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

Warm welcome to today's presentation of Munters Q4 and Full Year 2024. My name is Line Dovarn, and I'm Head of Investor Relations. And I'm joined here by CEO, Klas Forsstrom; and CFO, Katharina Fischer. We will begin, as always, with the presentation and then move over to Q&A at the end. Klas, please go ahead.

Thank you, Line, and welcome to the studio. I know this is your premier in this position.

Thank you.

So once again, a very, very warm welcome to this Q4 and full year report. Let me start with a little bit broader picture before we go into the details. It is an overall record performance achieved for the year by Munters. I talk about turnover, order backlog, profitability and even more pleasing, cash flow and operating working capital moving in the right direction. This in parallel, we continue to invest for the future. If I go into the quarter, it's a quarter with 2 business areas performing very well. Data Center, strong invoicing, high profitability and increased order backlog. FoodTech, I repeat the story, strong invoicing, high profitability, increased order backlog. And very important, ARR, our software business continues to improve step by step. Both business areas, I predict with a solid market demand in the coming quarters and beyond that for some areas. AirTech, a flat net sales, weak profitability and decreased order backlog. We are taking measurements that will start to pay off fully the second half of next year. So a weaker start for 2025 (sic) [ 2024 ], we had a gradual improvement and a stronger H2 versus H1. Moving back then to the quarter. Order intake came in 23% below. With that said, we had 2 large orders within the Data Center Technology. Excluding those, we did generate a growth in data center of 60%. For me, this is a sign of a very, very strong underlying market. AirTech declined, driven by a weaker Battery market in all regions. FoodTech increased strong growth in digital solutions, specifically in the 2 regions, Americas and EMEA. And order backlog increased with a few percentage, mainly orders in DCT to be delivered '25 and '26 when it comes to order backlog. Moving down over to the net sales increase with 19%, very pleasing, the best net sales quarter in our history. AirTech flat. Weaker Batteries, as I talked about, offset by some growth in EMEA. Data Center increased. Very pleased to see the strong drop-through from orders into net sales. FoodTech continue to grow strongly. Strong contribution from both sides, digital solutions and equipment. And all in all, we generated a book-to-bill in the quarter close to 1. It was stable profitability. Very often, we have a weaker quarter 4. It was an adjusted EBITA margin of 12.6%. Data Center and FoodTech, as I said earlier, driven by a strong net sales growth, generating a good drop-through. All business areas generated good positive impact from lean practices and other operational efficiency initiatives. In AirTech, under-absorption due to lower demand from Battery. All in all, the year ended up on a 15% margin. Different regions. As you can see, step-by-step, we have continued to be more and more U.S. American driven. And Americas is the main driver for growth also this quarter. Order intake, full year 56% order intake in the quarter, 62% of the total order intake steam from Americas. EMEA, about 30% and APAC around 10% -- in between 10% to 15%, depending on if we talk about net sales or order intake. The shift moving more and more towards America, I think that will remain. AirTech across all the different regions, it is the same story. It is very much Battery driven. DCT, a strong underlying demand, very pleasing to see, something that I talked about over the last couple of quarters. We are coming closer and closer also to direct business with hyperscalers. We increased the hyperscalers orders. Our solutions are becoming accepted into hyperscalers as well. DCT in EMEA. It is not us, I would say it's EMEA, a somewhat slower development, but very pleasing. The first combined order of CRAH. CRAH units and Geoclima chillers. It is a proof point that our strategic choice to acquire Geoclima is really starting to pay off. Already in the first quarter, we have them in our books. APAC, a couple of years ago, APAC stood for close to 25% of our turnover. I cannot say that I see any change there. It is still at a low level. It is not really declining, but it's not picking up either. AirTech then. I think the most important thing that is to take a look upon the arrows on the right side. Most subsegments are stable to improving in market demands in the coming 6 months. One segment definitely continued to be weak. I said something like this that I expect Battery to be in between 10% to 20% of total order intake for the coming quarters when we talk about AirTech. With that said, there are things still happening in the battery. So if we can play our cards well, if we can generate some of the orders that are boiling out there and the customer will close those orders, it could be a quarter also when we are about 30% of the total order intake coming from Batteries. But if I generalize, I predict a continued slow Battery market through the full year. Investments and lower volumes affecting margins. All in all, and you will hear Katharina talk a little bit more about this. I mean, the net sales is flat. We are investing for the future. We have underutilization in a few factories, primarily driven by batteries. Our estimate that is that this effect from battery is about 3% units drop in margin. We take actions and activities to mitigate this, everything from moving production from one factory to another, shortening the FDs, decreasing those and other cost mitigations. Our belief in the battery market remains strong. This is a temporary slowdown. So it's not about doing too drastical activities in this area. It is about adjusting to a slower market. All in all, the full year order intake flat, net sales decreased, adjusted EBITA margin declined to some extent. If I zoom out on this, and those of you that has followed us, you know this is how we divide our order intake patterns. The light yellow, the large orders, the brownish Battery segments, smaller orders. And as you can see, Battery is continuing to deliver. And this -- now I'll come back to what I said earlier, 10% to 20%, it could be a quarter where we have even 30% plus, but it's very unpredictable. But the other observation is the rest of the markets are either flat or slightly upticking. So it is a Battery challenge at current. And what about the segments outside Battery? Food processing, spray drying. I don't know how many of you have reflected on how much of our food is dried powder. It's baby milk powder, chocolate powder and, in this case then, vegetarian-driven or vegetable-driven type of powder, a very large industry. And here, we are delivering system-critical installations. It is either the dehumidifying part, the PureSystem, in this case, representing a PureSystem called 4000 or it can also be how we generate and take out the humidity by reusing heat. So all in all, I mean, a combination of a PureSystem and a VariMax 90% of the heat is reused, an extremely energy-efficient process. Coming back to Data Center. Super pleased with their performance, super pleased that they have proven that they are now winning orders related to Geoclima, and I will come back to what I mean with that. Also very pleased when I see that now we have shifted to some extent, the order pattern direct from hyperscalers and through co-locators. And just to take that question directly. This is not at all an indication that colocation is slowing down. Keep in mind, we talked about the SEK 2 billion order intake based upon smaller to midsized order. So colocation continue to be a very, very strong source. I don't see, we don't see any indications that investments into this area will slow down. Then, of course, as always, order patterns are unpredictable, but I mean now we talk about filling up 2026, 2027. So we are always one step ahead. When it comes to profitability, a continued strong profitability driven, of course, with volumes, a good drop-through. We need to remember that even if we always closed down during the winter season and holiday season, we did that as well. So compared to last year, not really changed compared to the quarter before, of course, a change to some extent. What I think is the most important number to remember here, that is 19.8%. I see now that our data center community, the strong drivers there, they have now established themselves in the range of 19% to 20%, something that I'm really, really proud of on their behalf. The strong larger order backlog, if I gather all this together, it is an indication that we have on large orders for this year on and about SEK 4 billion plus in large orders to be delivered during the year. And then, of course, beside that also smaller orders. One reflection when it comes to order pattern. We see that customers, independent if they are co-locators or hyperscalers, they are now so confident when it comes to us delivering. So they are putting orders somewhat closer to when they need to have them. They're also not prebooking, if I call it like that, or the capacity 1.5 years ahead. So I think the most important thing now is to follow the total order intake. Sometimes large order will appear because as soon as I say the pattern has changed, who knows, then we have a large order. But in general terms, it is more towards a more spread out medium-sized order pattern that I foresee. Geoclima and Munters products, you may remember the strategic rationale why acquiring Geoclima. It is very much towards, among other segments, liquid cooling, but also towards air cooled. Geoclima chillers and our already existing products, if you combine those 2 then we are doubling the segment that we serve. And here, super excited to see that already the first quarter with Geoclima in our books, we are taking the first small orders here. Here, we talk about, let's say, on the range of SEK 100 million. So it's not the large, but it's a proof point that what we set ahead is also delivered on. Moving over to FoodTech. The future for FoodTech is a focused digital offer. It is software and controllers. Also here, very pleasing to see yet another quarter where we are growing well above 20%. This quarter, 46%. You heard me say, first, we aim for SEK 400 million, and then we are intending to double that. I mean we are closing in on the SEK 400 million ARR number here. 46% in software growth during this. The future ahead here, that is to develop existing segment, penetrate those more, replicate what we have into closely attached new segments and then in certain areas, also create a new market by taking the data we have and offering new solutions to our customers. So it is building the base, expanding the base and inventing the base. The review on equipment business that was initiated continues. I'm very confident that we will deliver on that. I'm the first one to admit, it has taken longer than what I believed. As soon as we have an update, then it will come. I promise you that. Coming back to the different segments here. If I summarize, it is very much Americas and EMEA that are the driving forces. Asia continued to be sluggish. Equipment 47%, but digital solution, and I think this is important, represents now 53% of the order intake in this quarter. Step-by-step, we are improving that. The margins, 14.6% adjusted margin in the quarter. Always, we have a seasonal effect when it comes to equipment. To some extent, you can say a small seasonal effect also when it comes to the digital. But once again, we have really established a good underlying EBITA margin here. I just want to reiterate, we are not moving forward interested in maximizing the software profitability. We will continue to generate growth and thereby invest in R&D, sales force and expansion. It's easy to generate profitability in the digital segment. You just close the tap on investments. I talked about Geoclima earlier and the strategic intent when it came to Data Center. Here is another one that I'm so pleased to see. We had in the past controllers within Munters. We added InoBram in Brazil, an American small company and Hotraco in Europe. And jointly, we are working across those 3 continents and utilizing the knowledge, the product assortment, the purchasing power and driving synergies on profitability, but also driving synergies when it comes to how we work with customers and how we expand our customer base. The future of the new FoodTech is growth in software, ARR. Growth and synergies and profit improvements when it comes to our controllers. We have a very strong platform to build on here. Innovation. We have, over the last couple of years, invested a lot of innovation. It is both, I mean, our own products. You have heard the new SyCool and so on, but it's also smaller investments in partners like Capsol, ZutaCore, AgriWebb, one per each business area here. Why is innovation so important? And what is the most important measurement in my book when it comes to innovation? That is, innovation sets the door to the future. If you are not constantly driving new products into the marketplace, I mean, then you are not relevant. And the most important measure in my book, that is how much of your sales is newly developed product because then it is not only about an invention. It is also about commercial success. Munters Vitality Index, i.e., the sales of products developed in the last 5 years has reached 40% now. This is something that pleases me very much. I can tell you that in Data Center, it is well above 70%. For me, that is just sending the signal that we are extremely agile when it comes to adjusting to different trends in the Data Center arena. With that, I'm happy to hand over to you, Katharina, for digging deeper into the numbers.

Yes. Thank you, Klas. So turning into the financial highlights. So we enter 2025 with a continued stable order backlog that is to be delivered then during the coming 2 years. In the fourth quarter, the net sales increased with 19%, which is a combination of organic and M&A-driven growth. And this is in line with our growth ambition over 10%. 2024 was a year where we made several M&A transactions, and we also strengthened the market position of FoodTech Digital solutions, Clean Tech and AirTech and also Data Center Technologies. I'm very pleased with the traction in this area and how we have been able to close these transactions during 2024. As Klas mentioned, the EBITA margin was stable in the quarter. We had both Data Center and FoodTech delivering good margins, offset by a weaker margin in AirTech. Despite the flat margin, we were able to increase our net income significantly with 205% and we also generated a very good cash flow in the quarter. And the cash flow was delivered then by our continued good work in managing operating working capital. And right now we are at a level of 10.2% of net sales, which is well in line with our target then of 13% to 10%. Our net debt increased as a result of the acquisitions made in the quarter. So all in all, 2024 was a very strong year. We achieved good growth and strong profitability, and we increased our cash management capabilities, and we delivered on our strategic agenda. The margin then was flat in the quarter. If we look at the individual components, volume contributed positively, both in Data Center and FoodTech, whereas AirTech then was impacted by the Battery subsegment. Also pleasing to see that we had good net price increases in Data Center and FoodTech, whereas we in Data Center had some negative effects from shifting product mix where we came from concluding on orders with high recurring volumes, and then we have now started up new orders that we are ramping up. Operational efficiency or excellence was then negatively impacted by the under-absorption in AirTech that Klas talked about, although we also want to stress that all business areas are continuing to deliver on their lean initiatives, of course. As in prior quarters, we are continuing to invest in our strategic initiatives for scalability of the business, and this means continued investments in digital competencies and also system support, of course. And then, of course, for the full year, a margin of 15.1%, which is very strong. In the quarter, we recorded items affecting comparability of SEK 117 million. The majority of this, SEK 66 million is related to AirTech and the weakness we have in the Battery market there. And as we talked about before, the under-absorption in AirTech was more evident in Q4, and this has -- this in combination with that -- we see that the market for Battery continues to be weak in 2025, has led us then to revise the organization and identify actions and start to implement those actions in the quarter. And those measurements include workforce reduction, but also manufacturing optimization globally. In addition, we have also strategic portfolio alignment activities. So this is related to M&As that we have concluded during the year and also to the potential divestment of the equipment offering that we have started to separate out from November this year. Since I joined, I have been very impressed by the way the organization initiates and drives activities across handling the working capital. And this quarter, we see the fruits of that. We had a very strong positive contribution from changes in operating working capital. Also in the quarter, we closed and paid the acquisition of Geoclima for Data Center and Hotraco for FoodTech, and then we also increased our capital expenditures. And as we have said in prior quarters, we have ramped our investments. And in the quarter, it was 9.4% of net sales, which is up from the third quarter, which was 7.9%. So this is, of course, an extremely extraordinarily high level, driven by 2 significant investments. One in the new factory in Cork, Ireland for Data Center and the other one for the new major factory in AirTech then in U.S. Going forward, we see the level to come down from the existing level, so to say, but we do want to stress that the level going forward will still be higher than the historical level that you have seen. Also on capital allocation priorities, we will -- we have allocated capital to the investment areas that we identified a few years ago and that we continue to do. If we look at leverage, leverage increased then to 2.3x at the end of December, and this is mainly driven by the higher debt as a result of the acquisitions made during the year. For the first half of 2025, I would like to point out that the minority owners of MTech, our software company, they have exercised their put option with a fair value of SEK 1.1 billion at the end of December. And we expect to pay 80% of the transaction price in the first half of 2025 and the remaining 20% in the first half of 2026. Do note also that the lease for the new major factory in Amesbury will come on our balance sheet from January this year and, hence, impact leverage going forward. The service business is very important for us to increase the efficiency in our installed base and also, of course, then reduce our Scope 3 emissions. We define service as aftermarket services in each of the business areas. And to that, we add the FoodTech Digital Solutions annual recurring revenue software as a service. We also follow up on components, of course, and components have 2 parts, and it's reported in AirTech. It is the dehumidification wheels and the evaporative paths. And the ambition we have set is for Service & Components to be 1/3 of the group's net sales. And in the quarter, we reached 22%. And for the full year, we reached 24%. So even though the increase in the percent of net sales was not significant, we did increase the organic growth with 10%. So going forward, we will, of course, focus then in AirTech on the aftermarket services then and the components. And then Data Center, I want to point out, have during the past years, increased their service share. So they are now at 8% on net sales if you compare to Data Center's turnover. And then for FoodTech, here, we have our shining star, which is the software company, MTech, that are delivering very well on their ARR. So in the quarter now, we report SEK 330 million, which is up 46%, so quite impressive. Then I want to turn to our strategic sustainability targets and report the progress on those. We have set targets for 2030 to reduce our Scope 1 and 2 emissions to net zero and also reduce Scope 3. And as you can see here, we have renewable electricity in our factories at 79% in the quarter, slightly down from prior year when we had 80%. If we exclude acquisitions from this, it will increase slightly to 81%. On the social side, we want to strengthen the diversity as we see that as a driver for innovation and inclusive culture and also for employee engagement. And the target we have set here is for women and workforce to be 30% and also 30% women leaders. And our performance in the quarter was 22% for both, so flat on the women and workforce and slightly improved on the women leaders. If we exclude acquisitions here, the numbers will turn to 24% and 25% and 20%. So we continue to drive activities to strengthen this across the company, of course. And we also have some targeted initiatives with certain leadership programs, and we also have inclusive recruitment practices to support our ambition to increase the female share. On the governance side, we have chosen to focus on code of conduct, and we have a code of conduct for employees, suppliers, and we are also developing one for our customers. And on the supplier side, we have a 99% achievement in the quarter. And of course, the target is 100, but you will always have a few suppliers in and out, so to say. So a small deviation can be accepted here. And with that, I would like to hand it back to you, Klas.

Thank you very much, Katharina. So let me summarize. We have 3 targets when it comes to financials. It is currency adjusted growth in total above 14% over a business cycle. It is an adjusted EBITA margin of above 14%, and it's an operating capital on 10% to 13%. We are delivering, I was close to say, as always, on 2 of those, and those are varying in between the quarters, an adjusted growth of 12%, an EBITA margin of 15.1% and then on the year and then operating working capital an impressive, I have to say, 10.2%. The other story I would like to reiterate that is -- when I and parts of the management team came in 2019, we didn't have any dividends at all. Step by step, we have improved the payout of dividends, and the Board is now proposing a dividend increase with 23%, of course, to be formalized during the AGM later on during the year. But for me, this is another evidence of continuous improving company, who always aim to increase the dividend either by increasing the share, now 30%, or the result that you base your share on. Full year highlights. We continue to strengthen the foundation for future growth. Yes, Battery is a downtick at current. But if I look ahead a couple of years, this, in my book, is an unstoppable trend. It is not only EVs. It is also about energy storage. It is about energy balancing. So Battery will also come back. That's the reason why we are doing adjustments, but we are maintaining the course for the future. Overall, record performance achieved in the year. I'm so pleased to all our employees what they have delivered, yet another record year. As I said earlier, we invest continuously to stay ahead of the curve. That is in innovation, repeating what I said, 40% vitality index. I think that is a proof point of a company being very forward leaning. And then, our belief is in line with our purpose for customer success and a healthy planet. Thereby, we invest in our operations when it comes to sustainability commitment, but we're also investing in innovation in order to help our customers to become more sustainable. So with that, I think we open up for Q&A, and we welcome Line once again here.

Thank you, Klas and Katharina. Yes, we are now ready for the Q&A session. Yes, we are now ready for the Q&A session. So those of you listening to the webcast, you can post your questions and we will address them here. And for those of you dialing in to the telephone conference, I ask you to please limit yourself to 2 questions at a time. And you are welcome to join the queue again if you have more questions. So we'll hand over to the telephone conference, please.

[Operator Instructions] The next question comes from Adela Dashian from Jefferies.

My first question relates to the Data Center segment. And it would be great if you could provide some color or initial thoughts on the recent news flow. Obviously, the market has had a big reaction to that DeepSeek [ surrogate ]. Is there anything you can say about how your market position could potentially be impacted in either direction? And then maybe also as it relates to colocation, which many have been viewing your minimal exposure to hyperscalers versus colocation as a negative, but do you now see, let's say, that there is a reduced computing power demand. Do you see your colocation exposure as a positive? Or yes, any color there would be great.

Thank you for the questions. And if I start a little bit in zooming out and if I talk about the 2 matters, then DeepSeek and substantial announced financial support in U.S. as an example. In our view, both are positives. DeepSeek, of course, that is how you drive efficiency in your search engines and how you generate the data and message it, so to speak. With that said, that drives the artificial intelligence forward. Our products, independent if it is liquid cooling, combination of liquid cooling, air cooled, et cetera, the demand for those products will continue to be strong. We don't see any indication that short term, this is a slowdown. On the positive side, definitely, that is, of course, that both our customers and initiatives announced in U.S., there is a continued capital inflow into the buildup of data centers. So in short, I view them as, first of all, data center market is rapidly changing and we are rapidly changing. And then capital will continue to flow into data center. On the other question, I view this as a positive. And I think when it comes to the shift in between, it is just reiterating the story we have said many times. At the end, the driving force for all -- most of our data center sales, it is the hyperscalers. And I've said many times. Sometimes, it is direct sales and, historically, we have had a smaller portion of that and then it is through co-locators. The lower percentage of co-locators is then calculated on a higher number. So in reality, it is a strong colocation, smaller to medium-sized order intake as well. So all in all, I'm super excited for the future of data center as such.

I hope that counted just one question because I actually have another, but I want to be respectful of everyone else listening in. On AirTech margins, you've previously guided for, or I should say, you've given us a range of roughly 13% to 16% EBITA margin is where you feel comfortable. But now obviously, with the weakness in Battery, we probably shouldn't expect that Q4 also reflects it too. And you also say that you don't expect an improvement until the second half of the year. Like can you give us some -- when can we expect you to get back to historical, if you will, or more recent better margins in AirTech?

But it's a very fair question. And I can say, I'm not -- I'm disappointed on the margin that we deliver in AirTech. There are many different reasons behind that. And I mean, it is better that the reason is that it's a lower market, then it's internal misbehavior, so to speak. So what we are doing now that is we're taking mitigating actions because this accelerated during the fourth quarter. And we see that the Battery market will be weak, but it's still coming in orders. And step-by-step during the quarters then, a weaker first half and a stronger second half. And I aim to be pleased during the second part of the year, i.e., to be back there. But that is not the forecast. That is just saying that is what I expect our Data Center team to deliver on.

AirTech.

AirTech, sorry.

Maybe a little bit on that, Klas. I would also like to say that you also remember that in the first quarter, we will run double factories and move into the new big factory in AirTech.

Yes. It's good to have that on top of the mind as well.

Yes. So likely down further in the first half or at least in Q1 versus Q4.

The second half -- I look forward to meet the second half of next year.

We'll take another question from the telephone conference.

The next question comes from Joen Sundmark from SEB.

To continue on the topic. AirTech, it looks like sales is up a bit here, yet you mentioned lower capacity utilization rates affecting margins negatively. So do you expect this to be the only reason for the negative margin development? Or could pricing and sort of negative mix also affect it, going forward? Or how do you see that?

I can start and Katharina can add, if she thinks that I miss the main points then. I mean the major driver of what we had summarized to 3% in effect in this quarter, that is volumes and then underutilization. But then, of course, we have also started to implement more capacity, meeting the market when that returns. So that has also had an effect. But the main portion is, of course, the underutilization and in the factories. But Katharina, any...

I think you can add that we, in prior quarters, also have talked about the increased competitive pressure also in Battery.

Absolutely.

Okay. That's very clear. And then moving on to Data Centers, sort of looking beyond the mega orders that you showed last year, you still show a quite solid growth now in Data Centers. Would you say that you are taking market share here? Or what's sort of your view on this?

What I'm very confident on that is that we have, if not the best, because here I'm biased, definitely medal podium product performance. We are leading the innovation game in data center cooling. I reiterate more than 70% of our sales in data center are driven by products with an age of less than 5 years. So technology share, definitely, we're taking. In my book, we are also taking share in Europe because we have increased a little bit in Europe. And then we are defending or slightly taking share also in North America. I think the most important call it, measure here is not to look upon the order intake there. It is to look upon our net sales increase because that is actually what is delivered to the market in each and every quarter. I'm super confident. I said name to you and don't see this as next year. But our ambition is step-by-step to double the sales.

Okay. And just a follow-up there, if I may. You have your facility in Cork now being up and running. Sort of thinking about the normal lead times in data centers and the market in Europe, is it Geoclima now that's sort of showing numbers increasing there? Or how do you look at the market in Europe and order intake?

I mean, if I compare U.S. to Europe, the European market is growing at a slower pace. I mean the data center market is growing at a slower pace. That is due to, among other things, regulations and stuff like that. America, U.S. are the driver of innovation and investments, et cetera. When it comes to Cork, we will step-by-step now implement and fill up that factory. So that is not full at current. But that is the normal plan as we do it. Then what is pleasing with Geoclima, that is, as I mentioned earlier, we have taken the first combination order. Geoclima chillers and our air-walled solutions. That jointly then generates double order intake in that specific project.

We'll take one more question from the telephone conference.

The next question comes from Gustav Berneblad from Nordea.

Maybe just to build a little bit more on AirTech there and sort of you announced several cost savings here. Can you just elaborate a bit more on how much or how much these cost savings are and then also when we will see this take effect?

Katharina, would you like to start?

Yes. So I mean, the measures we are taking include workforce reduction across the 3 regions and then the optimization of the manufacturing globally. And those impacts will start to take effect in the first quarter and then ramp up during the year.

Can we say anything about the magnitude though?

I mean I put it like this, that is you saw that the IAC was SEK 66 million, a good estimate full run rate that is SEK 100 million plus.

Okay. Perfect. And then I mean, looking at sort of your graph there on Slide #4, I mean, you present that 12% or Battery as a percentage of the order intake, 12%. I mean that implies that the Battery orders are up some 186% quarter-over-quarter if we compare Q4 to Q3. I mean is this just driven by 1 project as you're still very sort of cautious to the market? Or are you actually seeing something here?

Let me view the Battery market from 2 perspectives then. I mean the first perspective, and that is really what we are saying, that is, there is a slowdown, generally speaking, in the battery projects across the globe. We don't see a pickup in China really. Yes, there are orders, but we are not seeing a pickup. It is definitely -- has been a slowdown in North America. As I said earlier, perhaps the boiling market still is medium-sized orders within Europe. I look forward, my belief is, we will, in general terms, have a 10% to 20% order spread, i.e., driven by batteries. With that said, there are some interesting semi-large projects that we are working on. But it's very, very unpredictable if that they will come to an order, if they come to close. But if so, I would not be surprised that 1 quarter may have even 30% of the total order intake in AirTech. But the main message is, it is a year with a slower order intake or a market. But our belief moving forward, that is, this is an unstoppable force. It is EVs. It is energy, call it, balancing and it's also energy storage.

We'll take another caller from the teleconference.

The next question comes from Carl Deijenberg from Carnegie.

So I just wanted to come back to AirTech again then. And if you could explain a little bit of the sales development here sequentially because I recall that the second large battery order that you finalized or took in 2022 was finalized in Q3, and now you're reporting it on net sales almost being up 10% sequentially. While orders have still been trailing below what you have been reporting. So can you -- or on the net sales. So can you talk a little bit of what's driving the sequential development in AirTech Q4 versus Q3, that will be helpful.

You're absolutely right. I mean, the announced larger orders were closed in Q3. I think you can look upon this from 2 perspective here as well. I mean, first of all, Battery is not everything, i.e., it is also different segments that are delivering. And then on top of that, we had smaller battery orders that came during the year. So it's a combination of a good strength in general in the non-Battery markets. And then what we have to add also, of course, we have also brought in nonorganic portion, I mean, while adding companies. So a combination of those 3, I would say.

Okay. Very well. That's helpful. And secondly, I also wanted to ask I mean you elaborated to it a little bit previously, but on the DCT margins, I mean you have been talking about cycle margins being accretive for the division and versus the CRAHs, for example. And now you're going into '25 with a mix, which is obviously a little bit different versus what you have been delivering on here in 2024. So I just wanted to ask a little bit the margin that you're reporting here in Q4, is that, let's say, reflecting the mix that you're set to deliver on here going into the new year? Or is there anything else we should take into account when we look into 2025?

But you're absolutely right. I mean the highest margin we have on the well-established cycle. We have 1 large cycle order continued to deliver through the year. If I recollect my memory, it's about USD 137 million. That is to be delivered during the first part of the year. Then we have brought in other products then. And some of those products have a lower margin. So we will have a mix effect. With that said, you remember when we started to introduce SyCool, after that, we step by step, we're improving the margins. But the short answer, yes, over the year, we will have a mix effect. But on that lower mix, we will continue to improve how we operate, et cetera.

We will take another caller from the telephone conference.

The next question comes from Mats Liss from Kepler.

First, I mean, coming back to AirTech there and you mentioned the acquisitions that you have made and contributed to sales. Could you say something there about the earnings contribution also? Maybe you touched upon that during the presentation, but I wasn't able to listen to that. And will it continue to be -- or will it sort of affect margins going forward in any way? I mean, please?

I think what we can say is that for Airprotech that we acquired, that one had a quite good margin in the fourth quarter. But I also want to point out that in Clean Technologies, the margin can vary between quarters.

I have a little way of saying when I look upon our acquisitions, and I oversimplify now, but I think it's fair enough. The first year, we invest and we deliver and we are a little bit behind what we have put forward as a business case. So far, in most of our cases, 1 year after that, we are ahead of our business case, both when it comes to sales and when it comes to the predicted...

Then, well, looking at FoodTech, I mean you have the intention to divest the equipment part of FoodTech during previously. Could you say something about the progress there?

Mats, we hear someone in the background very clearly.

Yes, it was about the...

Margin -- divestment of FoodTech.

Yes. If you could repeat that, Mats, maybe...

Yes, sure. Sorry about the sound. Yes, I mean, you have the intention to divest the equipment part of FoodTech. And could you say something about how that process progressed?

Absolutely. It is progressing. And I said a couple of times and I said it last quarter, I had expected it to close earlier. I'm still very positive. It is just a matter of that when we reach the position that we can announce it, we will announce it. But I remain very positive on that. So as soon as we have an update, then we will inform the market. And you can see now in the report, we have also split it out the 2 businesses to give you a better view of what is what.

Great. And also, I mean, a similar topic there. I mean, gearing is -- well, it's increasing somewhat, especially if you include the option -- MTech option, which will also increase. Do you see it as sort of -- well, could you say something about the level there? Is it business as usual? Or is it sort of hindering you to move into new projects and areas to some extent?

As I said, it will -- both the lease will, of course, impact the leverage a little bit going forward and also the option payout, of course. But as always, I mean, we are following this closely and evaluating our financing and so on.

What Katharina said earlier and what I also highlighted, we have taken strong, strong strides forward when it comes to operating working capital, cash flow generation, et cetera. But of course, I mean, we need to be targeting where to spend and where not to spend closely, as we always have done.

Thank you, Mats. We have to cut you off there. We have 1 more caller.

Just one final there. And the tariffs were sort of postponed now, Mexican. Could you say something about the potential impact there for you?

Absolutely. First of all, I mean, the general statement that is very valid for us. In general terms, we produce and we sell within a region. It is on and about, max, let's say, 10% that moves in between the different regions. When it comes to Americas, about 3% of our sales in U.S. is affected from Mexico. And here, our intention is to, in the majority of that be able to -- if the tariff comes because this is a clicky clacky movement there. I mean, then to bring forward as much as possible to the customer. But it's a very low number that is affected from Mexico and nothing from Canada.

And we have 1 more caller on the line, so we'll let you ask 1 question and then we have to finish off.

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

Squeezing in here towards the end. The one and only question then. So going back to what you said at the Q3 report, Klas, that Q4 and Q1 are seasonally strong order quarters for Data Centers. We saw it now happen in Q4. Is the comment still valid when you now look into Q1 and maybe also Q2?

I mean this is the silver bullet question. I remain very positive towards the underlying market. I cannot guide you because then I know that I will be wrong when it comes to large orders. I expect us to continue to deliver good, and that goes for several quarters. Last year, I mean, we had extraordinary strong order intake in Q4. I mean, it could have dropped over to Q1. But the simple and fair answer is, I see a very, very solid underlying market. Then I cannot predict when orders are coming, but I'm confident on the underlying market, absolutely.

With that, we are out of time. And so we thank Klas and Katharina for presenting today.

Thank you.

And thank you to everyone for listening in. If you have any further questions, we at Investor Relations are happy to help out, so just reach out to us. And we hope to see you or talk to you soon again. Have a good day.

Thank you.

Thank you.

Thank you.