounts and annual report for the fiscal year 1 January – 31
December 2018. “Munters Group AB” or “the Parent
Company” refer to Munters Group AB (publ), and “Munters”
or “the Group” refer to the Munters Group, which comprises
Munters Group AB and its Group companies.
The Board of Directors approved the annual accounts for
publication April 9, 2019. The consolidated and Parent
Company income statements and balance sheets will be
submitted for approval at the Annual General Meeting on
May 8, 2019.
OPERATIONSThe Munters Group is a world-leading supplier of energy efficientdehumidification and air treatment solutions. Using innovativetechnology, Munters’ experts create the perfect climate forcustomers in our focused business segments. Our largest customers
are found in the food, pharmaceutical, retail, data centers, livestock
and power industries. Munters has been a pioneer in the field of air
treatment since the company was founded in 1955. As of 2017,
the operation is organized into four business areas: Air Treatment,
AgHort, Data Centers and Mist Elimination.

Five-year summary

2018

2017

2016

2015

2014

Order intake, SEKm
Net sales, SEKm
Organic growth, %Earnings before interest andtax, SEKm

6,914
7,122
5

7,197
6,604
6

6,373
6,040
8

5,420
5,399
12

4,323
4,216
7

134
2

453
7

577
10

384
7

-104
-2

7
-94

152
173

153
85

13
-18

-513
-435

2,843
40
9,268

2,661
41
9,198

2,724
38
8,991

2,617
37
8,008

2,148
39
7,271

231

170

184

113

104

3,653

3,559

2,953

2,874

2,635

EBIT margin, %Profit/Loss after financial
items, SEKm
Income for the year, SEKm 0
Net debt, SEKm 1)
Equity/assets ratio, % 1)
Total assets, SEKm
0
Investments, SEKm
Average number of
employees01) Net debt and equity ratio are calculated excluding shareholder loans for the years
2014 to 2016.

Order intake and net sales
Group
Order intake for 2018 decreased by 4% to SEKm 6,914 (7,197)
and decreased 7% organically. The decrease was mainly due tolower order intake in Data Centers.
Net sales increased by 8% to SEKm 7,122 (6,604) and 5%
organically, driven by growth in all business areas except Mist
Elimination.
Air Treatment
Order intake for the full year was flat and declined by 3%organically as a function of low investment level within the
Supermarket end-market in the US, along with the strategic exit ofgeneral air handling solutions affecting order intake in other
Commercial applications. Order intake in Services continued to
grow in 2018.
Net sales for the full year 2018 grew by 5%, of which 2% wasorganic. The slow down in the Commercial sub-segment impacted
sales negatively and Component sales remained on the same level
as in 2017. Net sales in Services continued to grow in 2018.

8 2 			

AgHortOrder intake in 2018 increased by 13% whilst the organic growth
was 10%. The growth was primarily driven by strong performancein the Swine sub-segment in China, but also by two large orders forSonarEcho. Order intake in EMEA and Americas were at the samelevel as last year. Order intake in the biggest market US was down,
primarily due to low sales of cooling pads.
Net sales in 2018 increased by 10%, of which 7% was organic.
The Swine sub-segment in China primarily drove the growth.
Data Centers
Order intake for the full year 2018 decreased by 48% anddecreased by 52% organically, primarily due to lower order intake
from large digital customers in Europe. The decrease in Europe waspartially offset by higher order intake in Americas and Asia during
the year.
Net sales year to date increased by 25%, due to higher volumes
from two large orders from a digital customer in Europe, partially
offset by lower volumes in the US compared to 2017.
Mist Elimination
Order intake for the full year of 2018 grew by 13% andorganically by 8%. Order intake increased in the sub-segments
Marine in Europe and Process in APAC and Americas.
Net sales for the full year declined by 1% and declined by 6%organically, affected by lower volumes for FGD projects in China
but largely compensated by growth in both the Marine and Process
sub-segments. Europe showed increased net sales across several
sub-segments, with the largest increase in Marine.
Gross profit
Gross profit for Munters amounted to SEKm 2,271 (2,146) and thegross margin was 31.9% (32.5).
Indirect costs
Selling and administrative costs for Munters amounted to SEKm
1,929 (1,566) corresponding to 27.1% (23.7) of net sales. Selling
costs in 2018 was affected by a write-down of goodwill amounting
to SEKm 323.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

BOARD OF DIRECTORS’ REPORT

Operating profit (EBIT) and adjusted EBITA
Group
Operating profit (EBIT) for the full year amounted to SEKm 134(453), including depreciations of SEKm -99 (-79) and amortizations
and write-down of SEKm -503 (-209), whereof SEKm -133 (-189)
was related to surplus values derived through acquisitions and
SEKm -323 (0) was write-down of goodwill in Data Centers.
Adjusted EBITA for the full year amounted to SEKm 676 (675),
corresponding to an adjusted EBITA margin of 9.5% (10.2).

MUNTERS ANNUAL REPORT 2018

Taxes
Income taxes amounted to SEKm -101 (21). The tax cost for the fullyear was negatively impacted by SEKm 71 related to write-down of
goodwill.

Air Treatment
EBIT amounted to SEKm 496 (511) and adjusted EBITA increased
to SEKm 497 (466). Favorable development of gross margins,
including the improved results in the Mexican production, increased
profitability for the year.

Items affecting comparability
Items affecting comparability that affected earnings for 2018 wascosts that amounted to SEKm 39 where SEKm 22 incurred due tothe CEO change and SEKm 16 were costs related to a profit
improvement program within Data Centers.
Items affecting comparability that affected earnings for 2017 wascosts that totaled SEKm -13, consisting primarily of preparation
costs for listing Munters amounting to SEKm 73, a gain of SEKm 7
related to a property sale and a positive effect of SEKm 53 after
final agreement on the purchase consideration for HB Group.

AgHortEBIT amounted to SEKm 244 (225) and adjusted EBITA was SEKm
249 (236). The adjusted EBITA margin for the full year was slightly
lower year on year. The margin was positively impacted by higher
volumes but burdened by less favorable product mix, fewer large
projects and investments in the software and digital offering. In
addition, the majority of the growth in 2018 have been in Asia andthe increased volume have required investments in the localorganization.

Investments
Investments in tangible assets totaled SEKm 148 (126). One part
relates to machinery and equipment for the production operations in
Mexico, Italy, the US, China, and Germany. Deprecations totaled
SEKm 99 (79).
Investments in intangible assets excluding goodwill and otherintangible assets related to acquisitions totaled SEKm 84 (44).
Amortization and impairments totaled SEKm 503 (209), where of
SEKm 323 was write down of Goodwill in Data Centers.

Data Centers
EBIT amounted to SEKm -440 (-13) and included a write down of
goodwill of SEKm 323 (0). EBITA decreased to SEKm -80 (-9).
Increased volumes in Europe were offset by margin deviations anda loss on the commissioning of a large contract, as well as by lower
volumes in Americas during the year compared with 2017.

Goodwill
Goodwill as of December 31, 2018 amounted to SEKm 4,218(4,251). The decline was attributable to a write-down of SEKm 323(0), linked to the business segment Data Centers where our
economic outlook has deteriorated, however partially counteracted
by positive exchange rate effects owing to a weaker SEK against
USD compared to the previous year.

Mist Elimination
EBIT amounted to SEKm 52 (34) and adjusted EBITA was SEKm 52(36). The profit increase was mainly related to lower overhead costs
and by reduced warranty accruals.
Net finance items
Financial income and expenses amounted to SEKm -127 (-301). The
first part of previous year was affected by interest cost on the former
shareholder loan and large cost at the termination of the previous
loan arrangement. The total average weighted interest rate per year
end, including financing fees, was 4.6% (3.5).

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

Financial position and liquidity
Munters primary financing facilities consist of a term loan of USDm
250 and a multi-currency revolving credit facility of EURm 185. The
facilities have no mandatory amortization requirement. The final
maturity date is in May 2022. The loan agreement has one
financial covenant (consolidated net debt in relation to adjusted
EBITDA). Of the Revolving Credit Facility, EURm 20 is allocated toancillary facilities made available for overdraft and guarantee
purposes. Available unutilized credit facilities as of December 31,
2018, amounted to SEKm 918 (811). Interest-bearing liabilities

83

amounted to SEKm 3,013 (2,855). Cash and cash equivalents
amounted to SEKm 404 (402) as of December 31, 2018.
SIGNIFICANT EVENTS DURING THE YEARAt an extra General Meeting in Munters Group AB at December
18, 2018 Magnus Lindquist and Johan Ek was appointed ordinary
board members and replaced Christopher Curtis and Joakim
Karlsson. Magnus Lindquist was appointed Chairman. John Peter
Leesi left his position as President and CEO at December 18. The
recruitment of a new CFO started immediately. Johan Ek wasappointed interim President and CEO at December 18. Katarina
Lindström has been appointed President Global Operations andMichael Gantert has been appointed new head of business area
Data Centers.
Incentive program
At the General Meeting on May 17, 2018, it was resolved inaccordance with the Board’s proposal on the implementation of along-term incentive program. The program shall comprise no morethan 1,257,000 employee stock options to be granted to membersof the group management and certain other key employees,
approximately 75 employees in total. Participation in the plan is at
the board’s discretion and no individual has a contractual right toparticipate in the plan or to receive any guaranteed benefits.
Options are granted under the plan for no consideration and carryno dividend or voting rights.
Each employee stock option that is not cash settled shall entitle theholder to acquire one share in the company at an exercise priceequivalent to SEK 55. Each cash-settled employee stock option shallentitle 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 aperiod of ten business days immediately prior to the exercise of theoption, with deduction of an exercise price of SEK 55.
The participants shall be able to exercise the employee stock
options from the third anniversary of the allotment, up to andincluding the fourth anniversary of the allotment. Exercise of theemployee stock options shall, as a principal rule be conditional
upon the program participant still being employed with the Group.
The costs of the program are estimated to SEKm 7.4 that will be
incurred over the three-year period.
The Board of Directors of Munters Group AB (“Munters”)
resolved, pursuant to the authorization granted by the Annual
General Meeting held on May 17, 2018, to repurchase the83FINANCIAL REPORTS BOARD OF DIRECTORS’ REPORTBOARD OF DIRECTORS’ REPORT

company’s own shares on Nasdaq Stockholm. The purpose of the
repurchase was to secure the delivery of shares to the participantsof Munters’ long-term incentive program, which was resolved by the
Annual General Meeting 2018, and to cover cash flows related tothe program. Repurchase was to comprise a maximum of
1,467,000 shares on one or several occasions and to be made on
Nasdaq Stockholm in accordance with its Rule Book for Issuers. The
repurchases was made at a price per share within the from time totime registered trading interval. Payment for the shares was made in
cash and amounted to SEKm 59. As at December 31, 2018,
Munters Group AB held 1,467,000 shares in own custody whichequaled 0.7% of the outstanding shares.
FINANCIAL INSTRUMENTS
Financial instruments in the Group, beyond those arising inoperating activities, consist of interest-bearing bank borrowings andcurrency derivatives. Further information on the financial instruments
is presented in Notes 3, 19 and 20.
RESEARCH AND DEVELOPMENT
Overall, research and development costs incurred by the Groupamounted to SEKm 217 (167), corresponding to 3.0 % (2.5) of net
sales. Capitalization of internally generated intangible assets
totaled SEKm 60 (31). Activities in the area comprise research
initiatives, technology and product development and productownership.
To ensure sustainable and long-term value creation, innovation,
development and product launches are balanced delicately. A clear
trend has been to focus on digitization and smarter products, which
will generate great opportunities in both business areas.
Sustainability and energy efficiency are something we consider very
important and a large part of our research resources are being
used for the development of technologies in these areas.
EMPLOYEESThe number of permanent employees at year-end was 3,518(3,496). The increase in the number of permanent employees is
primarily attributable to increased production personnel in Data
Centers. The average number of employees during the period was
3,653 (3,559), an increase of 2.5 % compared with the previous
year. Women accounted for 19% (18) of all employees. Staff
turnover totaled 19% (20). The high staff turnover relates mainly to
the US and Mexico where Munters has large production operations.

8 4 			MUNTERS ANNUAL REPORT 2018

The average age was 42 (42). For remuneration to senior
management as well as adopted remuneration guidelines, Note 31.
FINANCIAL RISKS
Financial risks mainly consist of currency, interest and financing
risks. The continued development of the global economy includingchanges of interests and currency rates is a factor of uncertainty for
future profitability. A description of the Group’s financial risks andMunters Treasury risk management, are disclosed in Note 3.
PARENT COMPANY
The Parent Company does not engage in sales of goods andservices to external customers. Cash and cash equivalents at theend of the period amounted to SEKm 77 (134). The Parent
Company had two permanent employees, one man and one
woman.
SHARE CAPITAL AND OWNE RSHIPThe share capital of SEK 5,507,934 comprises 183,597,802
shares, whereof 1,467,000 shares in own custody, with a parvalue of SEK 0.03 per share, which amounts to 0.7 %. The sharesin Munters Group AB are listed on Nasdaq Large Cap under thesymbol MTRS. The ten largest owners in Munters Group AB holds
86.3% (83.2) of the number of shares outstanding. Of these,
Nordic Capital was the biggest shareholder 50.1% (50.1) followedby FAM 11.4% (11.4). No other shareholder holds more than ten
percent of the shares, either directly or indirectly.
PROPOSAL ON DISTRIBUTION OF DIVIDEND
Earnings of SEK 4,149,872,124 are at the disposal of the Annual
General Meeting. The Board of Directors of Munters Group AB
proposes that the Annual General Meeting 2019 resolves on adividend of SEK 0.00 per share.
PROVISIONS IN ARTICLES OF ASSOCIATIONThe Annual General Meeting is charged with appointing anddismiss Board members. The Annual General Meeting decides onchanges to the Articles of Association.

84

GUIDELINES FOR REMUNERATION TO SENIOREXECUTIVESFor the guidelines for remuneration to senior executives in effectduring 2018, refer to Note 31. The auditors have reviewed that theguidelines adopted by the Annual General Meeting have been
followed.
The Board of Directors proposes that the annual general meeting2019 resolve on guidelines for the remuneration of senior
executives to apply up to the annual general meeting 2020,
pursuant to the following.
The group of senior executives encompassed by the guidelines
comprises the CEO and other members of Group executive
management, as well as members of the Board of Directors of thecompany, to the extent employment or consulting agreements areentered into. The guidelines are valid for remuneration underagreements entered into after the approval of the guidelines by theannual general meeting, and for changes made to existing
agreements thereafter.
The remuneration to the management may consist of fixed salary,variable compensation, long-term incentive programmes, pension
and other benefits. The total remuneration package should bebased on market terms, be competitive and enable the company torecruit and retain the managers the company needs to meet its
short-term and long-term targets.
Fixed salary
The fixed salary for the CEO and the other members of the senior
management shall mirror the demands and responsibility that theposition entails as well as individual performance. The fixed salary
for the CEO and the other members of the senior management is tobe reviewed on a yearly basis.
To the extent a member of the Board of Directors carries out workfor the company or for another group company, in addition to theboard work, consulting fees and/or other remuneration for suchwork may be payable.
Variable compensation
Variable compensation in cash is conditional upon the fulfilment ofdefined and measurable criteria and should be maximised to 140
per cent of the annual fixed salary for the CEO and 70 per cent forthe other members of senior management.
The criteria for variable compensation in cash are determined forthe promotion of the company’s and the group’s short-term andlong-term targets, long-term development, value creation and

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

BOARD OF DIRECTORS’ REPORT

financial growth and shall be designed not to encourage excessive
risk taking. Terms and conditions for variable compensation in cash
should be designed so that the Board of Directors, if exceptional
economic circumstances prevail, has the option of limiting or
refraining from payment if such a measure is consideredreasonable. In this context, fixed annual salary means cash salaryearned during the year, excluding pension, supplements, benefits
and similar.
Long-term incentive programmes
The aim of having long-term incentive programmes is to create along-term commitment to the company, to attract and retain
members of the senior management and key employees and toalign the interests of the participants with the interests of theshareholders.
Long-term incentive programmes, if any, should constitute acomplement to the fixed salary and the variable compensation in
cash, with participants to be nominated based on, among otherthings, competence and performance.
PensionPension benefits should be defined contribution. For senior
executives outside Sweden, pension benefits may vary due tolegislation or practice in the local market.
Other benefits and compensation
Fixed salary during notice periods and severance payment,
including payments for any non-compete restrictions, shall inaggregate not exceed an amount equivalent to the fixed salary for
two years for the CEO and 18 months for the other members ofsenior management.
Other compensation may consist of other benefits that are
customary and in line with market practice, such as healthcare
insurance, which shall not constitute a material portion of the total
remuneration.
Additional compensation may after decision by the Board of
Directors be paid out in extraordinary circumstances, provided thatsuch arrangement is made for management recruitment or retention
purposes and is agreed only in individual cases. Suchextraordinary arrangements may for example include a one-off cash
payment, or a support package including relocation support orsimilar.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

MUNTERS ANNUAL REPORT 201885

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

The overhead cost saving from the program are estimated to
SEKm 160. In addition, the intended closure of our Data Centerfactory in Europe, subject to union negotiations, will give an
estimated profit improvement of SEKm 50, this in spite of Data
Center net sales drop of SEKm -600 of which approximately 80% in
2019. In total, we expect a positive Group adjusted EBITA effect ofSEKm 105 in 2019 and SEKm 210 in annual effect from 2020.
Nonrecurring charges for the Munters full potential program of
SEKm 350 will be incurred, with 60% be taken during the first six
months of 2019, and the remaining 40% in the last six months ofthe year. The Munters full potential program will temporarily
increase the leverage during 2019 and necessary consent from thelending banks have been received. We expect Group leverage to
be in line with our mid-term financial leverage target in 2020. The
Board proposes no dividend to be paid for 2018 withconsideration taken to the costs for the restructuring initiatives.

Business segments
Data Centers and Mist Elimination, currently run as two separatebusiness areas, will be integrated into Air Treatment during the firstquarter of 2019.

Revised mid-term financial target for net sales growthMunters has revised its mid-term financial target for organic net
sales growth to 5% (previously 7-10%), reflecting the new businessmix.

Three phase plan to capture the full potential of Munters
The Board of Directors and the management team are fullycommitted to strengthen the performance of Munters. During thepast two years, net sales growth has been at a good level whereas
earnings and margins have been below expectations in all ofMunters business areas, and most notably in Data Centers. The root
causes have been identified and we have designed acomprehensive and ambitious plan to increase the overall
performance of the company. A three-phase plan has beenlaunched to capture Munters full potential, to increase customer
focus and to improve Group earnings.
As part of the first phase of the program, we have the intention toclose down our European Data Center factory in Dison, Belgium.
This is subject to union negotiations. Our analysis of our Data
Centers operations has convinced the Board of Directors and the
management team, that the prospects for establishing a profitable
Data Center business in Europe are limited in a market withovercapacity and ongoing price pressure. Our focus going forward
will mainly be on the US Data Center market where we have amore commercially viable base for achieving profitable growth. This
include established customer relations and proven record ofaccomplishment in the US market, which provides a good platform.

Munters mid-term financial targets are:
Net sales growth – Munters’ objective is to achieve an annualorganic sales growth of 5%, supplemented by selective acquisitions.
Adjusted EBITA Margin – Munters’ objective in the medium-term
is to have an adjusted EBITA margin of 14%.
CapitalCapital structure – Munters aims to maintain a ratio of net debt
to adjusted EBITDA of 1.5x to 2.5x, and may temporarily exceed
this level (e.g., as a result of acquisitions).
Dividend policy – Munters aims to pay an annual dividend
corresponding to 30–50% of its consolidated income for the period.
The decision will be based on the financial position, investment
needs, acquisitions and liquidity position. There can be noassurances, however, that in any given year a dividend will be
proposed or declared.

Deviation from the guidelines
The Board of Directors may resolve to deviate from the guidelines if
the Board of Directors, in an individual case, is of the opinion that
there are special circumstances justifying that.
SIGNIFICANT EVENTS AFTER PERIOD ENDCORPORATE GOVERNANCE REPORT ANDSUSTAINABILITY REPORT
Munters Group AB has chosen to prepare the Corporate
Governance Report and Sustainability Report as a separate
document from the Annual Report. The Corporate Governance
Report is outlined on Pages 70–77 and the Sustainability Report on
Pages 52–61. For descriptions of risks and controls in conjunction

85

FINANCIAL REPORTS BOARD OF DIRECTORS’ REPORTBOARD OF DIRECTORS’ REPORTMUNTERS ANNUAL REPORT 201886with preparation of the consolidated accounts, refer to the
Corporate Governance Report.
FINANCIAL STATEMENTS AND NOTESThe Group’s income and financial position in other respects arepresented in the following statements of comprehensive income,financial position, cash flows and changes in equity, as well as in
the Notes. The Parent Company’s income and financial position inother respects are presented in the following income statement andbalance sheet, statement of changes in equity, cash flow statement
and notes. All amounts are in millions of Swedish kronor (SEKm)
unless otherwise specified.

8 6 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

FINANCIAL REPORTS FINANCIAL STATEMENTS
FINANCIAL REPORTS

87

MUNTERS ANNUAL REPORT 2018

Statementsof cash flows
Statements of comprehensive income Statementof cash flows

Statement of comprehensive income
GROUP
Amounts in SEKm
Net sales
Cost of goods sold
Gross profit/loss
Other operating income
Selling expenses
Administrative costs
Research and development costs
Other operating expenses
Earnings before interest and tax (EBIT)

Note

2018

2017

4, 6

7,122
-4,851
2,271

6,604-4,4582,146

14-1,362
-567
-217
-6
134

53
-978
-588
-167
-14
453

5
-131
7
-101
-94

8
-309
152
21
173

-105
11

174
-1

7

7
5, 8, 9Financial income
Financial expenses
Profit/Loss after financial items
Tax
Income for the year

10
10

11

GROUP
Amounts in SEKm

Note

2018

2017

134

453

602
-15
19
740
-109
-123
507

288
13
-24
730
-176
-109
445

-67
441

-210
235

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

-268
1
1
-27
-126
-44
-464

407
-472
-59
-55
-180

99
18
3,749
-3,662
205

-5
402
8
404

-24
432
-6
402

OPERATING ACTIVITIES
Earnings before interest and tax (EBIT)
Reversal of non-cash items;
Depreciation, amortization, and impairments
Provisions
Other profit/loss items not affecting liquidity
Cash flow before interest and tax
Paid financial items
Taxes paid
Cash flow from operating activites before changes in working capital

8

Cash flow from changes in working capital
Cash flow from operating activities
INVESTING ACTIVITIESAttributable to Parent Company shareholders
Attributable to non-controlling interests
Average number of outstanding shares before dilution
Average number of outstanding shares after dilution

183,165,852 119,658,011
183,165,852 119,720,995

Earnings per share before dilution, SEK

21

-0.57

1.45

Earnings per share after dilution, SEK

21

-0.57

1.45

193

-89

-17

-13

4

3

Other comprehensive income, net after tax

179

-99

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

85
75
10

74
75
-2

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

12

12
13
14

Other comprehensive income

Other comprehensive income that may be reclassified to profit or loss in subsequent periods:
Exchange-rate differences on translation of foreign operations

Other comprehensive income not to be reclassified to profit or loss in subsequent periods:
Actuarial gains and losses on defined-benefit pension obligations, incl. payroll tax
Income tax effect on other comprehensive income not to be reclassified to profit or loss insubsequent periods

24

11

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

FINANCING ACTIVITIESNew share issue
Warrants
Loans raised
Amortization of loans
Repurchase of shares
Dividends paid
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents at January 1
Exchange-rate differences in cash and cash equivalents
Cash and cash equivalents at December 31

20
20
23
23

19

Interest received totaled 3 (8). Interest paid on bank debt totaled -124 (123).

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

87

FINANCIAL REPORTS FINANCIAL STATEMENTS
FINANCIAL REPORTS

Statements of financial position

Statements of financial position

Statement of financial position
GROUP
Amounts in SEKm at December 31

Statement of financial position
GROUP

Note

2018

2017

CURRENT ASSETS
Raw materials and consumables
Products in process
Finished products and goods for resale
Advances to suppliers
Accounts receivable
Prepaid expenses and accrued income
Derivative instruments
Current tax assets
Other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS

Amounts in SEKm at December 31

Note

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

3, 17, 19
18
19

19
19

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

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

391
106
288
20
1,095
224
3
53
109
404
2,693

386
135
259
18
1,204
106
2
35
126
402
2,672

9,268

9,198

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

2017

6
5,083
543
-1,912
3,719

6
5,083
351
-1,691
3,748

23

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

19, 2024
25
19
11

CURRENT LIABILITIESInterest-bearing liabilities
Advances from customers
Accounts payable
Accrued expenses and deferred income
Derivative instruments
Current tax liabilities
Other liabilities

19, 20

19
26
19

19

Provisions for pensions and similar commitments
Other provisions
Total current liabilities

24
25

TOTAL EQUITY AND LIABILITIES

8 8 			

2018

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

88

MUNTERS ANNUAL REPORT 2018

MUNTERS

|

-4

0

3,716

3,748

3,002
230
16
137
421
3,805

2,848
207
22
137
394
3,607

11
285
535
590
1
28
181

7
382
581
486
2
52
212

8
107
1,746

8
114
1,843

9,268

9,198

A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

FINANCIAL REPORTS

Statements of comprehensive income

Statements of changes in equity

Statement of changes in equity

Statement of comprehensive income

Attributable to Parent Company shareholders

SharecapitalOther
capitalcontributions

Translation
reserve

Profitbrought
forward

6

5,083

351

-1,691

GROUP
Amounts in SEKm
Opening balance, January 1, 2018

PARENT COMPANY
Amounts in SEKm
Noncontrollinginterests
Total

3,748

0

Total
equityPut/call option related to non controllinginterests-4

Acquisition of non-controlling interests

Comprehensive income for the year
Closing balance, December 31, 2018

Opening balance, January 1, 2017

6

0

5,083

2,167

-4

-

-4

193

14
-55
-59
1
-105
-13

14
-55
-59
1
-105
180

-14
11
-1

0
-55
-59
1
-94
179

193

-118

75

10

85

543

-1,912

3,719

-4

3,716

439

-1,850756

Note

Net sales

-

11

767

Administrative costs

-11

-77

Earnings before interest and tax (EBIT)

-11

-77

Financial expenses

-0

-84

Profit/Loss after financial items

-11

-161

Group contributions
Profit/Loss before tax

-11

Tax

10

-

11

Income for the year

OTHER COMPREHENSIVE INCOME
Amounts in SEKm
Profit/Loss for the year

Comprehensive income for the year
6

2,798
18
99
-

2,803
18
99
-

-10

2,803
18
99
-10

Acquisition of non-controlling interests

19
-24

19
-24

1

19
-23

Income for the year

174

174

-1

173

Other comprehensive income, net after tax

-89

-10

-98

-1

-99

Comprehensive income for the year

-89

164

75

-2

74

351

-1,691

3,748

0

3,748

Closing balance, December 31, 2017

6

5,083

-

Gross profit/loss

Note

86
-75

0

-

-11

-75

2018

2017

-11

-75

Other comprehensive income, net after tax
Changes in equity, 2017
Set off issue**
Warrants
New share issue
Change in non controlling interest
Put/call option related to non controllinginterests

2017

2018

3,748

Changes in equity, 2018

Dividends paid*
Repurchase of shares
Share option plan
Income for the year
Other comprehensive income, net after tax

89

MUNTERS ANNUAL REPORT 2018

-11

-75

* Dividends paid amounts to SEK 0.30 per share**The new share issue put SEKm 103 into the Group; together with transaction costs of SEKm 4, net SEKm 99.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

89

FINANCIAL REPORTS FINANCIAL STATEMENTS
FINANCIAL REPORTS

Statements of cash flows

Statements of financial position

Statement of financial position

Statement of cash flows
PARENT COMPANY

PARENT COMPANY
Amounts in SEKm, at Dec 31

Note

2018

2017

ASSETSNON-CURRENT ASSETS
Participations in subsidiaries

90

MUNTERS ANNUAL REPORT 2018

Amounts in SEKm

Note

2018

2017

OPERATING ACTIVITIESProfit/Loss after financial items

-11

-161

4,086

4,086

Profit/loss items not affecting liquidity

0

82

4,086

4,086

Taxes paid

-0-

Cash flow from operating activities before changes in working capital

-12

-78

0
0

0
-

Receivables from subsidiaries
Other receivables
Cash and cash equivalents

0
77

86
0
134

Cash flow from changes in working capital-1

4

Cash flow from operating activities

-12

-74

Total current assets

77

220

16

Total non-current assets
CURRENT ASSETS
Prepaid expenses and accrued income
Current tax assets

18

TOTAL ASSETS

4,163

4,306

FINANCING ACTIVITIESNew share issue-

Warrants
Group contributions

EQUITY AND LIABILITIESEQUITY

Restricted equity

Loan amortization

Share capital

Repurchase of shares

23

Dividends paid

23

6

6

Share premium reserve

4,074

4,074

Other capital contributions
Profit brought forward
Income for the year
Total equity

18
68
-11
4,155

18
257
-75
4,281

Unrestricted equity

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

9 0 			

26

-

18

89

27

-

20

Loans raised

23

0

1

2
3
2

2
20
2

8

25

4,163

4,306

99

-20

-

-59

-

-55

-

Cash flow from financing activities

-45

165

Cash flow for the year

-57

90

Cash and cash equivalents at January 1

134

44

Cash and cash equivalents at December 31

77

134

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

FINANCIAL REPORTS

MUNTERS ANNUAL REPORT 201891

Statements of changes in equity

Statement of changes in equity
PARENT COMPANY

Amounts in SEKm
Opening balance January 1, 2018

RestrictedequityUnrestricted equity

Share
capitalSharepremium
reserve

Other
capitalcontributions

Profitbrought
forwardIncome forthe year

Total

6

4,074

18

257

-75

4,281

-75
-55
-59

75

-11

-55
-59
-11

Changes in equity, 2018
To be carried forward
Dividends paid
Repurchase of shares
Income for the year
Closing balance, December 31,
2018

Opening balance January 1, 2017

6

4,074

18

68

-11

4,155

0

1,177

-

437

-180

1,434

6

2,798

Changes in equity, 2017
Debt conversion
Warrants
New share issue0

To be carried forward
Income for the year
Closing balance, December 31,
2017

MUNTERS

|

2,804
18

6

18
99

99

4,074

A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

18

-180

180
-75

-75

257

-75

4,281

91

FINANCIAL REPORTS NOTESNOTESMUNTERS ANNUAL REPORT 2018

92

Notes

Notes

NOTE 1

ACCOUNTING POLICIES

Munters Group AB, corp. reg. no. 556819-2321, is a Swedish public limited company registered in
Sweden with its registered office in Stockholm, Sweden. The address of the headquarters is Munters
Group AB, Box 1188, SE-164 26 Kista, Sweden. This Annual Report and Consolidated Accounts weresigned by the Board of Directors for Munters Group AB on April 9, 2019, and approved for release by
the Board on the same date. The income statements and balance sheets for the Parent Company and theGroup published in the Annual Report and Consolidated Accounts is to be adopted by the Annual
General Meeting on May 8, 2019. The most important accounting policies applied in preparing thefinancial reports are reported below. In the main, the same principles applied to the Parent Company
were applied to the Group. The extent to which the Parent Company’s accounting policies differ fromthose of the Group, or to which it was deemed important to explain the principle applied in the Parent
Company, is indicated under a special heading at the end of this Note.
BASIS OF PREPARATIONThe Consolidated Accounts were prepared in accordance with International Financial ReportingStandards (IFRS) as adopted by the EU, the Swedish Annual Accounts Act and the Swedish Financial
Reporting Board’s recommendation RFR 1 – Supplementary Accounting Rules for Corporate Groups. The
Parent Company’s Annual Report has been prepared in accordance with the Annual Accounts Act andwith the application of the Swedish Financial Reporting Board’s recommendation RFR 2 – Accounting forLegal Entities. IFRS rules for measurement and disclosure are thus applied, with the exception of thedeviations indicated in the section titled “Accounting Policies of the Parent Company.”
Basis for assessment
The Consolidated Accounts are based on historical acquisition costs with the exception of financial
derivatives, acquisition options and purchase considerations.
New and amended IFRS applied from January 1, 2018
IFRS 9 Financial Instruments
IFRS 9 Financial instruments is the new standard on accounting for financial instruments and has
replaced IAS 39. The standard comprises classification, valuation and impairment of financial
instruments as well as hedge accounting. IFRS 9 has overall had a limited impact on the Group’s
financial statements. IFRS 9 has introduced new classifications of financial instruments, however themeasurements under the new classifications are the same as previous classifications and due to that no
impact on prior year financial statements. Last year’s classification as “Loans receivable and accounts
receivable” are classified as “Financial assets measured at amortized cost”, however the classifications“Financial assets at fair value through profit/loss”, “Financial liabilities measured at amortized cost” and“Financial liabilities at fair value through profit/loss” remain the same.

9 2 			

The area impacted relates to the new methodology for impairment on accounts receivables. The
implementation of the impairment model in IFRS 9, the expected credit loss model, has however not had
any material effect and no adjustment of the opening balance at January 1, 2018 has been necessary.
IFRS 15 Revenue from contracts with customers

IFRS 15 Revenue from contracts with customers establishes a new regulatory framework to account forrevenue from contracts with customers and has replaced IAS 11 Construction Contracts, IAS 18 Revenue
and all revenue related IFRICs (International Financial Reporting Interpretations Committee) and SICs
(Standing Interpretation Committee of the IASC, predecessor to the IFRIC).
The new standard is designed according to a control-based five-step model framework. The standard
regulates commercial agreements (contracts) with customers in which delivery of goods/services isdivided into separately identifiable performance obligations that are recognized independently. In
certain cases, the good/service can be integrated with other obligations in the contract, whereby apackage of goods/services comprises a joint obligation. The standard establishes rules for calculating
the transaction price for delivery of goods and services and the manner in which this can be allocatedamong the various performance obligations. Revenue is recognized when control has passed to thecustomer by the customer being able to use or benefit from the good/service, at which point it isdeemed to have been transferred. Control may be passed at a given point in time or over time.
Three different criteria have been established for determining whether a performance obligation issatisfied over time. Either the customer receives and consumes all of the benefits as the obligation is
performed; the company’s performance enhances an asset that the customer controls; or finally thecompany’s performance does not create an asset with an alternative use to the company and thecompany has an enforceable right to payment for performance completed to date.
Munters has used the full retrospective approach for transition to the new revenue standard whichmeans that prior reporting periods are to be adjusted should deviations exist, however the new revenue
standard has not had a material impact on Munters’ historical consolidated financial statements, basedon the fact that Munters as of December 2017 did not have open contracts of material values that would
have been treated differently should IFRS 15 been applied. Munters has therefore not reported any priorperiod adjustments.
Even if the new revenue standard has not had any material impact on the financial statement IFRS 15
introduces a number of additional qualitative and quantitative disclosure requirments. Disclosures interms of disaggregation of revenue in to categories, information on when Munters typically satisfies
performance obligations, significant payment terms in customer contracts, explanations of how thetiming of satisfaction of performance obligations relates to the typical timing of payment , allocation oftransaction prices and for performance obligations that are satisfied over time, which methods is used torecognize revenue, can all be found in Note 4.
New and amended IFRS that have not started being applied
IFRS 16 Leases is the new standard on accountng for leases and will go into effect for fiscal years
beginning after January 1, 2018, and have not been applied in the preparation of these financial
reports. IFRS 16 was issued in January 2016 and the new standard will result in almost all leases being

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESMUNTERS ANNUAL REPORT 2018recognised on the balance sheet by lessees, as the distinction between operating and finance leases isremoved. Under the new standard, an asset (the right to use the leased item) and a financial liability (topay rentals) are recognised. The only exceptions are short-term and low-value leases. Munters will apply
the standard from its mandatory adoption date of 1 January 2019 and will apply the simplified
transition approach and therefore not restate comparative amounts for the year prior to first adoption.
Right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any
prepaid or accrued lease expenses). Munters will apply the transision exempt rule under IFRS 16 not tomake a new assessment if a contract is or contains parts that constitute a lease and will therefore apply
the standard for all contracts that have previously been identified as leases, or parts that constituteleases under IAS 17 and IFRIC 4
Munters will use the incremental borrowing rate to discount the lease liability. The incremental
borrowing rate will be decided based on contract length and contract transaction curency. Munters will
also apply the exemption rule to excluede intitial direct costs when calculating the right of use asset
when applying IFRS 16 at the first application date.
To prepare for the new lease standard a project team was set up to review all of the Group’s leasingarrangements over the last year in light of the new accounting rules under IFRS 16. The standard willaffect the accounting for the Group’s operating leases. As at the reporting date, Munters has noncancellable operating lease commitments of SEKm 451, see Note 9. Of these commitments,
approximately SEKm 101 relate to short-term and low value leases which will both be recognised on astraight-line basis as expenses in the profit or loss. For the remaining lease commitments Munters expects
to recognise right-of-use assets of approximately SEKm 475 on January 1, 2019, lease liabilities of
SEKm 458 (after adjustments for prepayments and accrued lease payments recognised as at December
31, 2018) and provision for dismantling expenses of SEKm 18.
Net profit after tax expects to decrease, provided no new agreements are added, by approximately
SEKm 13 for 2019 as a result of adopting to the new rules. EBITDA is expected to increase withapproximately SEKm 109 as the operating lease payments were included in EBITDA but the
depreciation of the right-of-use assets and interest on the lease liability are excluded from this measure.
Adjusted EBITA is expected to increase by approximately SEKm 1, as the operating lease payments
were included in EBITA but the interest on the lease liability is excluded from this measure. Cash flow
timings will not be affected.
Munters activities as a lessor are not material and hence the Group does not expect any significant
impact on the financial statements.
Reconciliation lease obligations

SEKm

Operating lease commitments disclosed at December 31, 2018, (Note 9)451

Less low value and short term leases-101

Adjustments as a result of a different treatment of extension and termination options

186
536

Operating leasing obligation per December 31, 2018 (not discounted)

536

Discount effect from incremental borrowing rate

-78

Lease liability recognised at January 1 , 2019458

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

93

No other IFRS or IFRIC amendments that have not yet been adopted expects to not have any significant
effect on the Group’s financial statements.
BASIS FOR CONSOLIDATIONThe Consolidated Accounts encompass Munters Group AB (the Parent Company) and its subsidiaries.
Subsidiaries are all companies over which the Group has a controlling influence. The Group has
controlling influence over a company when it is exposed to, or has the right to, variable returns from its
holdings in the company and can impact the returns through its controlling influence in the company.
Subsidiaries are included in the Consolidated Accounts as of the date on which controlling influence
was transferred to the Group. They are excluded from the Consolidated Accounts as of the date on
which controlling influence ceases.
The financial statements for the Parent Company and its subsidiaries included in the Consolidated
Accounts refer to the same period and have been prepared in accordance with the accounting policies
that apply to the Group. All intra-Group transactions, revenues, costs, gains, or losses that arise intransactions between companies included in the Consolidated Accounts have been wholly eliminated.
Business acquisitions
The Consolidated Accounts have been prepared using application of the acquisition method, which
involves eliminating the acquisition cost of shares in subsidiaries against their equity at the time ofacquisition. Transaction costs related to acquisitions are not included in the acquisition cost, but are
expensed on an ongoing basis. The equity acquired in the subsidiaries is established using a marketbased evaluation of assets, liabilities and contingent liabilities at the time of acquisition. The Group’s
equity thus includes only that part of the subsidiaries’ equity that arose after the time of acquisition. In
the event of business combinations where the sum of (i) the acquisition cost of shares in subsidiaries; (ii)the value of holdings without controlling influence; and (iii) the fair value of previous holdings exceeds
the fair value at the time of acquisition as regards the Group’s share of the identifiable net assets
required, the difference is recognized as goodwill. A potential negative difference – “negative
goodwill” – is recognized as income immediately after being established.
The useful life of each individual intangible asset is established and then amortized over theestablished useful life. If the useful life is deemed indefinite, no amortization is recognized. An
assessment that causes the useful life of an intangible asset to become indefinite takes all the relevant
circumstances into account and is based on the premise that there is no predictable maximum time limit
for the net cash flow generated by the asset. The useful life of goodwill is assumed to be indefinite andgoodwill is not amortized.
If the initial recognition of a business combination is incomplete at the end of the reporting period
when the business combination took place, the amounts for items where recognition is incomplete isrecognized on a preliminary basis. These preliminary amounts can be adjusted during the evaluation
period, or additional assets or liabilities can be recognized, to reflect new information obtained about
the facts and conditions that existed as of the time of acquisition, and would have impacted therecognized amounts at that time if the information had been available.
Contingent considerations are classified as financial liabilities and re-evaluated every period to fairvalue. Re-evaluation profits and losses, if any, are recognized in income for the year. If the businesscombination is carried out in several steps, the previous equity shares in the acquired company are re-93

FINANCIAL REPORTS NOTES
NOTES

evaluated to their fair values at the time of acquisition. Any resulting profit or loss arising out of the reevaluation is recognized in income for the year.
Munters has call options and has issued put options regarding non-controlling participations, whichwere agreed on in conjunction with the business combination. Depending on the conditions in theoptions as well as in the shareholder agreements, each of the options are classified and recognizedbased on one of the two following principles:• In the event the conditions are deemed to mean that all economic benefits and disadvantages accrue
to Munters right from the time of acquisition, no non-controlling interest is recognized but a liability
equivalent to the fair value of the future redemption price, on the other hand, is; changes in value
attributable to the liability are recognized over the income statement. At 31 December 2018, Muntersrecognizes no options based on this principle.
• In the event the conditions in the put/call options are not deemed to mean that all financial benefits
and disadvantages accrue to Munters as of the time of acquisition, Munters recognizes non-controlling
participation initially and allocates this part of the income. The Group also recognizes a liability
corresponding to the discounted expected redemption price for the options whereupon non-controlling
participations attributable to the options are eliminated. The difference between liabilities for the
options and the non-controlling participations to which the options refer is recognized directly in equity
and disclosed separately from other changes in equity. The dissolution of the discounting effect is also
therefore directly recognized against equity. Munters recognized the option attributable to MTech
Systems in the US based on this principle.
Associated companies“Associated company” refers to a company in which the Parent Company directly or indirectly has along-term holding corresponding to not less than 20% and not more than 50% of the voting rights, orotherwise has a significant influence. Munters has no holdings in associated companies.

MUNTERS ANNUAL REPORT 2018

94

When the Group no longer has controlling interest, each remaining holding is evaluated at fair value
at the time when controlling interest was lost. The change in recognized value is recognized in theincome statement. Fair value is used as the initial recognized value and constitutes the basis for thecontinued recognition of the remaining holding as an associated company, joint venture or financial
asset.
Translation of the accounts, functional currency and reporting currency of foreign subsidiaries
Items included in the financial reports for the various units in the Group are valued in the currency usedin the economic environment where the respective companies primarily operate (functional currency).
The Consolidated Accounts are prepared in SEK, which is the functional and reporting currency of the
Parent Company. Results of operations and financial condition for all Group companies that have afunctional currency other than the reporting currency are translated into the Group’s reporting currency
as follows:• Assets and liabilities are translated into the exchange rate on the balance date;• revenue and costs are translated into the average exchange rate; and• all exchange-rate differences that arise are recognized in other comprehensive income.
Goodwill and adjustments of fair value that arise in connection with acquisition of foreign operations
are handled as assets and liabilities in that operations and are translated into the exchange rate as of
the balance date.
Exchange-rate differences attributable to translation of a net investment in foreign operations arerecognized in the Consolidated Accounts, together with exchange-rate differences attributable toborrowing or other financial instruments classified as hedging instruments for such investments, in Other
comprehensive income and classified as hedge reserves in equity. Accumulated gains and losses inequity are recognized in the income statement when foreign operations are fully or partially divested.

Non-controlling interests
In the event of acquisitions under one hundred percent but where controlling influence is achieved, noncontrolling interest is determined either as a proportional share of fair value on identifiable net assets
excluding goodwill, or at fair value. This choice of principle is made for each individual businesscombination.
Non-controlling interests are recognized as individual items in the Group’s equity. The Group’s
earnings and each component in other comprehensive income are attributable to the Parent Company’sowners and to non-controlling interests. Losses attributable to non-controlling interests, if any, are also
recognized if it means that the share is negative. Transactions with non-controlling interests that do notlead to loss of control are recognized as equity transactions (i.e. as transactions with owners in their roleas owners). A change in holdings is recognized through an adjustment of the recognized values forcontrolling and non-controlling interests so that they reflect the changes in their relative interests in thesubsidiary. Upon acquisition from non-controlling interests, the difference between fair value of purchaseconsideration paid and the actual share acquired of the recognized value of the subsidiary’s net assets
are recognized in equity. Profits and losses on divestments to non-controlling interests are also
recognized in equity.

9 4 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESMUNTERS ANNUAL REPORT 2018

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

Closing rate

Currency

Country

2018

2017

2018

2017

AUD
CAD

Australia
Canada

6.49
6.71

6.54
6.58

6.32
6.59

6.42
6.56

CNY
DKK
EUR
GBP
JPY
NOK
SGD

China
DenmarkEuro zone
United Kingdom
Japan
NorwaySingapore

1.31
1.38
10.26
11.59
0.08
1.07
6.44

1.26
1.29
9.63
10.99
0.08
1.03
6.18

1.31
1.38
10.28
11.35
0.08
1.02
6.56

1.26
1.32
9.85
11.10
0.07
1.00
6.16

THB
USD
ZAR

Thailand
United States
South Africa

0.27
8.69
0.66

0.25
8.54
0.64

0.28
8.97
0.62

0.25
8.23
0.67

TRANSACTIONS IN FOREIGN CURRENCIESTransactions denominated in foreign currencies are translated into the functional currency at theexchange rates that apply on the transaction date. Exchange-rate gains and losses that arise inconnection with payment of such transactions and upon translation of monetary assets and liabilities inforeign currency to the exchange rate on the balance date are recognized in the income statement.
Exchange-rate differences concerning operating receivables and operating liabilities are recognized in
EBIT, while exchange-rate differences attributable to financial assets and liabilities are recognized as
financial income or financial expense. Realized and unrealized exchange-rate differences are thus
recognized in income for the year.
SEGMENT REPORTING
Operating segments are reported using a method that tallies with the internal reporting submitted to thechief operating decision maker. The chief operating decision maker is the function responsible forallocating resources and evaluating the Group’s financial position and earnings. In Munters, thisfunction has been identified as Group Management. Group Management monitors operations from a
product-based perspective, which also constitutes Munters’ operating segments: Air Treatment, Data
Centers, AgHort and Mist Elimination.
The accounting policies applied to the segments are the same ones applied to the Group.
REVENUE RECOGNITION
Munters provides goods such as equipment, components and spare parts to customers within four
operating segments. Customer contracts can contain pure equipment orcomponent sales or sales ofequipment including activities such as installation, startup and commissioning services. Both equipment
and installation, startup and commissioning services are all distinct in accordance with the definitions in
IFRS 15 meaning any bundled sales will comprise several performance obligations under IFRS 15.
MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

95Sale of goods
The majority of customer contracts within Munters operating segments Air Treatment, AgHort and Mist
Elimination fulfill the requirement to recognize revenue at a point in time, which means revenue for the
performance obligation to deliver equipment is recognized when this performance obligation is satisfied(when control passes of the equipment). Revenue was already prior to IFRS 15 recognized at a point intime (when control had passed) and there is no change from prior principles.
Customer contracts within the operating segment Data Centers fulfill the requirement to recognize
revenue over time, i.e. equipment is highly customized and customer contract terms stipulate that cost
incurred will be recovered with a reasonable profit margin should the customer decide to terminate thecontract. Revenue for the performance obligation to deliver equipment is recognized over time using ameasurement of progress towards complete satisfaction method. Munters uses an output method for thispurpose (equipment produced and passed internal quality control), meaning number of equipment inrelation to total equipment in the customer contract.
Within Air Treatment and AgHort there are a number of customer contracts that fulfills the requirement
to recognize revenue over time according to the criteria’s mentioned above.
Contracts including installation, startup and commissioning activities (bundled sales) include several
separate performance obligations and the performance obligations to provide installation, startup andcommissioning services are satisfied over time, which means revenue related to these performanceobligations is recognized over time according to the progress of completetion. Revenue relating to these
activities was already prior to IFRS 15 recognized over time as they were performed.
In a bunded sale the total transaction price is allocated to each performance obligation according toeach performance obligations relative standalone selling price. There are in general no significant
variable considerations in the customer contracts, but some contracts agree to volume and cash
discounts. In such cases an estimate is made of the variable remuneration that is expected to berefunded to the customer and that part of the transaction price is recognized as a liability.
Rendering of service
In addition to installation, startup and commissioning services that comes from bundled sales Muntersprovides other kind of services to customers such as maintenance services. Revenue from service
contracts are recognized over time as the customer simultaneously receives and consumes the benefits ofthe services. These services were already prior to IFRS 15 recognized over time.
Warranty obligations
Munters provides assurance-type warranties where the warranty is a guarantee of quality of the goods
provided. These warranties will continue to be accounted for under IAS 37 Provision, Contingent
Liabilities and Contingent Assets. Munters’ commitment to repair or replace defective products inaccordance with normal warranty rules is reported as a provision, see Note 25 for details.
There are a number of contracts with customers that include extended warranty. These warranties are
regarded as service-type warranties and accounted for as separate performance obligations withrevenue recognized over the contraced time.

95

FINANCIAL REPORTS NOTESNOTESInterest income
Interest income on receivables of long maturity is calculated using the effective-interest method. Interest
income includes the accrued amount of transaction costs and any discounts, premiums, and other
differences between the original value of the receivable and the amount received when due.
Dividends
Dividends are recognized as revenue when the right to receive payments has been established. Thisapplies even if the dividends are disbursed from profits resulting before the time of acquisition.
Consequently, the investment may need to be tested for amortization.
WARRANTY COMMITMENTS
Warranty costs are recognized in cost of goods sold. Provisions for warranty costs are calculated at astandard rate in an amount that corresponds to the average warranty costs in relation to sales in themost recent 24-month period, with an adjustment for known warranty claims exceeding the standard
provision. Provisions for warranty commitments are related to the stated warranty period.
INCOME TAXESTax expenses for the period cover current tax calculated on taxable earnings according to the prevailingtax rate. Current tax costs are adjusted with changes to deferred tax assets and liabilities attributed totemporary differences and loss carry-forwards. Current tax costs are calculated on the basis of the tax
regulations decided, or decided in practice, in the countries where the Parent Company and its
subsidiaries operate and generate taxable income. Taxes are recognized in the income statement
except when the underlying transaction is recognized directly in equity or other comprehensive income,in which case the associated tax is also recognized in equity or other comprehensive income.
Deferred tax is recognized on all temporary differences arising between the carrying amount on assets
and liabilities and their recognized tax base in the Consolidated Accounts. Deferred tax liability,
however, is not recognized if it arises out of the initial recognition of goodwill. Nor is deferred tax
liability recognized if it arises out of a transaction constituting the initial recognition of an asset or
liability that is not a business combination and at the time of the transaction impacts neither recognized
nor taxable earnings. Deferred income tax is calculated by applying the prevailing tax rate (and laws)that were decided or announced as of the balance date and are expected to be in effect when thedeferred tax asset is realized or a deferred tax liability is settled. Deferred tax assets on loss carryforwards are recognized to the extent that it will be possible to deduct such losses from future profits.
Deferred taxes attributed to temporary differences regarding holdings in subsidiaries, associatedcompanies or joint ventures are recognized only to the extent to which the Parent Company can control
the timing of reversal of the temporary differences and that it is probable that such a reversal will notoccur in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legal right tooffset for current tax assets and tax liabilities, and when the deferred tax assets and liabilities are
attributed to taxes levied by the same tax authority and relate to either the same tax subject, or different
tax subjects when there is an intent to settle accounts through net payments.

9 6 			MUNTERS ANNUAL REPORT 201896

TANGIBLE AND INTANGIBLE FIXED ASSETS
Non-current assets are recognized in the statement of financial position at acquisition cost, lessaccumulated depreciation according to plan and any impairment losses. The assets of acquiredcompanies are recognized at fair value on the date of acquisition, less accumulated depreciation oramortization.
The acquisition cost of the asset is depreciated or amortized on a straight-line basis to the estimatedresidual value over the anticipated useful life of the asset. For anticipated useful lives, refer to Note 8,
Depreciation, amortization and impairment losses. Each asset’s remaining useful life is tested at the endof each accounting period, and adjusted as necessary.
Buildings, machinery and equipment
Land is not subject to depreciation because it is considered to have an indefinite useful life. Normal
maintenance and repair costs are expensed as they arise. More extensive renovation and upgrade costs
are reported as an asset and depreciated over the remaining useful life of the asset.
LeasesLease of tangible fixed assets where the Group, as lessee, essentially holds the financial risks andbenefits associated with ownership of an asset classified as a finance lease. Leases in which asignificant part of the risks and benefits of ownership are retained by the lessor are classified as
operating leases.
Recognition of finance leases entails recognizing a non-current asset as an asset item in the statementof financial position, at the lower of the fair value of the asset or the estimated present value of theunderlying lease payments, and initially reporting a corresponding liability. The asset is depreciatedaccording to plan over its useful life, while the lease payments are recognized as interest and repaymentof the liability. For an operating lease, the lease payments during the lease period are expensed in theincome statement.
Goodwill
Goodwill relates to the value by which consideration remitted, non-controlling interest (if any) in one’s
own company and the fair value of previous equity share in the acquired company at the date ofacquisition (if the business combination was carried out in steps) exceed the fair value of identified net
assets. If the amount falls below fair value for the net assets acquired (in the event of an acquisition at
low price), the average difference is recognized directly in the income statement.
Goodwill is not amortized, but the impairment is tested yearly or more often if events or changes incircumstances indicate a possible decrease in value. Goodwill is reported at acquisition cost lessaccumulated amortizations. In connection with the sale of a unit, the recognized value of goodwill is
included in the resulting profit/loss.
Patents, licenses and similar intellectual property rights
Direct external expenses for the development of software for internal administrative use are capitalized,
provided future efficiency gains are probable and exceed the expenses committed. Activities during thefeasibility study phase, and maintenance and training costs, are expensed on an ongoing basis.

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NOTES

Research and development
The Group’s outlays for research are expensed as they are incurred. Research outlays are recognized as
an intangible asset in the statement of financial position, provided that it is technically feasible and alsothat the Group intends to complete the asset for use or sale. There should also be conditions to use andsell the asset, and it should be possible to demonstrate the probability of future financial benefits. In
addition, adequate resources are required to complete the development and to use or sell the asset.
Outlays arising before the mentioned criteria are met are expensed. Depreciation of capitalized
development starts when the asset is complete and ready to use. Amortization occurs on a straight-line
basis over the useful life, usually three to five years, and is recognized in the report on comprehensive
income as research and development costs.
Impairment testing
When there is an indication that a non-current asset’s value has declined, the carrying amount of theasset is assessed. Goodwill and other intangible assets with an indefinite useful life are impairment
tested on a yearly basis, or more often if there are indications of impairment.
Impairment testing of individual assets
In the event a recognized value of an asset exceeds its estimated recoverable amount, the asset isdepreciated to its recoverable amount. The recoverable amount is the higher of the asset’s fair value
minus sales costs, and its value in use. The recoverable amount is assessed individually for each cashgenerating unit.
“Net sale value” refers to the most likely sale price in a normally functioning market. “Value in use”
refers to the present value of the estimated future cash flows that are expected to result from the use of
the asset plus the estimate residual value at the end of the asset’s useful life.
Value in use is normally measured using discounted cash flow models, which requires assumptions ofsuch parameters as a discount rate, future cash flows, and the expenses necessary to generate theestimated cash flows. Any impairment previously recognized is reversed, if the recoverable amount isdeemed to exceed the carrying amount. The reversal amounts are limited such that a carrying amountmust not exceed what it would have been if no impairment had been recognized in prior periods.
Impairment testing of goodwill
For the purpose of testing the need for amortization, goodwill acquired in a business combination isallocated to cash-generating units or groups of cash-generating units expected to be favored bysynergies in the acquisition. Each unit or group of units goodwill has been allocated to corresponds tothe lowest level in the group at which the goodwill in question is monitored in internal governance. It is
not a larger part of the group than a segment (i.e. a business area according to the Group’s segment
reporting). Amortization of goodwill may never be reversed.
INVENTORY
Inventory (raw materials and consumables, products in process and finished products and goods forresale) is valued at the lower of acquisition cost and net sales value. Net sales value is the estimatedsale price in operating activities less applicable variable sales costs.
For products manufactured in-house, the acquisition cost consists of direct manufacturing costs plus a
reasonable share of indirect manufacturing costs. Interest expenses are not included in the value of

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A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

inventory. Measurement has taken into account normal capacity utilization. The acquisition cost isdetermined using the first-in, first-out method. Otherwise, weighted average cost may be used if thismethod is a good approximation of the first-in, first-out method. Required impairment is recognized forobsolescence based on each item’s age and rate of turnover.
FINANCIAL INSTRUMENTS
Financial instruments are all forms of contracts that give rise to a financial asset in one company and afinancial liability or an equity instrument in another company.
Classification
From January 1, 2018, Munters classifies its financial assets and financial liabilities in the following
measurement categories:• those to be measured subsequently at fair value through profit or loss (FVPL), and• those to be measured at amortized cost.
Measurement
At initial recognition, the group measures a financial instrument at its fair value plus, in the case of afinancial instruments not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial instruments. Transaction costs of financial instruments
carried at FVPL are expensed in profit or loss. Subsequent measurement depends on the group’sbusiness model for managing the instruments and the cash flow characteristics of the instruments. There
are three measurement under IFRS 9:• Amortised cost: Instruments that are held for collection/payment of contractual cash flows where thosecash flows represent solely payments of principal and interest are measured at amortised cost. Interest
income/expense from these financial instruments is included in finance income/expense using theeffective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit
or loss and presented in other gains/(losses) together with foreign exchange gains and losses.
Impairment losses are presented as separate line item in the statement of profit or loss.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets,
where the assets’ cash flows represent solely payments of principal and interest, are measured at
FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest income and foreign exchange gains and losses which arerecognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from equity to profit or loss and recognised in othergains/(losses). Interest income from these financial assets is included in finance income using theeffective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses)
and impairment expenses are presented as separate line item in the statement of profit or loss.

97

FINANCIAL REPORTS NOTESNOTES• FVPL: Instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A
gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss
and presented net within other gains/(losses) in the period in which it arises.
As at December 31, 2018 Munters only had financial instruments in the categories amortised cost and
FVPL.
Accounts receivable and other receivables
As the expected tenor of accounts receivable is short, they are recognized at the amount expected to be
paid based on estimated credit losses with consideration of historical default rates. Any amortization of
accounts receivable affects operating profit or loss. Accounts receivables and other receivables aremeasured at amortized cost.
Derivatives
Derivatives are recognizes in the statement of financial position on the trading date and measured atfair value both initially and in subsequent revaluations at the end of every reporting period. Changes invalue are recognized in the income statement, no hedging is applied.
Cash and cash equivalents
Cash and cash equivalents are defined as cash, bank balances, investments in securities maturing inthree months or less and utilized overdraft facilities. Utilized overdraft facilities are recognized in thestatement of financial position as current liabilities.
Accounts payable and other payables
Accounts payable are commitments to pay for goods and services acquired from suppliers in operating
activities. The amounts are unhedged and most often paid within 30 days. Accounts payable and otherliabilities are classified as current liabilities if they fall due within one year. If not, they are recognized
as non-current liabilities. Accounts payables and other liabilities are measured at amortized cost.
Borrowing
Borrowing is initially recognized at fair value, net after transaction costs. It is subsequently recognized atamortized cost, and any difference between the amount received and the amount repaid is recognizedin the income statement, allocated over the borrowing period using the effective-interest method. Fees
paid for loan facilities are recognized as transaction costs for borrowing to the extent it is probable thatthe credit line will be used, either in whole or in part. In such cases, the fee is recognized when thecredit line is used. When no proof exists that it is probable the credit line will be used, either in whole orin part, the fee is recognized as an advance payment for financial services and allocated over the tenorof the loan commitment in question.
Contingent purchase considerations and put/call options
Contingent purchase considerations and put/call options are initially and thereafter, recognized at fairvalue in the statement of financial position. Changes in value are recognized in the income statement, or
alternately in other operating expenses.

9 8 			MUNTERS ANNUAL REPORT 201898

Recognition and derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, the date on which
the group commits to purchase or sell the asset. Financial assets are derecognized when the rights toreceive cash flows from the financial assets have expired or have been transferred and the group has
transferred substantially all the risks and rewards of ownership.
Impairment
From January 1, 2018, the group assesses on a forward looking basis the expected credit losses
associated with its debt instruments carried at amortized cost The impairment methodology applied
depends on whether there has been a significant increase in credit risk. For trade receivables, the groupapplies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to berecognized from initial recognition of the receivables, see Note 17 for further information.
Offsetting of financial instruments
Financial assets and liabilities may be offset against each other and recognized net in the Consolidated
Accounts in cases where Munters has agreed with the counterparty that assets and liabilities will be
netted. No offsetting has taken place in the statement of financial position as of December 31, 2018.
Accounting policies applied until 31 December 2017
IFRS 9 has introduced new classifications of financial instruments, however the measurements under the
new classifications are the same as previous classifications and there is therefore no impact on prioryear numbers. Last year’s classification as “Loans receivable and accounts receivable” are classified as“Financial assets measured at amortized cost”, however “Financial assets at fair value throughprofit/loss”, “Financial liabilities measured at amortized cost” and “Financial liabilities at fair value
through profit/loss” remains the same.
PROVISIONS
Provisions are recognized when the Group has or may be considered to have an obligation as a resultof events that have occurred, and where it is probable that payments will be required to fulfill theobligation. An additional prerequisite is that it must be possible to reliably estimate the amount to be
paid. Provisions for restructuring measures are allocated when a detailed, formal plan for the measures
is established and well-founded expectations have been created among those who will be affected by
the measures.
Provisions are measured as the present value of the amount expected to be required to settle theobligation. In this connection a discount rate before tax is used that reflects a current market assessmentof the time value of money and the risks associated with the provision. The increase in the provisionowing to time passing is recognized as an interest expense.
CONTINGENT LIABILITIESContingent liabilities are reported when there are possible obligations relating to transpired events thatwill only become actual obligations given the occurrence or non-occurrence of one of more uncertain
future events that are not entirely within the control of Munters. Contingent liabilities may also be an
obligation arising from transpired events but not reported as a liability or a provision because it is not

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NOTES

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MUNTERS ANNUAL REPORT 2018

probable that the obligation will be settled or because the amount of the obligation cannot be calculatedwith sufficient reliability.

the pension obligation. The change in the provision is recognized, to the extent that it pertains to theeffects of revaluations, in other comprehensive income.

EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for salaries and benefits expected to be settled within 12 months after the end of the fiscal
year are recognized as current liabilities at the undiscounted amount that is expected to be paid when
the liabilities are settled. The cost is recognized as the services are performed by the employees.

SHARE CAPITAL
Ordinary shares are classified as equity. Mandatory redeemable preferential shares are classified asliabilities. Transaction costs that can be directly attributed to issue of new shares or options are reported,
net after tax, in equity as a deduction from proceeds.

Post-employment benefits
Within the Group, there are several defined-contribution as well as defined-benefit pension plans andother non-current employee benefits, including some with pension plan assets.
Defined-contribution pension plans
In defined-contribution pension plans, the Group pays a predetermined premium to a separate legal
entity and does not have any legal or informal obligation to make additional payments if, whencompensation to the employee is to be paid, the legal entity has insufficient assets. The Group’s
payments relating to defined-contribution plans are recognized as an expense during the period theemployee performed the services to which the expense relates. Deferred fees are recognized as an asset
to the extent that cash repayment or reduction in future payments can be of benefit to the Group.
Defined-benefit pension plans
All other plans for post-employment benefits other than defined-contribution plans are defined-benefit
plans. The liability or asset regarding defined-contribution pension plans that is recognized in thestatement of financial position is the present value of the defined-benefit obligation at the end of thereporting period less the fair value of the plan assets. The defined-benefit pension obligation is
calculated annually by independent actuaries using the projected unit credit method. The present valueof the defined-benefit obligation is established by discounting estimated future cash flows using theinterest rate for high-quality corporate or housing bonds issued in the same currency that the benefits will
be paid in, with tenors comparable to the pension obligation in question. For Swedish plans, thediscount rate equals the housing bond rate. Net interest is calculated by applying the discount rate todefined-benefit plans and to the fair value of the plan assets. This cost is included in labor costs in theincome statement.
Revaluation gains and losses arising out of experience adjustments and changes to actuarial
assumptions are recognized in other comprehensive income during the period in which they arose. They
are included in profit brought forward in the statement of changes in equity and in the statement offinancial position. Expenses for employment during previous periods are recognized directly in theincome statement. Expenses for the year for employment in the current year are recognized inadministrative costs and the interest expense for the defined-benefit net liability is recognized in financial
expenses in the income statement.
Special employer’s contribution in Sweden is calculated on the difference between the pension
obligation adopted according to IAS 19 and according to the rules applied for the legal entities.
Calculated future employer’s contribution is recognized in the statement of financial position as a part of

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

DIVIDENDS
Dividends to the Parent Company’s shareholders are recognized as a liability in the Group’s financial
reports in the period when the dividend was approved by the Parent Company’s shareholders.
EARNINGS PER SHARE
Earnings per share before dilution are calculated by dividing earnings attributable to the Parent
Company’s shareholders, excluding dividends attributable to preferential shares, by a weighted average
number of ordinary shares outstanding during the period. Earnings per share after dilution arecalculated by adjusting the amount used for calculating earnings per share before dilution throughobserving the effect after tax of dividends and interest expenses on potential ordinary shares and of theweighted average of additional ordinary shares that would have been outstanding in the event of aconversion of all potential ordinary shares.
RELATED PARTY DISCLOSURESThe companies related to Munters are defined as the Parent Company, subsidiaries, and associatedcompanies as well as other companies managed by Nordic Capital. “Related physical persons” aredefined as Board members, senior executives, and close family members of such persons. Companies inwhich any of the mentioned physical persons have significant influence are also defined as companies
related to Munters. Information on transactions that entail a transfer of resources, services, or obligations
between related parties is disclosed, regardless of whether or not remuneration is paid. The disclosure
contains information as to the character of the relationship and the effect of the relationship on thefinancial statements.
EVENTS AFTER THE END OF THE REPORTING PERIOD
If events arise that are significant but should not be taken into account when the amounts in thestatement of comprehensive income and statement of financial position are adopted, then the characterof the event and, if possible, an estimate of its financial impact will be disclosed in the Board of
Directors’ Report and notes. “Significant” implies that an omission to disclose the information could
influence financial decisions made by users of the financial statements.
Significant events that confirm the situation existing at the end of the reporting period and occur after
the reporting period but prior to the signing of the Annual Report will results in adjustments to theamounts in the Annual Report.

99

FINANCIAL REPORTS NOTESNOTESMUNTERS ANNUAL REPORT 2018

ACCOUNTING POLICIES OF THE PARENT COMPANY
The Parent Company’s Annual Report has been prepared in accordance with the Annual Accounts Act
and with the application of the Swedish Financial Reporting Board’s recommendation RFR 2 –Accounting for Legal Entities. This means that IFRS are applied with the deviations and additions
presented below.
Financial statements
Under the requirements in RFR 2. the Parent Company’s financial statements deviate from thosepresented for the Group. This means that the Parent Company has the following five statements in the
Annual Report: income statement, other comprehensive income, balance sheet, statement of cash flow
and statement of changes in equity.
Financial instruments: Recognition and measurement
The Parent Company does not apply IFRS 9 Financial Instruments for 2018, nor applied IAS 39
Financial Instruments: Recognition and Measurement for 2017. Instead, measurements are based on theacquisition costs of assets and liabilities.
Ownership of subsidiaries
Holdings in subsidiaries are recognized in the Parent Company using the cost method. If there areindications of a decline in value, the value is tested and, if required, the holdings are impaired.
Group contributions
The Parent Company recognized all Group contributions, paid and received, as appropriations.
Shareholders' contribution
Shareholders' contributions from the Parent Company are recognized directly in the receiver’s equity
and capitalized in the shares and participations of the Parent Company, to the extent impairment is not
required.

NOTE 2SIGNIFICANT ESTIMATES AND ASSESSMENTS

In preparing the financial statements, Company management and the Board of Directors makes
assessments and assumptions that affect the final accounts and disclosures. These assessments are basedon experience and the various assumptions that management and the Board consider reasonable under
the prevailing circumstances. The conclusions thus drawn form the basis for determinations concerning
carrying amounts of assets and liabilities in cases where they cannot be readily determined using
information from other sources. Actual outcomes may differ from these assessments, if other assumptions
are made or other conditions applied.
The estimates and assessments that are considered to have the greatest impact on Munters earnings
and financial position are outlined below.

1 0 0 			100Measurement of goodwill
The Group tests for impairment of goodwill each year. This test requires an estimation of parameters
affecting future cash flows and a determination of a discount rate. Then the recoverable amount of eachindividual cash-generating unit is established by calculating the value in use. Note 15 presents thesignificant assumptions made to test goodwill and describes the effects of reasonable and possible
changes to the assumptions on which the calculations were based. At the end of 2018, the Group
recognized goodwill to a value of SEKm 4,218 (4,251).
Acquired intangible assets and establishing useful lives
When businesses are acquired, the intangible assets acquired are measured at fair value. In cases
where there is an active market for the acquired assets, the fair value is determined based on prices inthat market. Because active markets are often lacking for these assets, valuation models have beendeveloped to estimate fair values. One example of a valuation model is discounted future cash flows.
These assets are amortized based on established useful lives. Company management makes
assumptions and judgements regarding how long each asset will generate financial benefits for theGroup. At the end of 2018, the Group recognized Technology, Customer relationships and Brands to avalue of SEKm 1,326 (1,341).
Development expenses
Determining whether an intangible asset resulting from development should be recognized as an asset
requires an assessment of the extent to which certain specific conditions are satisfied. With regard tocapitalized development projects, management’s assessment is that their technical and financial
feasibility are confirmed. At the end of 2018, the Group recognized intangible assets regarding productdevelopment to a value of SEKm 105 (72).
Deferred tax assets on loss carry-forwards
The Group recognizes deferred tax assets on loss carry-forwards to the extent that it is probable suchlosses can be deducted from future profits. The actual outcome may deviate from the assessments madebecause of factors such as changes in the business climate or to tax regulations.
At the end of 2018, the Group’s total tax loss carry-forward was SEKm 951 (968). In the consolidatedbalance sheet, a value for tax purposes of capitalized loss carry-forwards was recognized in the amountof SEKm 101 (120), relating primarily to Australia, the Netherlands, Mexico, Germany and Sweden.
Contingent purchase considerations
A contingent purchase consideration in connection with acquisitions is often dependent on futurefinancial performance related to the acquired unit. Actual results may differ from these assumptions,which involve changing a previously recognized contingent consideration.
Legal disputes
Provisions for legal disputes are estimates of the future cash flows that will be required to settle theobligations. The disputes primarily related to contracted obligations attributable to contracts withcustomers and suppliers, though other types of disputes also arise in normal business operations.
Management considers it improbable that any of the known disputes in which Munters is currently
involved will have a significant negative effect on the Group’s accounts.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES

Critical judgements in recognizing revenue
A number of customer contracts fulfill the requirement to be recognized over time based on the degreeof completion. The forecasts for each contract constitute an estimate of final revenue and expenses.

FINANCIAL RISK MANAGEMENTNOTE 3Through its operations in a global environment, Munters is exposed to several different financial risks,such as currency risk, interest rate risk, credit risk, and liquidity risk.
The financial risks are controlled and managed based on a financial policy approved by the Board of
Directors. The policy covers the entire Group and is updated on an annual basis. The purpose of thepolicy is to create a framework for managing the various financial risks. Risk management and financing
activities are handled centrally by the CFO and the Group Treasury function, under control andmonitoring of the Board of Directors, Audit Committee and CEO. The overall objective is to limit thevolatility attributable to financial factors in the income statement and balance sheet, protect financial
assets and future cash flows, as well as optimize the Group’s financing and meet covenants. The
Treasury function, which acts as the Group’s internal bank, identifies, evaluates, and hedges financial
risks in close cooperation with the Group’s operational units.
Percentage of revenue, %
2017
43.3%
26.1%
9.8%
3.5%

2018
34.2%
33.6%
9.3%
1.5%

2017
38.4%
29.7%
7.3%
1.5%

SEK
JPY
GBP
BRL

2.7%
2.2%
1.9%
1.6%

3.3%
2.2%
1.7%
1.7%

7.3%
2.0%
2.8%
1.5%

8.9%
2.1%
2.3%
2.1%

KRW
AUD
THB
SGD

1.3%
1.8%
1.3%
0.9%

1.5%
1.5%
1.2%
0.9%

0.6%
1.3%
0.7%
0.7%

0.7%
1.1%
0.7%
0.5%

Other
Total

3.0%
100

3.2%
100

4.5%
100

4.8%
100

Currency risk
Due to Munters global presence, the Group is exposed to transaction exposure in transactions in foreign
currency and through translation exposure translating income statements and balance sheets into SEK.

|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

Transaction exposureGroup internal sales in foreign currency primarily occur through the Group’s production companies,
which invoice the Group’s sales companies in their functional currency. By doing so, transaction
exposure and hedging operations are concentrated to a few companies in the Group.
The hedging of transaction exposure shall primarily occur through so-called natural hedges, whereby
incoming and outgoing cash flows in foreign currencies are matched in order to minimize the net
exposure. For example, Munters has decided to have their major part of its external loans in USD to geta natural hedge towards the large inflows of USD presented in the table above. Otherwise, hedging
shall primarily occur through the forward selling of currency. The value of forward contracts at year-end
was about SEKm 1.7 (-0.1), see Note 19. Munters does not apply hedge accounting for these financial
instruments.
A significant proportion of Munters’ income and expense is generated in foreign currencies, of which
the most significant are presented in the table above. The geographic distribution of Munters’ production
plants results in a matching of revenues and expenses in local currencies, which limits the currency
exposure.
Munters’ sensitivity to variations in exchange rates is presented in the table below. The analysis
includes transaction exposure and is based on EBIT for 2018. All other factors influencing earnings are
assumed unchanged in the calculation.

Percentage of costs, %

2018
38.4%
28.2%
12.0%
4.7%

Currency
USD
EUR
CNY
DKK

MUNTERS101

MUNTERS ANNUAL REPORT 2018

SEK +10% compared with
USD

Estimated effect on EBIT
SEKm
%
-54.0
-11%

CNY
DKK
KRW
THB
AUD
SGD
CAD
TRY
CZK
ILS

-27.6
-28.1
-6.5
-5.0
-4.9
-1.5
-1.0
-2.3
3.1
6.8

-6%
-6%
-1%
-1%
-1%
0%
0%
0%
1%
1%

MXN
EUR
Other currencies
Total

8.6
28.1
-3.3
-87.7

2%
6%
-1%
-18%

Translation exposure
A large proportion of Munters’ subsidiaries have net assets in their functional currency, which is different
from the Group’s reporting currency. When these are translated into SEK, translation differences arise
which are recognized in other comprehensive income. Translation differences attributable to net

101FINANCIAL REPORTS NOTES
NOTES

investments in foreign currency are not hedged. However, pursuant to the financial policy, this ismonitored and calculated regularly in order to determine its impact on earnings and financial position.
The effect on other comprehensive income of the translation of foreign subsidiaries’ net assets into SEK
totaled SEKm 193 (-89). This refers mainly to subsidiaries that have USD, EUR and CNY as functional
currency.
Interest rate risk
Interest rate risk refers to the risk of the value of financial instruments and interest-bearing assets andliabilities changing due to changes in interest rate levels.
To ensure efficiency and risk control according to policy, the majority of borrowings are managed by
the Group Treasury function.
Munters is exposed to interest rate risk through interest-bearing borrowings, which are one of theGroup’s sources of financing in addition to equity and cash flow from operating activities. Interestbearing borrowings consist primarily of a long-term bank loan with a variable interest rate. In addition,
few subsidiaries are permitted to keep individual third party bank debt.
The Group has no significant interest-bearing assets besides bank balances, so revenues and cash flowfrom operating activities are largely independent of changes in market interest rates.
The Group had at the end of 2018 no outstanding interest rate derivatives.
Interest exposure
The average fixed interest term for the Group’s external loans was 2 months (2.1) at year-end 2018. If
the interest rate increases with one percentage in all countries where Munters has loans or investments,
the impact on net financial income and expense would be approximately SEKm 25 (24). This sensitivity
analysis assumes that all other factors, such as exchange rates, remain unchanged.
Credit risk
Credit risk is the risk of Munters incurring losses due to a counterparty failing to pay.
Credit exposure
For Munters, the predominant portion of credit risk relates to accounts receivable. Munters works actively
to limit this risk. An approved credit rating is required for a counterparty to be approved. Advancepayment is generally encouraged, and partial advance payment is required when the value of the order
is a significant amount and delivery extends over a long period of time. Accounts receivable are also
mainly spread among many customers, primarily companies in different industries and with wide
geographical distribution, which limits concentration of the credit risk. The Group’s five largest customers
accounted for 15% (14) of total revenues, calculated on a full-year basis. At December 31, 2018, thefive largest customers accounted for 13% (17) of total outstanding accounts receivable.
To ensure that the Group’s accounts receivables are paid, the management of receivables is regulated
in a special policy. According to this policy, each business unit must have established and documented
processes for handling unpaid receivables. The documented processes include specifications of time
limits for taking various actions, including legal action, as well as who is responsible at various stages ofthe process. Documentation of actions taken ensures that follow-up is possible. The measures arematched to amounts and to different groups of customers and business areas in a manner that will resultin efficient handling of overdue accounts receivable.

1 0 2 			MUNTERS ANNUAL REPORT 2018

102

Counterparty exposure
A list of approved counterparties and maximum exposure to each approved counterparty is establishedin the financial policy. Approved counterparties should be characterized by high ethical values andhave a credit rating of at least A-/A2 according to Standard & Poor’s/Moody’s credit assessments.
Exceptions may sometimes be made for local banks, but such cases must have the advance approval of
the CFO.
Liquidity risk
Liquidity risk refers to the risk of Munters, at a given point in time, not having sufficient liquidity to cover
expected or unforeseen expenses.
The liquidity reserve is defined as bank balances or invested funds that can be released within twobanking days without any additional or minor cost, plus any unutilized credit facilities, committed forminimum 12 months, less any outstanding uncommitted debt. Management continually monitors
forecasts of Group cash flows and liquidity reserves to ensure that the Group has sufficient funds tosatisfy the needs of operating activities and to cover interest payments and loan repayments. According
to the financial policy, the long-term liquidity reserve shall exceed an amount equivalent to 1.5 monthsof disbursements. Short term the liquidity reserve can fall below that level to SEKm 350. A risk to go
below the permitted threshold level requires immediate actions. At the end of 2018, the Group had
unutilized credit facilities of SEKm 918 (811). The Group’s total liquidity reserve less trapped cash per
end of 2018 amounted to SEKm 1 275 (1 085).
Group Treasury works actively to ensure an effective cash management structure by centralizing theliquidity to the parent company through cash pools and other form of sweeping mechanisms. Cashsurplus shall primarily be used to repay on external debt. The Group’s cash and cash equivalents shallbe deposited in bank accounts or high-liquidity interest-bearing instruments. Any surplus liquidity insubsidiaries shall be deposited with Group Treasury. By securing accessibility to guaranteed long-term
credit facilities, spreading maturities and sources of financing for borrowings, the Group will avoid
expensive financing and refinancing difficulties. For more information about the Group’s borrowings,
see Note 20.
Capital structure
Munters aims to have a capital structure that ensures long-term stability in operations, satisfies various
investment requirements and safeguards the value of the Group. Munters endeavors to ensure thatGroup’s subsidiaries shall have an optimal capital structure relating to financing requirements, foreignexchange and tax regulations in each jurisdiction. Subsidiary financing shall mainly be done by internalloans or capital contributions. Requirements in the Groups external loan agreement and common praxis
following the type of business of the individual subsidiary and country shall be taken into consideration
when deciding form of financing. An analysis of the subsidiaries’ capital structure is done on a yearlybasis to secure that the different requirements are met.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES

NET SALESNOTE 4

Satisfaction of performance obligations and payment terms
Munters overall supply consists of goods, such as equipment, components and spare parts, and services,such as installation, startup commissioning and maintenance services, within four different operating
segments: Air Treatment, Data Centers, AgHort and Mist Elimination.
Customer contracts range from pure component deliveries, mainly within AgHort and Mist Elimination,
to contracts comprising equipment, installation, startup and commissioning services, mainly within Air
Treatment and Data Centers.
The performance obligation to deliver goods within Air Treatment, AgHort and Mist Elimination is in thegreat majority of contracts satisfied when Munters delivers the goods according to the delivery terms in
the contract, however there are contracts within Air Treatment that are satisfied over time as Muntersproduces the goods. The performance obligation to deliver goods within Data Centers is satisfied overtime as Munters produces the goods. This because the Data Centers customer contracts are customerspecific deliveries without alternative use for Munters and with the right to recovere cost incurred with areasonable profit margin should the customer decide to terminate the contract.
Installation, startup and commissioning services are services satisfied over time as Munters performs
The same relates to aftermarket services, such as maintenance services and extended warranties, andservices and subscription contracts within Munters software delivery.
Within AgHort and Mist Elimination, payment terms are in general at point of delivery, which also
correlates to time of revenue recognition Within Air Treatment and Data Centers customer advancepayment is generally encouraged, and partial advance payment is required when the value of the order
is a significant amount and delivery extends over a long period. In these customer contracts, there is nota one to one correlation between payment terms and revenue recognition, which creates customer
balances in the financial statement.
Allocation of Net sales
The majority of customer contracts within Munters operating segments Air Treatment, AgHort and Mist
Elimination fulfill the requirements to recognize net sales at a point in time, however there are a numberof customer contracts within these business areas that requires to recognize net sales over time, which isreflected in the below matrix. In contrast, the majority of customer contracts within the Data Centersbusiness requires to recognize net sales over time.
In addition equipment sales Munters also provides different kinds of services to customers such as
installation, commissioniong, startup and maintenance. Net sales from services are recognized over timeas these services are performed.
Allocation of the transaction price in a customer contract with several performance obligations isbased on standalone selling prices.

MUNTERS103

MUNTERS ANNUAL REPORT 2018|

A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

2018

AirT

DC

AgH

ME

Total

Allocation timing of revenue recognition
Goods transfered at a point in time

2,787

13

1,851

385

5,035

Goods transfered over time
Services transfered over time
Total

628
309
3,723

985
22
1,019

1
139
1,991

−
4
389

1,614
473
7,122

AirT

DC

AgH

ME

Total

2,726
592
251
3,569

−
804
28
833

1,670
−
137
1,808

394
−
1
395

4,790
1,397
418
6,604

2017
Allocation timing of revenue recognition
Goods transfered at a point in time
Goods transfered over time
Services transfered over time
Total

Contract balances
Accounts receivables are non-interest bearing receivables with a general payment term of 30-90 days.
Within AgHort and Mist Elimination revenue recognition and billing in general aligns. However, within
AgHort there are contracts with billing annually in advance. These contracts qualifies for revenue
recognition over time and therefore deferred revenue balances arises. Within AgHort there is also othercontracts qualifying over where payment terms deviates from revenue recognition, which result in bothdeferred revenue and accrued income balances.
Within Air Treatment and Data Centers, it is common with advanced billings, which creates advancesfrom customers. Within Air Treatment the great majority of customer contracts qualifies for at a point intime revenue recognition meaning that once equipment are delivered, revenue is recognized fully forthat performance obligation and any advances in the balance sheet is netted off and remaining balanceis recognized as an accounts receivable. However, within Data Centers the great majority of thecustomer contracts qualifies for over time revenue recognition meaning that as soon as the measurementof progress of a performance obligation exceeds any advanced billings contract assets are recognized
due to the fact that the billing terms does not allow for further billing until further milestones have beenreached.
Contract balances

2018

2017

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

1,095
139
125

1,204
35
0

Contract liabilities
Advances from customers
Deferred revenue (Note 26)

285
55

382
61

103

FINANCIAL REPORTS NOTESNOTESMUNTERS ANNUAL REPORT 2018104

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

NOTE 5

INFORMATION ON COSTS BY NATURE
Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs

Material costs
Other production costs
Personnel and other administration
Cost of depreciation
Amortization and write downs on surplus values-3,083
-906
-707
-72
-4

-894
-6
-462

-546
-18
-3

-180
-3
-35

-

Other costs
Total

-78
-4,851--1,362-567

2
22017 Group

Cost ofgoods sold

Sales costs

Administrative
costs

R&D costs

Other costs

Material costs-2,797

-

-

-

-

-896
-706
-60

-781
-8

-570
-18

-153
-13

-

0

-189
-

-

-

-14

-4,458-978-588

2018 Group

Other production costs
Personnel and other administration
Cost of depreciation
valuesOther costs
Total

-

-

1 0 4 			

-217

-167

-14

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES105

MUNTERS ANNUAL REPORT 2018

OPERATING SEGMENTSNOTE 6

Munters is a global leader in energy-efficient solutions for air treatment based on its expertise inhumidity- and climate-control technologies.
Reportable operating segments
The Group’s reportable operating segments have been identified from a management perspective. Thus
the segment information disclosed is based on internal reporting to the chief operating decision maker,
which at Munters has been equated with Group management.
The Group’s operations are managed and reported by four business segments as described below.
Air Treatment manufactures and markets products and holistic solutions for controlling humidity andimproving the indoor climate. Customers’ manufacturing processes and warehousing are becoming
more efficient and product quality, shelf life, and hygiene are improving.

Air Treatment

Data Centers manufactures and markets products and precision climate control systems to medium andlarge scale data centers.
AgHort manufactures and markets energy-efficient products and systems to create the right indoor
climate for the animal husbandry and horticultural industries.
Mist Elimination manufactures and markets environmentally friendly solutions and products for mist
elimination, such as for cleaning flue gas.
Business segment consolidation is performed applying the same policies as for the Group as a whole.
Transactions between business segments are conducted on market terms. Key control and reporting
concepts are order intake, net sales, EBIT, and operating working capital. No individual externalcustomer represents 10% or more of Munters’ sales.
In 2019, Munters will integrate Data Centers and Mist Elimination into Air Treatment.

Data Centers

AgHortOther &
Eliminations 1)

Mist Elimination

Total

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

1,158
1,102
3,798
3,723
29
3,752

1,079

792

-112
0
-83
-83

2,317
2,088
6,914
7,122
0
7,122

2,365

394
395
11
406

0
0
-96
0
-118
-118

0

1,866
1,808
30
1,837

171
155
445
389
14
403

127

1,261
833
23
856

518
371
2,107
1,991
27
2,018

368

3,787
3,569
19
3,588

470
461
660
1,019
49
1,068

7,197
6,604
0
6,604

Earnings before interest and tax (EBIT)

496

511

-440

-13

244

225

52

34

-217

-303

134

453

Change in accounts receivable
Change in inventories
Change in accounts payable
Change in advances from customers
Change in operating working capital

-24
1
80
-32
26

-11
18
-17
-4
-13

206
44
-94
-60
96

-13
-98
50
42
-20

-11
-14
-36
-18
-78

-51
-50
52
40
-9

-12
-1
-7
-8
-28

3
-5
3
4
4

3
0
-18
0
-14

-4
0
-28
-3
-35

164
30
-74
-117
2

-76
-135
59
79
-72

Internal reallocations
Investment
Add back of depreciation, amortization, and impairments
Operating cashflow

-10
-127
54
438

5
-83
42
462

-5
-20
359
-9

0
-23
13
-43

-7
-66
45
138

-0
-50
37
203

-1
-7
7
22

1
-4
6
41

23
-10
137
-82

-5
-10
189
-165

0
-231
602
507

0
-170
288
498

Other disclosures
Number of permanent employees at year end

1,856

1,886

413

452

875

770

290

318

84

70

3,518

3,496

Order backlog
Whereof recognized to net sales within one year 2)
Order intake
Sales from external customers
Transactions between business segments
Net sales

1) Pertains group internal eliminations and group items not allocated to any operating segment.
2) As permitted under the transitional provisions in IFRS 15, the transaction price allocated to (partially) unsatisfied performance obligations as of 31 December 2017 is not disclosed.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

105

FINANCIAL REPORTS NOTESNOTESGEOGRAPHIC INFORMATION
The information above is based on where customers have their registered head office.

NOTE 8External net sales
Sweden

2018
160

2017
155

United States
Germany
China
Other countries

2,338
521
904
3,200

2,413
424
783
2,829

Total revenues from external customers

7,122

6,604

Non-current assets

2018

SwedenUnited States
Euro countries
Other countries
Total non-current assets

499
3,922
1,621
294
6,336

2017
484
3,654
1,889
243
6,270

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

NOTE 7106

MUNTERS ANNUAL REPORT 2018

OTHER OPERATING REVENUE AND OPERATING EXPENSES
Group
2018

2017

DEPRECIATION, AMORTIZATION AND IMPAIRMENTLOSSES

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

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

Machinery and equipment
Buildings
Land lease3-10 years
20-33 years
50 years

The brands that emerged in connection with business combinations acquired when Munters Group AB
acquired Munters AB via Munters Holding AB are deemed to have an indefinite useful life, while theuseful life of customer relationships and technology also identified are estimated at 6–12 years. In
addition, the brands that emerged in connection with the acquisition of Proflute are deemed to have an
indefinite useful life.
Depreciation, amortization, and impairment losses on non-current assets were charged to income forthe year as shown below.
Group
2018
2017

Other operating income
Change in contingent price considerations

-

53

Other

14

0

Total

14

53

Other operating expenses
Other

-6

-2

Exchange-rate differences

0

-12

-6

-14

Total

1 0 6 			Cost of goods soldSelling expenses

-76
-468

-60
-197

Administrative costs
Research and development costs
Total

-21
-37
-602

-18
-13
-288

A write down by SEKm 323 was made during 2018, which was related to goodwill in Data Centers. In
addition, a write down of SEKm 18.6 was made on internally generated intangible assets. A write
down by SEKm 19.6 was made during 2017, which was related to customer relations in Mtech.
Amortization of other acquisition-related intangible assets totaled SEKm 133 (189) and is included inselling expenses.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES107

MUNTERS ANNUAL REPORT 2018

NOTE 10

Group
Write down of inventory
Opening balance
Write down current year
Reversal of previous years write down
Organizational change
Exchange rate differences
Closing balance

2018
-77

2017
-71

-5
6
-1

-13
5
1
1

-77

-77

Most of the write downs and reversal of write down are related to the obsolescence that is made at eachperiod end.

LEASESNOTE 9Operating leases
The period’s expense for operating leases on assets, such as leased premises, machinery, and major
computer and office equipment, is recognized among operating expenses and totaled SEKm 143 (106).
The minimum future lease payments for irrevocable operating leases have the following maturity.
2019
2020-2023
2024 and later
Total

FINANCIAL INCOME AND EXPENSES
Group
2018
2017

Parent Company
2018
2017

Financial income
Interest income, subsidiaries

0

-

-

-

Interest income, other
Other financial income

5
0
5

8
0
8

-

-

0
-132

-224

-0

-83

Financing Fees
Exchange-rate differences
Other financial expenses

-8
15
-6
-131

-69
-12
-6
-309

-0
-0

-1
-0
-84

Total financial incomeand expenses

-127

-301

0

-84

Financial expenses
Interest expenses subsidiaries
Interest expenses, loans

139
276
36
451

Finance leases
Like last year, there are no significant amounts of financial leases.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

107

FINANCIAL REPORTS NOTES
NOTES

NOTE 11108

MUNTERS ANNUAL REPORT 2018

INCOME TAXES
Group
2018
2017

Parent Company
2018
2017

Current tax

-79

-107

-

-

Deferred tax related to temporary differences and loss carry-forwards

-22

128

0

-

-101

21

0

-

Tax recognized in income statement for the year
Reconciliation of effective tax
Profit/Loss before tax

7

152

-11

-75

Tax according to prevailing tax rate for the Parent Company

-1

-33

3

17

5

2

-14

-23

Tax effect of;Difference attributable to foreign tax rates
Non-deductible expenses 1)
Non-deductable write-down of goodwill

0

-17

-71

-

Non-taxable income

4

17

-

-

Utilization of losses not recognized as an asset in the balance sheet

2

1

-

-

Change in valuation of deferred tax on temporary differences and losses

-26

-1

-2

0

Revaluation of deferred tax assets/liabilities due to change in tax rate 2)

2

69

-

-

Non-income-related taxes

-2

-3

-

-

Tax attributable to prior years/withholding tax

-1

-6

-

-

-101

21

Tax recognized in income statement for the year0-

Buildings
Machinery and equipment
Inventory

0
3
31

0
3
24

Accounts receivable
Provisions

6
9

6
9

Accrued expenses and prepaid income
Goodwill
Loss carry-forwards

36
4
101

49
5
120

Provisions for pensions
Other

25
10

22
5

Closing balance

227

242

Deferred tax liabilities

Group
2018
2017

Buildings
Machinery and equipment
BrandsGoodwill

3
28
301
16

3
21
281
11

Other intangiable assets
Accrued expenses and prepaid income
Other

60
13
1

74
4

421

394

Closing balance

1) Mainly related to interest cost on shareholder debt in 2017.
2) Mainly related to decreased tax rates in the US and Belgium in 2017.

Tax attributable to components of other comprehensive income

Group
2018
2017

Deferred tax assets

Reconciliation of net change in deferred tax assets from the beginning of the year to the end of year:
2018

Group
2018
2017

2017

Change in deferred taxes

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

4

3

Total

4

3

Opening balance

152

283

Acquisition of subsidiaries (Note 12)
Charges recorded in this year's profit
Tax on amounts recorded in Other comprehensive income

4
22
-4

22
-128
-3

20
194

-22
152

Exchange-rate differences for the year
Closing balance

Deferred tax assets for pension provisions refer to the difference between the calculation of definedbenefit pension obligations based on local tax legislation and IAS 19 Employee Benefits.
Deferred tax assets relating to loss carry-forwards are recognized to the extent that it is deemed likelythat the losses will be used to offset taxable income.

1 0 8 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESMUNTERS ANNUAL REPORT 2018

At year-end, there were tax loss carry-forwards in the group companies amounting to SEKm 951(968), of which SEKm 904 (929) may be carried forward for an unlimited period of time. Loss carryforwards for which deferred tax assets are not recognized totaled SEKm 533 (496), of which SEKm 533(496) may be carried forward for an unlimited period of time. Consequently, deferred tax assets on loss
carry-forwards totaling SEKm 418 (472) were recognized. These losses relate to the subsidiaries inAustralia SEKm 17 (18), Germany SEKm 62 (56), Belgium SEKm 0 (97), Brazil SEKm 0 (5), Mexico
SEKm 40 (17), Netherlands SEKm 33 (30), Turkey SEKm 0 (8) and Sweden SEKm 266 (241). Tax
losses in Mexico may be carried forward for ten years and tax losses the Netherlands may be carriedforward for nine years. In the other countries, losses may be carried forward for an unlimited period oftime.
SEKm 73 (47) out of the SEKm 418 (472) that has been included in the basis for calculating adeferred tax asset relate to Mexico and the Netherlands. During 2018 additional deferred tax assets
relating to old loss carry-forwards were recognized in Sweden since the business conditions have
improved and the loss carry-forward is thus deemed possible. Mexico, Netherlands and Germany has
generated tax losses during the year and these losses are deemed possible to use and thus a deferred
tax asset was recognized on these losses.
The deferred tax liabilities are mainly attributable to surplus values identified in connection with theacquisition of Munters in 2010.

BUSINESS ACQUISITIONS AND DIVESTMENTSNOTE 12ACQUISITIONS 2018
Humi-Tech Services Ltd
On July 2, 2018, Munters UK acquired 100% of the issued share capital of Humi-Tech Services Ltd, acompany registered in the UK providing services and maintaining humidifiers predominantly within the
UK market. Humi-Tech Services Ltd has a strong reputation in the market for being reliable andproviding high quality work and the main reason for the acquisition was to increase Munters service
footprint in the UK market. Humi-Tech Services Ltd has contributed with seven highly qualified service
engineers with knowledge in the humidification industry together with a strong customer base.
The purchase consideration amounted to SEKm 22 of which SEKm 14 upfront and an earn out of
maximum SEKm 8 contingent on the level of EBITDA in FY18 and FY19. We have estimated the full earnout to be paid out and provided for it fully. The surplus values arising from the acquisition relates tocustomer relationships. In 2017 Humi-Tech Services Ltd generated revenues of SEKm 14 with a reported
EBITDA of SEKm 5. Acquisition costs incurred amounted to SEKm 0.5. Acquired cash amounts to app.
SEKm 1.

109

ACQUISITIONS 2017
MTech Systems
On February 1, 2017, Munters completed an acquisition of 60% of the shares in the US based software
company MTech Systems. The company is operating within the business area AgHort. The purchaseprice amounted to SEKm 222, corresponding to a debt-free enterprise value for 100% of the company
of SEKm 370. Munters also has an option to acquire the remaining 40% of the shares that are held bysenior executives of MTech Systems, who also have an option to sell, starting in December 2020. The
purchase consideration on exercising the option will be based on the financial result for the 12 months
prior to the date of exercising the option. As a consequence of the option Munters recognize noncontrolling interest initially and allocate such part of income. The Group also recognizes a liability
corresponding to the discounted expected redemption price for the option whereupon non-controllinginterest attributable to the option is eliminated. The difference between liabilities for the options and thenon-controlling participations to which the options refer is recognized directly in equity and disclosed
separately from other changes in equity.
Compared with the purchase price allocation presented in the first quarter of 2017, the value oftechnology has been decreased by SEKm 25 and goodwill increased with the same amount during thesecond quarter. Final purchase allocations have been performed during the fourth quarter and has
resulted in increased goodwill of SEKm 61. The main adjustments related to deferred income which
increased by SEKm 36 and other current assets which was decreased by SEKm 27.
The acquisition of MTech Systems was financed by raising bank loans. In 2016 MTech Systems had
revenues amounting to approximately SEKm 140. Acquisition costs incurred amounted to SEKm 10,
which is reported as administrative costs. The goodwill arising from the acquisition, SEKm 223, wasprimarily attributable to future synergies expected through combining MTech Systems expertise inadvanced data analysis with data from Munters controllers, creating a complete overview of the supply
chain for poultry and swine producers. Overall this will significantly expand Munters offering to ourcustomers in business area AgHort.
The acquired business contributed revenues of SEKm 124 and net profit of SEKm 34 to the group forthe period from February 1 to December 31, 2017. If the acquisition had occurred on January 1, 2017,consolidated pro-forma revenue and profit for the year ended December 31, 2017 would have been
SEKm 136 and SEKm 37 respectively.

Information about acquired net assets and goodwill follows

According to
final purchaseprice allocation

Cash purchase consideration paid
Total purchase consideration
Fair value of non-controlling interests

222
222
162

Fair value of acquired net assets
Goodwill-161
223

MTech Systems
A part of the option in Mtech was exercised where another 6.4% was acquired for SEKm 23. The
original option remains and after this transaction there is a call option to acquire the remaining 33.6%
which terminates as of December, 2022.

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109

FINANCIAL REPORTS NOTESNOTESAcquired net assets at time of acquisition

MUNTERS ANNUAL REPORT 2018

Fair values
according to
final purchaseprice allocation

AssetsProperty, plant and equipment
Customer relationships

1029

Technology
Brands97
19

Accounts receivable
Other current assets

51
12Cash and cash equivalents
Total assets

35
252

Liabilities
Non-current interest-bearing liabilities
Current interest-bearing liabilities

00

Accounts payable
Accrued expenses and deferred income

156

Deferred tax liabilities
Other current liabilities
Total liabilities

22
12
91

Net identifiable assets and liabilities

161

Cash purchase consideration paid

222

Cash and cash equivalents in acquired company-35

Change in the Group's cash and cash equivalents on acquisition

187

Kevin Enterprises
On April 1, 2017, Munters completed an acquisition of Kevin Enterprises Private Limited, a privately
owned company headquartered in Mumbai, India. The acquisition was structured as an asset deal,
acquiring company being Munters India
Humidity Control Private Limited, Munters India. Since April 2017, the acquired business is reported asa separate reporting unit within Munters India, and is consolidated into Business Area Mist Elimination,
which is also the cash-generating unit to which the acquisition has been allocated. The purchased
consideration, after net working capital and net debt adjustments, amounted to SEKm 76. Fair value oftransferred net working capital and net fixed assets amounted to SEKm 18 and 35 respectively. Value of
intangible assets, including goodwill, was estimated at approximately SEKm 23. Net debt items wereapproximately SEKm 0.2. In 2016, Kevin Enterprises generated revenues of approximately SEKm 65.
Acquisition costs incurred amounted to SEKm 6, which is accounted as administrative costs.

1 1 0 			110The acquired business contributed revenues of SEKm 28 and net profit of SEKm SEK -5 to the groupfor the period from June 1 to December 31, 2017. If the acquisition had occurred on January 1, 2017,consolidated pro-forma revenue and profit for the year ended December 31, 2017 would have been
SEKm 38 and SEKm -7 respectively.

Information about acquired net assets and goodwill follows
Cash purchase consideration paid
Total purchase consideration
Fair value of acquired net assets
Goodwill

According to final
purchase priceallocation
76
76
61
15

Fair values according to
final purchase priceallocation

Acquired net assets at time of acquisition
AssetsProperty, plant and equipment
Technology

35
6

Order backlog
Favourable contract to use Brand nameInventories

1
1
11

Accounts receivable
Other current assets
Total assets

1064Liabilities
Accounts pay able
Accrued expenses and deferred income
Other current liabilities

3-

Total liabilities

3

Net identifiable assets and liabilities

61

Cash purchase consideration paid

76

Change in the Group's cash and cash equivalents on acquisition

76

Edata
On May 30, 2017, Munters Group acquired Brazilian-based Edata specializing in key software forfood processing plants, primarily for poultry production. The purchased consideration amounted to
SEKm 5. Edata provides software to keep track of production within food processing plants and is along-term partner to MTech Systems, the leading supplier of software solutions to the live productionindustry, which was acquired by Munters on Feb 1, 2017. Edata delivers form-fit solutions for tracking
finished products, measuring quality and yield, and for controlling waste in the food production process.
Edata’s software will be fully incorporated into MTech’s suite enabling Munters to integrate data fromMUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESMUNTERS ANNUAL REPORT 2018111

farms, hatcheries, feed mills in the food producers' production system. Identified goodwill from theacquisition were allocated to the AgHort cash-generating unit. Acquisition costs incurred totaled SEKm 1
and were recognized as administrative expenses. Edata had a turnover of approximately 15 SEKm in2016 and had 34 employees.
The acquired business contributed revenues of SEKm 8 and net profit of SEKm -6 to the group for theperiod from June 1 to December 31, 2017. If the acquisition had occurred on January 1, 2017,consolidated pro-forma revenue and profit for the year ended December 31, 2017 would have been
SEKm 13 and SEKm -11 respectively.
Krako
Munters has divested its 50 percent share in the company Hebora SRO for SEKm 30. In connection withthe divestment of Hebora SRO, Munters acquired the remaining shares in HB Krako SRO for SEKm 57,
in which Munters previously had the controlling interest. HB Krako SRO is 100 percent owned byHebora SRO. HB Krako SRO conducts operations in premises owned by Hebora SRO. A ten-year leaseagreement has been drawn up between HB Krako SRO and Hebora SRO. The total effect of thetransaction on cash flow totaled SEKm -27, which was reported as a divestment in the statement of cashflow.

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111

FINANCIAL REPORTS NOTES
NOTES

NOTE 13112

MUNTERS ANNUAL REPORT 2018

PROPERTY, PLANT, AND EQUIPMENT
Equipment,
tools,
fixtures, Construction
and fittings in progress

Buildings
and land

Plant andmachineryOpening balance
Acquisition of subsidiaries (Note 12)
Investment for the year
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balance

371
0
2
0
22
19
414

756
0
53
-8
12
42
854

460
0
46
-13
-1
21
514

Accumulated depreciation
Opening balance
Acquisition of subsidiaries (Note 12)
Sales and disposals
Reclassifications
Depreciation for the year
Exchange-rate differences for the year
Closing balance

215
0
7
11
12
246

537
0
-7
-14
40
28
584

Closing carrying amount

168

270

2018 GroupAcquisition cost

Equipment,
tools,
fixtures, Construction
and fittings in progress

Buildings
and land

Plant andmachineryOpening balance

393

731

454

69

1,647

Acquisition of subsidiaries (Note 12)
Investments for the year
Divestment of subsidiaries
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balance

26
1
-28
-15
7
-15
371

6
42
-38
48
-33
756

6
35
-33
12
-14
460

0
49
-67
-3
48

38
126
-28
-86
0
-65
1,634

237
-7
-12
0
7
-10
215

559
-34
1
33
-23
537

321
-31
-1
39
-10
319

-

1,117
-7
-77
0
79
-42
1,070
0

155

219

142

48

563

Total

2017 GroupAcquisition cost

48
0
48
-0
-36
4
62

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

319
0
-12
6
48
16
377

-

1,070
0
-19
-0
99
57
1,207

137

62

637

Total

Accumulated depreciation
Opening balance
Divestment of subsidiaries (Note 12)
Sales and disposals
Reclassifications
Depreciation for the year
Exchange-rate differences for the year
Closing balance
Closing carrying amount0

Depreciation is based on an asset’s acquisition cost and its estimated useful life as specified in Note 8.
The carrying amount of land totaled SEKm 36 (35).

1 1 2 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES113

MUNTERS ANNUAL REPORT 2018

PATENTS, LICENSES, CUSTOMER RELATIONS AND OTHER

NOTE 14INTANGIBLE ASSETS WITH DEFINITE USEFUL LIFE

Technology

2018 GroupAcquisition cost
Opening balance
Acquisition of subsidiaries (Note 12)
Investment for the year
Sales and disposals
Reclassifications
Exchange-rate differences for the year
Closing balance

Customer
relationships

Internallygeneratedintangible
assetsOther
intangible
assets

Total

592
-

852
26

116
-

147
-

1,707
26

-

-

60
0
2

24
-1
-1

84
-1
0

41
632

56
933

8
185

3
170

106
1,921

Other intangible assets
Other intangible assets mainly include patents, tradenames, licenses, and similar rights in Sweden,
Germany, the United States, the Netherlands and China.

Technology

Customer
relationships

Internallygeneratedintangible
assetsOther
intangible
assets

Total

519
105
-

864
30
-

89
31

135
1
13

1,607
136
44

-

-

-

-1

-1

-32
592

-43
852

-4
116

0
147

-79
1,707

Accumulated amortization
Opening balance

375

607

34

89

1,106

69
-

93
20
-

11
-

16
-1

189
20
-1

-21
423

-31
688

-1
44

0

Closing balance

104

-54
1,260

Closing carrying amount

169

163

72

42

446

2017 GroupAcquisition cost
Opening balance
Acquisition of subsidiaries (Note 12)
Investments for the year
Sales and disposals
Exchange-rate differences for the year
Closing balance

Accumulated amortization
Opening balance
Amortization for the year
Impairment for the year

423
57
-

688
73
-

44
16
19

104
14
-

1,260
160
19

Amortization for the year
Impairment for the year
Sales and disposals

Exchange-rate differences for the year
Closing balance

30
510

47
809

2
81

2
120

82
1,520

Exchange-rate differences for the year

Closing carrying amount

122

124

105

50

401

Technology
This item includes technology, SEKm 122 (169), where the majority of which was identified inconjunction with the acquisition of Munters AB in 2010.
Customer relationships
This item includes customer relationships, SEKm 124 (163), where the majority of which was identified
in conjunction with the acquisition of Munters AB in 2010. The impairment of customer relationships in2017 was related to the segment AgHort.
Internally generated intangible assets
Internally generated intangible assets mainly relates to recognized development costs within AgHort,
AirT and Data Centers. During 2018 development costs related to Data Centers have been written downwith SEKm 19 due to deteriorated economic outlook has, see further in Note 15.

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113

FINANCIAL REPORTS NOTES
NOTES

NOTE 15114

MUNTERS ANNUAL REPORT 2018

GOODWILL AND OTHER INTANGIBLE ASSETS WITH
INDEFINITE USEFUL LIFE

Intangible assets with indefinite useful life consist of brands and goodwill.
2018 Group

BrandsGoodwill

Acquisition cost
Opening balance

1,015

4,275

Exchange-rate differences for the year
Closing balance

71
1,086

293
4,569

Accumulated impairment
Opening balance

625

Impairment of the year
Exchange-rate differences for the year
Closing balance

0
6

324
2
351

Closing carrying amount

1,080

4,218

2017 Group

BrandsGoodwill

Acquisition cost
Opening balance
Acquisition of subsidiaries (Note 5)
Exchange-rate differences for the year

1,055
21
-61

4,253
243
-220

Closing balance

1,015

4,275

Accumulated impairment
Opening balance
Exchange-rate differences for the year

6
-0

26
-1

Closing balance

6

25

1,010

4,251

Closing carrying amount

1 1 4 			Recognized brands per cash-generating unit
Air Treatment
Data Centers
AgHortMist Elimination
Closing carrying amount

2018
881
133
66
1,080

2017
832
119
59
1,010

Recognized amount of goodwill per cash-generating unit
Air Treatment
Data Centers
AgHortMist Elimination
Closing carrying amount

2018
2,955
0
1,121
143
4,219

2017
2,835
300
980
136
4,251

Goodwill as of December 31, 2018 amounted to SEKm 4,218 (4,251). The decline was attributable toa write-down of SEKm 323 (-), linked to the business segment Data Centers where our economic outlook
has deteriorated, however counteracted by positive exchange rate effects owing to a weaker SEK
against USD compared to the previous year.
During 2017 goodwill increased through three acquisitions, refer to Note 12. At the same time, thegoodwill value decreased owing to the Swedish crown strengthening against the US dollar.
Management estimates that brands have an indefinite useful life because there is no predictable limit
for the period of time during which the brand is expected to generate net payments for the company.

IMPAIRMENT TESTING OF GOODWILL AND BRANDS
The values of goodwill and brands are tested annually, or more frequently if necessary, to ensure thatthe value does not deviate negatively from book value. The carrying amounts for goodwill and brands
were tested at September 30 and at December 31, 2018.
Goodwill and brands with indefinite useful life are allocated to the Group’s cash-generating units,
which are the smallest identifiable groups of assets that, as part of continual usage, generate cash
inflows that are substantially independent of other assets or groups of assets. The Group’s cashgenerating units are consistent with the Group’s four business areas, which also comprise the Group’s
operating segments: Air Treatment, Data Centers, AgHort and Mist Elimination.
Impairment testing of recognized goodwill and brands were based on recoverable amounts for cashgenerating units established through calculating future value in use. Future cash flows for the first five
years mainly based on the forecasts approved by the Board and Group management, and progress
thereof. The growth rate in the terminal period after the first five years has been determined at 2% (2).
Significant assumptions used to calculate values in use are the progression of sales growth and EBITA
margin, utilization of operating capital employed, and the discount rate. Management has establishedthe forecast growth rate based on previous results and expectations about the future market trend by
operating segment, which for Air Treatment substantially exceeds the current sales levels. These
assessments observe various economic indicators and internal and external analyses thereof. In

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NOTES

addition, important aspects are observed pertaining to the future financial trend, described in theGroup’s strategic plan.
The impairment testing has resulted in a write-down of goodwill and other intangible assets amounting
to SEKm 342. The write-down was attributable to the business segment Data Centers where our
economic outlook has deteriorated.
These calculations use a nominal discount rate (average weighted cost of capital before tax) of 11.7%(9.4). Increased interest rate in the US, increased cost of funding and increased business risks in Data
Centers are the main reasons behind the higher rate.
A sensitivity analysis for the parameters discount rate, sales growth and EBIT margin has been
performed for each cash-generating unit, as below. The effects refer to a change in the individual
parameter, all else being equal.
Sensitivity analysis
Discount rate
A 3.0 percentage point (3.9) increase in the discount rate would be required for goodwill and brands
impairment to be necessary in the Air Treatment cash-generating unit, a 4.0 percentage point (6.6)
increase in Mist Elimination, a 6.5 percentage point increase (9.0) in AgHort. Goodwill, allocated toData Centers, was fully written off in 2018.
Net sales growth
For Air Treatment, AgHort and Mist Elimination no reasonable declines in net sales growth are judged tolead to a need for impairment.
EBITA margin
A decrease of 4.4 percentage points (5.8) in the EBITA margin for the period from 2020 to 2023 would
be required for impairment of goodwill and brands to be necessary in the Air Treatment cash-generating
unit, a decrease of 3.7 percentage points (5.9) in Mist Elimination. For AgHort, no reasonable changes
in EBITA margin are judged to lead to a need for impairment.

MUNTERS115

MUNTERS ANNUAL REPORT 2018|

A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTE 16PARTICIPATIONS IN SUBSIDIARIES

Direct shareholdings, 100%
Munters Holding AB (corp. reg. no. 556818-9749)
Registered office: StockholmCountry
SwedenCarrying
amount4,086
4,086

Material indirect shareholdings
Munters AB (Corp.reg. no. 556041-0606)
AB Carl Munters (Corp.reg. no. 556035-1198)
Munters Europe AB (Corp.reg. no. 556380-3039)
Pro Component Sweden AB (Corp.reg. no. 556904-0891)
Proflute AB (Corp.reg. no. 556558-3415)
Munters Corporation
Munters Canada Inc
Munters de Mexico S de RL de CV
Shelf Service Company No 1 S de RL de CV

Country
SwedenSwedenSwedenSwedenSwedenUnited States
CanadaMexicoMexicoMunters Brasil Industria e Commércio Ltda
Munters Beteiligungs GmbH
Munters Euroform GmbH
Munters GmbH
Munters Reventa GmbH
Munters Netherlands BV
HB Beheer BV
Munters BV
Munters Spain S.A.U.
HB KRAKO s.r.o.
Munters France S.A.S.
Munters Italy SpA
Munters Ltd

BrazilGermany
Germany
Germany
Germany
Netherlands
Netherlands
Netherlands
Spain
Czech
France
Italy
United Kingdom

Percentage, %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

115

FINANCIAL REPORTS NOTES
NOTESMaterial indirect shareholdings
Munters Management Service Ltd
Munters Belgium SA
HB Drying Belgium
Munters Finland OY
Munters Israel Ltd

Country
Percentage, %United Kingdom
100
Belgium
100
Belgium
100
Finland100
Israel100

Munters A/S
Munters (Pty) Ltd
Munters-Form Endüstri Sistemleri Sanayive Ticaret A.Ş.
Munters India Humidity Control Private Ltd
Munters Air Treatment Equipment (Beijing) Co., Ltd

DenmarkSouth Africa
Turkey
India
China

100
100
80
100
100

Jiangyin SAT Air Treatment Equipment Co Ltd
Munters Korea Co., Ltd
Munters Company Ltd
Munters (Thailand) Co. Ltd
Munters K.K.
Munters Pte Ltd
Munters Pty Ltd

ChinaSouth Korea
ThailandThailandJapan
Singapore
Australia

100
100
100
100
100
100
100

M-Tech Systems USA, LLC
M-Tech Systems America Latina Ltda
M-Tech Processing, LLC
M- Tech Processing Brazil Sistemas Da Informacao, Ltda
Humi-Tech Services Ltd

United States
BrazilUnited States
BrazilUnited Kingdom

66
66
46
46
100

No restrictions exist regarding Group’s access to the subsidiaries assets, as a result of regulations or
minorities.
Acquisition cost at January 1
Accumulated acquisition cost at December 31

NOTE 17116

MUNTERS ANNUAL REPORT 2018

2018
4,086
4,086

2017
4,086
4,086

Provisions for bad debts corresponded to 4% (3) of total receivables and changed as follows.
Provision for bad debts

2018

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

38
31
-4
-23
2
44

2017
42
24
-8
-19
-1
38

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

NOTE 18

PREPAID EXPENSES AND ACCRUED INCOME
Group
2018
2017

Parent Company
2018
2017

Prepaid rent and leases
Prepaid insurance premiums
Accrued income
Prepaid expenses for goods and services

7
22
139
14

7
18
35
4

0
-

0
-

Other items
Closing balance

42
224

41
106

0
0

0
0

ACCOUNTS RECEIVABLES

Time analysis of accounts receivable,
past due but not impaired2018

Current< 30 days
30-90 days
91-180 days
> 180 days
Closing balance

667
206
129
62
30
1,095

1 1 6 			

2017
709
314
103
69
9
1,204

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NOTES117

MUNTERS ANNUAL REPORT 2018

FINANCIAL INSTRUMENTS BY CATEGORYNOTE 19

Book value of financial assets and liabilities by category

2018

2017

11
1,095
109
404
1,619

14
1,204
126
402
1,745

3
3

2
2

1,622

1,747

2018

2017

3,002
11
535
12
137
181
3,878

2,848
7
581
9
1
212
3,657

1
128
8
137

2
136
138

4,015

3,795

Financial assets measured at amortized cost
Other non-current financial assets
Accounts receivable
Other current receivables
Cash and cash equivalents
Closing balance
Financial assets at fair value through profit/loss
Currency derivatives whose cash flows
are not subject to hedge accounting
Closing balance
Total financial assets

Financial liabilities measured at amortized costNon-current interest-bearing liabilities
Current interest-bearing liabilities
Accounts payable
Accrued expenses
Other non-current liabilities
Other current liabilities
Closing balance

fair value at the end of the reporting period therefore in all material aspects corresponds to the carrying
amount.
The fair value of financial instruments such as accounts receivable, accounts payable, and other noninterest-bearing financial assets and liabilities, which are recognized at amortized cost less any
impairment, is deemed equal to the carrying amount because of the short maturities of these instruments.
Derivative instruments
The Group’s derivatives, recognized at fair value in the statement of financial position, are measured
according to IFRS 9 and categorized in level 2 according to the fair value hierarchy to IFRS 13. Thismeans that fair value is based on data for the asset or liability other than quoted prices on an active
market for identical assets or liabilities that are observable either directly (as quoted prices) or indirectly(derived from quoted prices).
At year-end, there were forward currency contracts in the Group as follows.
2018

2017

Nominal amountin local currency

Carrying
amountCAD/SEK
CNH/SEKDKK/SEK

0
-17
-10

-0.1
-0.4
-0.0

EUR/SEKJPY/SEKSGD/SEKUSD/SEKUSD/ILS

1
44
0
-17
-2

ZAR/SEK
Total-20

Nominal amountin local currency Carrying amount
-17
-15

-0.9
0.2

0.3
0.1
-0.0
1.9
-0.1

-5
100
1
2

0.5
-0.1
0.1
0.6

0.2
1.7

-20

-

-0.4
-0.1

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

Negative net amounts refer to sales, and positive net amounts refer to purchases. All forward contracts
are short-term and fall due for payment during 2019.
Financial assets and liabilities that are offset, or which are covered by a legally binding masternetting arrangement or similar agreement
Financial assets and liabilities that can be offset against each other consist of foreign exchange
derivatives covered by a legally binding master netting arrangement. In the year 2018 these items are
not offset in the balance sheet. The carrying amounts of such assets and liabilities are listed in the table
above.

1) Fair value adjustments recorded through equity. Acquisition option is valid through December 31, 2020.

Fair value of assets and liabilities
The carrying amounts of interest-bearing assets and liabilities in the statement of financial position may
deviate from their fair value for reasons such as changes in market interest rates. Munters deems that theinterest rate on interest-bearing liabilities is in line with market terms at December 31, 2018, and the

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117

FINANCIAL REPORTS NOTESNOTESContingent earn-outs and put/call acquisition options
The Group’s contingent earn-outs and put/call acquisition options, recognized at fair value in thestatement of financial position, were measured according to IFRS 9 and categorized in level 3
according to the fair value hierarchy to IFRS 13. The opening balance for the period was related to theacquisition of MTech Systems in 2017. The additional fair value of contingent consideration of SEKm 8(0) was related to the acquisition of Humi-Tech Services Ltd in July 2018 and the fair value of theexercised part of the put/call option amounted to SEKm 24 (0) and related to the acquisition of anadditional 6.4% of the shares in MTech Systems. The contingent consideration in Humi-Tech Services Ltd
is based on adjusted EBITA for 2018 and 2019.
Contingent price considerations
Opening balance
Estimated liabilities at acquisition (Note 12), undiscounted
Contingent consideration (Note 12)
Excersied put/call option
Changes recognized in other operating income
Discounting
Exchange-rate differences for the year
Closing balance

NOTE 20118

MUNTERS ANNUAL REPORT 2018

2018
136
8
-24
2
14
136

2017
51
162
-53
-13
-11
136

INTEREST BEARING LIABILITIESInterest bearing loans, non-current

Book value

MaturityType of loan

Interest rate

Currency

2022

Term Loan

Variable

USD

2018
2,222

2017
2,030

2022

Utilized committed credit facilities US

Variable

USD

90

189

2022

Utilized committed credit facilities Sweden

Variable

EUR

308

295

2022

Utilized committed credit facilities Sweden

Variable

SEK

380

330

2019-2025

Other non-current loan

Fixed/
Variable

Variouscurrencies

2

3

3,002

2,848

Total

Interest bearing liabilities, current
The table outlines current bank debt in Munters subsidiaries in Brazil Canada, China and India.
Term Loan is deducted by financing cost activated in balance sheet. Drawings under the revolving credit
facility are listed among non-current loans below.
Interest bearing loans, current

Interest bearing liabilities, non-current
Munters primary financing facilities consist of a term loan of USDm 250 and a revolving credit facility of
EURm 185. The facilities have no mandatory amortization requirement. The final maturity date is in May
2022. The loan agreement has one financial covenant (consolidated net debt in relation to adjusted
EBITDA). Of the Revolving Credit Facility, EURm 20 is allocated to ancillary facilities made available foroverdraft and guarantee purposes. As of December 31, the total Interest-bearing liabilities amounted to
SEKm 3,013 (2,855). The table below outlines the long term debt on Group level together with local
bank debt in group companies in among others, China, India and Brazil.

MaturityBook value

Type of loan

Interest rate

Currency

2018

2017

Other current loan

Fixed/
Variable

Variouscurrencies

11

7

Total
Total loans

11

7

3,013

2,855

Munters’ financial policy regulates the management of external borrowings. The Group’s forecasted
performance in relation to the limits stipulated by the covenant is closely monitored. This ensures that theGroup fulfills its commitments to external lenders and minimizes the liquidity and financing risk. At
December 31, 2018, the covenant was met. The Munters full potential program will temporarily
increase the leverage during 2019 and necessary consent from the lending banks have been received.
The total average weighted interest rate including both long- and short term financing at the end of theyear was 4.4%(3.3) and 4.6% (3.5) including financing cost.

1 1 8 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES

119

MUNTERS ANNUAL REPORT 2018

Changes in interest-bearing liabilities
Munters has during the year amortized on the Revolving credit facility in US dollar. The currency effects
shown in the table below are mainly caused by changes USD.

At December 31, 2018, the share price fell below the redemption price for both the employee stock
options program and the warranty program.

NOTE 22Non current loans

Openingbalance

Term loan

2,058

0

185

2,243

Revolving credit facility

815

-57

20

778

Other third party debt

3

-1

Financing fees

Cash flow Currency effects

Non cash
movements Closing balance

2

-28

Total

2,848

Current loans

Openingbalance-58

Cash flow Currency effects

Revolving credit facility

0

Other third party debt

7

5

Total

7

5

Total loans

205

7

-20

7

3,002

Non cash
movements Closing balance
0

PROPOSED DISTRIBUTION OF EARNINGS

The following earnings (in SEK ´000) are at the disposal of the Annual General Meeting:
2018

Proposed distribution of earnings, parent company
Unrestricted equity in parent company:
Profit brought forward
Income for the year
Total

4,161,243-11,371
4,149,872

The Board of Directors proposes that earnings be distributed as follows:
Dividend
To be carried forward
Total

4,149,872
4,149,872

11
-

-

2,855

11
3,013

EARNINGS PER SHARENOTE 21Group
Net income, SEK ´000
Attributable to Parent Company shareholders, SEK ´000
Attributable to non-controlling interests, SEK ´000
Average number of outstanding shares before dilution
Average number of outstanding shares after dilution
Where of average number of shares in own custody
Earnings per share before dilution, SEK
Earnings per share after dilution, SEK

2018

2017

-94,174-104,995

172,641
173,853

10,821
183,165,852
183,165,852
431,950
-0.57
-0.57

-1,212
119,658,011
119,720,995
1.45
1.45

Computing earnings per share, basic and diluted, is based on the net income attributable to the Parent
Company’s ordinary shareholders. The number of shares used in the calculation consists of a weighted
average of outstanding ordinary shares during the period.

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119

FINANCIAL REPORTS NOTES
NOTES

NOTE 23120

MUNTERS ANNUAL REPORT 2018

EQUITY

Share capital
The share capital of SEK 5,507,934 comprises 183,597,802 shares with a par value of SEK 0.03 pershare. The shares in Munters Group AB are listed on Nasdaq Stockholm’s list of major companies under
the symbol MTRS. The ten largest owners in Munters Group AB hold a total of 86.3% of outstanding
shares. Of these, Nordic Capital holds 50.1% indirectly via its Nordic Capital VII fund, and FAM AB
11.4%. No other shareholder holds more than ten percent of the shares, either directly or indirectly, in
Munters Group AB.
The table below shows the changes in the number of shares.
Number of shares
Opening number, January 1, 2017
Equity shares B
Preference shares A and B
Changes 2017:
Conversion of preference shares A and B and of Equity shares A to Equity share B 1:1

2,399,764
536,981
1,862,783

0Share B, split by 1/7
Off set issue
Share issue
Closing number, December 31, 2017
Equity shares B

14,398,584
164,926,726
1,872,728
183,597,802
183,597,802

Opening number, January 1, 2018
Equity shares B

183,597,802
183,597,802

Changes 2018:
Closing number, December 31, 2018
Equity shares B
Of which in own custody/treasury shares

183,597,802
183,597,802
1,467,000

Reserve for exchange rate differences
Opening balance, January 1, 2017
Exchange rate differences
Closing balance, December 31, 2017
Exchange rate differences
Closing balance, December 31, 2018

439
-89
351
193
544

1 2 0 			The reserve for exchange rate differences consists of differences that arise when the income statements
and balance sheets of foreign subsidiaries are translated into SEK. Compared with last year, the positive
exchange-rate effects during 2018 were mainly to a weaker SEK against USD and EUR.
Holdings of treasury shares
The Board of Directors of Munters Group AB (“Munters”) resolved, pursuant to the authorization grantedby the Annual General Meeting held on May 17, 2018, to repurchase the company’s own shares on
Nasdaq Stockholm. The purpose of the repurchase was to secure the delivery of shares to theparticipants of Munters’ long-term incentive programme, which was resolved by the Annual General
Meeting 2018, and to cover costs related to the programme. The repurchases was made at a price pershare within the from time to time registered trading interval. Payment for the shares was made in cash
and amounted to SEKm 59. As at December 31, 2018 Munters Group AB holds 1,467,000 shares in
own custody which equals 0.7% of the registered shares. The shares hold a par value of SEK 0.03 pershare.
Dividend during the period
Dividends of SEKm 55 was made during the year in accordance with the resolution from the Annual
General Meeting on May 17, 2018.

NOTE 24PROVISIONS FOR PENSIONS AND SIMILAR
COMMITMENTS

Group

2018

2017

Non-current defined-benefit obligations to employees
Other benefits to employees
Non-current

215
15
230

193
14
207

6
2
8

6
2
8

Total provisions for pensions
and similar obligations

238

215

Non-current defined-benefit obligations to employees
Current defined-benefit obligations to employees
Provisions recognized for pension obligations

215
6
221

193
6
199

Current defined-benefit obligations to employees
Other current employee benefits
Current

The Group finances pension plans for its employees in several countries. These plans mainly follow
practice in the country in question and may be defined-contribution or defined-benefit plans or a
combination of both. The most important defined-benefit pension plans cover employees in Sweden, Italy

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NOTES

121

MUNTERS ANNUAL REPORT 2018

and France. In France and Italy, provisions are made for mandatory remuneration when employment
ceases. For senior executives of the Group, there are guidelines regarding pension rights and pension
plans described in Note 31.
Defined-benefit pension plans in Sweden constitute 94 % (93) of total Group provisions for pensions
recognized under IAS 19. The calculations are primarily based on final salary and the plans are
unfunded. The pension plans in Italy and France, which constitute 4 %respectively 1 % (4 respectively 1)of total pension provisions, are also unfunded.
The Swedish pension plans (known as ITP plans) supplement the country’s social insurance system,
and result from agreements between employer and employee organizations. ITP plans mainly compriseretirement pensions, disability pensions and survivor’s pensions.
The ITP plan has two parts, firstly, ITP1, which is a defined-contribution pension plan applying toemployees born in 1979 or later, and secondly, ITP2, which is a defined-benefit pension plan applying
to employees born before 1979. White-collar employees within the Group in Sweden were covered byboth these parts. The ITP2 plan is managed within Munters in the FPG/ PRI system. Financing occurs
through provisions to an account in the balance sheet, safeguarded by credit insurance from the mutual
insurance company Försäkringsbolaget PRI Pensionsgaranti. Defined-benefit pension plans subjects theGroup to different kinds of risk attributable to increases in life expectancy, inflation and salary. Muntersrecognizes actuarial gains and losses in other comprehensive income in the period they occur to theextent that they refer to post-employment remuneration. Actuarial losses totaled SEKm -17 (-14) for theperiod.
In the Group, there are also defined-contribution plans that mainly comprise retirement pensions,disability pensions and survivor’s pensions. The premiums are paid continuously during the year by eachGroup company to separate legal entities, such as insurance companies. The size of the premium isbased on salary. The cost of these defined-contribution plans for the period totaled SEK 69 SEKm (69).

Below is the recognized provisions for pensions under IAS 19 in the consolidated balance sheet:2018 Group
Opening balance
Pension expenses current year, included in Income forthe year
Current service cost
Interest cost/income on benefit obligation

Present value of
defined benefit Fair value of plan
obligation
assetsRecognizedprovision, net

215

-16

199

8
5
13

0
-

8
5
13

12
4
16

1
1

13
4
17

Remeasurement, included in Other comprehensive
incomeActuarial changes arising from changes in financial assumptions
Experience adjustments
Transactions
Benefits paid by employer

-6

0

-6

Benefits paid by employer to plan assets
Settlement

-1
-7

-2
-2

-2
-8

Exchange rate differences for the year

-2

1

-1

236

-15

221

Belgium

16

-15

1

Of which unfunded plans:
Sweden208

208

Other countries

12

12Closing balance
Of which funded plans:

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121

FINANCIAL REPORTS NOTES
NOTES

122

MUNTERS ANNUAL REPORT 2018

Significant actuarial assumptions

2017 Group
Opening balance
Pension expenses current year, included in Income forthe year
Current service cost
Interest cost/income on benefit obligation

Present value of
defined benefit Fair value of plan
obligation
assets
-16

179

6
5
11

-

6
5
11

At the end of the reporting period, the discount rate is derived from a functioning market based oninvestment-grade corporate bonds adjusted for the duration of the commitment.

13
1

-0

13
1

14

-0

14

Transactions
Benefits paid by employer
Benefits paid from plan assets
Benefits paid by employer to plan assets

-6
-5
-

5
-2

-6
0
-2

Exchange rate differences for the year

6

-3

3

215

-16

199

14

-14

0

Closing balance
Of which funded plans:Belgium
Of which unfunded plans:
SwedenOther countries

2017
SwedenOthers
2.60
1.30
1.75
1.70
2.70
2.80
1.75
2.70
-

195

Recognizedprovision, net

Remeasurement, included in Other comprehensive
incomeActuarial changes arising from changes in financial assumptions
Experience adjustments

2018
Sweden Others
2.45
1.70
2.00
1.50
2.50
2.80
2.00
2.50
-

Group, weighted values
Discount rate, %Future inflation, %Future wage and salary increases, %Pension increases, %Social security increases, %

189
11

-

189
11

Sensitivity analysis
A reduction of 0.5 percentage points in the discount rate would increase the pension commitments byaround SEKm 24 (22), while an increase in the rate of 0.5 percentage points would reduce thecommitment by around SEKm 21 (20). Altered assumptions with respect to inflation being 0.5
percentage points lower would reduce the commitment by around SEKm 16 (15), and increase it byaround SEKm 18 (17) in an assumption of it being 0.5 percentage points higher. The sensitivity
analysis is performed by one actuarial assumption changing, while the other assumptions are kept
unchanged. The method shows the sensitivity of the liability to an individual assumption. This is a
simplified method, because actuarial assumptions are normally correlated.
Assumptions about life span are based on public statistics and experience from mortality surveys ineach country, and are set in consultation with actuarial experts. As of this year, for Swedish pension
plans, the most current life span investigation DUS14.
Munters’ budgeted fees for defined-benefit obligations equal SEKm 9 (5) for 2019.
Duration analysis regarding expected payments for post-employment pension benefits (not calculated
on present value):
Payments in the future years
Within the next 12 months
Between 1 and 2 years
Between 2 and 5 years
Between 5 and 10 years
Total

2018
5

2017
5

5
16
34
61

5
16
36
62

The weighted average duration for the defined-benefit commitments is 20 years (19).
Plan assets comprise insurance contracts signed with independent insurance companies. No portion ofplan assets in 2018 or 2017 was invested in the Company’s equity instruments, debt instruments, realestate, or other assets used by the Company. The Company only has a minor share of funded plans. The
most important actuarial assumptions are as follows:

1 2 2 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTES123

MUNTERS ANNUAL REPORT 2018

OTHER PROVISIONSNOTE 25

NOTE 26
Provisions
forwarranties

Provision for
restructuring

Other
provisions

Total

Opening balance

115

3

17

136

Additional provisions
Reversals of unutilized provisions
Exchange-rate differences
Utilized during the year

26
-45
6
-14

0
0
0
-3

27
-4
0
-5

53
-49
7
-23

Closing balance, December 31, 2018

88

0

35

123

2018 GroupACCRUED EXPENSES AND DEFERRED INCOME

Vacation pay liabilities
Social security contributions
Other expenses related to personnel
Received goods not yet invoiced
Commissions to agents/sales representatives
Interest expenses
Deferred income
Other
Closing balance

Group
2018
2017
86
91
36
34
132
78
146
76
48
31
13
9
55
61
74
107
590
486

Parent Company
2018
2017
1
1
0
0
0
0
2
2

Other provisions 2018 includes a provision for onerous contracts within Data Centers amounting to
SEKm 21.
NOTE 27

Provisions
forwarranties

Provision for
restructuring

Other
provisions

Total

Opening balance

113

4

23

140

Additional provisions
Reversals of unutilized provisions
Exchange-rate differences
Utilized during the year

36
-15
-5
-14

1
-0
0
-1

2
-0
-7

38
-15
-5
-22

Closing balance, December 31, 2017

115

3

17

136

2017 Group

PLEDGED ASSETS AND CONTINGENT LIABILITIESPledged assets forliabilities to credit institutions
Non-current assets
Current assets
Bank accounts
Receivables from subsidiaries
Other net assets
Shares in subsidiaries
Total

Group
2018
2017
14
13
-

27

Group

Provisions consist of:Current portion
Non-current portion
Closing balance

2018
107
16
123

2017
114
22
136

Contingent liabilities
FPG guarantees
Guarantees from banks and insurance companies
Total

2018
2
205
207

Parent Company
2018
2017
-

-

Parent Company
2017
2
152
154

2018
53
53

2017
21*
0

*There were two guarantees in the Parent company previous year that were not registered until 2018.
Consequently, the figure is not consistent with the previous year's annual report.
FPG guarantees refers to pension liabilities in Sweden. Other guarantees are operational guarantees,such as advances and completion guarantees.
Litigation
Munters is involved in a small number of commercial disputes. None of these disputes are deemed tohave any major negative effect on the Company’s financial position or earnings.

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123

FINANCIAL REPORTS NOTESNOTESMUNTERS ANNUAL REPORT 2018

Hunter New England Health District has sued Munters’ Australian subsidiary, Munters Pty Ltd., forbreach of contract in relation to services provided to John Hunter Hospital in the spring of 2008. The
services were provided as part of Munters Pty Ltd.’s Moisture Control Services, which were later
discontinued in 2010. Munters Pty Ltd. disputes the claim. Furthermore, Munters Pty Ltd is of the opinion
that the plaintiff’s demands are greatly exaggerated, and that the plaintiff through carelessness andnegligence contributed to the damage they are claiming compensation for. In the event Munters Pty Ltd.
is held liable for the damage, there will be a not insignificant adjustment of the amount of damages.
Munters Pty Ltd is protected under local liability insurance and for surplus amounts up to the limit in effectat the time under Munters AB’s insurance. In the event Munters Pty Ltd. is held liable for the damage,there is a risk that the company will have to bear that part of the damage that exceeds the part coveredby insurance.
Other significant legal proceedings are attributable to Munters’ subsidiary in the United States,
Munters Corporation. The company is currently named as co-respondent in 3 (8) asbestos-related cases.
In the past few years, Munters Corporation has in seven cases won through summary judgments, andthese are no longer in progress. Munters Corporation is of the firm opinion that the remaining claims are
unfounded and intend to strongly dispute every claim. Munters Corporation has coverage for theasbestos-related claims through several insurance policies. Subject to certain reservations, the insurancecompanies have confirmed that, until further notice, they will pay a significant portion of the expenses
for legal defense.

NOTE 28

124

Remuneration for senior executives and individual members of the Board is presented in Note 31.
Munters has not provided guarantees or securities to or on behalf of Board members or senior
executives. Munters has not identified any transactions with other related parties, besides those specified
in this Note and those to which reference is made.

TRANSACTIONS WITH RELATED PARTIES

Shares in Munters Group AB are owned indirectly through the companies Cidron Maximus Limited andCidron Maximus S.a.r.l, 50.1% owned by Nordic Capital through its fund Nordic Capital VII Limited.
Other parties related to Munters include other portfolio companies managed by Nordic Capital, andassociated companies as well as Munters Board of Directors and Group Management. There has been
no transactions or outstanding dealings during 2018 with other Nordic Capital portfolio companies.
After the end of the reporting period Nordic Capital Fund VII has offered the Chairman of the Boardof Directors, Magnus Lindquist, and the Interim CEO, Johan Ek, to acquire in total 6,000,000 call
options (3,000,000 call options per person) for shares in Munters.
The Parent Company has a related party relationship with its subsidiaries. Information about
participations in subsidiaries is provided in Note 16. Transactions between Munters Group AB and its
subsidiaries have been carried out on market terms. Luvata is not considered a related party for 2018.

Group
-

Sales
-

2018
Purchasing Receivables-

Liabilities-

Luvata

Sales
0

2017
Purchasing Receivables
42-

Liabilities
1

1 2 4 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESAVERAGE NUMBER OF EMPLOYEES AND GENDERNOTE 292018
Average number of employees

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

2017

Group
United States

Number
1,007

of whichmen, %
82

China
SwedenMexicoGermany

390
353
295
226

79
73
71
82

380
324
241
225

81
74
74
84

Belgium
India
Italy
BrazilIsrael

222
175
159
148
129

90
90
83
85
78

214
173
168
166
130

92
91
83
84
78

United Kingdom
Netherlands
Czech Republic
Japan

87
67
65
63

79
88
88
86

74
73
82
56

80
92
88
82

Denmark
FranceAustralia
Singapore
South Africa

43
34
33
24
21

67
82
85
79
81

40
29
32
19
21

70
83
84
79
81

Thailand
Korea
Spain
Finland

21
19
14
12

67
74
79
83

17
18
10
11

59
72
80
82

TurkeyCanadaPolandAustria
United Arab Emirates

12
5
4
4
4

67
60
100
75
75

10
4
4
4
4

80
75
100
75
75

Colombia
Switzerland
VietnamTaiwan

4
3
3
2

50
67
67
50

0
3
3
0

0
67
67
0

5
3,653

100
81

Other

MUNTERS125

MUNTERS ANNUAL REPORT 2018|

A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

Number1,025

of whichmen, %
82

0
3,559

0
82

NOTE 30WAGES, SALARIES, OTHER REMUNERATION, AND SOCIALSECURITY EXPENSES

Wages, salaries and other remuneration

Group
2018
2017
1,548
1,520

Social security expenses
Pension expenses - defined contribution
Pension expenses - defined benefit
Total

396
69
8
2,020

NOTE 31

381
69
6
1,976

Parent Company
2018
2017
5
4
2
1
9

1
1
5

REMUNERATION TO BOARD MEMBERS AND SENIOREXECUTIVES

Guidelines
The remuneration to the management may consist of fixed salary, variable salary, long-term incentive
programs, pension and other benefits. The total remuneration package should be based on market
terms, be competitive and enable the Company to recruit and retain the managers the Company needs
to meet its short-term and long-term targets.
Fixed salary
The fixed salary for the CEO and the other members of the senior management shall mirror the demands
and responsibility that the position entails as well as individual performance. The fixed salary for the
CEO and the other members of the senior management is to be reviewed on a yearly basis. To theextent a member of the Board of Directors carries out work for the Company or for another groupcompany, in addition to the board work, consulting fees and/or other remuneration for such work may
be payable.
Variable salary
Variable compensation in cash is conditional upon the fulfilment of defined and measurable criteria andshould be maximised to 140% of the annual fixed salary for the CEO and 70% for the other members ofsenior management, except for three members of senior management, the President AgHort, thePresident Data Centers and the President Global Services, whose variable cash compensation instead
shall be maximised to 210% of the annual fixed salary. Any variable compensation in cash exceeding
50% of the annual fixed salary for these three members of senior management shall be conditional on
75% of the exceeding amount (after deduction of taxes payable) being invested in shares in Munters

125

FINANCIAL REPORTS NOTES
NOTES

and such shares being retained during a period of at least one year. If the investment in shares in
Munters is not carried out, or if the shares are divested prior to the expiration of the one-year period, thepart of the variable cash compensation that was conditional on the investment in, and retention of,shares in Munters shall be refunded to Munters.
The criteria for variable compensation in cash are determined for the promotion of the company’s andthe group’s short-term and long-term targets, long-term development, value creation and financial growthand shall be designed not to encourage excessive risk taking. Terms and conditions for variable
compensation in cash should be designed so that the Board of Directors, if exceptional economic
circumstances prevail, has the option of limiting or refraining from payment if such a measure isconsidered reasonable. In this context, fixed annual salary means cash salary earned during the year,
excluding pension, supplements, benefits and similar.
Long-term incentive programs
The aim of having long-term incentive programs is to create a long-term commitment to the Company, toattract and retain members of the senior management and key employees and to align the interests ofthe participants with the interests of the shareholders. Long-term incentive programs, if any, should
constitute a complement to the fixed salary and the variable salary, with participants to be nominatedbased on, among other things, competence and performance.
PensionPension benefits should be defined contribution. For senior executives outside Sweden, pension benefits
may vary due to legislation or practice in the local market.
Other benefits and compensation
Fixed salary during notice periods and severance payment, including payments for any non-compete
restrictions, shall in aggregate not exceed an amount equivalent to the fixed salary for three years for
the CEO and 18 months for the other members of senior management. Other compensation may consistof other benefits that are customary and in line with market practice, such as healthcare insurance,
which shall not constitute a material portion of the total remuneration.
In addition thereto, additional compensation may after decision by the Board of Directors be paid out
in extraordinary circumstances, provided that such arrangement is made for management recruitment or
retention purposes and is agreed only in individual cases. Such extraordinary arrangements may forexample include a one-off cash payment, or a support package including relocation support or similar.
Deviation from the guidelines
The Board of Directors may resolve to deviate from the guidelines if the Board of Directors, in an
individual case, is of the opinion that there are special circumstances justifying that.

1 2 6 			126MUNTERS ANNUAL REPORT 2018

Remuneration to senior executives during the year
2018
Board
fee/BasesalaryVariable
remuneration

Other
benefits

Pensionexpenses

Total

Christopher Curtis, chairman until Dec 18, 2018

927

-

-

-

927

Magnus Lindqvist, chairman as of Dec 18, 2018

63

-

-

-

63

Helen Fasth Gillstedt, board member and chairman ofaudit committe

538

-

-

-

Joakim Karlsson, board member until Dec 18, 2018
Andreas Näsvik, board member

342
513

-

-

-

342
513

Lena Olving, board member

475

-

-

-

475

Joachim Zetterlund, board member and chairman ofremcom

488

-

-

-

488

Per Hallius, board member

400

-

-

-

400

Kristian Sildeby, board member

392

-

-

-

392

-

-

-

-

-

6,529

-

18,683

2,574

27,786

306

-

-

-

306

27,21738,191

2,924
2,924

5,148
23,831

5,649
8,223

40,93873,169Amounts in SEK 000s
Members of the Board:(2 women and 6 men)

Johan Ek, board member as of Dec 18
CEO John Peter Leesi, until Dec 18, 2018

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

538

Other senior executives has stock options (see Note 32). Total expenses for the options 2018 amounts to SEKt 245.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

NOTESMUNTERS ANNUAL REPORT 20182017

Amounts in SEK 000s
Members of the Board:(2 women and 7 men)
Christopher Curtis, chairman
Helen Fasth Gillstedt, board member and chairman ofaudit committe
Joakim Karlsson, board member
Andreas Näsvik, board member
Lena Olving, board member
Joachim Zetterlund, board member
Per Hallius, board member
Kristian Sildeby, board member
Klas Nordin, board member
CEO John Peter Leesi

Board
fee/BasesalaryVariable
remuneration

Other
benefits

Pensionexpenses

Total

1,218

-

-

-

1,218

375
363
363
300
442

-

-

-

375
363
363
300
442

404
280
63
6,104

-

297

2,440

404
280
63
8,841

Other senior executives(1 woman and 11 men)

25,357

864

5,132

6,472

37,825

Total

35,268

864

5,429

8,912

50,473

Senior executives refer to the Chief Executive Officer, Chief Financial Officer, Group Vice President Air
Treatment, Group Vice President AgHort, Group Vice President Mist Elimination, Group Vice President
Munters China, Group Vice President Operations, Group Vice President Business Development & PMO,
Group Vice President Human Resources and Corporate Communication, Group Vice President Data
Centers, Group Vice President Global Services, Group Vice President Corporate Social Responsibility
and Group Vice President Innovation & Technology.
Variable remuneration refers to the period’s proportional share of variable remuneration for the fiscal
year 2017, which has been paid in 2018. For the former CEO, the variable remuneration corresponds
to at most 140% of fixed annual salary. For the current CEO, there is no variable remuneration. For
other senior executives, the variable remuneration corresponds to 40–70% of fixed annual salary.
Other benefits refer to company cars and meal benefits, as well as housing benefits. The amountspecified under other benefits also includes housing and school allowances for four senior executives
temporarily based outside Sweden during the year. Pension expenses include costs for disability pension
insurance, survivor annuity, and the like. The amounts are stated excluding special employer’s
contribution pension expenses.
Severance pay
Between the Company and the CEO, the period of notice shall not be longer than 12 months if theemployment is terminated by the Company. Severance pay will be paid equal to 24 months’ basesalary.

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127

At December 18, 2018, it was agreed that CEO John Peter Leesi was to leave his position at Munter
Group AB. The agreement resulted in a notice period of 12 months and severance pay equal to 24
months’ base salary. As the CEO is free from work, compensation for the notice and severance period isexpensed in full with an amount of SEK 18.2 m, which will be paid in 2019. The recruitment of a new
CEO started immediately, and in the meantime, the Board appointed the newly elected Board member
Johan Ek as interim CEO. Johan Ek has a fixed salary of 500 000 SEK per month, the contract gives noright for variable salary and no provision for pension is made. For the interim position, there is a notice
period of 3 months from both parties, and no severance pay agreed.
Between the Company and other senior executives, the period of notice shall not be longer than six
months, if the employment is terminated by the Company severance pay will be paid equal to 12
months’ base salary.
Severance pay is not considered pensionable income. If the CEO or other senior executive takes theinitiative in terminating employment, there is no severance pay.

NOTE 32

INCENTIVE PROGRAM

At the General Meeting on May 17, 2018, it was resolved in accordance with the Board’s proposal on
the implementation of a long-term incentive program. The program should comprise no more than
1,257,000 employee stock options to be granted to members of the group management and certain
other key employees, approximately 75 employees in total. Participation in the plan was at the board’s
discretion and no individual had a contractual right to participate in the plan or to receive any
guaranteed benefits. Options were granted under the plan for no consideration and carry no dividend
or voting rights.
Each employee stock option that is not cash settled shall entitle the holder to acquire one share in thecompany at an exercise price equivalent to SEK 55. Each cash-settled employee stock option shall entitle
the holder to a cash amount equivalent to the value of one share in the company, calculated as thevolume-weighted average price paid for the company’s shares at Nasdaq Stockholm during a period often business days immediately prior to the exercise of the option, with deduction of an exercise price of
SEK 55. The participants shall be able to exercise the employee stock options from the third anniversaryof the allotment, up to and including the fourth anniversary of the allotment. Exercise of the employee
stock options shall, as a principal rule be conditional upon the program participant still being employedwith the group. The costs of the program was estimated to SEKm 7.4 and will be incurred over the threeyear period.
A total of 1,239,190 options was accepted and distributed in the program. At December 31, 2018 a
total of 12,720 cash settled options were terminated due to employment leave. Outstanding options at
December 31, 2018 equaled 1,226,470, whereof 99,280 cash settled and 1,127,190 equity settled.
The assessed fair value at grant date June 27, 2018 was SEK 5.97 per option. The fair value at grant
date is independently determined using an adjusted form of the Black Scholes Model which included aMonte Carlo simulation model that took into account the exercise price, the term of the option, theimpact of dilution (where material), the share price at grant date and expected price volatility of theunderlying share, the expected dividend yield, the risk free interest rate for the term of the option and127

FINANCIAL REPORTS NOTES
NOTES

the correlations and volatilities of the peer group companies. The expected price volatility was based on
the historic volatility (based on the remaining life of the options), adjusted for expected changes to future
volatility due to publicly available information.
At the extraordinary General Meeting on May 7, 2017, it was resolved to issue warrants as part of an
incentive program for certain members of the Group Management (“the participants”). In total, theincentive program comprises eight individuals and not more than 5,222,000 warrants. The participants
could subscribe for warrants at a market value corresponding to in total not more than SEKm 17.99. The
maximum number of warrants that could be subscribed for by the Participants corresponded toapproximately 2.77% of the Company’s share capital following completion of the offering andassuming full exercise of the warrants.
The warrants were issued in two separate series. Each participant subscribes for an equal number ofwarrants of both series. This number of warrants per participant and series depends on the participant’s
position within the Group and the number of shares held by the participant at the time of thecommencement of the program. Series 2017/2019 comprises up to 2,611,000 warrants that may be
exercised during the following subscription period: May 19, to November 19, 2019, with the exceptionof the thirty-day period preceding (a) the day of publication of the company’s interim report for thesecond quarter of 2019, and (b) the day of publication of the Company’s interim report for the third
quarter of 2019. The exercise price for series 2017/2019 corresponds to 121% of the price in the IPO(SEK 55).
Series 2017/2020 comprises up to 2,611,000 warrants that may be exercised during the following
subscription period: May19 to November 19, 2020, with the exception of the thirty-day period
preceding (a) the day of publication of the company’s interim report for the second quarter of 2020,and (b) the day of publication of the Company’s interim report for the third quarter of 2020. The
exercise price for series 2017/2020 corresponds to 131% of the price in the IPO (SEK 55).
The Company has reserved the right to repurchase warrants for example if the employment isterminated. Since the participants have paid market value for the options there are no expenses incurredin the Group related to this incentive program.

NOTE 33128

MUNTERS ANNUAL REPORT 2018

FEES TO AUDITORS

Fees and remuneration recognized as an expense to the Group’s auditors during the period are shown
below. Audit engagement refers to the statutory audit of the annual report and accounts, as well as theadministration of the Board of Directors and the President, other tasks which the Company’s auditors are
responsible for performing, and advice or other assistance occasioned by observations in such audits or
the performance of other similar tasks. Tax advice is consulting on fiscal issues. Other services areadvice that cannot be attributed to any of the above-mentioned categories.

1 2 8 			

Group
2018
2017

Amounts in SEK 000s
Ernst & Young
Audit engagements
Audit business beyond
audit engagements
Tax advice
Other services
Other auditors
Audit engagements
Tax advice
Other services
Total

NOTE 34

Parent Company
2018
2017

10,724

10,171

514

539

737
873
968

8,925
1,406
5,308

21

-

200
75
20
13,598109
1325,932535

539

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING
PERIODManagement changes
Jonas Ågrup will leave his position as CFO at end of 2019 and the recruitment of a new CFO has been
initiated. Further, Peter Lindquist has been appointed interim President of Business Area Air Treatment,
replacing Scott Haynes from February 13, 2019. The new Group Management team will consist of 6
members (previously 13 members); CEO, CFO, President Air Treatment, President AgHort, President
Global Operations and Vice President HR.
Three phase plan to capture the full potential of Munters
The Board of Directors and the management team are fully committed to strengthen the performance ofMunters. During the past two years, net sales growth has been at a fairly good level whereas earnings
and margins have been below expectations in all of Munters business areas, and most notably in Data
Centers. The root causes have been identified and we have designed a comprehensive and ambitious
plan to increase the overall performance of the company. Today we launch a three-phase plan tocapture Munters full potential, to increase customer focus and to improve Group earnings.
As part of the first phase of the program, we have the intention to close down our European Data Centerfactory in Dison, Belgium. This is subject to union negotiations. Our analysis of our Data Centers
operations has convinced the Board of Directors and the management team, that the prospects forestablishing a profitable Data Center business in Europe are limited in a market with overcapacity andongoing price pressure. Our focus going forward will mainly be on the US Data Center market where
we have a more commercially viable base for achieving profitable growth. This include establishedcustomer relations and proven record of accomplishment in the US market, which provides a good
platform.

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NOTESMUNTERS ANNUAL REPORT 2018129

The overhead cost saving from the program are SEKm 160. In addition, the intended closure of our
Data Center factory in Europe, subject to union negotiations, will give an estimated profit improvementof SEKm 50, this in spite of Data Center net sales drop of SEKm -600 of which approximately 80% in
2019. In total, we expect a positive Group adjusted EBITA effect of SEKm 105 in 2019 and SEKm 210
in annual effect from 2020.
Nonrecurring charges for the Munters full potential program of SEKm 350 will be incurred, with 60% betaken during the first six months of 2019, and the remaining 40% in the last six months of the year. The
Munters full potential program will temporarily increase the leverage during 2019 and necessaryconsent from the lending banks have been received. We expect Group leverage to be in line with our
mid-term financial leverage target in 2020. The Board proposes no dividend to be paid for 2018 withconsideration taken to the costs for the restructuring initiatives.
Revised mid-term financial target for net sales growthMunters has revised its mid-term financial target for organic net sales growth to 5% (previously 7-10%),reflecting the new business mix.
Munters mid-term financial targets are:
Net sales growth – Munters’ objective is to achieve an annual organic sales growth of 5%,
supplemented by selective acquisitions.
Adjusted EBITA Margin – Munters’ objective in the medium-term is to have an adjusted EBITA margin of
14%.
Capital structure – Munters aims to maintain a ratio of net debt to adjusted EBITDA of 1.5x to 2.5x,
and may temporarily exceed this level (e.g., as a result of acquisitions).
Dividend policy – Munters aims to pay an annual dividend corresponding to 30–50% of its
consolidated income for the period. The pay-out decision will be based on the financial position,
investment needs, acquisitions and liquidity position. There can be no assurances, however, that in any
given year a dividend will be proposed or declared.
Incentive program for the Chairman of the Board of Directors and the Interim CEO of Munters
Munters’ largest shareholder, a Nordic Capital Fund VII entity, has offered the Chairman of the Board of
Directors, Magnus Lindquist, and the Interim CEO, Johan Ek, to acquire in total 6,000,000 call options
for shares in Munters. The program entails that Magnus Lindquist and Johan Ek are offered to acquire in
total 6,000,000 call options (3,000,000 call options per person) at a total value of SEKm 13.8. The
Chairman of the Board of Directors, Magnus Lindquist, acquired 3,000,000 call options and Johan Ek
acquired 3,000,000 call options at February 20, 2019. Nordic Capital believes that the call option
incentive program contributes to creating a clear alignment of interests between these individuals andthe other existing shareholders in Munters.

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129

FINANCIAL REPORTS ASSURANCEAUDITOR´S REPORTMUNTERS ANNUAL REPORT 2018130

Assurance 2018

Assurance 2018

The undersigned assures that the Annual Report has been prepared in accordance with generally accepted accounting principles, and that the consolidated accounts have been prepared in accordancewith international accounting standards as referred to in Regulation EC 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the application of international accounting
standards, provide a true and fair view of the Company’s and the Group’s financial position and earnings, and that the Board of Directors’ report and the Board of Directors’ report for the Group
provide a fair view of the development of the Company’s and the Group’s operations, financial position, and earnings and describe material risks and uncertainty factors to which the Company and thecompanies in the Group are exposed.
Stockholm, April 9, 2019

Magnus Lindquist

Johan Ek

Chairman of the Board

President CEO Board Member

Per Hallius

Andreas Näsvik

Kristian Sildeby

Joachim Zetterlund

Board Member

Board Member

Helen Fasth Gillstedt

Board Member

Lena Olving

Board Member

Board Member

Simon Henriksson

Board Member,
employee representative

Board Member

Pia Nordqvist
Nordqvist

Board Member,
employee representative
Our Auditor’s report was submitted on April 12 , 2019
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

1 3 0 			MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

FINANCIAL REPORTS AUDITORS’ REPORT
AUDITOR´S REPORT131

MUNTERS ANNUAL REPORT 2018

Auditors’ report

Auditor’s Report

To the general meeting of the shareholders of Munters Group AB(publ.), corporate identity number 556819-2321
REPORT ON THE ANNUAL ACCOUNTS ANDCONSOLIDATED ACCOUNTS
Opinions
We have audited the annual accounts and consolidated accountsof Munters Group AB (publ.) for the financial year 2018. The
annual accounts and consolidated accounts of the company areincluded on pages 82--130 in this document.
In our opinion, the annual accounts have been prepared inaccordance with the Annual Accounts Act and present fairly, in allmaterial respects, the financial position of the parent company as of
31 December 2018 and its financial performance and cash flow
for the year then ended in accordance with the Annual Accounts
Act. The consolidated accounts have been prepared in accordancewith the Annual Accounts Act and present fairly, in all material
respects, the financial position of the group as of 31 December
2018 and their financial performance and cash flow for the year
then ended in accordance with International Financial ReportingStandards (IFRS), as adopted by the EU, and the Annual Accounts
Act. The statutory administration report is consistent with the otherparts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting ofshareholders adopts the income statement and balance sheet for theparent company and the group.
Our opinions in this report on the annual accounts andconsolidated accounts are consistent with the content of theadditional report that has been submitted to the parent company's
audit committee in accordance with the Audit Regulation(537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards
on Auditing (ISA) and generally accepted auditing standards in
Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are
independent of the parent company and the group in accordancewith professional ethics for accountants in Sweden and haveotherwise fulfilled our ethical responsibilities in accordance withMUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

these requirements. This includes that, based on the best of ourknowledge and belief, no prohibited services referred to in the
Audit Regulation (537/2014) Article 5.1 have been provided tothe audited company or, where applicable, its parent company or
its controlled companies within the EU with the exception for one
service of limited extent. The service has been terminated and has
been communicated to the company’s Audit Committee.
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our
professional judgment, were of most significance in our audit of theannual accounts and consolidated accounts of the current period.
These matters were addressed in the context of our audit of, and informing our opinion thereon, the annual accounts and consolidated
accounts as a whole, but we do not provide a separate opinion onthese matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s
responsibilities for the audit of the financial statements section of ourreport, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to ourassessment of the risks of material misstatement of the financial
statements. The results of our audit procedures, including theprocedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying financial
statements.
Timing of revenue recognition
Description
As described in note 1, revenues from sale of goods arerecognized at a point in time when risks and rewards aretransferred to the buyer in accordance with the delivery terms.
Revenues from larger project assignments are recognized over timein proportion to progress of completion using an output method at
the reporting date.
The company´s customer agreements contain several different
performance obligations, as described in note 1 and 4. In order toallocate revenue to different performance obligations, and to
determine the progress of completion of performance obligations

within project assignments, certain estimates have to be madewhich effects the timing of revenue recognition.
As a result of the above, we have assessed that the timing ofrevenue recognition is a key audit matter.
How our audit addressed this key audit matterIn our audit of the fiscal year 2018, we have evaluated thecompany´s principles of revenue recognition in accordance withapplicable GAAP. We have reviewed the company´s processes forrevenue recognition and evaluated key controls within theseprocesses.
Also, we have audited revenue transactions close to the yearend
by reviewing customer agreements and delivery notes to verify thatrevenue is recognized in the correct period. Furthermore, we haveevaluated the company´s estimates for determining percentage ofcompletion and revenue recognition related to larger project
assignments.
We have assessed whether the disclosures in the annual report isappropriate.
Valuation of goodwill and trademarks
Description
Goodwill and trademarks amounts to SEKm 4,218 and SEKm
1,080 respectively in the consolidated statement of financial
position. As described in note 15 the company annually, or whenindicators of impairment are identified, performs an impairment test
to verify that the carrying values do not exceed the recoverable
amount. Recoverable amount is determined by calculating the value
in use for the respective cash generating unit using a discounted
cash flow model. As also described in note 15, forecasts of future
cash flows for the next five years are based on financial plansapproved by the board of directors. The financial plans include
assumptions of future sales growth and operating margin, as well
as utilization of operating capital employed. Furthermore,assumptions of discount rates and growth beyond the five-year
period are required.
The impairment test of the fiscal year did result in an impairmentof goodwill amounting to SEKm 323. As shown in note 15,changes in significant assumptions and estimates could have aneffect on the carrying value

131

FINANCIAL REPORTS AUDITORS’ REPORT
AUDITOR´S REPORT

Due to the assumptions and estimates made in conjunction withthese impairment tests, and due to the total amount of the carrying
value, we have considered valuation of goodwill and trademarks asa key audit matter.
How our audit addressed this key audit matterIn our audit of the fiscal year 2018, we have evaluated thecompany’s process for preparing impairment tests. We haveaudited the cash flow models used for the impairment tests andevaluated how cash generating units are identified. We have also
evaluated the assumptions related to future cash flows bycomparing to historical outcome and forecasts, as well as
performing sensitivity analyzes. Furthermore, we have assessed thediscount rate and the assumption of long term growth rate after theforecast period by comparisons to peers.
We have assessed whether the disclosures provided in the annual
report is appropriate.
Other Information than the annual accounts and consolidated
accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages 1-81.
The Board of Directors and the Managing Director are responsible
for this other information.
Our opinion on the annual accounts and consolidated accounts
does not cover this other information and we do not express any
form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts andconsolidated accounts, our responsibility is to read the information
identified above and consider whether the information is materiallyinconsistent with the annual accounts and consolidated accounts. In
this procedure we also take into account our knowledge otherwise
obtained in the audit and assess whether the information otherwise
appears to be materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing toreport in this regard.

MUNTERS ANNUAL REPORT 2018accordance with the Annual Accounts Act and, concerning theconsolidated accounts, in accordance with IFRS as adopted by the
EU. The Board of Directors and the Managing Director are also
responsible for such internal control as they determine is necessary
to enable the preparation of annual accounts and consolidated
accounts that are free from material misstatement, whether due tofraud or error.
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the Managing Director are responsible forthe assessment of the company’s and the group’s ability to continue
as a going concern. They disclose, as applicable, matters related togoing concern and using the going concern basis of accounting.
The going concern basis of accounting is however not applied if theBoard of Directors and the Managing Director intends to liquidate
the company, to cease operations, or has no realistic alternative but
to do so.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether
the annual accounts and consolidated accounts as a whole are freefrom material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinions. Reasonableassurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs and generally
accepted auditing standards in Sweden will always detect amaterial misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these annual
accounts and consolidated accounts.

1 3 2 			••

•As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:•

Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts andconsolidated accounts and that they give a fair presentation in•

Identify and assess the risks of material misstatement of
the annual accounts and consolidated accounts, whether
due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide abasis for our opinions. The risk of not detecting a•132material misstatement resulting from fraud is higher thanfor one resulting from error, as fraud may involve
collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.
Obtain an understanding of the company’s internal
control relevant to our audit in order to design audit
procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on theeffectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates andrelated disclosures made by the Board of Directors andthe Managing Director.
Conclude on the appropriateness of the Board of
Directors’ and the Managing Director’s use of the going
concern basis of accounting in preparing the annual
accounts and consolidated accounts. We also draw aconclusion, based on the audit evidence obtained, as towhether any material uncertainty exists related to events
or conditions that may cast significant doubt on thecompany’s and the group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s reportto the related disclosures in the annual accounts andconsolidated accounts or, if such disclosures are
inadequate, to modify our opinion about the annual
accounts and consolidated accounts. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions
may cause a company and a group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of
the annual accounts and consolidated accounts,
including the disclosures, and whether the annual
accounts and consolidated accounts represent theunderlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient and appropriate audit evidence
regarding the financial information of the entities orbusiness activities within the group to express an opinion
on the consolidated accounts. We are responsible for the
direction, supervision and performance of the groupaudit. We remain solely responsible for our opinions.

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AUDITOR´S REPORT

We must inform the Board of Directors of, among other matters, theplanned scope and timing of the audit. We must also inform ofsignificant audit findings during our audit, including any significant
deficiencies in internal control that we identified.
We must also provide the Board of Directors with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we
determine those matters that were of most significance in the auditof the annual accounts and consolidated accounts, including themost important assessed risks for material misstatement, and are
therefore the key audit matters. We describe these matters in theauditor’s report unless law or regulation precludes disclosure about
the matter.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board of
Directors and the Managing Director of Munters Group AB (publ)
for the financial year 2018 and the proposed appropriations of thecompany’s profit or loss.
We recommend to the general meeting of shareholders that the
profit be appropriated (loss be dealt with) in accordance with theproposal in the statutory administration report and that the membersof the Board of Directors and the Managing Director be discharged
from liability for the financial year.
Basis for opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the groupin accordance with professional ethics for accountants in Sweden
and have otherwise fulfilled our ethical responsibilities inaccordance with these requirements.
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.

MUNTERS|A N N U A L A N D S U S TA I N A B I L I T Y R E P O R T 2 0 1 8

MUNTERS ANNUAL REPORT 2018

Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss. At the proposal of adividend, this includes an assessment of whether the dividend isjustifiable considering the requirements which the company's andthe group’s type of operations, size and risks place on the size ofthe parent company's and the group’s equity, consolidation
requirements, liquidity and position in general.
The Board of Directors is responsible for the company’sorganization and the administration of the company’s affairs. This
includes among other things continuous assessment of thecompany’s and the group’s financial situation and ensuring that thecompany's organization is designed so that the accounting,management of assets and the company’s financial affairs
otherwise are controlled in a reassuring manner. The Managing
Director shall manage the ongoing administration according to theBoard of Directors’ guidelines and instructions and among othermatters take measures that are necessary to fulfill the company’s
accounting in accordance with law and handle the management ofassets in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, andthereby our opinion about discharge from liability, is to obtain audit
evidence to assess with a reasonable degree of assurance whether
any member of the Board of Directors or the Managing Director inany material respect:•
has undertaken any action or been guilty of any omission
which can give rise to liability to the company, or•in any other way has acted in contravention of theCompanies Act, the Annual Accounts Act or the Articles
of Association.

133

accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or thatthe proposed appropriations of the company’s profit or loss are notin accordance with the Companies Act.
As part of an audit in accordance with generally accepted
auditing standards in Sweden, we exercise professional judgment
and maintain professional skepticism throughout the audit. The
examination of the administration and the proposed appropriationsof the company’s profit or loss is based primarily on the audit of theaccounts. Additional audit procedures performed are based on our
professional judgment with starting point in risk and materiality. Thismeans that we focus the examination on such actions, areas andrelationships that are material for the operations and where
deviations and violations would have particular importance for thecompany’s situation. We examine and test decisions undertaken,
support for decisions, actions taken and other circumstances thatare relevant to our opinion concerning discharge from liability. As abasis for our opinion on the Board of Directors’ proposed
appropriations of the company’s profit or loss we examined theBoard of Directors’ reasoned statement and a selection of
supporting evidence in order to be able to assess whether the
proposal is in accordance with the Companies Act.
Ernst & Young AB, Box 7850, 111 44, Stockholm, wasappointed auditor of Munters Group AB (publ.) by the general
meeting of the shareholders on the 26th of May 2016 and has
been the company’s auditor since 2010.
Stockholm 12 April, 2019
Ernst & Young AB

Erik Sandström
Authorized Public Accountant

Our objective concerning the audit of the proposed appropriationsof the company’s profit or loss, and thereby our opinion about this,is to assess with reasonable degree of assurance whether the
proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with generally

133

FINANCIAL REPORTS DEFINITIONSDEFINITIONSMUNTERS ANNUAL REPORT 2018134

Definitions of key financial indicators

Definitions of key financial indicators

In this annual report as well as in the quarterly interim reports, there
are references to a number of performance measures. Some of themeasures are defined in IFRS, others are alternative performancemeasures and are not disclosed in accordance with applicablefinancial reporting frameworks or other legislations. The
performance measures are used by the Group to assist bothinvestors and management in analyzing Munters’ business. Below
are the performance measures found in this annual report
described, defined and the reason for use disclosed.
Organic growth
Change in order intake and net sales compared to the previous
period, excluding currency translation effects and contributions toorder intake and net sales from businesses that were acquired
and/or divested during the current period and/or any comparison
period. The measure is used by Munters to monitor order intake andnet sales growth driven by changes in volume and price between
different periods.
Order backlog
Received and confirmed sales orders not yet delivered andaccounted for as net sales. Order Backlog is a useful measure toindicate the efficiency of the conversion of received and confirmed
sales orders into net sales in future periods, and is used by Munters
to monitor business performance and customer demand, and adjust
operations.
Order intake
Received and confirmed sales orders during the reporting period.
The order intake is an indicator of future revenues and,
consequently, an important KPI for the management of Munters’
business.
Operating profit (EBIT)
Earnings before interest and tax. Munters believes that EBIT shows
the profit generated by the operating activities.
Adjusted EBITA
Operating profit, adjusted for amortizations, write-downs ofintangible assets and items affecting comparability. Muntersbelieves that using adjusted EBITA is helpful in analyzing our1 3 4 			performance as it removes the impact of items considered not to beof recurring character and therefore do not reflect our core
operating performance. Compared to last year adjusted EBITA has
been re-defined to exclude a yearly tax-driven adjustment of internal
cost allocation between the segments
Adjusted EBITA margin
Adjusted EBITA as a percentage of net sales. Munters believes that
Adjusted EBITA margin is a useful measure for showing theCompany’s profit generated by the operating activities.
Items affecting comparability (IAC)
Items affecting comparability relates to income statement items thathave an impact on operating profit and are, in our opinion,
considered not to be of recurring character.
Capital employed
Capital employed is calculated as the balance sheet’s total assets,
excluding interest-bearing assets and deferred tax assets, less total
liabilities, excluding interest-bearing liabilities, pension liabilities
and deferred tax liabilities.
Return on capital employed (ROCE)
Operating profit (EBIT), divided by the average capital employed.
The average capital employed for each year consists of an averageof the closing capital employed in the last 13 months.
Return on capital employed (ROCE) is also presented applying EBIT
adjusted for IAC and Capital employed adjusted for goodwill for
improving comparability against other industrials.

Net debt
Net debt calculated as interest bearing debt and pension liabilities,
deducted by cash and cash equivalents. This is a measure of theability to repay the debt if it was all due.
Average number of employees
Average number of employee is calculated as the sum of permanent
employees at the end of each of the last 13 months divided by 13.
Operating cash flow
Earnings adjusted for depreciation, amortization, and impairments,
as well as for investments and operating capital.
Operating working capital
Accounts receivables, inventories, accounts payables and advancesfrom customers.
Earnings per share
Net income adjusted for the right of preferential shares to dividend,
divided by the weighted average number of ordinary shares.
Equity/assets ratio
Equity (including holdings with non-controlling interests) divided bytotal assets.

Cash and cash equivalents
Cash and bank balances plus investments in securities and the likewith maturity periods not exceeding three months. This is a measurethat highlights the short-term liquidity.
LTM
LTM (last twelve months) after any key indicator means that the KPI
corresponds to an accumulation of previous twelve month reported
numbers. The measure highlight trends in different KPIs, which isvaluable in order to gain a deeper understanding of thedevelopment of the business.

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OUR HISTORY

A legacy from Carl
Munters to improve
Munters has been an innovator in advanced climate control
solutions since its founding in 1955. Carl Munters (1897–1989),
a Swedish inventor and entrepreneur, built the company on
his insights into the laws of thermodynamics and his ability totransform them into innovative technologies and commercial
successes.
As time went on, Carl Munters would receive nearly 1,000
patents, most of them in the areas of dehumidification andevaporative cooling – which are today’s core technologies atMunters. 227 of the patents he registered during his time at thecompany are still active today. Carl Munters was a passionate
inventor, and his example is a strong source of inspiration in ourdaily work. Curiosity, innovation and the art of engineering are
his legacy to us.

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CARL MUNTERS(1897–1989)
In 1923, Carl Munters (above, right),
and Baltzar von Platen invent the firstrefrigerator without moving parts,and sell the rights to Electrolux.
In the 1940s, Carl and a numberof his employees developed thecentral inventions behind Munters
operations: an air conditioning
system based on evaporative coolingand dehumidification. The key
components of the system were thesorption rotor and the evaporative
cooling pads.

135

A BREAKTHROUGH IN
MODERN DEHUMIDIFIERS
1950s:
A breakthrough in modern
dehumidifiers Carl Munters founds
Carl Munters & Co together with anumber of partners, including Marcus
Wallenberg, in 1955. The idea wasto develop modern air conditioning
systems based on evaporative cooling,
dehumidification and heat recuperation. The starting shot for Muntersdehumidification business is firedin 1958, when the Swedish Armed
Forces orders 200 dehumidifiers.

1950 – 6 0

NEW MARKETSAN INTERNATIONAL
GROUP

1970s:
Product ranges, customer segments,
and areas of use all expand. Aninternational distribution network isestablished. The oil crisis of 1973
results in severe demands on energy
savings, giving Munters major
market potential. The company isacquired by Incentive AB in 1974,
and Carl Munters retires.

1970

OUT INTO THE WORLD
1960s:
The company expands its production
base, establishing dehumidifier
production in the US. Its best-sellingmodel ever, the M100, is launched
in 1964.

FOCUS ON THE CORE
2010s:
Munters is acquired by Nordic
Capital Fund VII and is de-listedfrom the Stockholm Exchange in2010. Several strategic acquisitions
are made in thefollowing areas:

1990s:
Munters expands to become aninternational Group, with sales
offices in over 25 countries.
A new manufacturing plant is built in
San Antonio to concentrate dehumidification solutions for supermarkets
and ice rinks. Environmental issues
become increasingly important,laying the basis for new productsin evaporative cooling. Munters
finalizes its largest acquisition todate, and through Euroemme is
now able to offer complete climate
solutions for the rapidly expanding
poultry industry. In 1997, Munters islisted on the Stockholm Exchange.

198 0

BROAD INTERNATIONALEXPANSION
1980s:A modern Munters takes shapethrough acquisition of resellers andagents. The company establishes
operations in several countries, including Japan in 1987. Munters focuseson environmental improvements; in1988 it acquires a unique Swedish
air purification technology (Zeol) that
it further improves with Munters rotor
technology.

19 9 0

Livestock farming and greenhouses• Rotem – experts in control andmanagement systems• Reventa – specialists in climate
control• MTech and Edata – two outstanding companies in software forpoultry and swine production
The power and processing industry• Kevin Enterprises in India.

2000

2 010

STRATEGIC ACQUISITIONS

Air treatment for industrial andcommercial applications

2000s:
Munters invests in sales andproduction in Asia. The acquisitionsof Aerotech, Agro A/S, Turbovent
Environment and Form makeMunters a world leader in climate
systems for livestock farming andgreenhouse cultivation. Munters alsoacquires Des Champs Technologies –strengthening the company’s position
as a leading supplier of energy-efficient solutions for commercial
buildings – and Toussaint Nyssenne,
a leading European manufacturer oflarge-scale air treatment systems.

• ProFlute – a leading supplier ofdesiccant rotors to the global OEM
market• HB Group – a significant
supplier of high-quality customized
hygienic air treatment systems toclients such as the food industry
In 2017, Munters Group [ticker:
MTRS] was listed on Nasdaq
Stockholm.
In 2018, several new products werelaunched with a focus on optimizing
the climate while reducing energy
consumption as DryCool® Focus andSonar Echo.
In February 2019, an extensive
and ambitious three-phase plan,stability, profitability and growth,
was launched to utilize Munters’ fullpotential and to improve the Group’s
earnings.

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