Munters Group (Stockholm:MTRS) Q3 2026 Earnings Call

0:00 Good morning and a warm welcome to today's presentation of Mönters Q3 results. My name is Lina Duan and I am Head of Investor and Corporate Relations. And with me I have our CFO, Katarina Fischer, and our new CEO, Stefan Ostman. Welcome.

0:16 Thank you.

0:18 Good. So we will begin, as always, with a presentation of the results and then we will have a Q&A at the end. So with that, I will hand over to you, Stefan.

0:28 Thank you, Lina. So happy to be here and take over the baton from Claes. I think we are here to report a quarter where we had tremendously strong commercial development and a little bit more headwinds in the profit parts. So I will try to cover both in the best of ways. So let's get straight to the numbers. Again, from a commercial perspective, it's fair to say that this is one of the best quarters we've had. We had a significant order intake of plus 70%, a book-to-bill of 1.6%, and a backlog which resulted in plus 178%. So a staggering value of 28 billion SEC now in the backlog. I'm also happy to see that we can see this momentum starts translating into sales growth, showing plus 18% at the group level. So Airtek coming in with strong performance, primarily in APAC and Americas.

1:26 And DCT, despite the component shortages that has been limiting output, I think we can see this strong sequential growth of 30% and the highest net sales actually ever for DCT. Food tech, growth in software, however, offset by lower sales of controllers in Europe, which is more seasonality and specific pockets of the market showing less demand currently. Profit-wise, as you've seen, DCT declined, and I think that reflects the changed product mix we see, component shortages, ramp-up inefficiencies, and just the challenge of starting up a new factory in the midst of this unprecedented growth we see in data centers. Food tech remained strong, and I think that it's important to comment that it remained strong despite continuous investments, while air tech improved on higher volumes and favorable mix and cost savings, all in all resulting in a good development for the quarter.

2:26 We are still a company with pretty high concentration in Americas, primarily in the US. Yet, I think it's important to also point out that we saw development in other regions as well in the quarter. As an example, both Airtek and DCT growing their part in APEC with four percentage points each. And also in EMEA, DCT growth four percentage points within their respective business area allocation or distribution of sales. So heavy in the US, but good developments also in other markets. Coming to more of double clicks on the respective business areas, I think Airtek order intake continued to show a positive trend.

3:13 We see growth in all regions and an increased backlog. In APAC, we're seeing strong growth and partly due to component sales for battery production. I think that's interesting looking at monitors. showing that even if battery has declined in significance as an order, as a segment, we do have more ways to win. We can win on the system level, but we can also win on the component part, where we are part of the value chain also here, primarily in China. So I think that is a good development for Airtek, and it shows that we can be the system provider and the component supplier as well. Q3, showing progress the third year in a row. I think the trend curves are clear. We are growing order intake and net sales. And I know that Claes had been saying before that for acceptable utilization of footprint, we need an order intake of roughly 2 billion SEK a quarter, and we are now showing 9 million last 12 months in the third quarter.

4:13 We are at decent levels where we should be able to start to level load the factories in a good way. Still, there is more upside to work with the observation in the factories. we would move towards double digits towards the end of the year. Now this has happened faster. So 12.9 is strong. We should also remember that the six percentage point up is having tailwind from two and a half percentage points coming from the cancellation fee that we had from one of the bigger orders. Even if I back that out, 10.4 is comparable with Q2, and I think that we are developing at a steady level sequentially.

5:03 Going into data centers, I will be very brief on this. I'm sure there will be many questions, but it's more than doubled. It's broad-based across the expanded product portfolio. to say that we have taken a big part of this market and that the portfolio we offer is making a dent in the market. Looking at the profit parts of it, we're starting to see the higher net sales, 30% sequentially. It is the top quarter in terms of sales. Also looking at service at 70%, that's a growth of 41% versus Q3 last year. So also, even if the relative portion, if you compare it to the hardware sales, it's not developing in a fantastic way.

5:55 a very strong number for this specific isolated service business. But of course, profit-wise, there is more to wish for, but we start to see the right movements. I think we have done most of the things we can do. I mean, all the CapEx investments in the new factory is in place. We have hired people that we need. and we have started to set up the flow exactly as we wanted to. To zoom out and kind of take a step back, we always said that this will start in Q2 and we did start production in Q2. My experience So all in all, I think we're progressing pretty well in line with where we wanted to be in terms of operations.

6:46 However, combining that with external factors of supply chain constraints, we are not where we wanted to be. I know Claus used this picture before to illustrate how we are now moving up the vertical part of this picture where we increase the volumes, but it's going to take even more and a few steps forward. significantly better place in efficiency and output than when we entered the quarter. So very happy to see that our own process and production lines are getting better by each week. So there's a lot of active work from management now to do all things we can do to improve the profitability levels. And very much of that relates to the supply situation, qualifying more than because it's important to remember this is industry-wide.

7:45 It's not specific to monitors. Everyone is in this situation one way or another. I think we've seen the worst and we have that behind us, but there's still a pretty fluid situation. So we should not see this as we are out of the woods, but we ended the quarter much stronger than we entered it. So moving into food tech then. In terms of water intake, relative stable development in food tech close to last year. It's a somewhat softer market in controllers for Europe, while soft and I'm optimistic about the near-term development. I think we have a lot of things interestingly set up for food tech and they do have a very unique value proposition in the market.

8:37 The ARR is reflecting this. It has developed 18% plus. So I think they also show healthy margins in food tech. And I think it's important to point out that that is despite continuing investments in future of this part of monitors rather than slowed it down. So I think we're building a very unique part of monitors. But also a unique asset that, as you know, we're now divesting and the process develops according to plan. So happy to get back to you when we have something more to say. But in short, it's progressing according to plan. So that was a very brief summary of the highlights overall. So I'm happy to hand over to you, Katarina, for the financials before we go back to some summary and Q&A.

9:26 Yes, sure. Thanks. So this was especially noted in air tech, but also in DCT, whereas food tech was flat. We also saw improved profitability in the quarter, where we exceeded the margin in Q2 and Q1. We had a negative cash flow from operating activities mainly related to the inventory build-up in DCT, somewhat mitigated by advances from customers. Still, our operating working capital to net sales ratio improved in the quarter to 4.2%, which is then well below our range of 10 to 13%.

10:18 The margin had a mixed development in the quarter. It was slower than we had a positive volume impact, both in Airtech, but also in DCT, so that impacted the margin positively. Then for DCT then, as Stefan talked about, there was a negative product mix effect and also tariffs weighed on the margin for DCT. Price increases are continuing to be implemented across the three BAs. The benefits of that will take a little bit longer. Stefan talked about this as well here, of course, as we are ramping up the city then in Virginia, we still see some production efficiencies related to the component constraints.

11:17 So that has a negative impact. And then for Airtek, the underutilization also weighed on Airtek's margin in the quarter. We see positive impacts from the cost-saving programs for Airtek. So that could be seen in the margin. And then we also wrote in the report about the positive one. And we see this as normal running business. It's not often that we have order cancellations. but sometimes it happens and this time it happens and it of course it is then offsetting some of the costs that we have had for this order in Q3 but also in prior quarters.

12:03 Sequentially the margin improved.

12:08 This was the highest margin fourth quarters, so we have really seen this, that we are able to strengthen the margin sequentially due to higher volumes and also cost savings. Speaking about ATEX, cost structure five have been completed and delivered well above the plan, and that also showed a very structured execution across the organization. and then we are continuing on the program now in 2026 and it's progressing very well and so far it has reached around 180 million and we are targeting 250 million then full year effects and this program addresses then adjustments in investments workforce optimization and decrease efficiency but also of course we are safe then the margin has strengthened and supported by volumes and this program Looking at the cash flow then, the cash flow was negative from operating activities.

13:35 The profit was solid, a solid profit generation, but it was really this change in the operating working capital, mainly then the inventory build up in DCT, but also higher accounts receivable as a result of higher sales. And this was then also offset by a stronger EBITDA. You can also see a positive effect from AgriWeb and we sold the minority holding that we had in AgriWeb and that generated a positive impact of 32%. Then on the year-to-date, pretty much the same story, solid earnings, and then the inventory build-up.

14:25 But on the year-to-date basis, it's largely mitigated by customer advances. And then, of course, we are continuing to invest in the business with the strategic capacity expansions and so on. And in the first quarter, we also have this. So we continue to invest and we are applying our very disciplined capital allocation principles. So, of course, we look for initiatives that improve excellence and also strengthen our potential growth. or future growth potential. In the quarter, we had CapEx as percent of net sales as 4.6%, and on a rolling 12 basis, it was 6%.

15:17 And then the majority of the investments in the quarter has been related to the Virginia expansion, of course, because we are ramping that up to support Strong demand in the US DC market, of course. We are also making investments in Airtek in the component production capacity in Mexico. So that is another investment that is ongoing. And if we look at guidance for operating working capital to net sale ratio that as I mentioned before we are making very good progress so it's down now to 4.2% in the quarter.

16:07 In terms of leverage, leverage increased then to 3.4 from 3.2 in the prior utilities related to the Virginia expansion then. And then there was also a small offset with the improved EBITDA. and as you know our long-term ambition is to have a leverage of 1.5 to 2.5 so that is not the fixed target but the long-term ambition and going forward we expect leverage to gradually improve then supported by higher earnings and also disciplined cash generation Still, we do know that this has taken longer time than previously expected due to that it has taken a little bit longer to translate.

17:07 Yes. So then, to end this part of the presentation then, I just wanted to share a little bit of a highlight from one of our investments in sustainability. So this is an investment in solar panels. in our Amesbury facility in the US. So during some couple of summer months, the facility and the installation were then able to generate 100% of the electricity needed to run the factory. and the whole site, so to say. So, of course, that had a very positive impact on our CO2 emissions and also on our utility costs.

17:52 So, of course, while this will not... Of course, it strengthens our resilience towards higher energy costs and also our overall resilience for the future. So with that, I would like to hand it back to you, Stefan, to summarize the quarter.

18:14 Thank you very much, Catharina. So then I move this forward. So in terms of summary, important, we are not changing the outlook for this year. We see positive order trends continue in the right direction of AirTech. There is a strong demand translating to sales growth now in DCT. And I think the ramp up is starting to prove that we're on the right way. And with Foodtech, we do see solid earnings and increased ARR, 18% plus year over year. So not changing the market outlook and not the business outlook either.

19:01 As the overall summary, I was thinking about how to summarize this. Klaus had his way and today a big part of Monters is the product business. And normally we look at this through four very important conversions. How do you go from market potential and turning that into orders? How do you go from having these orders and turn it into revenue according to the production milestones you need to hit to be able to recognize revenue? And how do you make sure that that revenue turns into profit and that profit turns into cash? And if I put that filter in Q3, I think it's very clear to say that in the first conversion, the market potential into orders, we have an outstanding commercial performance.

19:49 So we can make a difference in the markets, both in in air tech and in DCT and obviously also in food tech. Orders into revenue, this is where we have a little bit of a mixed situation, where Airtek is progressing according to plan and even slightly better, while DCT are struggling with the outputs compared to where the original ambition was, despite having 30% sequential sales growth. So we are still negatively impacted by the components constraints, but I think we have the worst parts behind us. revenue to profits obviously in overall in total as a group I think we came in strong but with that said I also it's not lost to me that where where DCT is trailing a little bit lower So that is obviously something we need to continue to work with.

20:47 I think we had a strong finish to the quarter and I'm looking forward to see how we can take this further, not only in Q4, but definitely to position ourselves for a strong 2027. and then profits into cash. Katarina covered that well. I mean it's very much related to the GCT inventory build-up that drives negative operating cash flow. With that said and also that one on a more positive note, this is also what will be part of it also related to some delays in projects that are outside of control and that combined with us Now, you know, getting access to the components we need to build builds up higher levels.

21:33 But again, that is part of the recipe for a stronger Q4. So all in all, I think I leave it there and we go straight to Q&A.

21:45 Great. Thank you very much, Stefan and Katarina. We are ready to take on questions. And for those of you in the telephone conference, I ask you, as always, to limit yourself to two questions so that we can hear from as many of you as possible. And then you're welcome to join the queue again, of course. Please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial £6 again on your telephone keypad. The next question comes from Jingyi Jing from UBS. Please go ahead.

22:33 Good morning, this is Jingyi from UBS. Thank you for taking my question and congrats again on the very strong auto intake. My questions are on DCT, firstly start with the growth and margins. Last quarter Claude mentioned the progress in DCT was delayed. and in particular, do you still guide for 30% growth this year and when should we expect to reach the high teens margin?

23:08 Good. Okay, thank you. Let's take them in sequential order then. Yes, I think that the delay of roughly a quarter is still a pretty good estimate. It's no exact science in terms of volumes. We're now starting to see that happen, but yes, we were planning to be earlier in that ramp-up than where we are right now, going back to the picture I was showing with that incline of the curve. The 30% overall is something that we put out there in the market and I would like to get away from the exact numbers here. There is a range, right?

23:54 I think if we hold according to our plans, I think there's nothing in the outlook having a significantly stronger H2 than H1 that we will subject to some external matters that we cannot fully influence ourselves. But if you ask me if I'm confident based on our own operations and where we are, yes, I think that is highly reasonable that we should be able to hit that. still. And sorry, there was one question in between those two that I lost. Which one was that? Yeah, I think the question on the last bit was

24:39 more of a mid-term play here I mean it could happen earlier but I think we have to see this from the waterfall of being at our top you know plus 20 percent something and then we have made the deliberate growth choices here going into new geographical areas broadening the portfolio because we didn't want to stay one or two trick pony right that has a decretive effect but the absolute value generation is of course much larger. So I just see a clear step towards that already now in near term and then continue to develop on that throughout next year. Thank you very much. That's very clear. As a follow-up, can I dig a bit into DCT Q4 deliveries? From what I understand, your delivery obligations from the large orders is stepping up again in Q4 versus Q3. And I tried to map out from the delivery schedule you published previously in the presentation decks.

25:50 From that, I estimate about $2.5 billion Q4 versus Q3. with your expectations? And secondly, are you confident in delivering this volume if that holds?

26:05 I was going to try to be funny and say I have to because if I say that we keep the outlook, we need to be there and above to be where we need to be. So the short answer would be yes.

26:19 And I think just to complement a little bit, the growth will also come. It's not only from the Virginia facility. No. It's also growth.

26:27 Of course, the bigger volumes come from the U.S. And to Katarina's point, not only Virginia, but also from Texas.

26:39 Great. Thanks so much.

26:42 Thank you.

26:43 Thank you. We can take the next caller. The next question comes from Jacob Marken from SEB. Please go ahead. Good morning, and thank you for taking my questions. Two percentage points tariff impact here in the quarter, which is down from last quarter and from the top that you had at four percentage points previously. I mean, should we see this as you have been able to source more local components in the US here in the quarter? Can you tell us a bit more on the component size locally in the US?

27:33 I think this is where we also need to start to gradually change the narrative a little bit, because if we go back, it was very important to us to kind of separate these are the tariff impacts coming from us localizing productions of shillers from Italy to the US, right? and then we had first a tariff impact on shipping over full units and then later on for the bill of material there were still vendors and still is from Italy that we import impact it's reducing it's still there but it's more about optimizing the bill of material rather than localizing it because In the biggest scheme of things, no one in the US, including us, will ever have a fully US-based bill of materials. So there will always be shipping in and imports, and some of them will carry tariffs, right? But that is something in a project business that we always take into consideration when we set the price. the challenge here was that we went into the market to make a dent commercially before and the supply chain constraints so it's been squeezing us more historically if that makes sense it's still there but it's limit it's washing out gradually we will still have some tariff impact related to the specific localization or moving from Italy

29:06 also in the coming quarter. But it's getting less and less, and I think next year I will stop talking about it. Then it's more optimizing the bill of material rather than localizing it. quite a lot of inventory here in Q2, Q3 and when do you expect that to unwind and for cash flow to improve from reducing inventory?

29:38 We expect it to stabilize at year end. So we will still see some increase in the fourth quarter, not as big as between Q2 and Q3. So we also need a higher level of supplies going forward to support higher volumes. Okay, and is part of the inventory buildup that you are not been able to secure some of the crucial components that you have. You build the inventory for all of the products and then you can't get all of the components and then you're stuck with some off-brand products.

30:25 No, that's correct. Exactly. So, for example, we had one little bit more shortage of coils. And then, of course, we had all the other components, right? But the positive side of that is, of course, that we are well equipped now to secure more components and to be in a better place for Q4. Good. Did you have another question? No, that was my two ones, so I'll get back in. Thank you.

30:57 Thank you. Okay. We can take another caller. The next question comes from Adrian Jelani from ABG Sundal Collier. Please go ahead. Yes. Hello. Good morning. My first question also on DCT is just trying to understand what the complexities are in the Virginia ramp-up.

31:28 Yes, thank you. I think it's a relatively broad mix when you start up a new factory. Some that you always have that is not specific to our situation, including hiring new people, making sure that you build with the right quality in this mission-critical industry. We can't make any mistakes, right? So... I think Klaus expressed it like in the beginning you have two persons working and eight people watching and then you start to move towards having eight people working and two watching and then finally all are working right. that we're not in the plan is to be to a point and concretely if we miss a component as an example it very often ruins the whole concept of lean like one piece flow another concept we work according to that means that you have to build in certain components at a stage of production that is not beneficial to make it in a fastest possible way So that is definitely something that is tampering us.

32:36 And revenue, which is also mid-term a little bit of an opportunity because that means that you might have half-produced units that are waiting to get finalized. But besides that, this very much relates to how we build stuff and the timing of it because to hit our margins, it's very important that we are exactly in line with the plan according to how we set up the flowlines. Understood. And then for my second question, just on the cancellation fee, I mean, I guess this is an unusual thing, but given that orders have been outpacing sales, then what is usual?

33:24 If you go back and look at this historically, and please fill in, Katarina and Line. In DCT, if I go back to my years, we have experienced one cancellation, basically, and that was industry-wide, not related to monitors. It was a big project in Denmark that got cancelled in 2022. it happens though so it's always the risk in a product business I think the way we are the big giants but on the other hand we have a very good visibility into the product projects and very often we work with the big ones like the hyperscalers and the wholesale collocation and they very often have good alternatives to pivot because when they cancel it's very often because there's something related to long-term permitting challenges or that they didn't got the connections to the grid that they were expecting or something like that but then they have many other places so instead so With that said, it's always a risk, but I don't think it's elevated or anything that has changed in the business model for us or in the profile of Monters as it's been the last few years.

34:45 And for Airtek, it's very unusual. This was the first cancellation we had there and also connected to it being a larger project that was cancelled in full. Okay, understood. I guess those were my two questions, so thank you.

35:04 Thank you. We have a few questions here about the utilization in Virginia. Would you like to comment a bit on that?

35:15 To the full extent. We had 365,000 square feet and now we've added 200. We know we're going to need all of that. So of all the things you could worry about as a CEO, it's not one of them. I think that we have built a footprint that is very much in line with the demand and what we see not only short term, but also longer term. And with the portfolio mix we have, I think there is a broadening opportunity for Monters as well.

35:51 and we always work with being able to take on other products in these factories as well, so it's not just completely chiller production.

36:01 No, and I guess we shouldn't bang our chests too hard, it's no rocket science, but obviously when we build new factories, which we have had the privilege to do the last few years, obviously we've equipped them with the right cranes, the right ceiling height, the right size of how you enter with a truck. These things actually matter. There's details to be able to have that flexibility to move production between the sites. So we can't do it just so. But utilization is definitely important coming back to the margins. And we are working on it. And obviously, it's not where it should be right now in Virginia. Specifically, that's why we don't see the drop through. But we have a clear plan to get there.

36:44 that we don't give any specific utilization rates for the factories. We can take another caller from the conference. The next question comes from August Fleining from Handelsbanken. Starting with the dates on the margin. Maybe drawing a little bit on the previous question here, but could you perhaps elaborate a little bit of how much of the components sourcing is currently localized in the U.S.? And here I mean specifically for the chiller.

37:29 Yes. So without breaking it out in exact percentages, because that would probably be more disinformation than information, because I'm probably not right. But look at the big ticket items here, coils, fans. not necessarily related to the shillers that we are producing, but some of the biggest fan producers, as an example, are from Europe, compressors as well with Danfoss. So there is import for sure, but that is a deliberate import or a deliberate, sorry, not localization. Coming back to the whole question about are we localizing or optimizing?

38:16 When it comes to the things where we can and should localize, like smaller things, obviously the bigger values are in the bigger components like the evaporators as an example. So we are tying in more and more vendors and more and more collaborations. I think we have been hit by this as an industry, but also Montrose a little bit specifically because we were late to the party when we decided to move the shillers because there was this window of opportunity. So we had to go to very niche vendors for some of these components. Now we go to the broader one. So even if it's an import aspect, you might still have the tariff, but you have a completed by now.

39:01 There are still bigger components that we do import, but I assume we will continue to do so. But we're going to price it into the projects, of course. Thanks, Mr. Klerk. and turning to data-centered demand. Could you talk us a little bit through how customer discussions are developing at the moment, and maybe particularly, well, looking into 2027, are you seeing any changes in how projects are progressing from early this year?

39:40 No, it's a good question. And I think the simple answer is that we don't actually see any significant change in sentiment of the market. The infrastructure is still needed. There's a lot of debate, as you know, and as we all can read about AI and specific companies and specific business models. But in the bigger scheme of things, the need for this infrastructure, not only for AI, but also digitalization on a broader scale, is very much needed. And we see those investments coming through. So the plans that we see both in how it's planned according to where you need energy, as an example, and where projects are being run. Thank you very much.

40:28 Thank you. We can take the next caller, please. The next question comes from Gustav Bernerblad from Nordea. Please go ahead. Yes, good morning. It's Gustav from Nordea. I thought maybe just to start off, I mean, you tend to push up DCT and then also I want to follow up on that. Do you take prepayments? in the range of 10 to 30 percent for all the DCT orders or just the larger ones

41:08 Thank you, Gustav. Good questions. I think let's start with the first ones. I mean, we have come from a history where we have announced larger orders due to a number of reasons, right? I mean, we have been doing more related press releases and marketing related ones. In the beginning, everything we did was potentially we have also got used to larger orders as well. And I consider that more as the running business nowadays. So, but the short answer would be that, yes, we've had during the quarters, I think we've had both smaller orders to medium-sized order to some of the bigger ones that I...

41:56 bigger cluster orders. I think that is not ruled out in the future either. It's not the normal pattern any longer, but I've been around in this industry enough to know that this comes and goes. It's very cyclical. So some years are like that. And I think the supply situation has definitely been pushing in that direction that some customers or companies want to kind of hedge towards that on security. so yeah and the second one was the prepayments and then the short answer is in with that said though as we become larger of course the negotiations become tougher because the larger the company you are the tougher that negotiation will be that some customers do simply think that you get paid when you're done and Okay, perfect.

42:59 Do you see any risks? I guess it's more related to the smaller orders, or the ones that don't have prepayments, but the risk that customers are placing double orders, that market is infiltrated by double orders, basically.

43:20 No, would be the short answer. And again, it comes back to our positioning and differentiation. We have very few that small customers. We have pretty good visibility into the projects we're engaging with us, very much others as well. But double orders to kind of hedge and secure, no, I haven't seen any of that. Okay, perfect. Thank you. That was my two questions.

43:52 Thank you. Thank you. We can take another caller. The next question comes from Carl Dagenberg from DNB Carnegie. Please go ahead. Thank you. Good morning. So the pricing component here, Is it possible to give any quantification, you know, what kind of pricing increases you're seeing, you know, in the orders you're taking now relative, let's say, the beginning of the year? And secondly to that question as well, Is the order values now reflecting the higher component prices that children are seeing impacting the margins you're entering in 2017? That's my first question.

44:52 Thank you, Carl. And this one is a little bit dicey because I think we have both. We have parts of the backlog where we actually took orders at worse pricing because there's so much that has happened. to your point quite lately and as you know there's a can be activated but not always there's always a range until that is triggered so there is some risk built in always if you have a product business like that but then to answer your questions about have we increased prices yes surely and there's significant price increases made also cost increases that we have had to take in and then the blessing of a product model is of course that you can reset the prices product by product right so yes I think a big part of the backlog now has a healthy pricing and for some of our pricing model we have just adjusting to where the market is I would say for us it's probably lower than that.

46:04 I think it's also about positioning. I would say 40% sounds very good Thank you. Secondly, I also just wanted to ask on the backlog now in this city. I think it was around 22 billion by the end of Q3. Could you share anything on the facing of the deliveries here, 27 and 28?

46:55 Just to understand what kind of delivery expectations we should look at when we compare it with the backlog for the going concern right now.

47:10 I mean, obviously, a lot of what we take in right now, a big part of 2027 is basically filled up because if you haven't placed your order by now, you're basically late in this industry, right? So the more we move towards the end of the year, the more you should see that part of the orders allocated to 2028. Some could be late 2027. I don't know, Lina, anything you would like to add to that?

47:38 I know that you don't provide explicit guidance on that, but it sounds like that is fairly conservative when we look at the value of the backlog. Would you agree with that?

48:05 I think at the time he said that we had a backlog of about 22 billion he was splitting it up on two years so it was more a very quick assumption but I think it's quite

48:27 what we have in that backlog is related to 2027. So yes, you should be able to expect a pretty significant lift. Okay, very well. Thank you very much.

48:41 Thank you. We can take another caller. The next question comes from Adela Dacian from Jefferies. Please go ahead. Yes, good morning, and also congratulations from me on the very strong DCT order results. A lot of questions have already been asked and answered, but I'm still going to keep it to the DCT margins. Appreciate the color on the bridge today's margin versus where you ended up last year? I mean, I understand if you can provide me with specific numbers on all the components here, but maybe, you know, where the weights are leaning towards in terms of volume and the mix

49:44 Yeah, no, it's a good question. And I think we are, if we are humble and we zoom out a little bit, I think we come from a history the last quarter or the last two quarters since we started, where it's been more of a mixed bag, Adela, you know, that parts of this is going back to where I started. Like some of these are very much related to a general situation or generic. Like this is what happens when you start a factory. Those kind of child diseases are gradually washing off or washing out. I don't think we have so much of that now. Still some, of course, because not the least related to hiring quite a bit of new people. So there's a skill effect here that been, I think, the main change here. It's not to be underestimated when you have to make these adjustments between different batches of different productions in a producing environment. So that has been hurting us quite bad.

50:52 That is also getting gradually better, and that has a straight link to the supply chain situation. So they really go hand in hand. because if we don't have it, we will have to still move around products and move certain things on the line aside to take something on the margin. But to go back to answer your question, I think right now, without sounding defensive, I would say the absolute vast majority of the limiting factor is external. We have our docs in Herona when it comes to the operations, and we have all the equipment, and we have people working and ready to take on the bigger volumes. I hope you can see the 30% plus sequential as some kind of nugget of indication that we actually have the capability to start ramping up and obviously to hit the outlook we need more than those 30% but I think it's a good first step so I dare to be somewhat forward-leaning in this I know we've been discussing this back and forth several times before but with those factors being mainly external and obviously very limiting on your progress here would it be possible for you to provide some sort of like outlook on exactly what you are doing to combat this like what proactive measures are you

52:24 undertaking

52:26 yes I can touch upon a few quickly then some of them are obviously obvious but we are qualifying more vendors that's a very big part of that so being extremely active and not only traditional sourcing I'm talking about full management team or my head of R&D is working more actively on this than maybe other things, right? So really making sure that we can qualify alternatives to keep building, but maybe with something that wasn't there in the bill of material from the beginning. That also calls for the second bullet, and that is very tight collaborations with the customers, because we're all in the same fan, as an example, and the one that was specced in. That's a very clear, tangible activity that we can initiate.

53:16 Besides that, a lot of lean work. We have a dedicated team in DCT that works with nothing else than just operational efficiency improvements. And they are doing their thing in all of the factories, but of course now very much focused on Virginia and the Shiller ramp-up, which is another aspect. And then the last one, I would say utilizing this opportunity that to make changes in the production schedule without being so disruptive because if you only have your original factory and you're limited to the box you normally have that is more disruptive now we can actually move certain things out to the new part of the factory and utilize that we don't have full utilization yet right so that is also benefiting production that have more space to move as simple as it sounds that has adding extra short-term consultants that can come in and boost productivity and things like that.

54:22 and we have also built a stable stocks where we can. Yeah, definitely.

54:26 That's a very good point, Katarina. The stock levels of inventory is, of course, now once we get components, yes, we take the opportunity to, I'd rather tie some capital and make sure that we have what we need to produce because in the biggest scheme of things, that's going to be better for the company. And then long-term, of course, we need to be at the right level on both. Thank you. If I just... may quickly squeeze one in with the comments around working very diligently with your customers. I mean, your order book here suggests that there's absolutely no stop in the momentum, obviously. Would you say that this is then helping the view that you actually are in a really, really strong market position where your products are valued enough that customers are willing to see past these issues that you're currently experiencing and still place orders with you and not go months or a year ago.

55:39 That's a good question, Adelaide. I think it's fair to say, and obviously, you know, this is a subjective view, but I think we have more conversations in a positive tone that we now have had time to bring people to Italy, being our kind of R&D hub for shillers. Show them what we have, but also on a broader scale that we are a most significant player in the industry now. So, yes, I do think we have a good traction in the market. To be more humble, I mean, everyone is in a good position right now because there is a strong industry. But in that strong industry, I definitely believe we are taking market share seriously. discussing now is very much related on the expectation that you have as a capital market, which is very often quarter by quarter.

56:29 So if I look at that and I compare the commercial situation, I don't think there's a view external that we would be in a tougher situation than anyone else because our progress here is not worse than competition, I wouldn't say. everyone is on allocation list on certain components I see no one having a flawless like everything all ducks we are just in a different situation when we have started to move in a new production facility okay that's a great clarification thank you I'll stop there thank you next caller please The next question comes from Anders Rosland from Pareto Securites.

57:18 Please go ahead. Good morning. I have two questions regarding margins in DCT and Airtek. Just to phrase it a little bit differently, you mentioned product mix as one reason. question and the second one is in Airtek the fact that you took this or took that you had this capital gain of 2.5 percentage points you also mentioned that you had some costs related to this cancellation of order

58:11 Could you elaborate a little bit on what the underlying margin X the capital gain and Product mix for DCT is quite clear we've gone from and Anders I know you know us very well we've gone from if you zoom up we've gone from very much low you know concentrated around cycle and evaporative solutions we benefited highly from that and then we went into the chilled water infrastructure and with chillers but not only chillers also CDUs and new types of cross and if I look at this year we're basically producing three to us completely new concepts in the factory and Those, it all relates, that product mix all relates to going from things we are very used to producing and have set up routines and we have, you know, what it looks like in terms of output and efficiency to producing to a large extent what we produce in Virginia now is very much new.

59:25 Okay, and the other one, Airtek margin then the order cancellation fee. Yes, we had a positive one-off for Airtek in the quarter part of the normal running business.

59:42 Hence, we have not put this as an item affecting comparability because it does not meet our requirements to qualify for that. And we had some costs related to the order cancellation in Q3, but also in Q4. Okay, so you don't dare to say, because given the sales increase, which was quite impressive, you maybe have an effect a little bit better margins than the one just taking off the 2.5% point of cancellation income. Yeah, exactly. The 10-4, is that the running rate or that is obviously impacted by also your high costs?

1:00:46 So that's why I'm saying it was not a high cost in Q3. It was a small part. Okay. Okay. Thank you very much. Thank you.

1:01:00 Thank you. I think we have one more caller. We'll let you in Mats for the last question. Hi, thank you. A lot of questions. I'm in DCT here, and the orders are solid. Are there sort of new customers in the backlog now, or is it sort of existing customers that you have met before? and also maybe have to get a color kit mix there if you can show some color.

1:01:46 Yes. New customers, but also more from the established relationships. So I'm happy to see new, to speak in food tech terms, new logos added. Okay, great. And there are some sort of consolidation trends going on, and I guess some of your competitors have a broader offering. Is that something that customers like to see? I mean, more of a one-stop shop, or do you have sufficient offering? I think so, I guess, but more DCT, yeah.

1:02:35 in short Mats I think we have one of the broader offerings in the market so in terms of that I mean definitely whenever competitors are developing and joining forces or buying smaller ones it's potentially strengthening them so that's not lost to me but I think we are also very active both in how we are looking at the potential M&A agenda, but also where we are right now. We have done a lot of good moves the last few years that's put us in a good position. So we are equipped to compete. All right. Yeah, I had the final one there on food tech. Do you have some comments there on the progress of the divestiture?

1:03:25 No, nothing to share right now besides that we are on plan. We had a plan where we should be end of the year, and I think we are bang on that. So I'm happy to get back to you as soon as we have something relevant to say. Okay, great. Thank you all.

1:03:47 Thank you very much. A lot of good questions today. And with that, big thank you to Stefan and Katarina for presenting. I knew I would do that at some point. We're also reminding you that we will be having a capital markets day on the 11th of November. So please reach out and come listen to us then. Thank you very much. Thank you.