MUNTERS Q2 report 2020 - Klas Forsström, President and CEO Annette Kumlien, GVP and CFO
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MUNTERS Q2 report 2020 Klas Forsström, President and CEO Annette Kumlien, GVP and CFO
Agenda Highlights second quarter 2020 Implementation of strategy Second quarter 2020 results Summary 2
Highlights Q2 2020
Robust performance Active mitigation of Covid-19 effects Strategy implementation
Order intake Net sales
MSEK MSEK
+2% -6%
2000 2000
1500 1500
1000 1,840 1,870 1000 1,877 1,773
500 500
0 0
Q2 2019 Q2 2020 Q2 2019 Q2 2020
• Order intake increased organically by +1% • Some customer delayed investments and • Sharpening of customer offering and footprint
• Net sales declined organically by -6% delays in deliveries. Also, pockets of optimization measures to ensure execution of
• Adj. EBITA-margin increased to 14.7% (13.9) increased demand in for example pharma and the strategy. Examples:
‒ FoodTech strong performance with increasing data centers. ‒ Exit part of the commercial business in the US
order intake, net sales and adj. EBITA-margin; • Stable delivery because of diligent and expand Data Centers US manufacturing in
‒ AirTech declining order intake and net sales, Texas
management of supply chain and minor
whereas stable adj. EBITA-margin ‒ Consolidate operations in the Netherlands
disturbances in operations
• Leverage lowered in the quarter to 2.7x
• Continuous mitigating actions and adjustment
of cost base and planned investments
3
Lithium battery factory orders received – Q2
• Gigafactory for battery production in northern Sweden
‒ MSEK 60 order for climate solutions to the first phase
‒ Based on Munters DSS* system, ensures correct climate and
humidity in 11 dry-rooms
‒ Munters chosen for technical knowledge and contribution to
customer’s value creation through increased efficiency and
reduced energy consumption
• Tesla battery factory in China
‒ Order for climate solution based on Munters GreenDry
products, ensures efficient cooling and a stable climate
‒ Munters delivers cost-efficiency for initial investment as well as
operational life-cycle costs
*DSS = The Desiccant System Solution (DSS) offers a wide variety of material and components to fit
most demanding applications for indoor and outdoor installations
4
High order intake driven by strong performance in China Strong performance in China • Munters has during the last 5 years built up a strong local presence in the Chinese agricultural market • Strong brand built on deep application knowledge, high quality and excellent reliability • Chinese market is substantially growing driven by the recovery from the African Swine Fever (ASF). Increasing customer investments in modern swine production facilities with high bio- security but also investments in new poultry facilities Important SaaS-order in the US • Software order won from US biggest meat producer, Tyson Foods. The MTech software will be used to manage and optimize the whole supply chain for one poultry complex, including feed mill, hatchery and processing facility • Software as a Service (SaaS) agreement 5
Robust demand driven by Asia
Americas Regional split Americas EMEA APAC
• AirTech had a good development of Data Centers US and
Share of total order intake 39% 37% 24%
Services as well as in the sub-segment Pharma
• FoodTech had a weak development, primarily driven by the Y/Y change in %* -8% -1% 28%
overcapacity in the swine market in the US
EMEA
• AirTech had a weak development driven by a weak marine
market, partly offset by a good development in industrials and
Services
• FoodTech had weaker development in several countries due to
the effects from the Covid-19 outbreak, offset by a good
development in Germany
Asia
• AirTech declined mainly due to weak development in
Mist Elimination
• FoodTech strong development in the swine segment driven by
the increased investments resulting from the African Swine
Fever (ASF) outbreak in 2019
6 *As reported, not currency adjusted.
Agenda Highlights second quarter 2020 Implementation of strategy Second quarter 2020 results Summary 7
Focus in 2020 and beyond
Purpose:
For customer success and a healthier planet
Strategic priorities:
Focus areas
Customers Improve go-to-market models and pricing strategies
Focus investments in R&D and product portfolio alignment
Innovation
and adjustment
Markets Growing in prioritized markets and strengthen Services
Excellence in Continuous improvements, lean activities in complete value
everything we do chain, manufacturing footprint and working capital
Organizational re-design, leadership and competence
People
development in line with strategic priorities
8
Next step in strategy implementation
Sharpening the customer offering and footprint optimization
• Exit non-core part of the commercial business in the US
• Expand Data Centers US manufacturing in AirTech in Texas
• Consolidation of operations in the Netherlands
• Other measures to ensure execution of the strategy
9
Agenda Highlights second quarter 2020 Implementation of strategy Second quarter 2020 results Summary 10
Q2 2020 vs. Mid-term targets and PY
Mid-term Q2 Q2
1 targets 2019 2020
Net sales growth 5% 4% -6%
Org. growth p.a. over a business cycle
2
Adjusted EBITA-margin 14% 13.9% 14.7%
3
Capital structure (LTM*) 1.5x-
3.8x 2.7x
(Leverage: Net debt / adj. EBITDA) 2.5x
*LTM = Last Twelve Months
111 Net sales growth
Group: Robust performance in a challenging market
Order intake Order backlog Net sales Quarterly net sales growth
MSEK MSEK MSEK
+2% +8% -6% 20%
2000 3000 2000
15%
2500
1500 1500
2000 10%
1000 1,840 1,870 1500 2,453 2,653 1000 1,877 1,773
5%
1000
500 500 0%
500 Q3 Q4 Q1 Q2
-5%
0 0 0 2019 2019 2020 2020
Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 -10%
Order intake Net sales
• Increased +2%, adj. for currency effects +1% • Declined -6%, adj. for currency effects -6%
• AirTech: Decline driven by weak Mist Elimination, partly offset by • AirTech: Decline driven by weak development in Mist Elimination
good growth in Data Centers US and the industrial segment. and the industrial segment. Offset by good growth in Data Centers
Services grew slightly, despite negative effects from Covid-19 US. Services slight growth despite Covid-19 outbreak
outbreak • FoodTech: Increase because of good growth in the swine
• FoodTech: Increase because of good growth in China driven by segment in China. Offset by a weak development in EMEA and
good growth in the swine segment. In EMEA, demand was softer Americas
and the US had a weak development in the swine segment • Services represented 14% of total net sales
121 Net sales growth
AirTech: Strong growth in Data Centers US
Order intake Order backlog Net sales Quarterly net sales growth
MSEK MSEK MSEK
-3% 25%
1400 2500 -9%
+6% 1400 20%
1200
2000 1200 15%
1000
1000 10%
800 1500
1,264 1,231 800
1,324 1,207 5%
600
1000 1,883 1,997 600
0%
400 400
500 -5% Q3 Q4 Q1 Q2
200 200
-10% 2019 2019 2020 2020
0 0 0
Q2 2019 Q2 2020 -15%
Q2 2019 Q2 2020 Q2 2019 Q2 2020
Order intake Net sales
• Declined -3%, adj. for currency effects -3%, • Declined -9%, adj. for currency effects -10%
• Decline driven by Mist Elimination with global weak demand in the • Decline mainly due to weak development in Mist Elimination driven
marine market by the marine market globally and the power subsegment in India
• US strong development in Data Centers US and the industrial • Data Centers US and the pharma segment had good growth
segment where lithium batteries had good development • Services grew slightly driven by Americas and EMEA
• Services had slight growth driven by the Americas and EMEA.
• In APAC order intake was down due to a weak market for Mist
Elimination
131 Net sales growth
FoodTech: Strong growth in China
Order intake Order backlog Net sales Quarterly net sales growth
MSEK
+13% MSEK
MSEK +15% 700
700 700 +2% 6%
600
600 600 4%
500 500 500
2%
400 400 400
582 656 570 656 300
0%
300 300 563 575 -2% Q3 Q4 Q1 Q2
200 200 200 2019 2019 2020 2020
-4%
100 100 100
0 0 0 -6%
Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 -8%
Order intake Net sales
• Increased by +13%, adj. for currency effects +13% • Increased by +2%, adj. for currency effects +2%
• Strong development in Asia, driven by the swine segment in • Increase because of a good growth in China with a strong
China, as capacity being increased after ASF* outbreak in 2019 development in the swine sub-segment
• EMEA had softer order intake, partly offset by Germany had a • The US had a negative development especially in the swine
good development segment due to an overcapacity in the market.
• In Americas, the US had a weaker development mainly due to a • The Americas and the EMEA region impacted in the quarter by the
decline in the swine segment Covid-19 outbreak
*ASF = African Swine Fever
142 Adjusted EBITA-margin
Improved adjusted EBITA Q2 2020
Adj. EBITA Adj. EBITA-margin AirTech FoodTech
MSEK
-1% MSEK MSEK
300 15.1%
% 250 15.0% 16% 250 17.1% 20%
16 13.9% 14.7% 18%
250 14% 15.2%
14 200 200 16%
12%
200 12 14%
150 10% 150 12%
262 260 10
150 8% 10%
8
100 6% 100 8%
100 6 199 181 6%
4 4%
50 50 50 85 98 4%
2 2% 2%
0 0 0 0% 0 0%
Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020
Adjusted EBITA: AirTech:
• Slightly improved adj. EBITA-margin because of: • Margin in line with 2019. Lower net sales, offset by a stable
• Active mitigation of the effects from the Covid-19 outbreak gross margin and lower indirect costs
• Stable gross margin and lower indirect costs FoodTech:
199 176
• Improvement because of a slight improvement in gross margin
driven by efficiency improvements and lower indirect costs
152 Adjusted EBITA-margin
Execution of Strategy
Major impact from measures taken in AirTech
Items Affecting Comparability (IACs)*
Exit non-core part of commercial business
• Exit non-core part of the commercial business in the US within MSEK
business area AirTech 160
138
Expansion of manufacturing 140
125
120
• AirTech to expand Data Centers US manufacturing in Texas
100
Consolidation in the Netherlands
80
• In the Netherlands, operations to be consolidated 60
39
Other measures to execute the strategy 40
17 14
• In addition, several other measures will be taken to ensure 20 6 8 7
execution of the strategy 0
AirTech FoodTech Other Total
Q2 2020 Q2 2019**
*IACs include Covid-19 related IACs, Implementation of strategy and other measures
**2019 IACs related to the Munters Full Potential Program (FPP)
162 Adjusted EBITA-margin
Execution of strategy
Measures implemented over next 18 months
Total costs (IACs) Run-rate savings
MSEK
MSEK
200
30
150 70
30
100
158
50 106
52
0
Q2 2020 After Q2 2020 Total
Total
Cash Non-Cash
Time Savings
• Expected to be implemented within next 18 months • Estimated to about MSEK 70, to reach full annual run-rate
Total costs once the measures are implemented
• Estimated to appr. MSEK 188, ~ MSEK 158 to impact cash flow
Q2 costs
• MSEK 136 booked as IACs, ~MSEK 107 to impact cash flow
• Additional MSEK 52, all cash items, will be booked as incurred
173 Capital structure
Cash flow development
Cash flow development, LTM* Cash flow for the period, Q2 2020
MSEK Cash flow from operating activities MSEK
Cash flow for the period
1,000 300
250 85 -56
800 82 -85
200
600 150 83
400 100 -284
200 50 102
0
0 -50
-200 -100
Operating Reversal Changes in Finance Changes Investing Financing
FY 2018 Q1 2019, LTM* Q2 2019, LTM* Q3 2019, LTM* YE 2019 Q1 2020, LTM* Q2 2020, LTM*
profit of non- provisions items in working activities activities
cash items capital
Cash flow development: Cash flow for the period:
• Continued focus on cash and management of working capital • Cash flow for the period impacted by a repayment of outstanding
• The positive effect on cash flow from working capital mainly driven RCF drawings of MSEK 240.
by a good performance in business area FoodTech.
*LTM = Last Twelve Months
Cash flow development includes discontinued operations
183 Capital structure
Continued improved leverage in Q2
Cash conversion (OCF*/Adj. EBITA) Development of leverage
80% Net debt / EBITDAx
4,5
60% 4
3,5
40% 3
2,5
20%
2
0% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
June 2019 Sep. 2019 Dec. 2019 March 2020 June 2020
• Strong cash generation and cash conversion contributed to lower • Create headroom for strategy implementation in times of a
leverage challenging business environment:
• Leverage 2.7x end of June, decrease from 3.1x end of March • Covenant related terms for the current financing has been re-
negotiated. Covenant increased to 5.5x from 4.5x, from
• Net debt decreased from MSEK 3,338 at end of March 2020 to Q2 2020 to Q1 2021
MSEK 2,896 because of a positive cash flow development and a
positive exchange rate effect of MSEK 209 • In July, Munters established a new MSEK 750 Revolving
Credit Facility (RCF) secured by EKN, the Swedish Export
Credit Agency, as a precautionary measure
*Operating cash flow
19Agenda Highlights second quarter 2020 Implementation of strategy Second quarter 2020 results Summary 20
Robust performance in a challenging business environment
• Growth in order intake, adj. EBITA-margin improvement
as well as lower leverage
• Current healthy order backlog
• Visibility of the effect of the Covid-19 outbreak limited
• We are well positioned in a long-term growing market
driven by climate change, energy efficiency and
digitalization
21Questions & Answers
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