Welcome to this webinar hosted by Investor Relations. My name is Line Dovärn. I am Director of Investor Relations. Today, we will be focusing on Clean Technologies, an exciting area within our business area, AirTech. You can ask questions throughout the webinar by using the chat function below. We will address all questions at the end of the presentations. With that, I will hand over to our CEO and President of Munters, Klas Forsström. Welcome, Klas.
Thank you, Line, welcome once again to everyone participating. You will meet me, you will meet senior leaders and expert from AirTech and Clean Technologies. All in all, it will be about, I mean, what is Clean Technologies? In a nutshell, it is solutions for a healthier planet. What we have, that is, you have clear strategies for value-creating growth, built around organic growth, well-targeted M&As wherever suited, a strong expertise across the globe, and a current solid knowledge platform. What do we deliver then? We deliver solutions for customers' climate impact, i.e., lower emissions, lower carbon footprint, and it's focused on mission-critical process steps and components. This, you will hear much more about later on. You will also hear about many solid participations that we have had in projects around the globe.
I can mention just two: a well-known large carbon capture project in Norway, near the Norcem in Brevik, and also very exciting, a sustainable transportation solution in India. Here we talk about green methane. All in all, as Line said, we are very, and I am very excited about the future. If I dream ahead, some years ahead, I see clear possibilities for a very sizable profitable business. As always, it's about step by step, success breeds success, all driven by strong people and competence. With that, I would like to hand over to you and our strong people and competence. Line.
Thank you very much, Klas. I'm now joined by our President of AirTech, Henrik Teiwik. Welcome.
Thank you, Line. Just building on what Klas was saying, I firmly believe that we in CleanTech is well positioned for profitable growth going forward. If you look at the underlying trends supporting our business, we are supported by the strong underlying sustainability trend, increasing the demand for clean air solutions. We have also a good starting point. We have been in this industry for a long time, and of course, with that, we have also, over the years, collected a lot of knowledge across the three technologies that we today support: mass transfer, mist elimination, and VOC abatement. We'll come back more to that and what those technologies are all about. In combination, we have also applying this in a number of application areas where we have also gathered a lot of know-how over the years.
We now also have a clear strategy for us also going forward. It's all about combining increased product development and increased investments in R&D, with also broadening our commercial and geographic footprint in the world. If we look at Clean Technologies today, it roughly constitutes to 9% of our net sales in AirTech, and we have production facilities across the three continents: in the U.S., in Europe, and also in Asia, both in India and in China. If you look at our order intake development in the past years, we have grown with roughly 14%-15% per year. Also, of course, resulting in a strong development in net sales, as you see in the chart below here.
The profile, as of 2022, roughly 40% of our revenues comes from process, the process industry, 30% from the power industry, and then 20%, roughly, from our VOC business. Here, we also, or I should also highlight that we have a small business still in marine, but as you may have known, we actively took a decision a number of years ago to exit this segment due to some changes in environmental regulations. This business today is just a fraction of what we do. Similar to our other AirTech businesses, we're also supporting the Clean Technologies organization with a center of excellence, both to facilitate knowledge sharing across the organization, but also to support with dedicated expertise and application know-how to our colleagues around the globe.
We do this in three in our three technology hubs: mist elimination in Aachen, in Germany, mass transfer in our, from our Mumbai hub in India, and VOC in our Amesbury hub in the U.S. With that, we will talk much more about what we actually do in CleanTech and also, share some of our prospects about the future ahead. I hand over to you now, Line.
Thank you. Our well, our next speakers are our CleanTech experts. We are joined by Jing Jin, who is Vice President of Clean Technologies, and our EMEA Business Unit Manager, Markus Karbach.
Welcome.
Hi, everyone, and thank you. Welcome to this deep dive session of Clean Technologies. I thought that we should start together by watching a video together of the business line.
Industries around the world want cleaner, green energy and even cleaner processes. They are looking for reliable, energy-efficient, and cost-saving solutions to improve their processes.
The path that the world is on regarding climate is not sustainable. We know that we need to move from a carbon-based economy to a non-carbon-based economy. We need to do it fast.
Munters has a vast knowledge and strong offering in three technology areas: mist elimination, mass transfer, and VOC abatement. Mist elimination systems that separates liquids and gases, mass transfer technology that separates chemical components and facilitates liquid extraction, VOC abatement, which removes polluting solvents from the air. With these technologies as a base, Clean Technologies from Munters offer solutions that enhance process productivity and lower emissions in processes like carbon capture and the production of electro fuels.
What is it that we do in Clean Technologies? Well, as the name alludes, we provide primarily three benefits to our customers. The first one is to clean the emission, meaning removing anything harmful from an airstream before it is released out to the atmosphere. Number two is to provide higher productivity in the production process, and the third one is to protect the equipment downstream. We do that through our three technologies: mist elimination, that separates droplets from an airstream; mass transfer, that is internals that go into columns for production in processes and in abatement systems. Lastly, we have VOC abatement. VOC stands for Volatile Organic Compounds, and we have systems that concentrates and removes that from the airstream. When it comes to the segments, we primarily focus on three ones: it's the power segments, it's the process segments, and the electronic segments.
We're also present in marine, but as you saw earlier, that's a fairly small share of our business today. We sell both components and full system into these segments, and we typically go direct to the market. That means that when there is a new production or a new facility, we typically work with EPCs or OEMs. EPC stands for engineering, procurement, and construction companies, and we work with them to design in our equipment. Then, once it's time for upgrades or replacements, we tend to work directly with our end customers. Just to give you a small sort of sample of end customers, within power, we typically work with waste to energy companies, biomass or wind. In marine, it's typically the scrubber manufacturers that we work with.
In the process industry, it's a fairly wide field where we work broadly with steel, pulp and paper, chemicals, and others. Within the electronic space, we work primarily with semiconductors. Now, Markus will tell us a little bit more about our products and technologies.
Thank you, Jing, and hello to all in today's webinar. Let's now have a look a little bit deeper into the three core technologies of our business line, which are our solid current position for the future growth. Gas-liquid separation or mist elimination has been known for decades as the high-performing method to separate liquids in the form of droplets from gases. Our main product are vane-type mist eliminators, where the gas stream is forced to follow the bend and are so-called vanes or profiles. As you can see on the left part of the slide, the heavier load of droplets is hitting the wall and is then rinsing down. A smart and efficient method.
The art lies in the decision which profile to choose and how to set it up to reach an ultimate separation with lowest possible energy need. Droplets and gas flows can cause many negative impacts in today's technical processes. It can be pollution, it can be damage to downstream equipment, it can be product loss, inefficiencies in processes and others. With mist eliminators, we can enhance process productivity and lower emissions with lower energy need, resulting in the reduction of overall environmental footprint. Typical applications are scrubbing air intakes, adsorption, distillation, and many more. Typical industry segments are coal-fired power plants, waste-to-energy, as Jing mentioned already, marine, steel, and other process industries, including carbon capture for hard-to-abate industries.
The second technology, mass transfer, is a unit operation in chemical engineering, which includes various technologies and methods so as fractionation, absorption, extraction, distillation, and others for the separation of components out of a mixture. It is based on transfer of material from one homogeneous phase, like liquid or gas, to another phase by the concentration gradient, for instance, temperature. After or during any chemical reaction or process, where a separation operation either remove some component or improve the purity of the product, it is achieved only by one of the operations of mass transfer. Typical products you see here are random packing, structured packing, trays, liquid distributors, but also mist eliminators. With the mentioned applications in industry, segments are petrochemical, refining, e-fuel and biofuel production, pharmaceutical, and again, carbon capture for hard-to-abate industries. The third one in the row is VOC abatement.
VOC, as Jing already mentioned, stands for Volatile Organic Compounds and describes a group of chemicals that can vaporize into air from products as well as from processes. The hazardous impact comes when the VOC reacts with nitrogen oxide and sun and forms ozone, which is also called as smog. Cleaning VOC-laden airstreams from industrial processes by zeolite media has been selling by us to industrial customers since the 80s, for more than 1,000 installations. The technology is a two-part process. First, we use a zeolite wheel concentrator to get from a low-concentration, high-volume airstream to a high-concentration, low-volume airstream. Once concentrated, a secondary step is then used to efficiently incinerate or condense the volatile organics. Our current product offering, the Rotor Concentrator, is based on reducing operating costs compared to alternative technologies, and with that also reduce secondary emissions such as carbon or nitrogen dioxide.
Typical industrial applications are painting, etching, anode and cathode manufacturing, or surface coating. The industry segments are semiconductor manufacturers, solar, cell production, paint shops, lithium battery production, as well as furniture production. With that, back to Jing.
Thank you. If we zoom out a bit and look at the market, what do we see? We view our market through a sustainability lens. Of course, sustainability is one of the mega trends, and it is impacting all of our end customers. When we talk about sustainability and our ability or our wish to reduce our environmental footprint, there are basically two paths to do it, and this is regardless if you're a private citizen, a company, or even a country. Either you can mitigate the emission that is created. This means that you're not even creating the emission to start from. A very good example of that is what's happening in the power industry. Here, wind and solar is growing exponentially because they are not creating any emissions when operated, and they're now also economically viable in many places in the world.
If we look into the transportation sector, I think many of you guys out there already know about the electrification of private vehicles. Perhaps some of you already have one as well. Unfortunately, electrification is not the silver bullet for transportation. Basically, the longer you want to go and the heavier you want to transport something or someone, batteries are a less sustainable way of doing it. One of the best examples would be intercontinental flights. If we were to electrify that, the weight of the batteries would take up the whole load of a plane. When batteries are not the choice that we can make, then we need some kind of electrical fuel or sustainable fuel to get there.
Here, for example, there will also be a connection to carbon capture, which we'll talk a little bit more about later today. Of course, decarbonization and mitigation is the preferred path, but sometimes the technology is not there, and then you need to move over to an abatement path, which means that you're capturing the emission and treating it before releasing the air out. In this category, we find many of our process industries, and the reason is because they have very high temperatures in their production processes that doesn't lend well for electrification. These type of companies do need to invest in abatement equipment to reduce their environmental footprint. One example would be the cement industry, which need various type of abatement technologies to reach net zero.
We are in CT today already supporting both paths of mitigation and abatement. In 2021, we felt that because the dynamics were changing so much in the industries, that we wanted to take another step, a further step in what we wanted to do. In 2021, we launched a new strategy with a mission to deliver clean air to the world. We're very passionate about this in our team, and we're committed in continue to help our customers migrate towards green technology that will enable them to reduce their environmental footprint. We will then do that in the three focus areas. We will grow in renewable power generation, focusing on wind, biomass, and waste to energy.
We will then strengthen our footprint in sustainable transportation, both on the battery side with our VOC abatement systems, but also on the e-fuel side with our mass transfer on mist elimination technology. We'll continue to grow in the process industry and focus on the hard to abate sector in that industry, which means growing steel, cement, pulp and paper, and chemicals. As I mentioned before, we're already catering to all of these industries today, but of course, this is not where we want to stop. We want to add new abatement technologies and improve technologies for our target industries, because we'd want to help our customers both today and tomorrow in their sustainability journey. You can ask: Well, which areas are we looking into when it comes to new technologies?
Today, we're mainly focused on removing sulfur oxides and VOCs from an airstream. In the future, we'll continue to do that. We'll expand the different technologies within those two compounds, but we're also looking into expanding into particulate matter removal and CO2 capture. You already heard before that our key components today already are in these type of systems, where we believe that we can have a broader scope in this area. The vehicles we see to reach the future portfolio will be threefold. We will work with our internal R&D. We will also create external partnerships, and we will also do selective M&As in the areas. If that was or where we want to go, how far are we in this journey? I think if I reflect a bit on the journey, I started in this position mid-2020.
Of course, 2020 was very much marked by COVID and market turbulence on supply chain, oil crisis that made the marine market collapse. We, as a business line, also had a very high share of what we call legacy segments, compared to where we wanted to focus. It was in this environment that we designed our new strategy and also launched it partially in 2020, but fully then in 2021, focusing on renewable power, sustainable transportation, and the hard-to-abate industries. Already in 2021, we saw tremendous good growth in those areas, but it was in 2022 that we saw sort of the full effect of the new strategy and the hard work of the team. Just as an example, we not only significantly grew the top line, but we also grew in the areas we wanted.
In 2 years, we managed to double the net sales in process industries as an example. We also improved the EBITDA margin and delivered on a number of lighthouse projects. All in all, I would say that we are on a good journey of delivering our strategy, and we're extremely optimistic about the future. What we will do now is to share a couple of these lighthouse projects that we are very proud that we have participated in.
Thanks, Jing. The first case is one of the world largest waste-to-energy plants currently under construction and located in Singapore. Two main pollution you find in a waste-to-energy process, which is HCl scrubbing, stands for hydrochloric acid, and SO2 for sulfur dioxide scrubbing. To abate that, you need wet scrubbers, and the wet scrubbers need on top of them, a mist eliminator, which prevents the droplets in the exhaust of the scrub system escape to the gas stream. The delivery of the tailor-made equipment, based on our mist elimination technology, will be delivered in 2023. Second case is the semiconductor or a semiconductor production in Arizona, in the U.S.
Here, the challenge was that we had to concentrate very low VOC concentrations out of a massive volume of air, and our equipment had to fit into an existing footprint and was required for a 24/7 uptime. We provided a single skid, which contains out of a rotor concentrator and a thermal oxidizer, and together only consumes 40% of the energy needed for, in comparison to alternative technologies. The third one is on you, Jing.
Thank you. This is an e-fuel production in Chile, and we are extremely excited about this because this shows how a CCU production could work. CCU stands for carbon capture and utilization. Instead of storing the carbon on under the bedrock, you actually use it in a production to create a sustainable e-fuel. Haru Oni is the project name, and it's located in Chile. You see a picture of the actual site on the right-hand side. This is the world's first e-fuel demonstration plant. It started in 2021 and delivered its first fuel end of last year. In 2023, they're looking for a scale-up with a full scale-up than in 2024, delivering 55 million liters. We've then supplied key components into that system.
Let's take a little bit look at how that works. On the right-hand side, you see a simplified diagram. On the side, they have a renewable energy of wind and solar that then powers a green hydrogen production. In combination, they also have direct air capture system that captures the carbon dioxide directly from the air and concentrates it to a stream. That, together with the green hydrogen, will then create green methanol, which is in the next step, a crack to a e-fuel that can be used for transportation. In this case, we work together with Global Thermostat, who supplies the direct air capture unit, and we've supplied key components into that. In general, if you look at the system, you would see places where you have red and blue lines.
This is where typically our equipment will go into. Red is mist eliminators, and blue is mass transfer equipment. All in all, I would say all of these cases show the direction that Clean Technologies is moving in. We are very excited about this development. We are optimistic about the future because we believe that clean air is a necessity for everyone in the future.
Thank you very much. Very interesting. Before we open up the Q&A session, I would like to welcome Henrik back to summarize today's presentation.
Thank you, Line Dovärn, and thank you also, Jing Jin and Markus Karbach, for sharing all these insights. Just to recap, I hope that we have showed today how excited we are about Clean Technologies, and I also hope that you are excited as we are about the future ahead. I truly believe that we have a strong starting point to build from all the knowledge that we have in Munters, in the Clean Technologies organization, and also all the experience that we have in many of the even more relevant application areas also for the future. We also have a clear strategy and clear priorities ahead of us. We have also started to demonstrate that we're moving gradually more into these, you can call, future growth areas, also, as we showed today.
With that, we are done with the formal presentation, and, but we're, of course, available also for questions from the audience. I hand over to you, Line.
Absolutely. Yes. You can still post questions by using the chat function below, we will address all questions. The first one I will ask direct to you, Henrik: What are the Clean Technologies' synergies with the rest of AirTech?
It's a good question. I think the foundation of Clean Technologies, together with the rest of the AirTech business, is providing effective climate solutions in the most energy efficient way and also in the most sustainable way, and I hope that we today have demonstrated how we also do that in the context of Clean Technologies. Also, we have a technology synergy with our VOC technology. We are, of course, providing different type of media than our humidification business that we have in the rest of Munters, but the road to technology is similar. I also think that it's exciting to see that we are also touching many industrial segments in a little bit of a different way, but also within the larger family, like lithium batteries, like automotive, like other sectors.
There is a lot of interaction between the business areas in that or businesses in that sense.
Thank you. Jing, oh, sorry. Can you describe your go-to-market process, and are you in dialogue with the end customers, or do you sell through distributors or others? Sorry, that question was to you, Markus. My confusion.
Not a problem, not a problem.
Yep.
In the complete life cycle of the product we are selling or we are in contact, somewhere also, always to the end customer. It depends on the type of the project, if it is a new build project or if it's a replacement or retrofit, when the end customer steps into the process. There are also others, like EPCs, engineering, procurement, contractor companies, or like integrators or OEM customers.
Mm-hmm.
The end customer normally is always somewhere in the line.
Yep. Good. Jing, this one was for you. What technology trends do you see for the coming years in this area?
That's a very good question because a lot of things are happening in this area. I mean, we see the sustainability as a mega trend, and we believe that, of course, both regulatory aspects will come into it, but also, a lot of companies have pledged to a net zero goal. Of course, you know, a lot of things will happen in this area.
Good. Klas, you're still with us.
Hi.
Hi.
I hope so.
Yes. A question for you. Will you consider growing Clean Technologies through M&A, and if so, what type of potential M&As do you see in this area?
The simple answer is absolutely. That is something that we consider. Let me sort of frame it with our group strategy in regards to M&A. We are aiming to either go for, I call it, the bolt-on type of solutions, i.e., something that can give better technology or shortcut innovation. We go for also where we can expand our opportunities to grow from a geographical perspective, and then, of course, also if we could have an even better coverage in general then. All in all, I see as many opportunities in selected M&As as in organic growth.
Good. Good. Henrik, what does the margin development look like within Clean Technologies compared to other segments within Munters and AirTech? Can you say anything about the margins you are expecting in the coming years?
Yeah. As you know, Line, and also for the audience, we don't disclose margins for our different businesses within AirTech. We have, of course, the overall group target of 14%. Currently, also, AirTech is trading above that, and I think we have also, in the previous communication, disclosed that Clean Technologies has a little bit of a margin gap to the rest of the AirTech businesses, but with equal ambition to reach the group target of 14%. That's the ambition also going forward.
Good. Jing, what type of partnerships, you talked about that you have some partnerships, what kind of partnerships do you focus on?
Well, we are very broad in our seek for partnerships. We're looking both in the technology space, both, you know, early things like from universities, startups, but we're also looking within our own supply chain, for example. We're basically, I would say, broadly seeking partnerships that we believe could be a win-win for both.
Good. Markus, who are your main competitors in this sector, and how do you compare?
Yeah, we are not naming other companies in the same industry, but we compare definitely first on the quality of the application.
Mm-hmm.
Whether set which profile, how do we set it up, so that is the first point to compare, and the second pair is definitely the performance from the first contact to the order to then the delivery and after-sale service.
Mm-hmm. Mm-hmm. Good.
I would say if you were to ask our customers, I think we're known primarily for our application knowledge.
Mm-hmm
Also co-development together with our customers in the application. We have units that's been running for many, many years. Sometimes, you know, they need an upgrade, and we're there.
Yeah
... to support them.
Yeah. We have another question here. "We have seen a quite steady order intake growth for the last 3 years. Any reason to believe we will see a change in this pattern, where we will see a pickup in demand the coming years, or what is your take here? Also, what is the service potential in this business as a % of sales?
I can start. I mean, we should not speculate too much of the order intake overall. As we have also presented here, I mean, in the long term, we're comfortable with the underlying supporting trends here. I believe that we will see also a positive development going forward in the long term. In the short term, no one knows exactly how it will play out quarter by quarter.
Mm-hmm.
It's also a little bit dependent on some larger or smaller projects.
Yeah, absolutely. Service? Yeah.
Yeah, service.
I mean, we sell today both components and systems.
Mm
... to our customers. Of course, we have service on our systems, and we have replacement parts for our components. That is definitely part of the business.
Good.
Maybe I can just shortly add. I mean, as exactly as Henrik said, I mean, we don't speculate in short-term sort of growth patterns, et cetera. Of course, I mean, we have highlighted this area as a very interesting area, i.e., it should have and will have a good chance to contribute solid to our overall growth target that is 10% per annum.
Absolutely. Yes, Henrik, Oh, sorry, I lost the question. The what type of investments do you think you might have to make within Clean Technologies to be able to capture these market growths?
I think we, when we look at investments, it's a couple of different items. One is, of course, that we, together with the rest of AirTech and rest of Munters, continue to invest in our MPS that we have talked about, our Munters Production Systems, and continue to do investments in more efficient operations in that sense. The other area is, of course, also in the people, and, you know, when we grow, we need to also continue to invest in both the organization and also in the footprint. Then, as Klas was also answering earlier, we have also strategic or selected M&A, where we will also complement the business with. We're supporting this in a number of areas.
Perfect. I think those were all the questions we had today. I will end off by saying that this webinar, together with presentations and our other webinars, are available on the investor relations website. I would like to thank everyone for listening in today, and a special thank you to Klas Forsström, Henrik Teiwik, Jing Jin, and Markus Karbach for presenting today. Wish you all a nice weekend. Thank you.
Thank you.
Thank you.
Thank you.