Strong net sales and adjusted EBITA growth driven by Data Centers and Air Treatment
First quarter 2017
• The order backlog increased by 17% to SEKm 1,998 (1,713).
• Order intake totaled SEKm 1,654 (1,617), an increase of 2%, of which 1% organically. Last year´s figure for the first quarter includes a record high Data Center order worth SEKm 240.
• Net sales increased by 25% to SEKm 1,519 (1,220), of which 23% organically.
• Operating profit (EBIT) increased by 1% to SEKm 75 (74).
• Adjusted EBITA increased by 23% to SEKm 147 (119), corresponding to an adjusted EBITA margin of 9.7% (9.8%).
• Net income amounted to SEKm -41 (-29).
• Cash flow from operating activities was SEKm -20 (53).
• Acquisition of 60% of the shares in MTech Systems was completed on February 1. The purchase price amounted to SEKm 222.
• Helen Fasth Gillstedt was appointed as a member of the Board and as Chairman of the Audit Committee.
• Lena Olving was appointed as a member of the Board.
Events after period end
• On April 1, Munters completed the acquisition of Kevin Enterprises Private Limited, a privately-owned company headquartered in Mumbai, India.
Comments from the CEO
NET SALES GROWTH OF 25% IN THE FIRST QUARTER DRIVEN BY DATA CENTERS AND AIR TREATMENT
The first quarter of 2017 showed strong growth for Munters with an increase in net sales of 25% and increased adjusted EBITA. The strong net sales growth in the quarter was mainly driven by the continued strength of our Data Center and Air Treatment businesses in the US and Europe and solid performance in Asia across the business areas. Order intake growth for the Group was 2% but the first quarter of 2016 benefitted from a record high Data Center order of SEKm 240. Data Center orders are lumpy in nature and we expect to see similar characteristics in the current year. Nonetheless, the order intake continued to show robust growth in Data Centers and in Air Treatment order intake grew.
Munters benefits from strong demand in our key market segments
The business area Air Treatment continued its strong growth trend during the quarter with a 23% increase in order intake with robust growth both in the industrial and commercial end-markets. In industrials, high demand within the lithium-ion battery, pharmaceuticals and other industrial end-markets were the main growth areas during the period. In commercial, the supermarkets end-market had another strong quarter following the lower demand witnessed during parts of 2016. Air Treatment net sales grew by 18% in the quarter, mainly driven by deliveries to customers in food, pharmaceutical and electronics.
Order intake in Data Centers decreased by 49% (or SEKm 155) in the quarter, with growth in the quarter impacted by the record high order of SEKm 240 received in the first quarter in the previous year. Data Centers net sales in the first quarter of 2017 showed strong development with an increase of 183% driven by strong demand in the US and Europe. Munters continue to see high activity in the Data Center end-market. Given our highly competitive customer offering, based on our innovative technology for significantly improved energy efficiency, we continue to take market shares in our focused end-market.
The business area AgHort showed solid performance during the quarter with continued growth in order intake and net sales of 10% and 12% respectively, supported by positive currency effects and the acquisition of MTech Systems. The AgHort business area has experienced lower investment levels mainly in the poultry and swine industries but the impact has been less pronounced than in previous downturns since we are more diversified today with additional customers in new geographies and end-markets. Long term, we continue to believe that the underlying growth drivers of more efficient and safe food production as well as increasing importance of animal welfare will remain intact.
Our business area Mist Elimination had a soft start of the year with a 2% decline in order intake compared to the very strong first quarter in 2016, impacted by anticipated lower volumes in the power end-market in the US, partly offset by continued solid demand in Asia for super clean flue-gas desulfurization equipment. We believe that the underlying demand in the power end-market, supported by increasingly stricter environmental legislation, remains intact. As an effect of the lower order intake in the US during the last six months 2016, net sales declined by 14%.
All business areas showed growth in China in the quarter and Group order intake growth in this region exceeded 50%. It is also encouraging to see that our aftermarket Service business continued to perform well across all regions, up 17% to SEKm 151 (129) in Q1 2017, as a result of the significant investments we have made into this business during the last three years.
Adjusted EBITA growth from higher volumes
Adjusted EBITA increased to SEKm 147 (119) in the first quarter corresponding to an adjusted EBITA margin of 10% (10%). The improvement was mainly achieved through increased volumes. During the past years, we have made significant achievements in increasing operational excellence in our production, procurement and sales processes. In addition, our long-term investments in growth areas such as Services and Data Centers, have yielded good results. We have continued to invest in our organization and in our production facilities around the globe to further improve efficiency.
Strong platform for continued growth
Munters´ value proposition is based on our mission to deliver the perfect climate to customers globally where the climate is mission critical. Our solutions are based on our proprietary technologies and application expertise built over half a century. On the back of long-standing customer relationships, we will continue to expand our product offering to become a complete solutions provider leveraging our controls, software and service businesses.
During the past years, we have transformed our business towards high-growth application areas. All of Munters’ current end-markets are expected to demonstrate resilient and positive growth, driven by population and GDP growth, the need for increased energy efficiency, increased food and protein consumption, industrialization, urbanization and rising living standards globally.
Munters has a strong track record of synergetic acquisitions and will continue to pursue M&A opportunities in a disciplined and systematic manner. Acquisitions will be made in selected segments to expand the portfolio of core technologies, customer relationships and/or grow our presence in emerging markets. The recently completed acquisitions of MTech Systems and Kevin Enterprises, the latter after the period end, is in line with this strategy and illustrates how we continuously work to further differentiate our offering to competition and thereby drive long-term growth.
John Peter Leesi, CEO
For more information:
John Peter Leesi, CEO Munters Group
Phone: +46 8 626 63 01
Jonas Ågrup, CFO Munters Group
Phone: +46 8 626 63 01
Anna Beausang, Director Corporate Communications
Phone: +46 70 698 63 60
About Munters Group
Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate for customers in a wide range of industries, the largest being the food, pharmaceutical and data center sectors. Munters has been defining the future of air treatment since 1955. Today, around 3,500 employees carry out manufacturing and sales in more than 30 countries. Munters reports annual net sales in the region of SEK 6 billion and is owned by Nordic Capital Fund VII. For more information, please visit www.munters.com.