Release Date: February 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Munters Group AB (MMNNF, Financial) achieved a record performance for the year, with strong turnover, profitability, and cash flow.
- The data center and food tech segments showed strong invoicing, high profitability, and increased order backlogs.
- The company's software business, A Aar, continues to improve, indicating a solid market demand.
- Net sales increased by 19%, marking the best net sales quarter in the company's history.
- The company has made significant strides in innovation, with 40% of sales coming from products developed in the last five years.
Negative Points
- The Airtech segment experienced flat net sales and weak profitability, with a decreased order backlog.
- The battery market remains weak, affecting the Airtech segment and leading to underutilization in factories.
- Investments and lower volumes in certain areas have negatively impacted margins.
- The company's net debt increased due to acquisitions, affecting leverage.
- The Asia region continues to be sluggish, impacting overall growth.
Q & A Highlights
Q: Can you provide insights on the recent developments in the data center segment and how they might impact Munters' market position, particularly in relation to co-location and hyperscalars?
A: Unidentified_2: The data center market is rapidly evolving, and we see continued capital inflow into this sector, especially in the US. Our products, including liquid cooling and air-cooled solutions, remain in strong demand. We view our exposure to co-location as a positive, as it complements our direct sales to hyperscalars. Overall, we are optimistic about the future of the data center market.
Q: Regarding Airtech margins, given the current weakness in the battery market, when can we expect a return to historical margin levels?
A: Unidentified_2: We are taking mitigating actions to address the current challenges in the battery market. While the first half of the year may remain weak, we anticipate improvements in the second half. Our goal is to return to better margins by then, although this is not a formal forecast.
Q: What are the main factors affecting Airtech's margins, and how do you plan to address them?
A: Unidentified_2: The primary driver of margin pressure is lower capacity utilization due to reduced battery market demand. We are implementing cost-saving measures, including workforce reductions and manufacturing optimization, which will start to take effect in the first quarter and ramp up throughout the year.
Q: Are you gaining market share in the data center segment, and how do you view your competitive position?
A: Unidentified_2: We believe we are taking market share, particularly in Europe and North America. Our strong product innovation, with over 70% of sales from products developed in the last five years, positions us well in the data center cooling market. We are confident in our ability to continue growing our sales in this segment.
Q: Can you elaborate on the cost-saving measures in Airtech and their expected impact?
A: Unidentified_3: We are implementing workforce reductions and optimizing manufacturing globally. These measures will start to take effect in the first quarter and are expected to achieve a full run rate savings of over 100 million.
Q: How do you view the battery market's future, given the current slowdown?
A: Unidentified_2: While the battery market is currently experiencing a slowdown, we believe it is an unstoppable trend driven by energy storage and balancing needs. We expect a 10-20% order spread driven by batteries, with potential for larger orders in some quarters.
Q: What is the status of the divestment of the equipment part of Food Tech?
A: Unidentified_2: The divestment process is progressing, although it has taken longer than expected. We remain positive and will announce updates as soon as we reach a position to do so.
Q: How do you view the impact of potential tariffs on Mexican imports to the US?
A: Unidentified_2: Approximately 3% of our US sales are affected by Mexican imports. If tariffs are imposed, we intend to pass on the costs to customers as much as possible. The impact is expected to be minimal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
