Munters Group AB (publ) (MTRS) Earnings Call Transcript & Summary

Hello, and welcome to this presentation of our Q2 results. With me here today, I have our CEO, Klas Forsstrom; and our CFO, Katharina Fischer. Welcome to those of you who are viewing online and also for those who are listening in on the conference call. Please feel free to enter all questions online throughout the presentation, and we pick them up in the Q&A session afterwards when we also open up for you who are listening in on the telephone conference call. So with that, I would like to hand over to you, Klas.

Thank you, Ann-Sofi. And once again, very, very much welcome to this Q2 report. As always, let me put a frame on this report. It's a quarter where we continue our strategic journey with strong progress. We delivered an all-time high profitability, strong cash flow and building a solid foundation for future growth, continued good underlying markets, strong long-term demand in data center technologies and markets, but also within food, service and components, just to mention a few. A weakening within battery in the near term, but still in the long run, a very strong market. Portfolio advancements, conclusion of FoodTech strategic review, we have the intention to sell the equipment, but also continued portfolio additions through M&As, all 3 like a hand in a glove very well fitted for future growth and profitability advancements. And finally, sustainability fully integrated in our strategy. SBTi commitment, investment in short delivery and Net Zero target continues step-by-step. Going in a little bit more into the details. As I said, a strong second quarter position us well for future growth. Order intake, 3% up, a solid quarter, increased net sales and all-time high profitability. AirTech, when it comes to order, flat, mainly weaker batteries in APAC markets. DCT, flat, but we have to remember last comparable quarter, we had a large order that skewed the comparables, very good level within smaller and midsized orders, showing a strong underlying market. FoodTech, really pleasing to see good growth across the system, driven by especially Americas and EMEA and the total order backlog increased with 6% in the quarter. Net sales reaching 7%. AirTech declined, primarily weaker battery subsegments in predominantly APAC. Strong deliveries on the other side on batteries in Americas. DCT, strong growth, successful execution on deliveries, and I will come back to that, it has become a very good delivery machine. And FoodTech, grow strongly, primarily EMEA and Americas. And book-to-bill, close to 1. Coming back to the profitability, a record profitability of close to 18%, 17.8%, driven by positive product mix and deliveries in AirTech, as I mentioned earlier, but also very much strengthening effects from lean practices and other efficiency improvements. And all in all, a high utilization rate in our main factories. With that said, we continue to accelerate our investments in digitization, ways of working and our manufacturing footprint across all our BAs. Net sales -- sorry, order intake, Americas and EMEA are main growth drivers. As you can see here, if I go back a couple of years, I mean, at that time, it was about 25% in APAC, about 35% in EMEA and the remainder in Americas. This has flipped substantially. All in all, Americas has done flat development. It is good in commercials and components, but that is offset by battery and services. Data center, a strong underlying demand. Hyperscalers, and I have to repeat this, hyperscalers rely on colocation providers to grow it rapidly. FoodTech, continued strong growth in the region. Coming back to EMEA then, order intake, AirTech did grow, especially in the Industrial segment. DCT, steady growth. And FoodTech, starting to recover in EMEA. APAC, very much as it has been. Weaker development, mainly in the Battery segment when it comes to AirTech and FoodTech, a slight sign of recovery there. And if I summarize, if you can say, strong in data center, strong in FoodTech. AirTech, a little bit weaker in Americas and APAC, but steady in EMEA. You have seen this slide many times. It is the larger orders that we have communicated. I can just highlight one here, and that is now we have finalized the deliveries of one of the battery orders, as you can see. I'm super confident moving forward that especially when it comes to data center, it will either be several medium-sized orders or 1 or 2 larger orders. And once again, it is an erratic order intake in Data Center. Moving into the different business areas then. I think the main thing to bring with us here from this picture, that is I call it a shift. It is a shift moving slightly away, short term, from strong order intake and a strong marketing battery to moving into other markets. And here, I would like to highlight both clean technologies, service and components, but also food. So for the coming quarters, I think it's fair to say that you will see green arrows in the ones that we indicate and red or flat arrow in the Batteries sector. When we talk about net sales, super pleasing to see a very strong operating adjusted EBITA, driven by, as I said earlier, efficiencies, the finalization of deliveries of 1 large battery project. What is very pleasing here to see that is the precalc summed up to the end deliveries, actually a little bit better than I think it was planned. And adjusted EBITA margin then increased. You have seen this slide many times. And I think you can take with you 2 things here. First of all, battery is at current weaker, but it is built up by many, many smaller orders. The second thing that is, if you start 1.5 years ago and take a look on all the other segments, at least I interpret this as a very stable, slightly increasing underlying market. This is a slide that I really like. Those of you that have followed Munters over many years, you know that the fundamental Munters, that is our components. It is our desiccant wheels. It is our evaporative pads. The desiccant wheel taking away moisture from the air, predominantly into segments like battery, windmills, storage, et cetera. The last couple of years, this has represented about 50% to 60% of our total component sales, now it is about 40%. This quarter, it has started to flip over to evaporative pads, 60% are component sale -- order intake is in this. And what is the driving force here? It is very much data center and some food installations, but predominantly data center. A lot of data center rely on this type of evaporative cooling. And I predict that this will continue to grow for the coming years. Coming back to windmills. We are exposed to many different industries. Electrification is not only the EVs. Electrification is cutting across, and I believe personally that electrification is perhaps the most important question for our generation. If we cannot shift to greener electricity, I mean, then we will slowly create a world that is not better, it is worse. Taking the windmills, in each and every windmill, we may have one dehumidifier at the top of the windmill and one at the bottom in the column. We are building many windmills in the coming years. Coming back to Data Center. And here, I will be a little bit deeper in a couple of slides. But first of all, I will try to clarify something that when you take a look upon this slide, it is the transactional sales that we represented here, i.e., very little direct sales to hyperscalers, a lot of sales through colocation that is feeding it into hyperscalers. The predominant driver in data center is, of course, hyperscalers. But it is, when you buy a car, sometimes you buy it off a car dealer and sometimes you buy it directly from the manufacturer. It is the same, different ways to the market. And here, I'm very confident that this growth in data center will continue moving forward. If you talk about adjusted EBITA, super pleased, Data Center has become a lean producing machine. I had the opportunity to visit one of the factories a couple of weeks ago. I was truly impressed. That's the reason why you see such a great EBITA in this. I think they have started to put themselves up at a new standard here. But all in all, it is a strong value growth. It is good effects from lean practices. It is a positive product mix. And on top of it all, high capacity utilization that is driving the profitability, very important. With that, we are not holding back on making investments. It's super important. We believe in this market going forward, and we will continue to invest. During the quarter or slightly after the quarter, but during the quarter, we have worked very much with a couple of acquisitions, one then in the area of data center. This is an Italian producer. And what I think is the most important thing to bring with you here, it is a producer of chillers. Chillers are super important in liquid cooling. So you have the chiller and you have what we normally are producing, the CDUs or the indoor part. You add those together, and then, you have a full system. So with adding this, we are actually then having a full system to sell. We are sort of doubling the potential in this arena. That in combination with a recently launched CDU unit that is open for liquid cooling on the chip. That is adding chillers to this. I call it, it is a hand-in-a-glove type of acquisition. With this, it is in Europe, which I like. It is in the right segment, which I love. And then on top of it, it is making a combination effect. So for me, this strengthen our offers towards the Data Center arena. Moving over to FoodTech then. 2 slides on this. First of all, we have concluded the strategic review of FoodTech equipment. We have come to the conclusion that our intention is to divest this, of course, when we get the right price for it. At current, it represents about 13% of Munters Group net sales on rolling in the last 12 months after quarter 2. We don't see the strategic logic to have this. We see a much greater future for Munters when it comes to controllers and software. With that said, it is a business, the equipment business, that is now improving its performance step by step. Moving over to controllers and software, yet another quarter with an impressive growth of ARR, 71%. And I come back to what I said a couple of quarters now. We are on the journey to move towards SEK 400 million or SEK 500 million of ARR in this arena. Fantastic gross margins. And here, I'm, short term, willing to sacrifice some of the profit in order to capture the growth. But also, in food, we are pursuing the acquisition road. In this case then, a controller company in U.S., dedicated to layer production, on and about SEK 100 million with an accretive profitability towards FoodTech as such. We are adding value creation parts into FoodTech for the future. FoodTech is turning green. In more and more areas, we can see that we are having an improved market. It is still sluggish market in China and in Asia, but in Europe, it is starting to come back. And when it comes to North America, it is very, very strong, have increased the order backlog during the quarter. That resulted in strong margin increase and a continued sales momentum. And also here, I think it is impressive margins that was delivered. It is very much the same reasoning behind, good strong net sales, positive contribution from net price here as well. On the group, on and about 4% to 5% net price increases, but stronger in FoodTech. Good profitability in all areas, but the underlying driver within the equipment side, it is operation excellence improvements. We continue to innovate also in FoodTech. Here, it is brought forward an E-line fan. That is very much a -- if I simplify it, an electronically maneuvered fan that reduces the energy consumption up to 50%. Instead of adjusting the current up and down, you can manipulate it through electronic control systems. And this delivers lower energy consumption and improved animal welfare. Service, components and Software-as-a-Service, a super important arena for us moving forward. During the quarter, the order intake, we reached 25%. The rolling is 26%. What I think is important here that is, if you see the largest contributor is on group AirTech when it comes to service, increasingly a contribution from Data Center and a good contribution from FoodTech. And here, you have to remember Software-as-a-Service plays a very important part. But if you come to components, I would like to go back then to I talked about earlier about desiccant wheels and the evaporative cooling, about 40% of what you see when it comes to the evaporative cooling is actually provided towards the Data Center segment. It is sold through and produced within AirTech in order to drive efficiency within one factory, but I think it's worth mentioning that this is also a component/service aftermarket directed to the Data Center arena. Sustainability is fully integrated in everything we do. Without digging into the individual numbers here, I think it's fair to say that we are step by step making progress in all areas. We are delivering great contributions when it comes to energy efficiency. We are not happy about our diversity, but we are step by step improving that. And when it comes to code of conduct, it's very simple. I mean, with our suppliers, we always strive or we always have 100% code of conduct, and then, we are gradually moving in now also towards the customers and our channel partners. But more to come about this in the future. So with that, over to you, Katharina.

Thank you, Klas. And as you have heard Klas talk about already, we reported a strong second quarter with an impressive profitability. Data Center and FoodTech saw continued strong growth in net sales. We saw this in the continued deliveries in the quarter. And with good deliveries, they also reported and delivered a very strong margin. In FoodTech, they saw gradually strengthening of the markets in Europe and the U.S. And this then fueled growth in these areas, the U.S., and this then fueled growth in these areas. And here, I would also like to emphasize what Klas said about the digital solutions. Aside what Klas said about the digital solutions In FoodTech and the SaaS business, we saw an impressive growth in the SaaS business in the quarter of about 71%. And this volume growth also then contributed to the improved margin for FoodTech. AirTech had a weaker net sales, and this was mainly driven by the Battery subsegment in APAC. Despite a slightly lower volumes, AirTech managed to increase their profitability through ongoing efficiency measurements and also the product mix in Americas where we delivered on those large orders. They have worked on improving their ways of working. And we see very good progress, as Klas mentioned, in our lean processes and also in other initiatives. One of these is the working capital management to see that we have been able to reduce the ratio of operating working capital to net sales to 12.5% in the quarter, which is now within the range that we have a target range of 13% to 10% acquisition of Airprotech, and we are now at a leverage. As we said, we delivered record high profitability in the quarter. A very strong driver of this was, of course, the volume increase. And here, we had a high utilization of the products and capacity at many of our sites. I would like to mention though that we had a slightly lower utilization in a couple of areas in Asia and in Europe. And this was then linked to the demand situation for some of the market segments in these regions. Product mix contributed strongly, and there, we have already mentioned AirTech and the delivery of those large orders there. Also Data Center had a strong product mix. FoodTech also continued to deliver on net pricing. So that, of course, contributes a lot as well. And then we have the operational excellence initiatives contributing in all regions for us. And we continue to make investments in our strategic initiatives. And what we mean by this is that we continue to invest in the digitalization of our ways of working and also to build a strong platform for system support, so we can continue to deliver with high quality and speed to our customers and stakeholders. Looking at the cash flow, it improved in the quarter due to the stronger operating earnings and also a positive contribution from a reduction in working capital. And as in the first quarter, we saw some larger customer advances from -- mainly from the Data Center orders, and this is visible in the slide, where you see this. And as we have pointed out before, and as you know, the Data Center market can be volatile from an order perspective, meaning how customers place the orders. And this means then that the order intake can vary between quarters and then that can also have an impact on how we receive the customer advances, depending on the cash profile on these orders. In the quarter then, we closed the Airprotech acquisition, and we paid with that with cash, and we were also able to amortize on some of our loans in the quarter. Looking at CapEx then. So we continued to increase our CapEx spending in the quarter. However, it's stable from -- as a percent of net sales point of view. Over the coming quarters, we will continue to increase our investments, and we will see a peak here as we finalize the production of the new facility in Amesbury in the U.S. Also Data Center, they are expanding in Europe. And here, the build of the new production site in Cork, Ireland is progressing according to plan. Capital allocation is, of course, a very important topic for us, and for me, and I have a high focus on this. And over the coming years, Munters will need to continue to invest in different areas, so we will continue to invest in R&D and production and also in our own facilities to make them ready and for us to reach our Net Zero emission target for 2030. We are, of course, also focusing on our M&A agenda that we are now driving with higher speed to capture the growth opportunities. And here, after the close of the quarter, we announced 2 new acquisitions. Looking at M&A more in detail, you can see that so far in 2024, we have closed the acquisition of Airprotech. We have also acquired Automated Environments and also Geoclima, the Italian manufacturing company that produces the air and water-cooled chillers. We have also done a couple of minority investments in Agriwebb and Capsol. And these acquisitions and investments, they are covering 3 of our important growth areas, so that is the FoodTech Digital business and then also Clean Technologies and also Data Center Technologies. And as I have stated many times before, it's very important for us to make sure that we integrate the companies we buy in a good way. And we have a very structured approach how to do this. And then also, one example of the good synergies delivered in the quarter, where we saw some very good synergies from in and around, where we saw some great sourcing synergies. As the cash flow improved and the earnings improved, we managed them to decrease the net debt and also managed to lower the leverage ratio to 1.8%. And for us, it's very important, of course, to work on constant deleveraging and also make sure we have a strong balance sheet. And in the second half, we expect to close the acquisition of Geoclima. And going forward, our net debt and leverage can vary depending on the M&A transactions that we make. And with that, I would like to hand it back to you, Klas. Thank you.

Thank you very much, Katharina. Moving forward to a summary then. And -- let's see if the clicker works here, we continue to progress towards our long-term financial targets. Those are financial targets that we aim to hold over a business cycle. Currency adjusted growth in this quarter resulted in a 7% growth. Certain areas, if I look forward, I predict strong underlying growth patterns moving forward. Data Center in both regions across the different product assortments. Food, both food processing and digital food support, strong growth. As I highlighted earlier, components and service is also a strong growth driver moving forward. Then short term, battery will be weaker. I think it is logic to some extent. Sometimes when you do a large transformation, that is then slowing down during certain periods and then start to take up. I always ask myself the question, do I believe it will be substantially more EVs 5 years ahead than today, and I always come to the conclusion, yes, of course, it will be like that. So long-term growth drivers. Electrification as such, if I leave EVs, it's also a very strong growth driver moving forward. It is everything from transmission towards back from the windmill parks. And as I said earlier, electrification and green electrification, I believe, is the largest question to solve for our generation. Then we can talk about carbon dioxide -- carbon capture and other areas, like volatile organic compound. My point is there are several growth patterns that works in our hands. Adjusted EBITA margin, I am so pleased and so proud of all our people in order that they could deliver well above our target, 17.8%. What we have to remind ourselves that is this is over a business cycle. We always strive to deliver the highest and best possible adjusted EBITA each and every quarter, but it's the long-term progression that is important. And then coming back to what Katharina said, we have the target to deliver an operating working capital through net sales. That is in between 10% to 13%. Super pleasing to see that our machinery here is also starting to work, but on top of that also, of course, fueled by advances in this case, in Data Center. So to summarize the quarter, all-time high profitability and a strong foundation for future growth. Many markets have a solid underlying demand. We advance in our portfolio adjustments, conclusion to sell the equipment part of FoodTech, but also 3 very important M&A is moving forward. All 3 in my book, targeted to the right region, the right segment, the right growth areas. And then sustainability is 100% integrated in everything we do. We set the target now, and we have SBTi commitment, and we are delivering on that step by step. So with that over to Q&As, and back to you, Ann-Sofi.

Yes. Great. Thank you. Before we open up for the telephone conference, I would like to start with a question that we have received from the web. And this is related to the Data Center orders in Q2. And since they were about flat, are there any concerns that we see on the level of the Data Center order intake, Q2? Yes.

The very short answer is no. The little bit longer answer if we look -- zoom out a little bit, last year, we announced -- in the same quarter, we announced a larger order on and about, if I remember it right, USD 80 million. This quarter, we didn't have any substantial large orders. So from my perspective, I see this as a sign of a very strong underlying growth. And I say it once again, some quarters, we will have substantially high order intake and others lower. Take a look, once again, I'm pleased to see the continuous progression of the deliveries out of our factories.

Perfect. Thank you very much. So with that, we can open up for questions on the telephone conference call.

The next question comes from Adela Dashian from Jefferies.

A few questions from me. The first one, I guess, piggybacking on the Data Center order pattern question just asked, I think you've previously said that in your core orders, the underlying orders, the small- to medium-sized orders in this segment typically range from anywhere between SEK 300 million to maybe SEK 600 million in a quarter, but it was substantially greater than that in this quarter despite any larger orders. So would you say that given the underlying momentum in the end markets that the core order size or magnitude is increasing and that we should expect, I guess, this level to be a more normalized level versus what you had historically recorded in the segment?

Thank you for a great question. And I think my honest answer is whatever answer, it may be wrong. But to be a little bit more clear, I see this as a strong indication that the Data Center market is improving. So it is a high probability that we will have a continued strong underlying market with medium-sized to smaller orders. And then depending on the customer, some customers decide to bundle together and others to release it step by step. But I see it as a clear sign that we have a very, very strong underlying demand in the Data Center segment.

Got it. And then maybe also if you could just touch on the -- what type of customers. I know there are the colocators, but is it European colocators or U.S.-based colocators that you're seeing the most orders from during the quarter?

The majority of our orders are still from U.S.-based, U.S.-owned. And the majority of the orders are coming in the North American business. We are making progress step by step within Europe. I'm very pleased on this. As you know, we are building a factory. But I also need -- like to highlight then the recently announced acquisition. I look upon this from at least 3 perspectives. First of all, it is targeted very much to one super interesting area, and that is liquid cooling. Today, we are making, by ourselves, one part of the liquid cooling system. It could be a cycle or it could be a CDU, one part. The chiller, the one that takes the heat away, so to speak, we are not manufacturing ourselves. We are bundling it together from subcontractors. Now, we will have this in our own hands, so to speak. So that will deliver a strong growth driver moving forward there.

And with this acquisition, do you feel like you now have the comprehensive product offering that is the most optimal? Or do you see opportunities to expand their portfolio even further?

I mean, with this, I think we have the wit, as good as any other players in the marketplace. I think we have -- we are well positioned in the different regions. And then I talk about then North America and Europe. These acquisitions also opens up to some extent sales offices in Asia as well. So maybe when we are ready, further ahead, we can start to advance also into Asia. But from a product perspective, I think we have a very strong base to work on. And then, of course, we will always fuel it up with new innovations being brought to the market.

And then lastly, just on the divestment process for FoodTech. Could you specify where you are within that process? And how is that evolving? Are we talking about one-on-one conversations that you're having with potential buyers? Or is it a bidding process that you're considering? And also the timeline would be great to know.

As we talked about during the Capital Markets Day, we had started to do paced appetite, now we have come to the -- in the market. Now we have come to the conclusion that we have the intention to sell this. We are entertaining dialogues with some very interested partners. And then I know that if I say a specific date when this will happen, I'd be most probably wrong. But I'm very confident that this will move on in a good way then. And we communicate when we are ready, so to speak. But I see this as being moving in the right direction.

Congrats on the quarter.

Thank you.

We take another question from the conference call.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav from Nordea. Just to build on the Data Center question, I mean, if we take DCT in Europe specifically, based on sort of your dialogues with customers, do you feel like there is a hesitancy in placing somewhat larger orders among your customers as you still sort of have a couple of quarters left until the new facility in Ireland is finalized? And so could there be a pickup in orders once you have finalized it? Or what would you say there?

I mean now I turn into a little bit speculations just to make that clear. Before we built the large facility in North America, of course, entertained dialogues with customers, and we started to build that ahead of the curve, as I used to say. I mean to some extent, you can look upon Europe in the same way. Now we have also, even if it's a completely different segment, completely different products, we have also announced that we will enlarge our footprint in Europe than when it comes to chillers. I do believe that, that combination will be a very strong point for us in Europe. But I also would like to underscore that Geoclima is not only selling in Europe, it is also providing sales in many other regions, so to speak. So it is this perfect complement, so to speak.

Okay. And then just on the Data Center margin there, it is very strong. I mean, can you just help us understand a little bit more? I mean, it looks like the 14% to 16% that you guided for, and you have obviously guided for the upper end of that range, but it seems rather outdated. Is there something we are missing here? I mean you have commented on pickup investment activities as well and so forth. Are they not seen in the numbers yet or...

I mean, some of it may not be seen in the numbers yet. But I have to say like this, I am truly impressed on the progression that the Data Center team is doing. I mean, I hate to say that I'm surprised, but what I mean, when we talked about driving efficiency, they have asked out past what I believed they could do. And I asked reference to when I visited one of their facilities in U.S. a couple of weeks ago. It is a very strong, lean machine. So with that, instead of talking about where do I have my expectations, I will put this as simple as this. My expectations is always rising on those that performs. So I will have high expectations on them moving forward. But I'm very satisfied with where they are at current, and I think that covers it.

Okay. And then just the last one on the FoodTech margin. I mean, can you give some sort of indication of how much is seasonality? And also, do you expect FoodTech to sort of perform in line with your financial margin target even despite you sit on the equipment part for the full year?

Normally -- I will come back to what I mean normally, normally is always the last and to some extent the first quarter in FoodTech on the equipment side weaker. But with that said, sometimes, if the market is going up, then that is a little bit bridged because the market is going up. And sadly then, when the market is going down, then in a region, I mean, it's double hit then so to speak. So from that, I think the best estimate that I can give you that is normally the second half, especially the fourth quarter is normally a seasonality weaker then. We have good progression in all areas of FoodTech at current, but I just want to reiterate that we are not shying away from investing in growth of the software moving forward. I mean there, it is the ARR growth that is the most important. We know that we have a fantastic gross margin there, so -- but all in all, at current, FoodTech is performing very nicely.

We will take another question from the conference call.

The next question comes from Karl Oskar Vikström from Berenberg.

Just to start off, I will continue with more questions on this DCT orders. You have covered quite a few points. I was just wondering when you now add this CDUs and also with the addition of Geoclima enhancing the portfolio, providing full-scale liquid cooling solutions, do you have a sense on how much this would sort of expand your addressable market? Or how much more of the actual CapEx that goes into that 8% were you able to capture here relative to what you have been up until this point?

I think both Katharina and myself need to come back to a very precise answer on that then. But in the arena of, let's say, where a customer is buying both a CDU or an indoor part and the chiller, you can say that the size of the indoor equipment is sort of equal to the size of the chiller. So in theory, on specific projects where you have both components, you can say it is twice the size of total sales on that. But then it is a more granular answer. I mean, it depends upon what type of products, et cetera, but a ballpark-ish measurement is that.

Sure. That's very helpful. And I guess, I mean, going back to the first question on the call is sort of this sort of run rate order intake and so forth, and you mentioned the market is quite hot and so forth. But presumably then it could be quite -- we could be quite confident maybe in sort of a pickup of this underlying rate of orders once this is added on, let's say. Would that be a fair assumption?

I have learned that it's very difficult to pick a precise order number per quarter, but I'd say like this, I see the order pipeline, and I'm very confident that in the coming quarters, we will continue to have medium- to small-sized orders at a healthy margin. And I would not be surprised if we would have orders that is also larger size. I am as confident now as I've been in the last 1.5 years when it comes to order patterns in Data Center, I see actually a continued strong underlying growth for the coming years. Data Center will not slow down as a market, and our intention is not to slow down in that market.

Sure. And I guess just another sort of final point on this discussion. You're quite clearly highlighting that the co-locators are sort of catering to the hyperscalers and so forth and that they're linked together. But I was just wondering with the sort of complete liquid cooling solution, do you see it's easier now? Or do you see that the hyperscalers going straight to the manufacturer as opposed to the car dealer, let's say, going forward, i.e., do you see more direct sales to the hyperscaler or to the -- yes, to the hyperscaler cohort going forward?

I think, we entertain dialogues with hyperscalers. And a couple of quarters ago, we have had a fairly large share of our order intake towards hyperscalers, if I remember it right, in the range of 30%, 40%. So I mean, we are not shying away from any one of those. It is very much depending on the customer preference, how would they like, and we work with both partners. We collaborate in certain areas with hyperscalers and some of the very, very well-known brands on the market in ship manufacturing, et cetera, et cetera. But instead of talking about exactly what collaborations we have, I can just say that I'm happy to see the collaboration taking place. And if it is direct to a hyperscalers or through a co-location, at the end, it really doesn't matter. What I can say that is we have seen that the acceptance on new technology the last couple of years have been higher within co-location arena. But we are open for all partners here. And I think they appreciate us, all parties as well.

Yes. No, that's fair. And then maybe just finally, if you could give us a little bit of color on the AirTech margin, which was quite strong. You mentioned in the final delivery of this larger project, I'm just thinking sort of we should think about this going forward, presumably may be with a somewhat weaker Battery market. Utilization might be a bit lower. I mean, this margin is something we should consider more as a one-off, let's say, in Q2. Or how should we think about that for the rest of the year?

And I mean, Katharina, maybe you can talk a little bit margins. I mean, I'm talking here the whole...

Yes, yes. No issues. No. But as we have said, the margin in AirTech in this quarter was exceptionally high due to the very high utilization in the factories and so on. So we normally talk about 13% to 16% range for AirTech, and right in this quarter, they were in the upper end of that range.

Next question from the conference call.

The next question comes from Karl Bokvist from ABG Sundal Collier.

My first one is on batteries here. I believe after the first quarter report you talked about then that the second half could show an improvement in battery activity. What do you think has changed since then? And also, can you expand a bit when you say that competition has picked up?

Let me talk it through on regions and regions. You have heard me say a couple of times more than a year that it is a, call it, consolidation type of setting in Asia, that has not read China, that has not really changed. We believe it has bottomed out, but it's not moving up. When it comes to Americas and to some extent Europe, what is clear that is that some of the investments that have been announced, they are pushed forward. And some of the projects that we have lost that we have had a win rate of in between 70% in America, down to 30%, depending on, call it, quarters. The last quarters, we lost a few of the larger orders there. The main reason for that was that some of the battery makers, they wanted to pursue with other players not that well positioned, but at a lower price. So that is what I mean with a higher competition. Some of those players, they are doing well. And some others of those players, they are not able to deliver this into the marketplace. Some of the projects that we have lost, they have later on been delayed. None of the projects that we have been winning has been delayed. So I think it is -- at the end, it has been a very interesting market than partners are coming into that and dip their toes into that. And now when we have a more damp market due to that some of the automotive makers are saying, we pushed this ahead a little bit. I think then the winners will be singled out, and I'm very confident that we are one of the winners or if not the winner, but it's a more damped battery market. On the other side then, what is interesting to see that is now it starts to come back, some smaller replacements in China when it comes to components, et cetera.

Understood. And my final one is on the acquisitions that have been announced. Can you say anything about the profitability of these 2?

If I take all 3 then, because I think all 3 serve the Airprotech, you can say that has an average, I lean towards Katharina. It is not accretive. It is average, and we will work, of course, with that, but it has a strong growth potential as such to the right segments. If I take then advanced equipment, if I remember right...

Automated.

Automated equipment (sic) [ Automated Environments ], sorry for that, and shame on me. North American player towards the layer segment. That has an accretive profitability, both compared to FoodTech and towards group. And then on Geoclima, I think it is too early to say what we will end up in that profitability. But I'd say it is average on group.

Okay. Understood. The final one now, restructuring costs, now when you say you have more or less like concluded the strategic review, can we expect this to come down?

Yes. I mean we are still in the process. So gradually, it will come down. Are you referring to EICs or restructuring cost?

Yes. Well, the total amount included in that line item, but I understand it includes a couple of things. But the total as a whole would of course be helpful to understand where the direction is.

Yes, exactly. So at the total level, it will come down over time as we finalize the divestment of equipment.

Okay. The next question from the conference call.

The next question comes from Anders Roslund from Pareto Securities.

I had just one question regarding the margins again in Data Center. You seemed very bullish about the outcome here. Why should we expect significantly lower margins than those 22%? What is sort of extraordinary in the quarter? You mentioned the product mix. But I mean, I guess you will see that for the product mix shouldn't be extraordinary, I mean...

No. But -- I can start, and please, Katharina pitch in as well. I mean, the product mix is very much driven by -- I mean, you have cycle. Cycle has a higher profitability on average than the, call it, average profitability within Data Center. With that said, also the other ones have greatly improved its profitability. So simply put, the more cycle we are producing or selling in a quarter that has a positive side effect. But then also the fill rates, some of our products are, call it, easy to mass produce if I use that expression and some others are more -- let's say, more tailor-made to some extent. So that is the other part of the mix as such then. Any addition?

No, I can just add that the Data Center continues to invest also. So their investment will gradually go up as well.

So that may have a sort of a dampening effect on margins that you increase the investments here.

It will have somewhat dampening effect on the margins. That is right.

Excellent. And then finally, the margins in AirTech, you indicated here that they -- those margins may come down when the product mix, when you have finalized the large U.S. orders here, I expect that margins will come down.

No. And as Katharina reiterated, Katharina and myself, we are pleased if it is in between 13% to 16%. And I used to say something like this, if it's above that, I'm super happy that which we are at current. And then it will be quarters that will be slightly below, and then, we will not be happy. But 13% to 16%, I mean, that is what I think could be a baseline, so to speak. And then, of course, that could be spiced up or that could be damped depending on product mix or loads in factories and so on and so on.

And finally, the FoodTech disposal, any time line for that deemed to be completed?

As I said earlier, Anders, it is -- this is difficult to set a precise time line on. We have started to entertain dialogues with potential buyers. If I put it like this, at current, I don't think any of us is in a hurry. I mean, it's a great business at current. But I mean, the strategic intent is to sell that off. And the main reason, as we have talked about that, is we don't see the strategic connection anymore, and we would like to allocate money to other growth patterns. But that's the best I can give you, but we keep all chapters on.

Thank you, Anders. I think we have one more question on the conference call.

The next question comes from Mats Liss from Kepler.

Yes. First, I mean, there's a lot of follow-ups, I guess. But looking at Data Center, the Geoclima acquisition, I just wondered, have you sort of met its other earlier on, these large data center projects and sort of maybe partly cooperated before? How well do you know the company?

A good question. We have entertained the relationship over quite a long time now. We know them fairly well. We have a view on where they should concentrate and where they are doing great. As we said, we will sort out some legal matters before we close, et cetera. We see it is as being a very good fit or I should say like a perfect fit in the glove that their products are complementing our products. And by doing that, we have a more complete solution then. Anything Katharina that we have gone through? I mean, we have been thinking on these acquisitions for a long now. It's like giving birth to a child to some extent.

No, I think you've covered it very well.

And yes, and in the process of sort of building a data center, do you sort of need -- well, I guess there is a contractor on top, and then, you will sort of have put a customer -- are you a sort of -- making a step change now and broadening the offer? And, well, it is -- or is it something that changed in that process?

Our belief is that the majority of the customers that we have that are interested in, call it, these type of solutions, they will truly appreciate that we now can deliver then when being closed a complete offer. Of course, we will already now from day 1 start to offer this jointly. So I think this is -- if a growth driver is the right word, but it's definitely a super strong complement to our offer.

Okay. Great. And just a final one on AirTech, the larger project deliveries, will this be more limited in the second half?

Sorry, Mats, we didn't hear the last.

No, I mean you had some large projects that was finalized during the second quarter. And there will be less of those in the second half. Is that right?

Yes. If I remember it right from the slide, we have 1 larger project still to be delivered out. But after that, we do not have any very large orders. Then it's more, let's say, medium-sized and smaller orders that will fill up our plants.

So thank you for that. Thank you for all the questions that we received and for everyone that have listened in to this presentation. With that, I would like to thank Klas and Katharina as well. And thank you for today, and we look forward to see you again at the presentation of our Q3 report in October. And until then, please reach out to us at Investor Relations if you have any questions. Thank you very much.

Thank you.

Thank you.