Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Munters Group AB (MMNNF, Financial) reported a strong order intake growth of more than 120% in the data center cooling segment, highlighting its leadership in innovation.
- The company achieved a 50% growth in annual recurring revenue (ARR) in its FoodTech segment, driven by digital solutions.
- Adjusted EBITDA margin improved to 16.2%, with strong contributions from data center technologies and FoodTech.
- Munters Group AB (MMNNF) maintained a stable leverage ratio of 1.9, despite acquisitions and dividend payments.
- The company is making strategic investments in digitalization and new production sites, indicating a focus on future growth and scalability.
Negative Points
- The AirTech segment experienced a decline in demand, particularly in the battery sector, impacting overall performance.
- Operating cash flow was lower in the quarter due to a negative impact from operating working capital, driven by project completions.
- The company faces challenges in the battery market, with a weak short-term outlook and overcapacity issues in China.
- Munters Group AB (MMNNF) has not received any large new advances in the quarter, affecting cash flow.
- There is increased competition in the battery segment, with new entrants driving prices down, potentially impacting margins.
Q & A Highlights
Q: Could you provide more details on the negative organic growth of minus 4% on orders, particularly regarding the price and volume trends?
A: The negative growth was primarily seen in the battery sector, which has been declining for three consecutive quarters. Previously, the battery segment accounted for about 40% of order intake, but it has now decreased to around 10%. The long-term outlook for EVs and batteries remains strong, but the market is currently weak, especially in North America and China.
Q: Are you seeing increased competition in the data center segment, and how do you view this going forward?
A: We are confident in our position as innovation leaders in data center cooling. While competition is present, we are focused on maintaining our leadership through innovation and customer interaction. We see strong growth potential and are optimistic about the market's attractiveness.
Q: Can you clarify the types of competitors entering the battery market and their impact?
A: New competitors, often not established in the market, have driven prices down but have struggled to deliver on promises. Chinese competitors are more active in Eastern Europe, but we don't see them significantly impacting other European markets. We expect some of these new entrants to be weeded out over time.
Q: Why haven't we seen any large data center orders this year despite a positive market environment?
A: While large orders have not been as frequent, our order intake for the first nine months is ahead of last year. The timing of large orders often depends on customer preferences, and we remain confident in our strong backlog and future order potential.
Q: How are you addressing the overcapacity in AirTech now that large battery orders are completed?
A: We are focusing on cost reduction through design improvements, lean practices, reallocating sales efforts, and transferring products between business areas to optimize factory utilization. Additionally, our new factory in Amesbury will help manage capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
