Very welcome to this Capital Markets Update with us here at Munters. I am Ann-Sofi Jönsson, and I'm Head of Investor Relations. I want everyone who is online with us now to know that please put your questions throughout the whole presentation session. We will pick them up after the presentations and then go through them in the Q&A session. Whenever you have a question, just put it through to us. You just press on the envelope that you see in the webcast, and then it will come through to us. Thank you very much, and with that, I hand over to our CEO, Klas Forsström.
Thank you, Ann-Sofi, and once again, very much welcome to this Capital Markets Update. I'm very pleased that we could have this event, even though the circumstances that are out there when it comes to travels and communications. As you know, Munters has a strong market position. Our markets are favorable, driven by sustainability, energy-efficient solutions, and safe and clean indoor climate. I'm proud and excited to lead Munters together with my management team forward into the coming years. Quarter one was marked as a stable quarter. Our focus was on mitigating COVID-19 activities, but also focusing on starting to implement our newly updated strategy. I'm very pleased with both of the initiatives. During the coming one and a half hour, I hope that you will feel updated on what we are doing and how we are progressing.
The first 60 minutes will be a presentation. After that, we will open up for questions. Today's presentation will be about an introduction related to Munters, a deep drill into strategy, and then connected to strategy, our sustainability roadmap. Those three sections will be held by myself. Then I will hand over to our CFO, Annette, to go through performance management. Then our two Business Area Heads: Peter and Johan, will come in and talk about AirTech and FoodTech. After that, we will open up for Q&As. We deliver energy efficient solutions for business critical purposes into the market. Our purpose is for customer success and a healthier planet. That is why we exist. We make a difference in the world.
To give just three examples, the first one from the farming side, we deliver solutions that lower the need of antibiotics, generate stronger yields, and an improved animal welfare. Our systems, VOC systems towards indoor climate, can absorb up to 99% of the target substances. When it comes to the world electricity production, our equipment cleans about 20% of all installed capacity. I think we truly make a difference. Munters is a truly global company. We are an innovative leader. It was founded 65 years ago. We have manufacturing and sales offices in approximately 30 different markets. We sell into more than 100. We create value in many industries, and a lot of those industries are business critical. It is data centers when it comes to communication, electronics, the pharma industry, the food processing industry, but also the farming and the livestock industry, just to mention a few.
Our core technologies, that is the platform. It is about the humidification and evaporative cooling. When it comes to AirTech offering, it covers many different product lines and solutions. Peter will come back to that more in detail. When it comes to the FoodTech offering, I think this is an amazing journey that has happened there. It goes from hardware being fans, moving into cooling systems, and surrounding the farm with all the hardware, and then adding on sensors and software to be able to steer and extract data from the farms. Johan will drill into that more in details. Shared in between the two business areas, we have product platforms like cooling pads, but then also controllers and the technology behind controllers where we share similar opportunities and challenges. Jumping back to last quarter. As I said, stable profitability in a challenging business environment.
Our focus was on cash flow and continuous improvements, both to mitigate the COVID-19 effects, but also to start to deliver on the refined strategy. We said at the end of the quarter that we foresaw continued challenging business environment for the coming quarters. Moving ahead, moving a few years ahead into our strategy. Munters have unique application knowledge. That is the strength that I see Munters as. I'm amazed when I meet customers, when I talk with our employees, how the combination of strong products and the closeness to the market really becomes a great recipe. The market trends are with us. It is about climate change, it is about population growth, it is about digitalization. The customer needs linked to that, energy efficiency, higher yields, less waste, and of course, improved animal and human health.
What we offer to that is, of course, our products and solutions and the application knowledge I talked about. The application knowledge is based upon the local presence covering many different markets. A strong base for us in the future is the very large installed base of equipment we have. That puts us in a great opportunity to increase and build on our global service offering moving forward. Our refined strategy enables us to reach our midterm targets. I'm even more convinced, despite the COVID-19 situation, that we will reach those targets. The targets are an annual CAGR of 5% net sales growth, an adjusted EBITDA margin reaching 14% in the medium term, and a capital structure in between 1.5%- 2.5%, i.e., the net debt ratio towards the EBITDA. What is this built on then?
In essence, it is built on the spin wheel, innovation, markets, and customers. For customer success and a healthier planet. Let me start out in the outskirts of this picture. Take a look on all the different products and application you can see out there. The windmills, the factories, the farms, the newly sold EV cars, et cetera. In all those products, it is Munters technology either inside or behind. We are helping the world moving forward. A strong spin wheel for successful business development is innovation, market, and customers. I constantly drive the products, solutions that we offer towards the market, generate the solutions for tomorrow already today. Target ourselves towards the markets where we can generate profitable growth and good cash flow. It could be regions, it could be segments, or it could be products.
Being very close to the customers, capturing what the customer sees as a value, being able to translate that, bring it into a value-selling process, and then sell on value. The engine to make this happen, that is excellence in everything we do. It is the day-by-day improvements in all our functions. Small steps every day generate giant leaps over a time period. The fuel for this, that is our people. That is the new people that we attract. It is our veterans and strong contributors that we develop. To spice it up, it is how we organize to be close to the customer out there. Drilling a little bit deeper into customers then.
As I said, customers, we are a customer-centric company, and it's all about capturing customer value, translating that to pricing strategy, being able to sell on value, and go to market depending on geographical market, type of customer, or type of industry in different go-to-market models. During this year, it's a lot of analysis, building the platform, putting together commercial excellence within Munters. Moving forward, it is about creating this culture in the full company of Munters, generating a delivery of additional annual net price increases in between 0.5%- 1% year- after- year. I think a good example is a frame agreement in China for FoodTech. It has a value of more than SEK 100 million. For me, it sends a couple of signals.
First of all, that our offer is appreciated in China. The Chinese swine market is changing, accepting and embracing more modern ways of farming. It is targeted towards large-scale farms. It will be delivered over a two-year period. The second part, that is, it is also a sign, as I indicated in the first quarter, that we see some promising signs in China. It is a rebound from the African swine fever. It's also good activity in general, talking about last quarter. Innovation, the core of every successful industrial company. Here, it's about focus our R&D investments into the right areas, constantly work with our product portfolio to align and adjust and scale down when it doesn't meet our requirements. At the end, combine our innovation process with our manufacturing technology.
The best way is when you develop ways of producing your products in parallel to the new products being installed. It is about focusing on core. That is what we do this year. It is a continuous work with alignment and adjustments. Of course, it is also to build future introductions based on modularizations. The Lego of Munters, different pieces being put together, creating many different opportunities for the customers. On top of that, our digitalization journey. Here we have set a bold target of reaching 40% assortment reduction by the year 2022. I can say, I'm very happy to see the progression taking place, both when it comes to that and also how we have started to work with modularization in our way of thinking in R&D. Here is a few examples then. I start down in FoodTech.
The recently introduced Trio platform, many different controllers now step-by-step being built into one controller covering several different old ones. Innovation, modularization, combined at assortment reduction. A similar example is the exhaust fan platform that recently was introduced as well. A similar example can be found up in AirTech when it comes to our AirC controllers, but also something that I think is brilliant, that is the combination of being able to offer a variety of solutions to the customer, but based on modularized systems, i.e. building blocks combined to offer well-structured customer solutions. Technology. When I hear the word technology and innovation, I shine up. Munters has a lot of strong technology platforms. Its dryers, its VOC systems, and its evaporative humidifiers, its cooling systems of different type. It is purification. Yes, to talk about the core of Munters.
The fascinating thing here that is, it's still so much to be done. By working with the material, by working with the design, by working with modularization, by adjusting it to digitalization and controllers, we can innovate, deliver value, solve customers' problem, and actually increase the prices. A brilliant mix. In more plain words then, what do we talk about? Here I talk about moisture. We can reduce oxidization of metal in windmills, in industrial production, in bridges. We can secure isolations and minimize short circuits in electronics. In a wider sense, it's also about how we make sure that the batteries that are being produced for automotive industry is produced in the best possible way. We can take away mold and fungi or minimize the risk for that to occur, but also clean the air.
Here are three typical example described in a diagram, but in a picture as well that makes it very concrete. This is what we deliver. Markets. We are going to focus on markets where we will win, where we will be able to reach the medal podium. It is markets from different perspectives. It could be a segment, it could be a product, or it could be a geographical region. We will drive service into those markets. Data-driven products and complete solutions is also part of what we're setting up right now. Also here, we've set a clear target ahead. It is to reach 30% our net sales should emanate from our service offer. During the COVID-19 experience, I think this is an example to be very proud of. It is Peter's team that has pushed a solution into the market when it comes to using modern technology.
Health for us and safety of our employees and our customers, being able to give support from a distance. The nice thing with this, it happens right now, and now it's solving a problem, but it's also kickstarting us for the future, and it will generate efficiency gains in service moving forward. Something that I think is very nice to see. Excellence in everything you do. I start to move as soon as I say this. Never settle for good. I mean, the small dance, the many steps. Sometimes I call it . The many small steps that after a while generate a giant leap. It is putting together best practices, ways of working. The playbook.
It is on focusing on lean and quality, and even if our customers are saying: You have the best quality in the industry, we still see that we can improve our quality and minimize the losses internally. It's about optimizing the manufacturing process and footprint. This year it is about focusing on capital, quality, and manufacturing footprint efficiency. Long term, it's aligning all the different processes and the full company to one value chain. An example here as well, and some of you have seen this example, but I think it's a good example that tells the story that we walk the talk. What are we delivering to our customers? We deliver energy efficiency. We deliver improved quality. In our Monterrey plant a few years ago, we had quality issues, and we didn't have the best of efficiency. Here we were able to solve both.
By implementing lean methods, bringing in the right management, we were able to both increase the output, improve the quality, and actually lower the electricity consumption. I think this could have been a customer case of us instead of internal work. Great to see. The petrol for this is our people. It is our people that we develop, that is the people that we're able to attract into the Munters moving forward. It is all about diversity. Why is diversity so important? Diversity drives innovation and growth. It is scientifically proven. The first step is diversity by numbers. Increase the number of females in leading positions, increase the different nationalities. The second step, that is diversity in mind. It's a proven fact, diversity in numbers also drives diversity in mind.
To support this, we have changed our organization, the core of this change, that is to give the two business area the full P&L responsibility and ownership of the value chain. Then across, where it makes sense, lean processes, supporting and sometimes challenging our business areas, driving areas of importance for all of us. Then, of course, a strong finance and strategy function, HR, communication, and sustainability. All in all, the key in this, that is that the business ownership is in the business areas. Moving over to sustainability. Actually, it is not moving over because sustainability is part of our strategy. Sustainability for us is how we design the products, it is how we operate our business, and it is what we deliver to our customers.
Because that is the final proof that our good work internally has generated a good output and a good win for our customers. We have defined a sustainability agenda with three main major areas and eight priorities linked to the three bullets I talked about earlier. The way forward is very simple in essence. Last year, we analyzed and prioritized our areas of focus. This year, we are setting targets, and we are starting our journey. Moving forward, it is very much about being able to show and prove and implement strong, customer-friendly products that generates gains for them when it comes to sustainability. This is one example from FoodTech. I earlier alluded a little bit to the very good development that has taken place in FoodTech when it was from turning them from just a hardware supplier into also a full value chain supplier.
Here we deliver to farmers and integrators full farm solutions, providing a perfect climate for animals and delivering increased productivity. We help them to fully connect the food chain, optimize the welfare for the animals through climate, generate energy resource, minimize energy resource consumption, and increase the yield. What is this all about? Directly, we can affect about 6%, and that is the energy consumption. By doing that, implementing our digital solutions, we are also improving the animal welfare, but we are touching more than 50% of the other sides. For me, this is actually as coming back home. As some of you know, I come from the metal cutting industry. There, products, the cost of a metal cutting product is about 4% or 5%, but it affects the result in production with up to 40%. It's the same here. Just take a look upon those numbers.
If our 57,000 broiler houses where we have our installed base, over a period of 12 years, we are saving an equivalent of more than 3 megatons of carbon dioxide. I know that Johan will talk a little bit more about this later on. To sum it up, our journey ahead is supported by strong market drivers. I feel that the sad event with the coronavirus has actually starting to put us in a better position a couple of years ahead because data traffic has already increased. It will be a higher demand for cleaner air in many industries. How you treat your animals, how you minimize stillness, et cetera, everything is playing in our hands. I'm very excited about the future. With that, I would like to hand it over to Annette.
Thank you very much, Klas, and it's great to be here. Great to connect to you guys that I've met before. For those who I haven't met before, great to meet you, too. I am Annette, the CFO of the group since the past almost one year. As a backdrop to performance management, I just would like to show to you how we are performing when it comes to our midterm targets that were set about 12 months ago. We're talking about the growth on an average cycle of 5%. Yes, we have been impacted by the COVID-19 situation very much as other companies have done. For those who remember the Q1 report, please look at the order backlog, and you can see it looks quite healthy.
When it comes to the margin, which is our second target, we have a seasonality, which those who follow us understands and knows about, which means that normally the Q1 is a bit lower than the rest of the years. The margin in Q1 was 8.3%, better than last year in spite of COVID-19 situation. Yes, it's below our midterm target, but we're working towards it. Capital structure. Well, leverage target, 1.5%-2.5%, we are at 3%. Does that mean that we have been sitting idle when you see 3%? No. Over the past year, we have worked quite hard with our performance management and with our financial position. As you already know, we have moved the EBITDA margin, but we have also spent quite some time and resources to address our balance sheet and make sure that we can turn our profits into cash instead..
Leverage has actually come down from 4.3% last year, Q1, to about 3% this quarter in spite of COVID-19 situation. As you can see, working capital has been one of the major drivers for it. Particularly if you look at Q4 last year, we actually dropped substantially down to a 14% level. When you look at that, you might ask, what are you doing? It's not just taking a pen stroke around it. No, it's simple things like looking into how do we run our sales and operation and planning processes, and how do we make sure that we interact in a very streamlined, lean, and efficient manner, making sure that whatever we have promised to the customer actually fits with our own production patterns and that we deliver on it.
Our U.S. operations performed very well from that perspective and actually is part of that big drop. Means that the cash conversion cycle or the cash conversion has gone upwards quite a bit. We were hovering around the 30%, if you look one and a half year ago, now we're above the 50%, even reaching as high as 70% towards the end of 2019. What have we done then? Well, we have been looking quite a bit on our performance management and how do we run our cycle and how do we talk to each other. At the end of the day, which you have seen also, is that we need to set a plan. When you set a plan, you need to have aligned objectives.
They need to be transparent as well, so that we all can collectively understand what we should, as a group, do towards moving towards the plan that has been set. Make sure not only that we understand the targets, but also if you look at the value chain processes, they run normally across functions, across organizational lines. That has to be extremely seamless and aligned in order to make sure that we execute on what we have set. At the end of the day, also set a timeline on it, execute on it, and also do the analysis and close gaps that comes up when you do these type of activities. This is really the normal cycle when you do in order to deliver profitable cash-generating growth. Simple, yes, but you have to do it and put it into work.
What we have also recognized over the past year is that our processes needs to be upgraded. We might not have the best-in-class processes today, but we're aiming to do that.
This actually cuts then across the whole value chain, talking about moving into how do we work with our products in research and development, how do we make sure that we actually keep them up-to-date in a master file, how do we prune our product assortment, how do we move into new products, how do we move the products to a customer, both from a sales perspective, commercial processes, but also through sourcing, planning, production processes, and really also about how do we make sure that we get paid at the end of the day, and how do we also, last but not least, make sure that we align our people so that we actually flow this in a very simple manner.
This will take some time to go through, but at the end of the day, if you don't start the journey, you will not deliver on it either. It's huge enterprise, but we will go through it, and you have also seen part of this through Klas' presentation, and when you go into Peter's presentation, you will be seeing part of that as well. With that, Peter, I would like to hand over to you to talk about AirTech.
Thank you, Annette. I have been responsible for AirTech since November last year. Before I get started, I would like to position AirTech both internally and externally. AirTech, we are the global leader in dehumidification and cooling solutions for demanding industrial applications. We withhold the position as number one in markets representing the majority of our net sales. If we take in the group, we represent 72% of group net sales 2019. For us, customers are key. I will start and end the presentation talking about customers. Currently, as both Klas and Annette has been talking about, we are, as everyone else, responding to the COVID-19 pandemic. When it comes to where we make a difference, and especially in the pharma industry, we are supporting a lot of critical applications, and that is applications as clean rooms applications, cooling chambers, and storage rooms.
These applications, they are in critical production steps within the pharmaceutical industry, so it's where COVID-19 test kits are being produced. It's where plastic parts for these test kits are being produced, and it's as well when it comes to active pharmaceutical ingredients production. We are all there, and we are all sort of supporting the pharma industry. Klas mentioned the purpose, and within AirTech, of course, we share the same purpose as the group. We strive for customer success and a healthier planet. When it comes to this, I would like to share some good examples. You have, over the years, always heard about AirTech making sure that the customers consume less energy. That has been our way to pitch our offering. If you convert that in how much energy do we actually save?
We reduce the global energy consumption every year by the equivalent of the usage of more than 1 million households. That's quite significant. That represent a small country. It represent a fairly big city. In the biggest cities, it actually represent months of consumptions every year. We're also playing an active part of the transition happening in the automotive industry, where everyone knows we are going from combustion-driven cars to electrical cars, and we are, in all regions, being very much involved in the lithium battery production. Connecting the world, we are doing that as well by supporting our customers in the data center industry, and we make sure that the customer's data centers, they operate more efficiently and as well, more sustainable.
When it comes to us people, we create a healthy climate indoor by reducing virus being spread, both in hospitals but as well in other public places. Outdoor, we are part of reducing the air pollution. Of course, all of these things we could not do without our customers. On the right side, you see a number of big blue-chip customers, and we have a very big and solid customer base. Just to give you some examples, within commercial, we have customers like Walmart. In the food industry, we have customers like Nestlé and Kraft. If you take in the pharmaceutical industry, customers like Abbott, Pfizer, and Merck. I mentioned automotive industry, Mercedes-Benz, Tesla are customers of us. You see a solid and strong customer base.
If you convert this on how we have been performing financially, you can see that in terms of net sales, we have been performing quite well. I mean, the CAGR since 2014 is + 10%, so that's good. When it comes to adjusted EBITDA margins, we are slightly below the group target of 14%, but we will get there. When it comes to how we have defined our industry over the years, we have primarily been talking about all the segments we operate, and we have taken a new stab of that and actually been looking at our core competencies and as well our core technologies. You see on this slide the way we are now describing our business. In the core, the center of everything is dehumidification, high-performance dehumidifications. That's the base of almost everything we do, and that's our core.
If you look at the arrows, the blue arrows, you see that we are expanding. That's when we are doing system sales. When we are in a process step, for instance, we are selling more than just one equipment. We are selling more. When you dehumidify, you might be forced to heat or cool. You might be forced to actually work with humidification. We are doing that as well. We're also working with pollution control and air quality. We have also activities as commercial with a non-high-performance dehumidification. You also see that we have some very strong adjacent businesses like data center, humidification, mist elimination, and VOC. This will be our map going forward on how we are going to take decisions.
If we will attack a segment, a market, if we are going to innovate products, if we are going to acquire companies, it will all be based on this map, and everything will center that, so we make sure we are taking the right decisions. When it comes to our product offering in this industry, we have a very strong product offering, and I'm actually amazed on how broad the product offering is, and how we are able to serve so many segments. If you look at the bottom of the slide, you see we have divided the offering in components, products, system, and services. When it comes to components, they are primarily sold to OEMs. They represent roughly 20% of our net sales. If I would pick one, I would pick the rotors.
That's part of our core, and that has been the core for the whole journey for AirTech by Munters. If I look at products, we have small dehumidifiers, we have standalone big dehumidifiers, and we have also product for rental for mobile. If I look at systems, I would pick out the big dehumidification systems, and as well, the SyCool Split, a new product for the DC segments. It shows that we're able to be very innovative, and we also shows that we are in the forefront when it comes to products and offering in the industry. When it comes to services, the service organization, they are very innovative in making sure that we find ways of expanding the offering. Klas talked about we need to make sure that we always send a service contract with the products. The way I see it actually fits nice together.
That's our offering, which includes products and services. Looking at in the markets we serve. We serve different markets like data center. With Munters, that's a fairly big business, we call that as a large business with Munters. The underlying growth drivers in that industry are strong, and I would say it's actually increasing. If you look at lithium battery production, that's a medium-sized business with Munters. Here as well, strong growth drivers. I talked about the transition to automotive industry. If I look at the core, the general industrial dehumidification, that's an extra-large business with Munters. Here, growth is typically ahead of GDP. The reason for that is that people become more aware that humidity is essential to control humidity in order to have an efficient process.
When it comes to our marine power and process business within mist eliminations, that's a medium-sized business. Here we have solid growth, driven by sustainability trends. Of course, this business is sensitive to regulatory environment. If we look at supermarkets and commercial, a medium-sized business with Munters, here we have weak growth. The positive thing is that we have a fairly large installed base, and we can actually service that and actually work with retrofits based on that installed base. The service business, very important. That's a large business within Munters, and as Klas mentioned, we aim to grow that part. Here we have a solid growth thanks to our installed base, but also thanks to the fact that our installed base is growing. We also see that we're able to expand our offerings so we can even be even more aggressive in the service business.
This is AirTech. What's about the future? I will reveal something when it comes to our strategy. When it comes to our strategy, we have actually worked a lot the last eight months. Here, the most important thing is our core. Strengthen the core is the first priority and the number one priority. We're aiming to stabilize that activity to improve and to make sure that we are very innovative when it comes to everything linked to our core. That means dehumidification business for mission-critical applications, we will invest a lot in these areas. We also made some tough choices. We will not do everything within dehumidification. The focus areas are going forward, food, battery, and service. This doesn't mean that we'll stop doing business in the other segments. We will continue to serve them, but the focus is food, battery, and service.
I talked about system sales, if you remember the map where we are actually expanding the offering and selling more in different process steps. Here we need to make sure that we convert and transfer our application knowledge to our customers and showing how they can actually get a bigger value if they invest more and work more with us. Also this is based on our core, our dehumidification technology. Here as well, in order when we expand our offering and when we are connecting more to the process steps, we need to make sure that we are connected. The digitalization is super critical for AirTech, and my hope is that within short, we will have all our products connected. We have the third leg, where we talk about building. Here is to pursue the opportunities we have within data centers, humidification, and mist elimination.
These, as you know, are now part of AirTech, and we will make sure that they become bigger, and we will build around these three areas. When it comes to our strategy, the key for us to be successful going forward is the way on how we actually implement the strategy. We have taken a new stab on that, and that is being done by launching a number of enablers, and they will make sure that we actually grow in the right way. All these enablers, they have six different themes. The first one being alignment and governance, the second one being people and knowledge. Third one, which is the center around everything, being innovation. We also will work a lot with commercial excellence. We will work with process and tools and efficiency.
What are these themes about? Alignment and governance means that we will actually be a little bit stricter on the way we follow up. We will also make sure that when we deploy the strategy, we will also be quite thorough in the way we follow up. When it comes to people and knowledge is key, and we need to make sure that we get the right people with the right knowledge. When we have the right people, we need to make sure that they stay, and of course, we need to train them. Very important. Innovation, Klas talked about that, and a lot about that, and that's also very important for us. We will invest even more innovation, add more people, making sure that we work with the right projects. Commercial excellence.
Very often we talk about efficiency in the factory, but we also need to have the most efficient sales force. We need to make sure that our customers and our salespeople have the right sales tools. Here is a lot about efficiency in the whole sales chain. Personal tools, Annette was talking about there, and here we're doing a lot together with Group in order to launch these activities, so we make sure that we become more efficient through the whole value chain. Finally, efficiency primarily within the factories. Product cost is key. We will now be more disciplined when it comes to implementing the Munters production system, and we are doing that in all our factories all around the world. These enablers, they are supporting the growth areas, and the growth areas are batteries, service, FoodTech, humidification, and data center.
To close, I will talk about the customer case, where actually we had a product, and a well-established product, and we were able to actually be very innovative within product management and sales. We bundled our product in a different way, and we were able actually to communicate some important values to the customer. We asked the customer: How important is proven carbon dioxide savings for you? What is the cost of water consumption and water discharge? How much is 30% energy savings worth for you? Normally, these customers are very CapEx-driven, but in the dialogue, OpEx became a big thing, and as well, them making a difference as well. Sustainability was as well very important. In this play, our unique selling points, they were actually standing out compared to competition. Within data center business, we have the best cooling expertise.
Our products, they outperform the rest. We are much better than competition. We have a unique system. We can promise an uptime that is quite outstanding. Of course, thanks to our service organization, we can support our products or our offering. We make sure that we can guarantee the uptime to the customer. We were selling on customer value. This meant for the customer that per data center, the customer will be able to save EUR 1.5 million per year, up to 300 tons carbon dioxide per year. When it comes to water consumption and discharge, up to 30% reduction. Not only were we able to actually make the customer more profitable, the customer became actually even more sustainable. Thanks. Over to you, Johan, and FoodTech.
Thank you, Peter. My name is Johan Ekeström, I'm the interim president of business area FoodTech. The business area previously called AgHort, contributed last year with roughly SEK 2 billion in sales, or 28% of the Munters Group net sales. Let's have a look at what we do and where we are heading. FoodTech's vision is for customer success and a healthier planet. We help to feed the world by changing the way we farm. We do this in two ways. We create the perfect climate for animal and plants. Two, we connect and digitalize the supply chain for our customers in the food industry. To create the perfect climate, we offer equipment and solutions to create the optimal climate. We do this using our deep knowhow about how to design houses and how to optimize climate. Connecting and digitalizing the supply chain.
Well, that we do by we offer services and software to support the food producer to optimize their value chain. That include the whole supply chain, including farms, but also the processing part of their business. By doing this, we can help our customers to produce safe and healthy food while using less resources. For example, reduce the use of antibiotics in the farms, and doing this by improving and make a more healthy climate in the farms. Also to reduce greenhouse gas emissions by helping our customers to use less feed and less energy in the farms. We will now look a bit more on our offering to provide the perfect climate. Our largest product group in terms of sales are fans.
We sell more than 150,000 fans every year. On the left there, you can see our first product in our new fan platform, which is called Saturn. Other product groups include air inlets, heaters, cooling systems, air cleaners, and all the products you need in order to create the perfect climate. A very important part of our portfolio are the climate controllers, the brains of the houses. They not only control the climate, but also things like feed, light, and water in the houses. On the picture in the bottom left, you can see the new Trio controller, which together with sensors, give the farm an opportunity of full control what's happening in their houses. These cloud-connected controllers is also an important part as they connect to our software. The software we offer under the MTech brand help food producers, integrators to control and manage their supply chain.
This include planning, forecasting, and optimizing their business. It also help them to run their daily operations. This is all the way from feed production to the farm, where they have the parents of the chickens, the hatcheries, the broiler farms, and all the way to the processing facilities and the logistics to retailers and end customers. Our main products, when it comes to software, are called Protean and the newly released Amino. Both are management softwares targeting poultry and swine customers. The product portfolio also include a new software called PPO, which is a production planning tool that use machine learning technology in order to optimize the planning in the factories. We also offer something we call Sonar. That is our tool to connect data from the farms and bring that data together with the rest of the data from the supply chain.
Sonar, for example, connect to our climate controllers, but also to our IoT devices that we call Echo, gathering the data from the farms and combining it with data from the rest of the farm. How do we sell our products? The majority of our sales is sold indirect through dealers and distributors, and two examples are Big Dutchman and Diversified Agriculture. But, we also sell some of our sales direct, for example, to large integrator. One such example is when we sell software, which we sell directly to these often quite large companies. One such example is Wayne Farms, a large U.S. integrator. Looking at our financial performance, 2015- 2018, we saw a very nice growth. This was driven partly by organic growth in Asia, but also by acquisitions.
Last year, the growth was slower, and this was primarily due to the African swine fever, which had a very negative impact on the markets around the world, but especially in Asia. Looking at our sub-segments, there to the left, and our split of our sales, you can see that broiler is our biggest sub-segment, with more than 40% of the sales. Swine and layer is egg production, are also important part of our business, while greenhouse and dairy are much less important for us today. I see that greenhouse is an important area, and I believe that I'm convinced that we will see a bigger share of our sales being greenhouse in a few years' time. Looking a little bit at the markets for each of these segments, starting with broiler.
In the broiler segment, we can see quite a lot of differences between the geographical markets. Here we see that quite good growth coming from Asia and developing markets, while we see a little bit less of growth from markets like EU and U.S. going forward. Overall, a solid growth in the segment. When it comes to the layer market, the demand the coming years will, to a large extent, be driven by the demand for cage-free produced eggs, especially in U.S., where a lot of organizations, for example, McDonald's, have committed to only serve cage-free produced eggs by 2025. As a reference, McDonald's had roughly 30% of their eggs sourced from cage-free one year ago. They still have some way to go there. When it comes to the swine segment, we see that in U.S. at the moment, they have a bit of overcapacity.
We see that the demand for pork in some markets are slightly going down. Germany is one such example. We also see a strong growth in Asia, and especially in China. That is partly driven by the recovery from African swine fever, but also from a structural change in the market, going from small backyard farms into larger, more controlled farms with higher biosecurity. Dairy, a small segment for us, is a segment where we expect a quite weak development driven by a lower consumption of milk, even though there will be projects out in the market driven by consolidation into larger farms. The greenhouse segment, it's a segment where we have seen quite strong growth during a couple of years, driven by increased demand and also more advanced greenhouses and more advanced climate control.
This is a development we believe will continue over the coming years. The digital market, which stretch across all these markets, there we see a big demand. We see that a lot of big players are committed to upgrade their way of doing business. Large integrators that are doing investments in IT, they want to connect their farms and use more advanced tool to manage and plan their business. Looking ahead, and a quick look at the strategy of FoodTech. I will focus on the top three boxes here on the left side, which I summarize and give our direction for FoodTech. Connect our customer supply chain, create the perfect climate, and grow in growing markets. Connect our customer supply chain.
That include everything that is related to software, but also to connect the farms, connect our climate controllers, connect our IoT devices, but also connect fans and other equipment in the few years to come. This area is also very important to succeed in the next area, create the perfect climate. In order to create the perfect climate, we have to use data and analytics and use more advanced way of controlling the climate in a farm. Here we're aiming to be able to also predict the results from a farm and even to be able to say that a certain design will give certain results even before the farm is constructed, and not only in terms of climate, but actually in output and results.
That is possible as we connect the data from the whole supply chain and we know all the inputs and outputs going in and out from the farm. Grow in growing markets. This is an area where we have seen that the growth out in the market the last few years have primarily been in growing markets outside of EU and U.S. We need to invest where the growth is happening. That said, we will also continue to invest in what we see as our core markets, subsegments in geographical markets where we are the market leader. One such example is the layer market in U.S., where we are the clear market leader, and we will remain in that position. By doing all this, we will help our customers to produce safe and healthy food while using less resources.
With that, I'd like to thank you for listening, and I will hand over to Klas.
Thank you, Johan. Before we open up for questions, let me summarize briefly. Munters has a strong market position. The market demand is in our favor, and I'm convinced that post-corona long term will actually play in our hands. We are building step by step a stronger platform, and we know our road forward. Our targets remain the same financially. It's up to us to outwit them. I'm very pleased and proud about how well we have been able to handle the COVID-19 situation, both in mitigating and driving, at the same time, our strategy forward. With that, I would like to open up for questions and answers.
Okay, great. Thank you. We have received quite a few questions here from those who are viewing us online. I will start with a question from Max Frydén at Danske Bank. The first question is clearly to you, Klas. It is: What do you bring to Munters with you from your experience in Sandvik? You were there during transformational years, decentralizing the company and pushing P&L accountability out in the operational units. How transferable is this experience to Munters in your view? If you could elaborate a little bit on that.
Thank you, Max, for the question. Yes, I bring with me all that experience. It's one thing to bring with you experience, it's something else to have a good and healthy and intriguing dialogue with the management team, and what I feel that is what we have. I think you can see a lot of what is recognized as strong ways of giving away business close to where the business decision should be. Authority and accountability is happening here, and people are embracing it. At the same time, when it comes to value selling, the essence of how you step by step improve profitability, I think you've seen quite a few examples of that. Of course, there are other things that will take longer time, much longer time.
My belief is that over the time period for our strategy, the coming three to five years, I don't see any challenges at all, more than that we take it step by step, and we start to deliver on it.
Thank you. He also has quite a few questions related to service, as Peter mentioned in his presentation, AirTech has around 20%, I think it was 17% of net sales were presented in Q1. The group as such, 12%, 13% of net sales is related to service, if we look at 2019 figures for the year. His question is: Could you elaborate on how large part of the installed base you're serving today, and what the potential is on the installed base? Also, if you could talk about how you grow your business, and how you think about investments in service sales.
I can start, and then I also would like to include Peter to give a flavor or more intrinsic knowledge about it. If I start with the more generic ways, how do you grow a service? As I said earlier, you start with the installed base you have. You start to populate that with service contracts. Each and every new installment, you have a service contract attached. You start to look outwards, and you see what type of competitor business are there, and you start to convert that business through service contracts. In our industry right now, we also have the opportunity to use digitalization. It could be digitalization as the example I showed that AirTech is using, remote service, but it could also be software as a service that is happening with great success in FoodTech.
But please, Peter, if you can elaborate a little bit more because I know this is a clear focus for AirTech.
I think just to build on what Klas was saying, we need to be much more aggressive in making sure that whenever we sell a product, we sell a service contract linked to that. That is key. Of course, we need to add products for our customer. That means preventive maintenance is one thing, and we also need to make sure that we can scale up. Actually, our biggest hinder is actually not the business opportunity at the moment, is for us to find people, and we are actually looking for a lot of service people all around the world. The market is there. We have the knowledge, and we just need to find ways of scaling up faster.
Here I may add, moving forward, if opportunities arises, we can add by hiring people, but we could also have the possibility to acquire, as we have done in the past, more dedicated smaller service companies. Whenever that would come, then we will talk about that.
Thank you very much. Max also has a question related to data center and mist elimination. He is wondering if we could talk about the market development in terms of growth. How we see that the market is going to grow in the next years, both for data centers and mist elimination? I think in your presentation, Peter, you touched upon both how you see the growth and also how large these businesses are in Munters? I hand the question over to you, Klas.
Let's do the same on this question as well. First of all, as you know, Max, we are not presenting anything what is happening right now. Everything that I talk about now is referring back to the first quarter. That is the mantra, and that is the way we look upon how to communicate. What is clear, that is data centers is a growing market, and we have focused our data center market in North America. We create stability there, and whenever we feel that we have this strong enough stability, then we will, in a controlled way, start to expand outside that. At current, we focus on North America. We generated a lot of growth, as I think we communicated clearly during the first quarter. The first quarter was also generating good result in mist elimination.
Peter, you are closer to the business, so please.
As I presented, as Klas just said, the growth in data center is strong, and it's today primarily a North American business, and the team is doing really well, both in performance and as well as also bringing up new products that we are launching. Data center is strong. When it comes to mist elimination, that's a smaller business. There is solid growth, and we have sustainable trends. However, as we reported in the Q1 report, the marine segment is a little bit soft. We were down both in orders and net sales compared to last year.
Thank you very much. We have another question from Carl Ragnerstam at Nordea, who is interested to know more or get our views on the manufacturing footprint consolidation on the back of what we talked about, you talked about your modularization journey. If we continue on this modularization journey that you spoke about, if you could elaborate something about how you see the optimal manufacturing footprint and what it would look like. How you see that going forward? If you could say something about how the SKU reduction is going. I think you touched upon that a bit in your presentation, but still, if you could elaborate a little bit on this compared to one year ago.
If I start with footprint optimization, for me, footprint optimization can cover many different aspects. One, that is what type of products do you allocate to certain factories? How are you sending different materials in between different regions? And then, of course, how many plants do you have? We are step by step approaching all those matters. All successful companies must always be on toes to do that. Modularization as such then, I think that is clear. That is the future for all innovative companies. It is the beauty of being able to generate many different customer opportunities, but in a controlled way. As you saw in the presentation, both from FoodTech and AirTech, it is a clear strategy. It is not just written on a piece of paper. We are actioning on it as we speak. Of course, that drives simplification.
The SKU reduction, we have put the bold target 40%. We are well on track on that. As soon as we have solid, good numbers, let's say beginning of next year, we will start to communicate how we are towards the target. With that said, we will also introduce new products. It's not just to take away and reduce. We are bringing new products. This is a never-ending story, and that generates industrial success.
Thank you. Another thing that you also talked about was digitalization. A question here also from Max at Danske Bank is regarding FoodTech, and if we can say something about how big share of our customers that today are using our software in FoodTech?
I don't have that number on top of my head, I will invite Johan. Before Johan elaborate on that then, I have to just say it once again. When I arrived to Munters, I was so impressed of the journey that has started to take place when it comes to surrounding the factory with hardware, bringing in controllers, adding on software, and taking a full control over the manufacturing food chain. I feel that has surpassed many, call it, normal manufacturing companies. Step by step, we are changing an industry. Johan, please, join us and elaborate a little bit on that.
When it comes to our software offering and our equipment offering, they are actually today addressed to two little bit different customer groups. The software offering is primarily targeting integrators, large companies that control the whole supply chain, but very often doesn't own the farms. Our equipment customers are often smaller farmers that buy the fans, cooling system, et cetera, from us. However, what we are doing now is to combine these two worlds. When it comes to software, if we take U.S. as an example, of the top 25 integrators in U.S., 23 of them are at our customer list for MTech software, which I think is quite impressive. Of course, a lot of their farms are using FoodTech equipment as well.
I actually think that we got a follow-on question here from Carl Ragnerstam at Nordea. He's just asking about the consolidation in the farming industry and what it will mean for the FoodTech business, because I guess larger farms tend to be more willing to invest in digitalization and software solution. I actually think you elaborated on that already because you talked about the integrators, and they are of course then serving large farms. Is there something you would like to add to that, Johan, or?
No, what we can say is that in many markets we see this, as I mentioned as well, China, it going more and more to large farms, which are exactly as the person asking the question.
Yeah
investing in more advanced technology.
Perfect. Thank you, Johan. Okay, we have some more minutes, so we take, let's see here. We have another question from Anders Roslund at Pareto. He's asking if you could elaborate on your future M&A strategy.
Thank you, Anders. I think this is a very good question. As I think you heard me and Annette in conjunction to quarter reports talk about earlier, our M&A strategy on a high level consists of three main categories. It is a string of pearls that is connected to either smaller technology-driven companies or service-driven companies. It could be bolt-on smaller companies where it comes to providing a specific, it could be a market presence, or it could be a certain product or application presence, such as, an example, the greenhouses. It can also long term then being our capabilities widening our footprint when it comes to be stronger also in the core in Asia or Americas as two examples. Three different categories. I think both Peter and Johan presented the core areas of their business, and then it's a matter of attaching certain things there.
It's also presented, what is not fitting into the core areas, that is of no interest. I hope that gave you a flavor on the three different categories.
Thank you, Klas. We have another question from Max regarding the cost-saving program that we launched in 2019, the so-called FPP program that was run. He's asking : If we could talk about how much savings we had realized at the end of the first quarter, and also if we could say something about the total savings and how we expect them to come through?
I don't think you will get the specific details for the first quarter, but I know those numbers, even if I love numbers, Annette is much better person to answer on. Please, Annette.
Hi, Max. As you know, the FPP program was really about to reset the base and fit the overall resources for Munters into the business that we have today. Most of those savings were realized already during the second quarter, but obviously when you look at it from an annualized perspective, there's part of it that actually contributes to the improvement in the result this year. That's also why you see the margin contribution is actually going up in Q1 versus Q1 last year. In total, the FPP program related to continued business was more or less around SEK 160 million, and SEK 50 million related actually to the closure of the Dison factory. Those are the values that we're talking about. Yes, the actions to realize them has been made. Most of the result was taken last year, but there's a spillover effect during this year.
Thank you very much, Annette, great. Let's see here. We have one question regarding the short-term demand. You have been very clear here, Klas, saying that you are not commenting on current trading, but still Max would like to ask this question. U.S. capital goods, so engineering companies are starting to feel their capacity, and several say in their investor calls that April was the worst month, and in May, capacity utilization looks better. Have you seen any changes so far in your customer behavior on the industrial side?
No, I hate to give you this answer, but this is the firm answer from us. What we communicated in quarter one, that is what we communicate when it comes to trading then. It's not too far away until we reach the end of this quarter, and then we will happily then answer all questions of what is happening in the market or what did happen in the market. I was very pleased with what we did the first quarter, and I will return on the second quarter when we're done with that.
17th of July we present that.
Please stay tuned.
Let's see here. We have another question from Karl Bokvist regarding service. I think we have actually spoken about service and because others have asked that question. We have one question from Carl that relates back to the data center business. That is if you can go a bit further into the U.S. data center business and why this business should not see similar misfortunes as with the European data center business.
Okay. Let me start this going back a little bit. Data center is a growing market. It is clear that the strategic choice to enter data center was the right choice taken many years ago. It was based upon the platform being built both when it comes to products and customer interactions in North America, primarily U.S. When it was brought over to Europe, I think in hindsight, and always easy to talk about hindsight, a few strategic mistakes or operational mistakes were done. They brought over a product that they adjusted too much. It was actually at the end, not a similar product. They started to produce this product in a new plant. They started to sell several large projects, each after each other. Occurred quality issues, and it became a negative spiral.
In North America, it has been a step-by-step steady build-up of competence, customer intimacy, and development jointly with customers. We took the decision to stay and continue to build on that success in North America. Peter, during the first quarter, I think we delivered on that plan. Anything to add in regards to that?
No, I think you are spot on. The product transfer wasn't a great success to Europe. If you look on Americas, what differs a lot is that they have many more customers, so they are much more spread out. The team, they are very well structured, and the products that we are selling, we have been selling them for many years, so we don't have none of these quality issues that we experienced in Europe. The growth in Europe went way too fast, and all that in combination made Europe not a big success, and then in U.S., things are looking completely different.
Thank you. We have another question from Lovisa Runge at Fourth AP Fund. The organizational structure was redesigned a few months back. You touched upon that in your presentation, Klas. Could you maybe tell us a bit more about the new positions, the strategic operations, innovation, commercial excellence, and how they will fit into the management team and what you expect them to bring Munters specifically?
If I start with the already put in place strategic operations, that is the part of the former global operation that is more into sourcing, more into commonly driven change programs such as lean, safety programs, et cetera. The idea is that it should be a lean function. The business responsibility lies in the business areas. When it comes to the two other functions or positions, they have not yet been put in place. I will start to push that forward in close dialogue with the business areas heads here.
They will serve a similar type of focus, i.e., it is to drive certain change programs that is common for both sides when it comes to how do we price things, how do we go to market, et cetera. At the end, already now, without having implemented and put those positions in place, in discussions with the business area heads, I see that a lot of traction is already happening. In short, that is lean functions that are there to challenge and to support, but the ownership of the business are in the business areas, a model that I'm very used to operating.
Thank you very much. That was the questions that we have received. With that, I hand over to you for some closing words, Klas.
Thank you very much. In circumstances like this, I appreciate very much that you all were able to join in. We are just in the midst of a pandemic then. As you can see, Peter is sitting not in Kista, he's sitting in Italy, and it has been a pleasure, but also I have been missing you, Peter, to put this simple, and missing the interactions with the Italian organization. I hope next time we see each other, all of us, we can continue to talk then face-to-face about Munters' strong market position, the market that is with us, and the progress that we have done to deliver on our strategy. The next time we see each other, that is actually, as you said, Ann-Sofi, the July 17th. Please, this is an extended invitation to that event. Thank you very much.
Thank you.