Munters Group Ab · OMXSTO:MTRS
Munters Group Ab — Investor Day (2019)
72 slides from Munters Group Ab's investor day presentation, 2019
Slide 1: Capital Markets Day 2019: Towards Full Potential
CAPITAL MARKETS DAY 2019 Towards Full Potential 1
Slide 2: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 3: Disappointing development since the IPO in 2017
Disappointing development since the IPO in 2017 Net Sales – solid growth over period EBITA – weak performance since 2017 Share price development below peers bSEK mSEK 8.000 +9% 900 -8% 7.122 801 7.000 6.604 800 +20% +59% 6.040 700 675 676 6.000 5.399 585 600 5.000 4.216 500 4.000 400 3.000 316 300 2
Slide 4: In Munters, I saw a company with a great proposition, and potential
In Munters, I saw a company with a great proposition, and potential… AirTech FoodTech Size of core markets (CAGR): Size of core markets (CAGR): +5% +6-7% 2018 2021 2018 2021 #1 Lithium #1 Processing (food etc.) #1 Broiler #1 Layer #1 Supermarkets #2 Pharma #1 Food chain SW #2 Swine 4
Slide 5: A number of internal constraints hindered our performance
...however a number of internal constraints hindered our performance Suboptimal prioritization of Suboptimal organizational structure resources and capital Dispersed product portfolio Insufficient customer focus Unclear performance culture Overly centralized structures 5
Slide 6: Executing the Full Potential Program our top-most priority
Executing the Full Potential Program our top-most priority PHASE 1: STABILITY PHASE 2: PROFITABILITY PHASE 3: GROWTH Secure stable and profitable Improve performance Accelerate growth in platform attractive segments and geographies 6
Slide 7: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 8: Sustainable climate solutions for demanding industrial and agricultural applications
Sustainable climate solutions for demanding industrial and agricultural applications 8
Slide 9: Sustainable Climate Solutions
Sustainable climate Critical to customers’ Sustainable Climate solutions success Solutions Our goal is to provide energy-efficient, safe and Munters’ customers operate in complex, reliable climate solutions where control of moisture demanding environments. We provide the right content and temperatur
Slide 10: We make a difference for the world
We make a difference for the world “2 of every 3 stents used to relieve heart conditions are “Munters climate solutions “Munters’ climate solutions manufactured in stable contribute to more than 1 of 7 are behind half of the world’s environments enabled by meals around the world batteries for electr
Slide 11: Growth opportunity fuelled by strong megatrends for sustainability
Munters' growth opportunity is fuelled by strong megatrends for sustainability Energy and Sustainable food Clean Air resource efficiency • Electricity consumption • Food traceability • Sulphur oxides pollution Munters reduction elimination • Hygienic processing solutions • Energy recovery • Volatile
Slide 12: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 13: Full Potential Program in three phases – focus on the first
Full Potential Program in three phases – focus on the first PHASE 1: STABILITY PHASE 2: PROFITABILITY PHASE 3: GROWTH Secure stable and profitable Improve performance Accelerate growth in platform attractive segments and geographies 13
Slide 14: Phase 1: Secure a stable and profitable platform
Phase 1: Secure a stable and profitable platform Strengthen leadership team STABILITY Simplify Munters structure into two decentralized Business Areas Secure stable and profitable platform Drive leaner structures and cash efficiency Drive Data Center performance uplift through focus towards
Slide 15: New organization and leadership team in place
STABILITY – Secure stable and profitable platform New organization and leadership team in place • Klas Forsström appointed new President and CEO effective no later than mid-October 2019 – 20 years of senior management positions at Sandvik (including President of Sandvik Hard Materials and Sandvik Co
Slide 16: 2 Business Areas under 1 vision with a shared operations platform
STABILITY – Secure stable and profitable platform 2 Business Areas – under 1 vision – with a shared operations platform CEO “Sustainable climate AirTech FoodTech solutions for demanding industrial and agricultural applications” Global Operations HR, Communications Finance, IT, IR and CSR and Strateg
Slide 17: Governance and accountability strengthened in Business Areas
STABILITY – Secure stable and profitable platform Governance and accountability strengthened in Business Areas Strengthened regional management teams Clarified strategic priorities and strengthened accountability More result-oriented and effective Business Area organizations Launched quarterly follo
Slide 18: Full program target EBITA improvement of 210 mSEK run-rate 2019E
STABILITY – Secure stable and profitable platform Full program target EBITA improvement of 210 mSEK run-rate 2019E Full Potential Program EBITA run-rate impact (mSEK) AirTech 95 FoodTech 40 1 Group Overhead 25 Total savings 160 Data Center (AirTech) performance uplift 50 2 Total program 210 18
Slide 19: Full impact expected in 2020
STABILITY – Secure stable and profitable platform Full impact expected in 2020 Program 2019 adj. EBITA impact 2020 adj. EBITA impact One-time costs Cash pay-back time – equals ongoing annual run-rate mSEK -350 costs Approx. Total program impact mSEK +105 mSEK +210 (60% during H1 and 40% during H2 20
Slide 20: Savings progressing according to plan
1 STABILITY – Secure stable and profitable platform Savings progressing according to plan Full Potential Program Savings 2019 end-of-year target = 160 mSEK • FTE reductions and other cost savings according to plan • One-time costs of 61 mSEK Run-rate savings according to plan (mSEK) Actuals Planned
Slide 21: Data Center profit uplift progressing according to plan
2 STABILITY – Secure stable and profitable platform Data Center profit uplift progressing according to plan Europe Americas • Union consultations ongoing according to the so- • Order backlog in Americas is 139% higher than at the called “Renault process” regarding intended closure of end of Q1 last
Slide 22: Strategic alternatives for ME and DC being evaluated
STABILITY – Secure stable and profitable platform Strategic alternatives for ME and DC being evaluated Data Center Mist Elimination Underlying market 10-15% expected CAGR in years to Up to 10% expected CAGR in years to growth? come come Leading technological solution and one Competitiveness
Slide 23: Full Potential Program – starting to look into future phases
Full Potential Program – starting to look into future phases PHASE 1: STABILITY PHASE 2: PROFITABILITY PHASE 3: GROWTH Secure stable and profitable Improve performance Accelerate growth in platform attractive segments and geographies 23
Slide 24: Our aspiration for 2021
Our aspiration for 2021 • World leading position in selected growing markets where the Perfect industrial and agricultural Climate is mission-critical • Customer see us as the most innovative partner of energy-efficient solutions – built around deep application expertise, leading technologies, a com
Slide 25: We are confident we can deliver on our financial targets
We are confident we can deliver on our financial targets • We operate in attractive markets driven by strong sustainability oriented global trends Net Sales growth of 5% Adjusted EBITA Margin of 14% mid-term • We pursue leading positions in selected market segments Net Debt/adjusted EBITDA ratio of
Slide 26: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 27: Operations - Global scale and regional agility
Operations - Global scale and regional agility Tobo, SE • 18 plants and spare part distribution centers Horstmar, DE Dison, BE • 7 assembly and logistic hubs Lansing Amesbury Beijing Hrusky, CZ Selma Buena Vista Chiusavecchia/Pieve, IT Jiang Yin Tel Aviv, IS Chashan Ft Myers • ~1800 Employees Monter
Slide 28: Our improvement journey continues
Our improvement journey continues 1955-2011 2011-2018 2019 future Distributed Manufacturing Global Operations Enable Business and Sourcing Reduce Cost OPERATIONAL PERFORMANCE Local optimization and local Growth through acquisitions A. A Customer needs comes first! processes Global sourcing -
Slide 29: Customer needs come first
A Customer needs come first • Quality ZERO defect mindset to protect Customers • Customization excellence - supporting full product lifecycle ‒ Product project readiness and early involvement in projects – Right from start! ‒ Optimized workflow for Standard, Configured and Customer Engineered produc
Slide 30: Create operational scalability to support profitable growth
B Create operational scalability to support profitable growth PHASE 1: STABILITY PHASE 2: PROFITABILITY PHASE 3: GROWTH • Define and implement known • Leverage volume of scale in • Leverage improvements across best practice with rigor Sourcing and Manufacturing larger volumes • Secure quality improv
Slide 31: Towards World Class: Focused improvements targeting cost savings
C Towards World Class: Focused improvements targeting cost savings to counter inflation and more every year Munters product cost structure Negotiations and category wave execution • Supplier days with focus on the most important suppliers and Direct material component categories (First wave) • Volum
Slide 32: We are aiming towards world-class level of manufacturing
C We are aiming towards world-class level of manufacturing Manufacturing performance (from low to high) Improve across factories – with the best ones Wide spread reaching Primarily raise between low “world-class” performance of and high level low-performing performing factories factories today Munte
Slide 33: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 34: AirTech – Energy-efficient, safe and reliable climate solutions
AirTech – Energy-efficient, safe and reliable climate solutions in which control of moisture content and temperature is mission-critical 34
Slide 35: AirTech is a global leader with a blue-chip customer base
AirTech is a global leader with a blue-chip customer base Business Area overview Selected customers Global leader in dehumidification and cooling solutions for demanding industrial applications #1 position in markets representing majority of AirTech FY2018 net sales Financial performance (Net Sales,
Slide 36: Getting the perfect, sustainable climate is mission-critical across industries
Getting the perfect, sustainable climate is mission-critical across a range of industries Poor humidity and climate control cause… With perfect climate… Lithium - Low battery performance - High quality batteries Battery mfg. - Production safety issues - Low energy consumption and safe production
Slide 37: We provide a broad offering of sustainable solutions
We provide a broad offering of sustainable solutions Dedicated Outdoor Air VOC elimination rotors Portable / Small Spare parts Systems Dehumidification PrimaCaire Dehumidification rotors Stand-Alone Systems maintenance contracts Dehumidification GlasDek humidification Mobile (rental) systems with co
Slide 38: Strong underlying demand growth – in niches where we are leaders
Strong underlying demand growth – in niches where we are leaders Key end Market Growth CAGR in 2018-2021 Key end market Outlook Munters position • Industrial: Lithium-ion Batteries – Investment in R&D 5% and production facilities to support Electric Vehicles, #1 Energy Storage and consumer goods • I
Slide 39: Business portfolio overview – AirTech with several strong positions
Business portfolio overview – AirTech with several strong positions Business Size in Our Market Opportunities Munters performance attractiveness Industrial - Drive growth globally, with a focus on niches and geographies XL with a special potential Commercial/Super- - Business is almost a “US-only” b
Slide 40: Strategic priorities/opportunities for the future
Strategic priorities/opportunities for the future 1 Continue pursue Service growth Prioritize resources to attractive and growing markets and segments 2 – e.g. LiBat and China 3 Improve offering with a priority to Munters core technologies, service and know-how 40
Slide 41: We have successfully grown the Service business
1 Continue pursue Service growth We have successfully grown the Service business – and we see more growth opportunities We are confident we can …and we have actions in place to pursue We have proven success do much more… profitable growth Service Net Sales (mSEK) • Installed base penetration is stil
Slide 42: Identify and pursue growth in markets with attractive opportunities
Prioritize resources to attractive and growing 2 markets and segments Identify and pursue growth in markets with attractive opportunities Market (example) Current performance Why we find it attractive Key activities to drive growth Net Sales (mSEK) • Market growth at double-digit • Dedicated expert
Slide 43: We are continuously investing in R&D to stay ahead of competition
Improve offering with a priority to Munters core 3 technologies, service and know-how We are continuously investing in R&D to stay ahead of competition Prioritizing key R&D areas A range of important product launches 1. Launch next generation of core components within pads and rotors 2. Launch conne
Slide 44: We are confident about the future for AirTech
We are confident about the future for AirTech • Active in markets with solid growth driven by pursuit for sustainability and productivity • Market leading position in most of our customer industries with a strong brand and blue-chip customer base • Strengthened organization and improved governance w
Slide 45: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
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Slide 47: FoodTech – We help to feed the world by changing the way we farm
FoodTech — We help to feed the world by changing the way we farm
Slide 48: Leading industry player with a solid growth over last years
Leading industry player with a solid growth over last years Business Area overview Selected customers The only global supplier offering a full suite of climate control solutions for poultry, greenhouse, dairy and swine industry Global leader in markets that accounted for almost 2/3 of Net Sales in F
Slide 49: Supporting our customers with climate and data-based optimization
Supporting our customers with climate and data-based optimization A Create the perfect Offer equipment and solutions to create the optimal climate for climate livestock and greenhouse production, including both hardware and know-how/design B Guide customers Offer services and software to support foo
Slide 50: We create the perfect climate with a broad product portfolio
A We create the perfect climate with the help of a broad product portfolio Cooling Environmental Climate Controllers Heating Air Circulators Light Filter Inlet Outlet Air Entry Air Extraction 50
Slide 51: We guide our customers with world leading software
B We guide our customers with the help of world leading software Software for managing the supply chain of food producers • Software for integrators covering the whole supply chain including e.g., production of feed, genetics, processing, and logistics • Software modules include e.g., functionality
Slide 52: Global trends supporting the growth in the FoodTech market
Global trends supporting the growth in the FoodTech market Key end Market Growth CAGR in 2018-2021 Key end market Outlook Munters position • Underlying megatrends drive demand • A growing world population #1 Broiler 6-7% • Increasing GDP (richer people eat more meat and vegetables) • Land scarcity –
Slide 53: Business portfolio overview – FoodTech with several strong positions
Business portfolio overview – FoodTech with several strong positions Business Size in Our Market Opportunities Munters performance attractiveness Poultry • Leverage strong position in layer segment (broiler and layer) L where there is an ongoing shift to cage-free egg production requiring investment
Slide 54: Negative impact from African Swine Fever – but opportunities for Munters
Negative impact from African Swine Fever – but it can create opportunities for Munters long-term New cases of ASF still being discovered The impact is difficult to predict, but not only negative • The outbreak of African Swine Fever (ASF) in China officially • Due to the reduced production in China,
Slide 55: FoodTech growth through portfolio enlargement, new geographies and acquisitions
FoodTech growth enabled through enlargement of the portfolio, expansion into new geographies and by acquisitions Key achievements over last five years • Increased the share of sales from Asia from 14% to 25%, primarily in China Geographic expansion • Added new product lines, e.g., inlets, direct dri
Slide 56: Strategic priorities for the future
Strategic priorities for the future 1 Create the perfect climate for our customers 2 Develop our distribution partner network 3 Guide our customers through data - Connect their whole supply chain 56
Slide 57: SonarEcho connects the whole supply chain for food producers
Guide our customers through data – 3 SonarEcho is fundamental for connecting (real- Connect their whole supply chain time) the whole supply chain for food producers effectively • Our existing software offering enables food producers to connect, control and manage their supply chain, e.g., manage inv
Slide 58: We are confident about the future for FoodTech
We are confident about the future for FoodTech • Active in markets with solid growth driven by the need for increased productivity, food safety, animal welfare and sustainable food production • Over the last years, we have successfully expanded geographically and expanded our offering • We are now i
Slide 59: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 60: Attractive financial profile, but we have not met our financial targets
Attractive financial profile, but we have not met our financial targets Strong Net Sales growth Profitability negatively impacted by DC Consistent high cash generation 13% 8,000 800 600 CAGR = 13% 10% 10% 9% 9% 6,000 600 400 8% 200 4,000 400 0 2,000 200 -200 0 0 2014 2015 2016 2017 2018 Q1 2019 2014
Slide 61: Financial profile is better when excluding Data Centers
Financial profile is better when excluding Data Centers – moderate slower sales growth but firmer margin Net Sales growth 2 p.p. lower without DC Margins 3 p.p. higher without DC (2018, Q1 2019) Consistent high cash generation 14% CAGR = 11% 800 12% 12% 600 12% 11% 6,000 600 9% 400 4,000 400 200 2,0
Slide 62: Services is a high margin activity, with large potential to be captured
Services is a high margin activity, with large potential to be captured Service Net Sales 2014-2019 mSEK % 850 11,8 800 11,6 11,4 • High growth of 17% 750 700 11,2 CAGR between 2014- 650 11,0 2018: 10,8 600 10,6 • Consistent growth 550 10,4 500 10,2 • Resilient to Munters 450 10,0 lumpiness 400 9,8
Slide 63: Full potential program (FPP) - full impact expected in 2020
Full potential program (FPP) - full impact expected in 2020 Program 2019 adj. EBITA impact 2020 adj. EBITA impact One-time costs Cash pay-back time – equals ongoing annual run-rate mSEK -350 costs Approx. Total program impact mSEK +105 mSEK +210 (60% during H1 and 40% during H2 2019) 2 years Timing
Slide 64: Key costs / structure and early encouraging signs from FPP
Key costs / structure and early encouraging signs from FPP Full Potential Program brings OH down 39% 2,800 37% 37% 37% 36% 35% 35% 3% 2,400 3% 2,000 2% 13% 2% 12% • OH cost increases mainly driven 1,600 3% 12% by Services, China and R&D 13% 1,200 14% 8% 7% • FPP will generate Run-rate 8% savings of
Slide 65: Considerations to improve gross profit and EBITA
Considerations to improve gross profit and EBITA Gross margin flat since IPO Adjusted EBITA down since IPO • Low performance mainly driven by DC, 34% 35% 13% but improvement potential across the 2500 33% 32% 32% 32% 800 Group 10% 10% 2000 9% 9% • Different initiatives under implementation 600 8% in
Slide 66: Currency exposure largely naturally hedged
Currency exposure largely naturally hedged Currency Transaction exposure (2018) Currency Sensitivity Table 3.0% 5,0% 1,0% 1,0% ` Estimated effect on EBIT 2.0% 1.0% 1,0% 1,0% 2.0% 1.0% 2.0% 1,0% SEK +10% compared with mSEK % • Good balance between sales and 2.0% 3.0% 2.0% 2.0% 3.0% 7,0% USD -54.0 -11
Slide 67: Very strong cash flow dynamics
Very strong cash flow dynamics High cash generation Increased focus on reducing NWC Munters is CapEx light, low CapEx levels in FPP 16.1% 15.7% 15.7% 15.3% 15.2% 600 1200 180 13.7% 160 1000 400 140 800 120 200 600 80 0 400 60 40 200 -200 20 0 0 2014 2015 2016 2017 2018 Q1 2019 2014 2015 2016 2017 20
Slide 68: Capital structure allocations priorities
Capital structure allocations priorities Current capital structure, mSEK 1 080 853 Goodwill 638 2 843 Other Intangible Assets 1 480 Tangile Assets Operating Working Capital 4 218 Equity Key priorities for Capital Allocation 3 720 Net Debt 1. Achieve strong balance sheet – Other Working Capital Items
Slide 69: Financial targets
Financial targets “Munters’ objective is to achieve an annual organic revenue growth of 5%, Growth 5% supplemented by selective acquisitions” EBITA margin 14% “Munters’ mid-term target is to have an adjusted EBITA margin of 14%” Capital “Munters’ target is to maintain a ratio of net debt to adjusted
Slide 70: Agenda – platform for today and the future
Agenda – platform for today and the future CEO – Munters Towards Full Potential • A strong company – but disappointing performance since IPO • Global player in niche markets • Full Potential Program to seize opportunities Global Operations – Building a customer-oriented and scalable platform AirTech
Slide 71: We are confident we can deliver on our financial targets
We are confident we can deliver on our financial targets • We operate in attractive markets driven by strong sustainability oriented global trends Net Sales growth of 5% Adjusted EBITA Margin of 14% mid-term • We pursue leading positions in selected market segments Net Debt/adjusted EBITDA ratio of
Slide 72: Questions & Answers
72 Questions & Answers @® Munters