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

Welcome to the presentation of our third quarter results. And with me here today, I have Klas Forsström, our CEO; and Katharina Fischer, our CFO. And I'm Ann-Sofi Jönsson, and I'm Head of Investor Relations and Group Risk Management here at Munters. We will run through the presentation. And after the presentation, we will have a Q&A session. And for those of you who are listening on the web, do feel free to place your questions throughout the whole presentation, and we will pick them up afterwards in the Q&A session. And then we will also open up for those of you who are listening in on the telephone conference. With that, I hand over to you, Klas.

Thank you, Ann-Sofi. And once again, very much welcome to this Q3 report. Before I and Katharina go into the results and the details of the quarter, let me start a little bit broader. And I'm very pleased that our investments in innovation have generated results. DCT a couple of years ago were a niche upcoming business area. Now I would label it a world-leading offering within data center cooling, with sustainable and long-term strong demand supporting the growth. I look upon ourselves as innovation leaders, and in this quarter, more than 120% order intake growth. FoodTech, the journey that started a couple of years ago, creating a new market with our software offering. And digital solutions, we are creating a market here, and the ARR was growing once again above 50% in the quarter. AirTech, our dehumidification systems, are leading with a strong service offer. But I mean 2 super good business areas in AirTech, a sluggish then demand when it comes to the battery segment. I don't think that surprises anyone from the news, but with the long-term outlook remaining strong. A strong report, strong growth. Order intake, plus 21%. Net sales, plus 6%. Adjusted EBITA, above 16% and growth of 21%. And very pleasing to see operating working capital in the targeted area. We will continue to invest in our footprint, in our digitalization and also in select M&As that generates an even better future. If I go back then more in detail, as I said, strong growth in profits with a continued weak battery outlook. The megatrends are definitely driving our order intake. Order intake, as I said, grew about 21%, 18% organic. In AirTech, an organic decline coming from the battery. In DCT, a strong growth. Good level of small and midsized orders in America, and I'm very positive when it comes to the coming quarters if it follows the normal order intake pattern. But here, order comes and goes in data center. FoodTech decreased mainly due to seasonal effects. All in all, the backlog increased with 7%. We also saw an increase in net sales, about 6%. AirTech organically declined with the batteries in APAC and Americas. DCT showed stable and sustainable growth, successful deliveries on the large orders. FoodTech, as I said earlier, grew strongly in both climate and digital solutions. And the book-to-bill in this quarter at 0.8. Continued strong profitability, now reaching an adjusted EBITA of 16.2%. The drivers in this quarter are clearly DCT and FoodTech. Strong volumes, but also efficiency gains. AirTech, positive product mix and final deliveries on large orders. Also pleasing to see that all business areas showed effect in lean practices and operational efficiencies. And as I said earlier, lower production utilization due to lower net sales in some of our factories within AirTech. DCT in Americas is the main driver of growth. As you can see here, about 60% of both order intake and net sales is represented by Americas, around in between 1/4 to 1/3 in EMEA and around 15% and -- or slightly shy of 15% in APAC. I will not go through all those details, but it's the same story, as I said earlier, also in the regions. AirTech negatively impacted from the battery and battery components. Positive in Americas when it comes to Industrial segments and also the Commercial segments. DCT, a strong star, driving growth and profitability in Americas. And FoodTech, somewhat weaker demand in climate solutions, i.e., predominantly in the equipment side, very much related to seasonal effects and timing. EMEA, AirTech slight growth, primarily in the Industrial segments. DCT, somewhat slower development in the region, very much driven by how customers are placing orders. And FoodTech, from a seasonal effect, a somewhat weaker demand in climate solutions. APAC, AirTech continued weak in the battery segments in China. And FoodTech, somewhat seasonal weaker effect in climate solutions. Drilling into AirTech, if I look upon the graphs on the right side here, you can see it is one segment that is down. It's the third quarter in a row that is pointing down, and all other segments are positive or stable. Investments and lower volumes are affecting the margins. Of course, it is the fill rates of our factories. It is the investments for driving efficiency. All in all, I said that I'm happy when we have an adjusted EBITA of 13%. This was, this quarter, on the border line. But I think that AirTech is doing good compared to where it used to be a couple of years ago. I think this graph shows 2 clear patterns. The first pattern is the blue and down. That is all segment except batteries. All segments, except batteries, I look upon this graph, and I say that it's stable to slightly increasing. And when it comes to batteries, I mean, all of the large orders that took place a couple of years ago are now out of the system, and depending on how the development is in different markets, it is substantially weaker than battery outlook. CT, stable development. Other industrials, a solid, good development. Commercials, the supermarket side in North America, but also the acquisition of ZECO is making strong progress there. Components, a little bit twofolded. We are slowing down in the battery, and we are, during the year, improved when it comes to the evaporative pads to the data center market. And service, a solid development. Battery. I also here see a 2-sided coin. The long-term outlook remains valid. Electrification will take place. At the same time, I think we all have heard what is happening now in the transition of EVs around the globe, and we're anticipating for 2025 challenging conditions to remain. All in all, it is an overcapacity in the Chinese market. It is under pressure. There are overall fewer projects globally, particularly in China, U.S. In Europe, I see still it is work ongoing with several larger projects, but they are pushed forward, but smaller projects are coming in. There are new entrances, new players coming in, in the market. And some of them have offered their help to battery factories, and very, very seldom, they have been able to live up to their promises. For me, that represents a positive future, i.e., some of the newcomers in here will most probably be weeded out in the future. Moving away from battery then. All the other segments, here represented in AirTech by a super-efficient cooling solutions for food storage in supermarkets. By using both a cooling pad solution and the normal cooling solution, a lot of energy savings can be generated. And also the vegetable actually are becoming fresher with humidity on top of that. Here, it's a sign of proof where our solution can also help support existing solutions moving forward. Data center continued to deliver. Here, I see several years of continued strong underlying growth. We have talked about a CAGR in the marketplace in between 10% to 11%, 12%. We have a very, very up-to-date innovation offer in the marketplace. We generated a good level of small and midsized order in the market. If I should go back to what normally the seasonal pattern is, then the end of this year and beginning of next year, we normally are also getting larger orders. But here, you know, sometimes the larger orders are coming 1 quarter and sometimes another quarter. But I'm quite positive moving forward for the coming quarters. The order backlog increased. Data center are truly delivering on profitability. It's good fill rates. It's good efficiency. It is good cost control and, overall, a stellar performance. As I said, the volume, but also the lean practices, the positive product mix, continued good price effects. But then, of course, we continue to invest for future growth. So hampered, to some extent, by the investments in our new production site in Europe. But all in all, a solid performance. When it comes to larger orders, and now we have also started to introduce orders that we have not published on press releases. The order pattern and the order deliveries is like this. So you can see we have a healthy backlog leaning into 2025. And on top of that, also, the recently closed Geoclima acquisition. Sometimes I get a question about service in the data center arena. We have moved up our service content currently from around 2% to now being at about 5%. We see more and more retrofit projects coming from colocation customers. It is mainly related to evaporative precooling for air-cooled chillers, i.e., our wet pads. And if I include our wet pad sales then also into data center, from a transactional point of view, we handle it through AirTech, I could add 4% to 5% on top of what we present at service within data center. So gradually, we are increasing the service level here. Moving over to our other top performer in the quarter, FoodTech. I talked about the weaker seasonal effect and timing effects. That is normal. Very often, the last quarter and the first quarter are weaker. This year, we saw a little bit earlier a decline from seasonal effects. The order backlog decreased to some extent. But as you can see, the majority of the segments are green. A couple of years ago, the majority of those segments were red. It continues to see strong margin increases from all regions. Lean practices, volumes, software, synergies within the controller community by bringing in new companies and then generating synergies together with the older existing controller companies. A very, very good progress all in all. And talk about new companies, Hotraco, that we recently signed with, an annual turnover of about EUR 41 million, headquarter in Netherlands, one of the FoodTech subs -- hubs in Europe. Employees, about 140. This generates a much stronger footprint in Europe, 45,000 controllers installed globally that will generate data that we then can bring into our ecosystem. It's an acquisition that is 100% in line with our M&A agenda to grow the digital and the software part of FoodTech. And it's expected to be completed during the last quarter of this year. Our conclusion remains, we will divest the nonintelligent equipment business. At current, it represents 13% of group -- Munters' group sales. It is making strong progress in profitability. But strategically, it is still a clear view that it do not belong within Munters. Also, I said it a couple of times, the continued growth of FoodTech software, 52%. I said that, first, we will double this, and then we will double it again. Now we are on and about SEK 300 million in ARR, with healthy profitability supporting that. With that, I hand over to you, Katharina.

Thank you, Klas. And as Klas has already mentioned a couple of times, we had 2 business areas delivering really strong results in the quarter. So that was Data Center Technologies and also FoodTech. In AirTech, we saw a weaker development due to the market situation in battery. I have now been with Munters for about a year. And I'm really impressed by the whole organization and how we always not only live our values, but also strive to deliver and ensure the highest quality of service and also the levels in the customer service. But at the same time, the organization is also very quickly to adapt to change and also to drive change. So I think that is very positive to see. And also during the year, we have seen fantastic progress being made in the implementation of our lean initiatives and also the manufacturing footprint and also how we work with innovation. And we have delivered really strong growth and increased profitability. So looking at the quarter here, we saw the net sales increase. And this was mainly driven then by data center, where we continue with the successful deliveries on the large orders. And then we also saw this really strong growth in FoodTech, both in climate solution and digital solutions, and we saw the annual recurring revenue increase over 50% in the quarter. So that success story continues, as Klas alluded to. The adjusted EBITA margin improved, and this was also driven then by data center and FoodTech, and they both had record margins in the quarter, and they have both done a fantastic job in driving profitability improvements. AirTech saw a weaker development, where we had a lower production utilization in all regions. Looking at cash flow, we saw that a little bit lower in the quarter. And here, we had a negative impact from operating working capital. So this was then driven by a consumption of advances mainly in project completions in AirTech. Our operating working capital-to-net sales ratio was at 11.3%. So this is well within our range of the 13% to 10%. And here, it is positive to see that all business areas are -- continue to focus and really drive the operating working capital management improvements. Our net debt increased due to the acquisition and closing of that acquisition in the quarter for AEI, and we also included a lease liability for the new factory in Ireland. But our net debt decreased -- the leverage ratio decreased to 1.9. We reached a very impressive profitability margin then of 16.2% in the quarter. When I started a year ago, we had 14.1%. I thought that was a really great margin. But apparently, we can do even better. So it's a really impressive margin. And one factor driving this is, of course, the strong net sales growth in data center and FoodTech, also in combination with the high factory utilization in several of the factories then in data center and FoodTech. We also saw product mix contribute in AirTech and data center and also net price increases across the business areas. We continue to see strong contribution from operational excellence. So that is also really positive to see. And then I want to highlight that we continue to make strategic investments for scalability in the business. And here, some examples are investments in digital competencies and system support. Looking at cash flow then, and this was then a little bit lower in the quarter and affected by the change in customer advances, where the project completions in AirTech reduced the customer advances. We have received no new advances in -- no new large advances, I should say, in the quarter. And then we also closed the acquisition of AIE (sic) [ AEI ]. And also, we had the second installment of the dividend payment in the quarter. Moving over to investments then. As we have stated in prior quarters, we saw now, in this quarter, the investments -- the capital expenditure increase to 7.9%. And we will also see this continue in the coming quarters as we continue to work with our new site in Amesbury, the new large factory there. We also make other investments, of course, in innovation and in IT and digital linked to our prioritized areas. And then I should also mention that the operating working capital has a slight uptick in the quarter then, and that is due to the consumption of the advances mainly in AirTech. We have maintained a stable leverage ratio. So it's 1.9, and we closed the acquisition then and also paid the dividend. Do note also that during the third quarter, we announced the acquisition of Geoclima, the Italian company that data center has bought, and that one will close in the fourth quarter. And also yesterday, we announced the acquisition of Dutch Hotraco that we also expect to close in the quarter. Now I would like to turn to our sustainability KPIs. So we have set targets for one scope -- for Scope 1 and 2 to be net zero by 2030. And this is a journey that we have been on for several years, of course, and we have made good progress, but we also have some way to go. And as you can see here, the renewable electricity in our factories is then 79% in the quarter, slightly down. This is due to the recent acquisition. So if we exclude that, the number is about 81%. We also work hard with our Scope 3 emissions that we want to reduce. And the use of our product is, of course, the largest emitting factor for us. So here, it's very important for us to make sure we have as energy-efficient products as possible, and it's a top priority in our innovation and product development work. On the social side, we want to increase diversity, and we know that, that is a factor for a stronger innovation and a factor for a more inclusive culture and also for employee engagement. And the target we have set here for ourselves is to then have, by 2030, 30% of women in the workforce and also as leaders. And here, we have numbers of 23% and 22% in the quarter. And if you exclude recent acquisitions, those would improve to 25% and 23%, respectively. Looking at the governance side then, we want to highlight the code of conduct. We work with the code of conduct for employees, suppliers, and then we are also developing a customer code of conduct. And in the quarter, we had 98% of our suppliers signing the supplier code of conduct. And here, it's good to note that in every quarter, we always have some suppliers in and some outs, so there could be a timing effect to why we are not at 100%. So we could have a slight deviation in the quarters. Also on the sustainability note, I wanted to talk a little bit about the service ambition. And service is, of course, a very important factor in making sure that we improve the energy efficiency in our installed base, hence, to reduce the Scope 3 emissions. And how we define service is the aftermarket service in all business areas, and then we add the FoodTech Software-as-a-Service revenue to that. We also measure components, of course, and we have set an ambition for the group to have service and components together to be more than 1/3 of the group's net sales. And the number in the quarter was 23%. And then if you look at the last as 12 months, it was 25%. I should mention that we have seen a slight impact on the components side due to the weakness in the Asia battery market then. All in all, we are doing very good progress on service. So we're very happy to see that. And with that, I would like to hand it back to you, Klas.

Thank you, Katharina. And let me start to summarize the quarter then before we move into Q&As. We have 3 financial, externally communicated targets. It is currency adjusted growth, in total of above 14%. This quarter, we reached 10%. It is over a business cycle to be about a 14% adjusted EBITA. This quarter, we reached plus 16%. And the operating working capital to be in a range of 13% down to 10%. And this time, we were closer to the 10% than the 13%, 11.3%. So 2 out of 3, and we continue to work with all the 3 moving forward, of course. So on a larger scale then, the quarterly highlights then. First of all, I mean, a super strong result and demand in 2 of our business areas, FoodTech and data center and then also in most of the end user segments within AirTech. The battery outlook, the battery market continues to be, short term, weak, but the long outlook is that the CAGR for -- towards 2030 is in between 10% to 20%, 25% per year. We have, for sure, strengthened our market positions through M&As and partnership that is both in FoodTech this quarter and also within data center. We showed a solid growth and robust profits driven by strong net sales. So all in all, I'm pleased with the quarter result. So with that, over to Q&As, and welcome Ann-Sofi.

Thank you very much, Klas. Yes. So now we will go over to Q&As. [Operator Instructions] And I know that we have a few questions on the conference call. So I suggest we kick off with a question from the conference call.

[Operator Instructions] The next question comes from Joen Sundmark from SEB.

So starting off with the question on AirTech regarding the negative organic growth of minus 4% on orders. Could you please give us some more color on the price/volume mix on this region and perhaps the trend you see exiting the quarter?

Okay. It was a little bit difficult to hear the question, but it was about AirTech. It was about volume and price mix at current then if I heard the question right then. I mean as we presented, I mean, in most areas, subsegments, we saw a stable to -- growth in the order intake. We saw a positive price effect in those segments. The only segment that we saw a clear negative, and that is for the third quarter in a row, and here we anticipated moving forward, that is then in the battery sector. There, if I go back a couple of years, that represented an order intake about 40% or, some quarters, even more. And now we have moved it down in order intake to be around then, this quarter, shy of 10% in orders. I hope that was answering the question that I didn't really hear.

I think the question was also about the future and what we see in the battery market then.

Maybe just to allude on that then. I mean if I take the long outlook, I mean, that is for sure -- and I think you've heard it from other presenters during the last couple of weeks that the long-term outlook for EVs and batteries is still strong. At current, in definitely 2 of the regions, North America and China, it continues to be weak. And in Europe, definitely weaker but still some activities going on. And our outlook is that we anticipate it to be weak for 2025.

All right. Then second question on data centers, sort of competition-wise, are you seeing competition picking up in the space? Or what's sort of your view on this going forward within data centers?

I think like this. I mean this is -- it is a quarter where you definitely see -- I go back to some businesses being weaker and then other businesses being stronger. And now we talk about the business that is definitely strong. I'm super impressed, first of all, with what data center is delivering. And of course, very often, you focus on the bottom line, but here, I talk about actually everything what they do. I'm so impressed how fast they are to go to market, interaction with the customers, the demands that the customers are coming in with. And just to give you a glimpse, I think that many customers now are moving towards what we then referred to as liquid cooling. Here, I see tremendous progress. Both in collaboration with ZutaCore, as an example, but also how we work with DCUs as an example. So all in all, I'm very positive for the continued, both growth and the market attractiveness in the market. And when it comes to competition, maybe I'm too bold when I say this, but I stand for it. I think we are the innovation leader in the data center cooling at current.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. Maybe just to start off here on -- to build on the battery segment here, and you commented on increased competition. Can you just clarify a bit on what sort of players you are seeing entering the market? Is it companies that sort of has been active in close-related niches? Or -- and then also maybe is it Chinese players, given that their market is weaker? Or if you can say anything there.

Good question. I think this is a question that has a couple of answers. I mean one type of competitors that are coming in, that is competitors that are not really established in this marketplace. And here, I have to say that they have then been driving price down and, at least what we see, very seldom then later on being able to deliver on what they have promised. A few of the cancellations that has not affected us has actually been in projects with that type of players. So that is one then for us. Here, I think, and maybe this is too harsh when I say it, but I think they will be weeded out as time goes. So from that perspective, it's good that it's a little bit lower activity in the battery market. Another type of competitors, that is, of course, then Chinese competitors. At current, we don't see Chinese competitors in many European markets. With exception, I would say, they are active in, if I call it, referred to it, former Eastern Europe then, that type of region. But beside that, it's more European players in Europe. And in North America, it is more the domestic players as such.

Perfect. That's very clear. And then maybe on the margin for AirTech, and then I have just 2 questions. For the first one, is it possible to give any sort of guidance of how -- or not guidance, but could you sort of split out how much of the effect is from the finalization here of the large order, that is for the complete margin of AirTech? And then also now that you don't have any larger orders left to deliver on within batteries, what are you doing to sort of mitigate this overcapacity? And do you see the risk to this 14% to 16% margin target?

Good question. And if I start with the second part of this, I mean, as you know, we have a decentralized business model. The business is driven and owned by the business area heads. I have full confidence in them that when business is moving up, they accelerate, and when business is going down, they decelerate, so to speak. But to give you a few flavors on what is happening. And of course, we are increasing the cost-out in design type of activities, i.e., it is then how you design and how you make them more manufacturable at a lower cost. We are driving lean in our factories. We are reallocating sales force activities to other growing segments. And then on top of that, we are also looking across the different business areas to see can we transfer products from one business area to another to increase the utilization grade there. And we have had shown a couple of examples in the past when we have moved data center products from one factory into another factory in AirTech. So that is a couple of examples then. One thing to highlight that is in beginning of next year, we will also put in place our new factory in Amesbury, in a similar manner as when we inaugurated the factory in Virginia. I mean we will operate with 2 factories, the old factory and the new factory. And that, of course, will be a transition period for, let's say, a couple of months in the beginning of the year. But all in all, I mean, we are doing many different activities to mitigate this.

The next question comes from Adela Dashian from Jefferies.

Just a couple ones from me. Maybe if we can start on the data center segment here. I mean, I think we all fully understand the underlying tailwinds and trends within this market, but they still have a bit hard time understanding why we haven't seen any large orders come through this year. I mean I understand that there is fluctuations quarter-to-quarter, but still, 2024 is the year with very robust commentary about this industry and yet no large orders. So can you maybe go a bit into more detail of why that is? Is it something that has to do with your existing customer base? I appreciate the color on competition and the progress that you're making on liquid cooling, but could there be any weak spots in your product portfolio? Or yes, essentially, why haven't we seen any significant orders yet in 2024 despite the underlying positive environment?

Thank you for the question. And if I go back and to just give a little bit of flavor where are we versus last year then in order intake. We are, for the first 9 months, ahead of last year's order intake. Last year and in many years, we saw that it is the latter parts very often of the year that larger orders are coming. From a competition point of view, from a performance point of view, I truly see, as I said earlier, that we are in the prime circle, so to speak. Here, it is very much up to customer preferences. I remain very, very cool when it comes to how I look upon the data center. As you saw in one of the slides, we have a pretty strong or very strong backlog delivering into 2025. We are filling up some parts in 2025, and we are starting to fill up 2026. So the only thing I can say, that is I remain very, very confident. And then some quarters may be weaker compared to what perhaps the view of the market is, and other quarters are substantially stronger. That is the only guidance I can say. I am confident.

All right. And then also on the margin trajectory, especially here in Q3 in the data center segment. I mean in Q2, you kind of guided for cost base expansion due to the investment needs, especially in the European market. But yet, we still saw, I would say, a significant improvement in the DCT margins here as well. So yes, maybe what -- is it still higher production utilization that's [indiscernible]? And how do you view that now with -- I mean, yes, the order intake is still higher than what it was last year in the first 9 months. But still with the absence of the large orders, there could be some pressure then on margins going into maybe not 2025 when you're still delivering on this high order backlog, but the coming years after that. So what's your view on that?

I mean, as you know, we tried to frame away from giving detailed forecast. What I can say that is, I'm super pleased with what they are delivering. I sort of become more and more confident that they are step-by-step increasing a sustainable bar for profitability. In the coming quarter then, a little bit like in AirTech, we are putting a new factory in place in Europe. That, of course, will drive investment costs. But on the other side, and I say this with a smile, I mean, we show continuous progress in AirTech -- in data center in North America. When it comes to the future, I would say like this, the product with the highest margin is SyCool. So it will be some mixed adjustments moving forward. But still, I foresee that we will have a strong margin without making any predictions in data center for the coming future.

Maybe if I rephrase the question just slightly. Have your investment needs in DCT been the same in Q1, Q2 and Q3 this year?

The investment needs when it comes to the build in Ireland that has continued during the year, it has accelerated. When it comes to the other parts of the investments, that is more I'd referred to as A&S sales cost, feet on the street, et cetera, et cetera, and that has continuously accelerated. So we are growing, but at the same time, efficiency gains in our factories are improving the margin. Katharina, anything to add on that from your side?

No. I think you covered all the aspects. And the product mix is strong in the quarter, of course, as well and net price increases as well.

Got it. That's great. Maybe just quickly and lastly, on the seasonal effects that you saw in FoodTech in Q3. Was there any type of similar seasonal effects in AirTech also in the order intake between Q2, Q3? And then also going into Q4, is that also like typically a seasonally weak quarter because you have the holiday season? Or does that not really add into things?

If I generalize, the business area where we have the clearest seasonal effects are, that is in FoodTech. And generally speaking, more from what we call then the equipment side, the climate system side, and that is due to when they install in farms, et cetera. This year, I would say that the season started a little bit earlier. Why is that? I cannot say. Maybe it is hurricane season in North America or other things. I frame from speculating. But it is always somewhat weaker during Q4 and Q1. In the other business areas, there are no clear seasonal effect, beside the one that I alluded to in regards to data center. We have seen the last couple of years a stronger order intake pattern during the fourth quarter, and sometimes, that spills over in the first quarter. But that is not seasonal from climate. It's more customer preferences.

Thank you. Then I will take a question from the web to follow-on to the discussion about DCT. We have a question from [ Justin ], who is wondering what the time line for the Geoclima integration into DCT is.

I can start and then also going over to Katharina because, I mean, you can say when you integrate something, you have different time lines, and I will explain why. I mean we have closed it now. Every sales, every order intake, every profitability krone is Munters. Then, of course, when you embrace a company like this, you buy a company due to that you believe it is strong. So then it's about integrating certain, call it, more business follow-up procedures, and I will leave that to Katharina to talk about. But then it's also, I mean, how can we sell together, et cetera? I can say that already after we signed and until close, we have started to operate in sales, in progress there as one company. But I mean perhaps some more flavors on what is the typical integration of our companies that we acquire.

Yes. And we have a very structured process for integration. So it actually starts already when we do the acquisition because we activate our integration teams very early on in the process. So they own the business case and also have very detailed plans early on for how to proceed with the integration. And then we have regular follow-ups, of course, to see how we are proceeding on each of the different work streams. And those are, of course, very detailed on finance and sales and operations and so on. So yes, a very comprehensive plan is in place to deliver on this integration.

And I just want to add one thing. I always say a little bit like this to our business areas. The best way to show that you're doing integration right, that is to outbeat the business plan for the first year. It doesn't always happen, but that is the target. And I see that we are becoming better and better with that.

Great. Thank you very much. And with that, we will take another question from the conference call.

The next question comes from Anders Roslund from Pareto Securities.

Yes. I have a question regarding data center again, the large orders versus the smaller orders or medium-sized orders. Now you -- in the second quarter in a row, you have roughly almost SEK 1 billion, you had SEK 1.2 billion last quarter and now almost SEK 900 million. Should we expect sort of a higher level than the SEK 300 million to SEK 600 million going forward now? That's one question. And then, of course, your comments about the expected large orders towards the end of the year or the beginning of this year, is this what you usually expect? Or do you know that you are in such processes that this could be possible? I guess those type of orders are not just coming in from 1 week to another, that some sort of process is preceding such an order. And then thirdly, about the data center. You have now -- since the third quarter last year, you reached SEK 950 million in sales, and you had a little bit above SEK 1 billion. It seems that you now have a plateau around SEK 1 billion in sales in data center. As I see it, you need to lift that level quite substantially if you are going to deliver according to your order intake. How should we see about the delivery pace in data center? So they all get together, those 3 questions.

Okay. Let me see here. The first question was about -- just to remind me because I have had the answer on my...

Yes, small or medium-sized orders, they are on a higher level now.

Yes. And I think like this, Anders, and you have heard me say sometimes that I regret sometimes that I said this, we have a base business. But if I refrain from that then, I say I see it as a clear indication on our strength in the marketplace and the market as such that we are continuing now to deliver, call it, a -- without any substantial large orders, around SEK 1 billion every quarter. So I see it as not to establish a new plateau or a new level, but I see it as it is a strength in the market and it's a strength in what we deliver. So yes, we have ticked it up to some extent. Then if I go back then to the larger orders. And here, I have to be clear. That is that we are constantly working with all our customers when it comes to when and how would they like to place orders, that is, of course, driven by what they win in the marketplace. Some of them are then bundling together larger orders in one. Of course, we then have a much lengthier, call it, discussion because then it's also about, I mean, do we have the manufacturing capacity, et cetera, et cetera. So that is a more long-taking discussion. And then in some cases, I mean, I shouldn't say it's short discussion, but it pops up within a couple of months, those medium-sized orders. When I say that I'm confident that larger orders will come in some quarters, that is I see it as a pattern. I don't hear any indications from the market that we are not doing what we should do. Then, of course, at the end, I mean I cannot promise anything for each and every quarter, but I can just say that I'm confident that larger orders will come, and in some quarters, they will not. And then to the last question then about -- that was...

Sales. Sales level has hovered around roughly SEK 1 billion now for a year.

And here, I can say, I would be pleased if we could have ticked it up. Last quarter, we had it around SEK 1.1 billion. Now we were a little bit shy of that. I would have been pleased if we could have moved it up slightly more. But I don't see any sort of worries in that we have too low capacity, et cetera. The only thing I can say that is we are gradually moving this up in line with when the customer would like to have what they have ordered.

Is it any reason to believe that clients do want to postpone a little bit the delivery here?

We don't see any signs of that. I can say like this, that of the larger orders, some of the order pallet has actually -- if we take the different installations, have been delivered ahead of the original plans, and others then slightly behind. So -- and this is the beauty with having a larger order portfolio then of similar products. So from that perspective, no, I have not seen it. Maybe then, and this is -- we haven't taken any orders in Europe. But if I generalize, in Europe, the legislation and the permits takes longer time for our customer to get to build a data center. But I mean the majority of orders are in Europe. Katharina, anything that you have on order patterns or...

No. Just on the net sales, it is the timing when the customer wants the delivery. So that plays into it, as you said.

And then finally, on the data center again. You mentioned Europe here. When will we see orders coming in Europe on a sort of a larger scale?

As you know, Anders, I cannot make promises there, but I see now we have soon a factory built that can handle larger orders, and that is the way we did it in North America. And as soon as customers are placing larger orders, we will welcome them as such. We are working diligent in starting to receive small and larger orders in Europe. The complement of Geoclima, maybe I should add on this as well. First of all, it gives us a larger footprint in Europe. Secondly, it complements our product assortment tremendously. You remember when we have talked about CRAHs in North America and the orders we are taking there. If you take a CRAH and you add a chiller, literally, you're doubling the order value, depending on that we, of course, can deliver both CRAHs and chillers. But now we have it in our portfolio, and I think that generates a tremendous strength.

Thank you very much. We're running short on time here, but I would like to take another question from the telephone call -- telephone conference, and I would appreciate if you could only ask one question, the respect of time.

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

So on the order intake in AirTech, if we exclude batteries and components, it looks to have been quite stable during the year. We can read what you write about the market, but just in general, what are your thoughts on demand here when we also consider the kind of lower or more uncertain general industrial activity?

Thank you, Karl. And would you like to answer because I've been talking all the time? Then I start. Then I try to sort of share the exposure here in the best possible way. But generally speaking, we don't see any weakening in our general, call it, business, the normal Industrial business, and that goes for both Europe and Americas. In China, I would say that it is a, in general, weak market, but that has not changed then compared to previous quarters. So a stable to slightly positive, that is what we indicated in the outlook then on the green arrows then as such. It will be a shift that -- perhaps should say that, I anticipate that in components, a weaker component driven towards the battery, i.e., the dehumidification, the desiccant wheels. And most probably a stronger component when it comes to the evaporative pads driven by data center industry.

Great. Thank you very much. I think we have actually room for one more question now from the conference call. So we take another question from the conference call, and if you can hold that to one question as well, that would be fantastic.

The next question comes from Mats Liss from Kepler.

Well, just coming back to data centers, one more. I mean you mentioned the European capacity sort of being implemented early next year. Has the lack of capacity in Europe been a, well, constraint for you to gain orders in Europe?

Thank you, Mats. I have to say not really. It is great that we have the capacity now. It is great that is not the new build that we have the chiller capacity. But if I generalize, no, that has not. It is more the, call it, our footprint in Europe. And also if you go in and take a look upon where is data center growing, it is a substantially higher market growth in North America compared to in Sweden. But I think with the new footprint we now are establishing, both the acquired and the built, we are really set up to drive growth in Europe. And perhaps I also should add. When we are building new factories, we are also building them in a way that whatever we produce in North America, we can also produce in our new build factory in Europe. If we need to balance, support North America or support Europe.

Great. And just to add one other question, and that's regarding FoodTech there, and you have the Hotraco acquisition. I mean are you sort of fully prepared now to grow the Software-as-a-Service business? Or should we expect more acquisitions to be needed there to fully be up and running?

I think like this very much. Now, if not all, the majority of tools that are there to work with are now provided within FoodTech. Now it is for them, and I am very confident that they will show that. They will generate software growth, and they will generate synergies, and they will generate controller growth. And then when that is established, then we should come back and see if we need to add more.

Great. Thank you very much, Mats. And thank you, Klas, and thank you, Katharina. And thank you for everyone who has listened in, those of you on the conference call and for those of you who are viewing us on the web. Do feel free to reach out to me or the rest of the IR team, Line or Daniel, if you have further questions. And we look forward to see you again at the presentation of our full year results at the beginning of February. So have a nice day. Thank you.

Thank you.

Thank you.