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

Warm welcome to today's presentation of Munters Q2 Results 2025. My name is Line Dovarn, and I'm Head of Investor Relations. Joined here by our CEO, Klas Forsstrom; and our CFO, Katharina Fischer. So we will, as always, start with a presentation from Klas and Katharina. And then we will open up for Q&As at the end. If you are listening to the webcast, I will remind you that you can ask questions throughout the presentation, and we will address them at the end. So Klas, please go ahead.

Thank you, Line and good morning. Let me open up with some opening remarks and a few words about a quarter that has passed. A solid quarter, really showing our capabilities. And I feel that we delivered growth across all business areas, generating order intake growth of 21% -- 22% and an overall robust margin of 13.6%. Both data center technology and FoodTech delivers on all aspects, and AirTech takes a step forward as planned. Extra pleasing to see that is -- that our latest M&As are delivering growth and profit really from day 1. FoodTech has now repositioned their portfolio from an equipment-driven company to a 100% software and control and IoT-driven entity. A portfolio shift that I feel is quite unique. The data center market is strong, and I enter the second half of 2025 with a strong comfort in our offering and having a market that also show robust strength. The quarter also showed continued delivery on our operating working capital, now clearly down below the target of 10%. So if that was the very high level, let us move into the details then. As I said, solid growth and a robust margin. Increased order intake, steady net sales growth and the robust profitability. And to go into some more details, 22% growth order intake with a 10% headwind in currency, organically at 12%, and structurally, the new M&As really showing strong growth. AirTech, organic growth, very positive sign and a positive development in APAC when it came to order intake. DCT continued to increase, one of the strongest first half years, I would say. Strong demand in Americas. FoodTech, as I said, overall -- strong overall performance. The order backlog decreased some 13%. Please remind yourself on here, we also have a currency effect. Book-to-bill slightly above 1 this quarter. Coming into sales then, 11%, whereof 10% is organic and a headwind of currency here, that is also about 10%. AirTech declined, lower sales in the battery market, but I would like to say that the battery market now has started to really reach the bottom. DCT increased very much so, and the execution of backlog in Americas continued. FoodTech grew, driven by controllers. Moving over to the robust profitability. I mean, in a fairly complex global environment, I'm very pleased to see that we delivered a margin of 13.6%. Solid volume growth, driving margin in DCT, production efficiency, product mix and lean improvements, pretty much the same story as we now have established quarter-by-quarter. AirTech, lower volumes as well as product and regional mix, but the cost-saving measurements are progressing as planned then. And coming back to FoodTech and healthy contribution from all the aspects, although impacted by product mix and investments. And as I mentioned, and you all are aware, this was done in a currency headwind. If I take a look upon the regions, the very short summary, that is strong in DCT, strong in FoodTech, and unchanged in AirTech. But a little bit more detail, regional and end-market divergence then. And if you take a look into Americas, I mean, now represent some 60% of our total order intake, EMEA, 26% and APAC then around 15%. This story is very much as in the past. There are some uncertainties in AirTech in Americas, but there also pocket of growth that we see is picking up. DCT, continued strong underlying market. Chillers is really starting to gain traction. FoodTech, a strong market. The avian bird flu is now controlled in the marketplace, a pick-up will come time after time over the coming months and quarters. Moving to EMEA, continued mixed sentiment across that. But I mean, nothing that has become worse, on the contrary, pretty much as in the past. DCT, there is an active chiller market, but I reiterate that the market in Europe is definitely slower than in Americas. And FoodTech then, a positive market outlook, very much driven by regulations and push for better practices. APAC, AirTech, here we saw improvements in China when it came to battery, and we also saw some growth in the Southeast Asia and Indian markets. We are not large in DCT when it comes to Asia. But we can see that when we now slowly start to enter, the market is definitely strong. And when it comes to FoodTech, China is a market that is mature, and there is high competitiveness in the market, but we makes good strides into that market. AirTech then, as I said, stable quarter with organic growth, very pleasing to see. And if I go down to the different subsegments then and highlight a few then. I said several times that I expected that battery would be in between 10% to 20% of the total AirTech order intake, and it was this quarter at 11%. I also have indicated, and I still have that view that it could be in quarters ahead of us where it will pick up to be perhaps about 25%. But our outlook that is now the battery has reached the bottom and then continued, I'm cautiously pessimistic that I don't see a pickup, but in reality, no real change. Long term, I definitely -- I am more optimistic. Also to mention here, you can see clean technology and service and composite -- the components are definitely showing that the market has underlying growth traction here. Worth to mention when it comes to components, it has a steady, strong underlying growth, but it has been a mix change there. So in the past, we had more desiccant wheel, higher than AirTech or battery and dehumidification type of components. Now it is more pads than wet pads, more data center-driven, just so you are aware of that. And all-in-all, I mean, I will come into the details, but a book-to-bill pretty much on 1 then. Battery and I will not go through all those details. But if I sort of summarize it, in the bottom left corner, there is from now until 2030, a continued strong belief that the market will grow in a CAGR in between 10% to 15%, picking up more in the coming years, but now being slow. In the regions, there are differences. I don't see any differences compared to when we talked last quarter. But it is competitiveness in APAC, but signs of a recovery. It is pockets of activities in EMEA and Americas, especially in labs and smaller projects, and this is really our sweet spot when it comes to that. At the end, I would sort of summarize it that this is a market where the fittest will survive. I can see clear signs in, definitely Americas, and to some extent in EMEA that weaker competitors are now being moved out from the market and leaving the market as such. This you have seen, and I have a couple of comments on this. One pattern that is clear, that is you can see there is somewhat a seasonal effect in between a little bit lower in Q3 due to the different, call it, buying patterns and Europe being close. So that is one, call it, sign. Another sign that is take a look once again on what I call then the blue and below. We have a very stable and strong, call it, base market outside battery. And when I look upon this, I see a continuous steady uptick, not quarter-by-quarter, but the general trend. So I go in then and saying we have a stable base market, and then we will balance the battery on top of that then. Worth highlighting, I will come back to CT. I mean CT, I see more and more activities happening in that type of market. Pleasing to see that we have delivered what we put ahead of us to deliver, a gradual improvement of the margins step-by-step. And also pleasing to see that is, as I talked about, the net sales that is slightly organic and then when it comes to order intake, I should say. And when it comes to net sales, yes, it is a decline, but I mean, very soon that is compensated and reach the average of order intake. The adjusted EBITA margin declined but pretty much on what we expected. And as you can see there, on the dots on the bars, it has started now to turn around when it comes to margins. And our view forward is very much a continued step-by-step improvements on the margins moving forward. Super important, super happy. We have now state-of-the-art factory manufacturing flagship inaugurated in the Boston region, Amesbury. And why is that so important? First of all, it's a modern facility, up-to-date when it comes to smart manufacturing, how we use electrification, how we use solar panels, et cetera, really a green factory. You can say it generates, as we've talked about some short-term hurdles because we have had, and we will have a little bit into the second part also some dual production with other factories before we have closed them fully. But it generates a fantastic opportunity for the future. Being in America, delivering and selling and producing for America. I talked about clean technology. I talked about innovation. And I think this is something that excites me very much. We talk about DAC, direct air capturing of carbon dioxide. Here, we have one in U.S. a first project of hopefully several more to come. It is our products, the components that we deliver. And by using those components, the total capturing of carbon dioxide is 500,000 tons, the equivalent of 110,000 petrol-powered passenger vehicles. And why do I talk about this then? If I take a look upon this customer, not only this installation, but this customer, what the potential could be? The potential if they implement it in all their facilities, it could be a SEK 7 billion potential. Of course, that will not come immediately. But I think it sends the clear signal, Munters and AirTech have many different growth vehicles to come. If I would add then other facilities or other companies across the globe, I mean then, we are closer to a potential SEK 10 billion than SEK 5 billion. So very exciting for the future. I think a first strong proof point that even in today's America, we can generate wins in the green area. Moving in then to data center. The short one, that is order intake increased. It is -- has been one of the best first half years in our history. Yes, order backlog decreased. Some of it is, of course, driven by currency. I continue to reiterate that I'm very comfortable with us moving forward into 2026, and I will talk more about that. And as you can see, it's also pleasing when it comes to product mix that what we have said we should develop, what we have acquired, that is also the type of products that are growing in demand. Data center really delivered on all different cylinders. I mean strong net sales, one of the best order intakes for the first half year, substantially above last year, dropped through to the bottom line, and I can also say I'm impressed at how they handle capital then. All-in-all, when it comes to the sales and the increase there, it is the backlog, strong execution in Americas. Really good to see that the demand for chillers through Geoclima has really started to pay off from day 1. Adjusted EBITA margin came out above 20%, and that makes me very comfortable in saying that we will be in this high teens moving forward. Then with that said, we'll continue to invest. There are some challenges across the globe, but all-in-all, I go into the next quarter with a lot of comfort. This slide, you have seen and I think you have used it. It indicates when are the more -- the larger orders to be delivered. We have added one at the bottom here. It is a USD 47 million chiller order to be delivered during 2026. And the rest of the backlog -- and don't take this as an exact number, but a backlog that you cannot see here, about 50% so far is then for 2026. And that's the reason why I feel so comfortable that we will go into 2026 with a strong backlog fill moving forward. I already talked about chillers then. You may remember, the day or very soon after we announced that we acquired Geoclima, we also announced that we will put up a expanded manufacturing facility in Virginia, I call it, a smaller twin to what we have then, directed into chiller manufacturing. And now we have started to do that. It is set to start to deliver in the second part of the first quarter 2026. And what we will produce there is very much some of the chillers that you can see here. Here, we talk about really high-performing chillers. When I listen around in the market environment, when I hear feedback from customer, up to 20% more energy efficient than any competitors in the marketplace, and that gives me comfort that we are in the premium segment when it comes to chillers as well. Going to FoodTech. Before I start to talk about what they deliver, I would like to reiterate that what a tremendous execution by our team doing a portfolio shift. Being a company that is driven by old fashion type of equipment, now being fully digitalized and software-driven. Many talks about doing this shift, Pia and her team has really delivered on that. So we have reset it, a very strong order intake and the best order intake in history for this type of segments. Controllers and software, book-to-bill 1.45. The ARR increased 11%. If we would adjust it for currency because the large majority of this is in U.S. dollars, it would be 18%. So that gives me the comfort to say we will continue to deliver, not quarter-by-quarter, but in the long run, what we have done in the past, 20% to 40% on average then on CAGR over the years. Also very pleasing here to see, in the same way as Geoclima started to deliver growth from day 1, also our controllers, especially Hotraco, their latest addition from day 1, generating growth and generating profitability. Of course, a lower profitability than software, but still above the average of Munters. You can talk about, I mean, organic growth and you can talk about what a new M&A drives when it comes into company. What is interesting here, both in DCT and in FoodTech, it is our strength in Munters, the receiving end that supports the newcomer, the new family members in driving order intake, they could not have done this by themself. So a fantastic new family member coming into Munters then. The 2 legs, controllers and software. Here, I have 2 examples of the progress that we are doing here. One is from China. A major egg producer in China, we talk about controllers, a contract signed for the future. It is 100% delivered controllers installed within active connectivity, completely connected for the future. Now those are not combined, but I think it gives you -- the 2 orders that I talk about there, but I think it gives you an example how well this connectivity, capturing data use in software. Also super happy to see that during the quarter, signed a contract with one of the world's largest leading egg producers with MTech then. And this is also, call it, a breakthrough in that. So I reiterate it. In the last 5 years, FoodTech have evolved from a traditional ventilation equipment business into a global leader in optimizing the food supply chain with digital solutions. With that, let's dig in a little bit more to the numbers, Katharina.

Yes. Thank you, Klas. So I would like to start by saying that I am very pleased with the strategic acquisitions we made across business areas last year. They have really further strengthened our market positions. The integration is going swiftly, and we already now see clear synergies contributing both to growth and to operational momentum. In the second quarter, the strategic acquisition had a significant impact. So they added 21% to the order intake and 10% to the net sales. And this was also complemented by solid organic growth that complemented then 12% to order intake and 10% to net sales. However, then we also had the negative currency impact of minus 10%. The adjusted EBITA margin remained robust at 13.6%, albeit lower than the exceptionally strong margin that we had last year of 18.2%. Data center continued to develop a very solid profitability. And then also FoodTech delivered a very healthy margin despite ongoing investments. And I think this really demonstrates resilience and operational discipline in FoodTech. The AirTech margin improved sequentially. So it improved versus Q1 margin, although the margin in this quarter then was, of course, lower than prior year. And this was mainly driven by the lower volume in Americas and also an unfavorable mix impact from regional and product mix. And here, there was an impact from the competitive market in APAC. Moving then to a major achievement in the quarter is the operating working capital to net sales. So here, we have improved our ratio down to 9.1%, which is now below our target range of 13% to 10%. And this is really a result of a strong focus that we have and really diligent execution by all our employees across the organization. Our net debt increased, and this was then due to the higher lease liabilities especially the new Amesbury factory that Klas talked about, but also due to the recent acquisitions done that have been financed through debt. Looking at the margin then. It is a robust margin, although it was a very tough comparison, of course, compared to last year. We had volume growth, especially in data center and FoodTech, whereas we had lower volumes in AirTech then in Americas. Very pleasing to see that we continue to have positive net price increases in data center. And -- however, then what we did see was this negative product and regional mix. So for AirTech, there was a negative regional mix, and that is due to a shift towards more Asia Pacific sales than in prior year. And for FoodTech, it was about the product mix, where we had more -- a higher share of the controller sales in the quarter compared to prior year. And this is due to the acquisition of the Hotraco company. From an operational excellence aspect then the underabsorption in AirTech weighed on the margin, while the factory utilization in data center was very strong. So that provided some offset. Another offset was the continued strong lean improvements across all the business areas. And then as discussed in prior quarters, we continue to invest in our strategic initiatives to scale the business really for the future. So there are many examples within FoodTech and also in data center for this, how we continue to invest in digitalization and automation and so on and also in our global footprint. And then finally, as Klas also mentioned, we also had a negative currency impact in the quarter. Yes. Looking at cash flow then. If we look at the bigger picture here on the year-to-date movements, you can see that the operating cash flow was lower than in prior year, and this was then mainly due to the lower earnings and also a less favorable impact from the changes in working capital. And that effect was really strong in last year. As I want to point out, it's not -- it's still a healthy level that we have, but the last year was extremely strong. From a business area perspective, data center continued to deliver very strong cash flow, positive cash flow, whereas AirTech had a negative cash flow impacted by the battery market and then also the underabsorption. The cash flow from investment, the [ SEK 1.3 billion ] here is, of course, a significant number. And the increase here compared to last year is driven by our acquisition of the remaining shares in MTech, and it's also a result of the increased investments in Amesbury and Cork. It's also important to note here that we had the proceeds from the divestment of equipment also, but that is reported under discontinued operations. This slide is only showing the continuing operations. Yes. So of course, we continue to have a very high focus on cash management. That is always very important, and I'm very pleased to see the progress we are making with operational efficiency and also the capital discipline across the business. If we look at investments, so our capital allocation strategy remains highly focused. And of course, we direct investments towards those areas that drive growth and value for the future. In the second quarter, the CapEx to net sales was 5.5%. And that was then a little bit lower than in prior quarters. But I would like to say that going forward we will maintain somewhat higher level of CapEx in the near future. And looking at the rolling 12, we are at 7.9% of net sales, as you can see in the graph. And this further points to this -- that we remain very committed to our strategic priorities, and we will continue to invest in those areas that will further strengthen our competitive position and drive the long-term growth. And one good example was when Klas talked about the expansion in the Virginia factory, where we will then be able to support chiller production in the U.S. and also have a test lab that will support the fast-growing DCT market in Americas. Looking at leverage, the leverage at the end of the second quarter was 2.8. So that is a higher level than last year when it was 2.0. And as I commented earlier, this is then due to the increased lease liabilities for the new factories but also the acquisitions made in the second half of '24 and also in the beginning of this year. And while we do not have any fixed leverage target, we have an ambition to be in a range of 1.5 to 2.5x. And while we are now a little bit above, we are not concerned about that because we know the reasons for us being there is due to these very important strategic investments that are really building us for the future. I would also like to mention that we, during the quarter, have taken many steps towards a diversification of our funding base and really strengthen that. So we have refinanced our sustainability-linked loans. We have also issued commercial paper, and we have established a medium-term note program for the Swedish market. So I think this is a very important strategic step for us and for us also to have it linked and backed by the green bond framework is very important. Yes. And then if we move into service, this is, of course, a very important area for us, and every business area has -- this is a very important priority to continue to scale this and grow our installed base. And you know that we define this as the aftermarket service in all regions, and then we also add Software-as-a-Service in FoodTech, the ARR, and then we also measure component closely. And the components are what Klas talked about earlier, it's the dehumidification rotors and also the evaporative pads. So all of this, we measure closely, and we have an ambition for the group to -- for those 2 combined, service and components to be above 1/3 of group net sales. And in the quarter, the number was 25%. And if you look at the rolling 12, it was 24%. And this then represent an organic growth for service of 4% and for components of 5%. So we remain focused on driving this further. So for AirTech, of course, really growing the global installed base, making the continuous improvements, having more AI-enabled controls, enhanced connectivity and also, of course, making sure our products are much more energy efficient. And we are also improving our system where we increased the monitoring capabilities, the remote support and also make sure that it all runs much smoother. So the whole thing is, of course, to make sure we have higher reliability and create more value for our customers. Turning then to sustainability. So here, I'm very pleased to report that we are making very good step towards our strategic agenda in sustainability. So I talked a little bit about the MTN program that was established. The size of the framework is SEK 5 billion and then in the beginning of June, we issued our first bond and those are then green bonds, and that framework is aligned with the ICMA Green Bond Principles. So we issued SEK 1 billion, and it was a 3-year bond of SEK 200 million and a 5-year bond of SEK 800 million. So this really supports us going forward. And we will also then direct the capital towards more sustainable investment, which is very much in line with our strategy, of course, to make Munters a very sustainable company for the future. So the green framework will enable how we finance things. But then, of course, what really makes the difference is how we operate in our facilities. So one very good example during the quarter is our FoodTech InoBram entity in Brazil. They are the first ones to be zero CO2 emissions. So they have very high share of solar panel energy and then they complement that with renewable energy. So I think that is a very good example of where that entity has had a good planning, long-term strategy to really improve their -- and reduce their energy consumption. Then we have also been engaged in other industry conversations, so to say. So we participated in the International Energy Agency Annual Conference. And that focused on industrial decarbonization and also scaling the global energy efficiency. But rather than me talking about this, I would like to hand it over to Klas, who attended the conference for a few comments.

Thank you, Katharina. And what is this all about then? If I divide it into 2 different areas. One area that is to drive the green transition. And when in Munters you can say, we do it in our operations, as Katharina talked about, we do it with our offer. A typical example is the carbon capture that I talked about, that is green solutions. Beside that, earlier, everyone talked about productivity. Productivity and energy efficiency is pretty much the same type of process. It is about bringing forward products that are more energy efficient. Turn more energy efficient than the majority of our competitors. By doing this, both work with the green energy and work with energy efficiency across the globe, then we really participate in making a better world for the planet, so to speak. So that's the reason why I sign on behalf of Munters, the commitment letter to doubling the global energy efficiency progress during this decade. And that is through our products and how we operate. Good. Let us move then to something else here, I think. Let's see, to the summary, you see here it comes. And if I sum this up then and start to talk about our financial targets. On the numbers, that is what took place during the quarter. And on the graphs, that is what has taken place then, as you can see on this separate time periods. But in the quarter, 21% growth, 13.6% adjusted EBITA and 9.1% operating working capital to net sales. So 2 above and 1, very, very close. I'm very pleased that we have this in this more unpredictable environment. And for me, it shows that we have targeted the right areas to grow, and we have executed in the right way within the company. So moving forward, I think that if we continue step-by-step to deliver more and more efficiency, more and more growth, I mean, in the long run, we will definitely be able to hit the home run on all 3 targets as such. But if I go more into the quarterly highlights then, very pleased with the continued good momentum in the quarter across all different areas, solid execution from DCT and FoodTech from top line all the way down to bottom line. Really good to see that volume and margin-enhancing actions are underway in AirTech, and they deliver what we said they should deliver. And then at the end, I mean, it is not each and every quarter. It is about the quarters that builds up years and builds up the future. So we are really positioned for the next phase of sustainable and profitable growth moving forward. Thank you. So with that, I think we move over to Q&A and welcome back, Line.

Thank you. Absolutely. We are ready for Q&A, and I will ask those of you calling into the telephone conference to please limit yourself to 2 questions, so we have time to hear from all of you, and you're welcome to join the queue again, of course. So I will hand over to the telephone conference.

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

Two questions from me then. The first one on the battery market outlook. Klas, I think you mentioned here that you believe that the weakness in the battery market has somewhat bottomed out. But could you please elaborate on what specific indicators that support that view and whether you're already seeing signs of a recovery in customer sentiment?

But thank you, Adela, for that question. And that is, first of all, I mean, we can see that there is still a weak market, but I don't see a declining market and a few -- further declining market and a few, call it, proof points on that. One, that is clearly seen that is, it started to pick up in Asia. Let's see for the future -- or China, let's see for the future if this is a more temporary uptick, but it's definitely not going in the opposite direction then. And when it comes to EMEA and Asia, it's -- Americas, it's very pleasing to see that what I call them labs and what I call smaller projects, they are still there and we are very much in our sweet spot. I mean here, customers would like to team up with a company like Munters that has a strong support function and application knowledge. On the other side then, that is medium-sized projects, we continue to see an hesitation to call it put on the green bottom, so to speak, and say, yes, we go for it. But what makes me very pleased that is I know that we are definitely, if not front runners, the finalists in quite a few of those. So when that comes, eventually, I mean, then we will have a good chance. So you can say, if I balance it out, more activities in Asia and not less activities in the 2 other markets.

Great. That's good color. And then on the data center market, if I may. It would be great to hear your views on the recent developments here, especially with Amazon launching a proprietary liquid cooling solution. Could you -- I mean I'm appreciative of the fact that you don't give specific customer exposures. But could you mention whether Amazon is a customer to Munters, and how you view this shift to the new competitive set?

Now if I elaborate then without saying that Amazon is a customer, the majority of the hyperscalers we have installments with. But as you know, also, the larger wins that we've done in the last couple of years that have been more towards what we call co-locators, but then, of course, co-locators provide then what they build to many hyperscalers. So my general comment on this. First of all, it is -- it shows that we are in a very attractive market. Many are working with different type of technologies. Secondly, this is not in competition with us, if I may say so. Our, call it, solutions that they are in -- and you know what I mean when I say step 2, step 3 and step 4, this is closer to a step 1. And with that said, it's also so that similar solutions has been on the market. So I don't like to look upon this as a, call it, a fantastic innovation with all due respect. So in summary, this is not worrying me. I think that everything that happens in the marketplace that drives energy efficiency, that makes our products connect easier into whoever works closer to the ship, so to speak, that is great for everyone.

If you could add probably just more towards the retrofit?

Yes, perhaps also, yes, I should also say -- thank you, Line, I mean this is more to the retrofit than really what we are into that is not retrofitting, if I call it, old installations, that is to upgrade it to the latest and best type of forward-looking solutions. But it's a great addition. Thank you, Line.

But can I just clarify the comment that you made about some of the co-location orders also going to hyperscalers. Would it be fair to say that a potential customer like Amazon could also be fulfilling orders within the co-location space?

The simple answer is yes. So co-locators, they are building, call it, they are handling 2 type of end customers. One, that is someone that they are building for on behalf of them, and they hand over a data center to a specific customer. If I generalize, a large customer, quite often hyperscalers. And then other type of customers that is that they operate them on their own or hand it over to someone that operates the many different customers within the same location. And I think I talked about hyperscalers and co-locators earlier, and then I have alluded to about 50% of the historical co-location end customers have come from what we call hyperscalers.

Thank you. We'll take another call from the telephone conference.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. I thought maybe just to build on the DCT here and sort of the larger order you have within SyCool that you deliver on here and looks to be finalized here in Q3. But would you say that roughly 1/3 of that order is still left? And also if you can comment sort of on your comments regarding the positive pricing in the market as well.

Thank you, Gustav. I cannot say exactly if it's 1/3 or if it's 20%, but let's say, in the ballpark of that. And I think the most important thing that is we are now very, very close to have delivered everything of the larger SyCool orders. So that is what we have referred to -- I have referred to earlier as a slight mix change then moving forward. So that is the summary on that large order then. And then when it comes to price, if I generalize, I mean, we have been, on average, in Munters across, we have delivered a price effect of about 3% during the last quarter. I think that is the normal, I always used to refer to when it comes to pricing. And when it comes to productivity, you should compensate the inflation in 2 ways. You should compensate the inflation with pricing i.e., the 3% and then you should drive efficiency with at least as much then. So the pricing effect, if I analyze on Munters is lower. We peaked at about 7%, 8% a couple of years ago. And when it comes to data center, it is, in some cases, we have a good price effect. And in other cases, of course, we compete also on price. But on average, we are not selling on price. That is the best I can give you, Gustav.

Yes. Perfect. That's very clear. And sorry, my last one here. Regarding your comments on avian bird flu and that you expect sort of increased demand in the coming months and quarters, you say. Can you just elaborate a little bit on that segment?

Yes. And maybe I should clarify. Maybe it was interpret -- it is not that it will be a fast pickup, but it is controlled, contained in North America, and that historically means that in a few months or quarters, then it will start to pick up. It is always a cleaning process, et cetera. But always after an outbreak of any type of flus, I mean, then you have also more of a push into the market and upgrades and retrofits and new builds. But I don't expect it to be, I mean, next month, then it will start to pick up.

Thank you. We can take another caller from the telephone conference.

The next question comes from Anders Roslund from Pareto.

Yes. I have 2 questions. One regarding AirTech. The order intake for the battery segment was down this year in the Q2, meaning that you had some growth in the other segments, excluding the battery. Could you elaborate how much down was the battery segment and how much up was everything else in the AirTech business?

The order intake, when it comes to battery represented 11% of the total order intake in AirTech then. And then, of course, that is in current run rate of currency, so to speak. So you can say that, as an example, what Katharina said, that is when it comes to service and component that was growing on and about 5%. So in simple terms, and I don't have -- sorry to, call it, disappoint you, Anders, I don't have the exact numbers. But you can say that it is around 5%, if I sort of balance it out in the rest. But here, we can come back to the, call it, more exact accurate number then. And this all goes back to what we have talked about. If you take a look outside battery, I see a stable to picking up market, showing that our strength is also very much outside that way. And the highlights is that was, to some extent, components and service, but it was also what we refer to as commercials this quarter.

Okay. And my final second question is regarding data center. The SEK 1.4 billion was definitely better than expected, but it's still below sales. And you have a run rate now on the sales level of SEK 1.5 billion, indicating some SEK 6 billion for the full year. To grow the business in data center for '26 and '27, you need to have an order increase of above SEK 1.5 billion. And we haven't seen that for a couple of years now. We have to go back to '23. And we had one quarter, fourth quarter with SEK 1.8 billion. So when will we see a little bit bigger order intake increases? Do you need larger orders or could you go up sort of gradually? Or how should we expect the order flow in Munters to see growth coming '26, '27?

But it's a fair question, Anders. And as you know, we tend not to say, I mean, this is exactly what the orders. But if I'll elaborate on it, I'll give you 2 perspectives. First of all, I mean, I see a very, very strong, call it, interest and super pleasing to see that our recently acquired chillers, they are making a strong progress. So here, I have high hopes or beliefs moving forward that, that will continue to grow. And besides that, also, the market is -- has an underlying growth. I've said a couple of times that if I use the word, I'm not concerned or I'm not worried, I'm very confident that we in -- I don't say next quarter, but in the coming quarters, we have a book-to-bill that is definitely above 1. And at current, we are starting to fill up, as I said earlier, one large order and about 50% of what we have then in the rest of the orders are already booked for 2026. So I'm not worried but it's a relevant question.

We will take another caller from the telephone conference.

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

The first one on my end would be that if we look at the order intake in AirTech without batteries, it seems like in million SEK that the order intake is now down to the kind of lower levels that we saw mid-2024 because during the last couple of quarters, otherwise, we've been talking about an improving order trend for the remaining AirTech, so to say. So I'm just curious here, of course, currency is one thing but are there other aspects that have kind of put a halt to the improving AirTech activity that you have been talking about, which also with 3 to months extension was the aspect that should support a return to higher sales growth as well.

Thank you for question. I mean exactly, as you said, I mean, we have in a substantial, call it, currency effect on and about 10% then across all the different sectors. If I look on it, yes, it is slightly below than last quarter. But really, when I look on the fill rates and moving forward, I see the same type of trend because it is the number of, call it, systems, the number of components, et cetera, that is filling the factories. It is not the value per se then. So it's a continued strong underlying market in this. With that, I think -- and this goes outside also Munters. In the general industrial sector, I would say, there is somewhat of a hesitation then related to the different, call it, tariffs on and off type of discussions. But I see still a very, very strong activity in the non-battery sector then, and two, clear evidence of that in this quarter or three, I would say, that is the components where it's a shift towards more pads. The second one is what we refer to commercials, and that is very much then driven in India. And the third one, there is also clean technology, where I highlighted one quite interested -- interesting product solutions.

Understood. And then the follow-up question is also on AirTech regarding the margin here that we're going from around 5% at the start of the year to 7.5% roughly now in Q2. You inaugurated a new facility here during Q2, and we understand the guidance you provided for like how we should think about the second half. But given that the factory is now, at least inaugurated, will we see a clear improvement already in Q3? Or will it be more towards the end of '25.

If I talk about the factory, 2 things to mention there, what will move into the factory later in the year, that is what I refer to as the process part, i.e., that is the desiccant wheels, the media production, et cetera. So that is still to be moved in during the second part of the year. And then beside that, the majority has now either moved in or is in the up, starting phase to move in. You will not see a dramatic uptick in that -- from that part in this quarter, but you will see a gradual uptick as we talked about. By end of this year, I mean, everything will be moved. We are not running 2 operations in parallel, so to speak. So I go back to what I referred to earlier, I expect a gradual then improvements in AirTech for the remainder of the year.

Thank you. Another caller from the telephone conference.

The next question comes from Mats Liss from Kepler.

Yes. Two questions. First, coming back to data center, then as you probably talk about the SyCool orders, which is on its final delivery phase. And given it's a long project related order, should we expect the profitability to be on the high side now when all the sort of safety-related guarantees, et cetera, are phased out? Or is it sort of a normal contribution to data center EBIT in this quarter?

I mean it is -- we have not had any, call it, negatives or positives in any type of provisions or call it, miscalculations of the project, if you say like that then, ups or downs. So what we have delivered, that is what we get at the bottom line, so to speak, if I summarize it like that. What you can see that is I reiterate that I feel that we will be moving forward, not each and every quarter, but in the high teens and some quarters slightly above and some quarters slightly below then and high teens, you can say that refers to about 19%. So I remain as, call it, forward-looking as forward, we have established that. But I don't foresee that we will be in the 21% area moving forward. And I think I've been very clear on that, at least for more than half year.

One last short question, Mats.

Yes. And on FoodTech area. I mean order intake was pretty strong, I think. And could you say something about the margin mix there in the orders compared to what you deliver sales-wise?

The order here, I mean, we both received substantial orders on the software side and on the controller side. The controllers do have a slightly lower profitability compared to the software. But the -- they have still above than what we have in Munters as an average. What is important to know when it comes to the software, last year, we had a very strong software year -- here. Now we are then reiterating investments to generate growth. So we are not maximizing the software profitability for this year. We are sort of, call it, aiming for the future. But all-in-all, a little bit lower in controllers and a little bit higher in software. But what we know, that is if we will not invest in software, I mean for future, we can deliver in the range of 30% on the software business.

Good. Thank you. We have run out of time. So I know we do have a few more questions that we have not had time to address, but we will reach out individually to you. So I would like to thank everyone for listening in. Thank you to Klas and Katharina for presenting. And feel free to reach out to us at Investor Relations if you have any further questions. I wish you a very lovely summer.

Thank you. Thank you very much.

Thank you.