Munters Group AB

STO:MTRS

Earnings Call Analysis

Strong Q1 Performance with Growth and Profitability Improvements

In Q1, the company reported strong growth with an 11% increase in net sales, 7% of which was organic. Profitability improved significantly with an adjusted EBITDA margin of 14.1%, driven by strong performances from Data Center Technologies and FoodTech. The company continued its strategic investments in digital competencies and factory upgrades, which resulted in improved cash flow and reduced leverage. Order intake grew by 32%, with notable demand in the AirTech and Data Center segments. The company anticipates maintaining this upward trajectory, supported by ongoing investments in both technology and sustainability.

Strong Start of the Year

The company's first quarter results indicate a strong and stable start to the year, characterized by a 32% increase in order intake, with 29% of this growth attributed to organic demand. This is particularly notable across all business divisions, fostering positive expectations for future performance.

Impressive Revenue Growth

Net sales surged by 11%, driven by a 7% organic growth rate, signaling robust growth across divisions. The standout performer was the Data Center Technology (DCT) division, exhibiting impressive delivery metrics. Despite some declines in the AirTech sector, the overall performance remains strong thanks to sustained demand in the Americas and EMEA.

Margin Expansion and Profitability

Adjusted EBITDA margins reached 14.1%, marking the second consecutive quarter of margin improvement. This was facilitated by price increases, solid operational performance, and high factory utilization, amidst accelerated investments aimed at long-term sustainable growth. Net price increases in both Data Center and FoodTech contributed meaningfully to these margin gains.

Regional Performance Insights

Regional breakdown highlights that the Americas and EMEA together contributed 83% of the order intake, showcasing significant market strength. Specifically, the DCT experienced substantial demand from co-locators and hyperscalers, while FoodTech showed positive trends in both Americas and EMEA, reflecting a burgeoning recovery in previously underperforming segments.

Future Growth Initiatives

The company is strategically focusing investments in areas poised for future growth, including an expansion in Ireland and investments aimed at carbon capture technologies. There's a targeted objective to achieve net-zero emissions for Scope 1 and 2 by 2030, reinforcing the company's commitment to sustainability.

Cash Flow and Leverage Management

Cash flow improved significantly during the quarter, with positive contributions from operating working capital, driven chiefly by customer advances in the Data Center segment. Despite slight increases in net debt due to acquisitions, the leverage ratio improved to 2.0, highlighting effective leverage management over recent quarters.

Outlook for Data Centers

Looking ahead, the Data Center market is anticipated to continue its upward trajectory. Guidance indicates that underlying margins could stabilize between 13% and 16%—a promising outlook that investors should closely monitor as the company navigates future demand fluctuations.

Revisions on Strategic Reviews

The strategic review of FoodTech is progressing, with potential announcements expected by mid-year. This initiative seeks to leverage improved operational efficiencies and market conditions to enhance profitability in this sector further.

Sustainability Goals

The company continues to focus on sustainability initiatives with renewable energy accounting for about 80% of factory electricity. Progress on recycling and health & safety measures indicates a commitment to maintaining high operational standards while achieving strategic growth targets.

Earnings Call Transcript 2024-Q1

[Ann-Sofi Jönsson, executive]

Welcome. Today, we are here to present our first quarter results for this year. With me, I have Klas Forsstrom, our CEO; and Katharina Fischer, our CFO.So welcome to those of you who are listening in on the conference call and for those of you who are on the webcast. Please feel free to post your questions throughout the whole session if you're viewing on the webcast. We'll pick them up after the presentation in the Q&A session. Then we will also open up for those of you who are on the conference call.So with that, I hand over to you, Klas.

[Klas Forsström, executive]

Thank you, Ann-Sofi and once again, very, very welcome to this Q1 report.Before I and Katharina starts to go into the details around the quarter, let me summarize it in a few sentences, a very strong quarter, stable growth, strong operational deliveries that paired with stepwise accelerated investments for future sustainable growth. All this combined resulting in margin improvements and a good cash flow generation. Our strategic review of FoodTech is progressing well. And our decision will be communicated at the end or by the end of H1.So with that, let's dig into the quarter. As I said, it summarizes with high demand and profitable growth. And if I take it then from the continued high demand, that drives stable net sales and enhance profitability and start with the order side then. 32% order intake. Of that, 29% organic. Quite strong in all business areas. Very good to see that AirTech demand, especially in Battery are increasing in EMEA. Data center technology, a solid development in Americas but also in Europe. And as you know, I mean some quarters, very strong order intake and some others, a little bit weaker due to customer setup then.FoodTech, super pleasing to see continued positive development mainly in Americas and EMEA and we increased the order backlog with about 10%.Moving over to net sales. All in all, 11% growth. Of that, 7% organic. DCT, the star in this quarter, very good deliveries. FoodTech climate solution, America has continued to be strong and very strong digital solutions in U.S. as well. AirTech decreased somewhat. Growth continued to be on the invoicing in Americas and that was offset by a weaker APAC and EMEA. Adjusted EBITDA margin then reaching for the second quarter in a 12 month period about a 14%, solid growth. Net price increases and strong operational deliveries on the plus side drives up the margin. Accelerated investments to create future sustainable growth of course is taking it down somewhat but all in all, resulting in a margin improvements and a good cash flow then.Going into the details then, Americas and EMEA being the main growth drivers then. The share in between the different ones or order intake, 42%, 41% and 17% in between the 3 regions. Net sales being stronger in Americas, about 60% and then 20%, 14%. But you can see the shift in EMEA starting to pick up on order intake. AirTech in Americas components and services, good growth, Battery somewhat weaker. The shifted order pattern that I've talked about for a couple of quarters, DCT, a continued very strong underlying demand both from co-locators and hyperscalers.And FoodTech then. Super pleased to see that they are continuing to deliver strong growth in all different segments then. EMEA order intake. As I mentioned earlier, a pick up in Battery after a somewhat weaker 2 quarters. DCT continued to deliver good activities in in the quarter. And FoodTech, super pleasing to see a good recovery across all segments, especially within broiler and Greenhouse.And then APAC, not very much change here. I mean it's a continued fairly weak development in APAC. As I talked about, the Battery market being then a little bit cramped and in China, FoodTech continued to be weak but I sense a slight recovery and we have bottomed out there. The solid order backlog, 10% then larger than 1 year ago. All in all, large order supportive all the way into 2025. Something to highlight here, the very first order at the top there that is completed now and we are eating ourselves into the orders then as per laid out the pattern here.If I go into AirTech then and start on the right side with the different arrows. As you can see, in some areas, slightly less green, but still very stable. And others continue to be pointing upwards. All in all, a quite solid market.Coming in then to the order intake. As I said, EMEA and Americas, strong, APAC, quite somewhat lower. And without going into the different details, what you can see, that is, we continue to have a strong service outlook components being a little bit weakened due to the aftermarket in Asia and the others being pretty much in balance with the last couple of quarters.If we then go over to net sales, a decrease of about 1% then. And here, it's sort of the reversed. It's America that is growing and it's a weaker EMEA then. And so you can see order pattern and invoicing is a little bit reversed. All in all then, a lowered margin that decreased to 14.9%. But with that said, you have heard me say, when AirTech is in between 13% to 16% or slightly over, I think they're delivering a strong and good operational outcome.I think this picture is quite interesting picture to talk about. A couple of -- a year, a year and a half ago, 2 years, we received some very, very large Battery orders that we're eating ourselves into now. But if I exclude those, this quarter is one of the strongest quarters then in the last couple of years for AirTech and it's a quite well balanced quarter as well. You can see Battery's smaller orders, especially in Europe are coming back and picking up but all the other areas are also slightly growing or being stable.We continue to adjust and invest into areas that we believe will generate long term future growth. A couple of years ago, we started with electrification, the batteries we put in focus and to deliver new products into the market when it came to Data Center. And now, we are searching for new areas. And 2 areas of importance that is, of course, for long run, carbon capture and VOC, i.e. to clean out dangerous or volatile organic compounds from different areas. Here, we are investing in a company called Airprotech. It has some net sales of about SEK 300 million for last year. And this gives us a very, very strong base to move into certain areas when it comes to purification. It's abatement. It is a very good base -- customer base where we can deliver service, but it's also then creating a more stable platform also for other areas within Clean Technologies.Moving over to Data Center. On and off, we have talked about what is the transactional sales to different segments, hyperscalers, co-locators and telecoms and enterprises. In general, and this is important to realize, hyperscalers are sourced through co-locators or directly in direct business. In this quarter, we didn't take any direct hyperscaler sales, but we know for sure that some of our co-locators are really sourcing the hyperscalers. So from that perspective, it is interesting to see more from a transactional sales where we are delivering and hyperscalers are behind a lot of the growth anyhow.Order intake, 17%. We didn't receive any larger orders, but we have to remember that last quarter, we had a super strong. I'm very convinced for the coming 2, 3 years, the foreseeable future Data Center market will continue to grow. Some quarters, it will be up in order intake and some other quarters, it will be weaker. I see a very, very strong market here.Then when we take orders, when we put it into our system, I'm very, very pleased to see what was generated towards the bottom line, reaching a 19% EBITDA. I have to say that I'm happily surprised to some extent, but it just shows what we can do when we have an operational flow and a good order intake that can fill up the factories. What is important to say, why did we deliver this then? I mean, of course, strong volume increase, net price increases, high utilization rate in the production paired with operational efficiency improvements. What we have to remember, we will continue to invest for the future in this, and that will, of course, have somewhat of an effect on our margin moving forward.With that then, I'm super happy to say that now we are repeating the pattern that we did in North America. We are investing and building more manufacturing capabilities. And we have -- yes, we are in mid through the construction of a new expansion in Cork, 11,000 square meters of production and office spaces. It is about 1/3 of the size of what we have in North America. But what we have also learned from North America that is that if needed, we can add shifts, et cetera. So I think that this will create a very, very good platform for continued growth in Europe.And when we do this, also important to say, I mean, our purpose for customer success and a healthy planet, we are also living that when we build our own factories. It is LEED Silver sustainability certification. That is a quite high level, and it generates a lot of energy efficiency also when we operate the building. FoodTech. Perhaps this is the area that I'm most pleased of. I mean AirTech and DCT has spoiled us to some extent in the last couple of quarters. It's so great to see the comeback that is happening in both that the market is improving in EMEA, but even more so that the operational measurements that we have taken is also generating a very, very good bottom line.You can see on the different arrows here that they are pointing more and more towards the green and upwards. Digital solutions continues to be a very strong market moving forward. I'm happy to see that the order backlog increased. I mean the order backlog is one of the strongest in quite a few quarters then. And this drives enhanced profitability and net sales. 11.7%, I think is a good base, and I'm super pleased that we have moved from a little bit shy of 5%. And why have we done that? I mean the increased net sales in both climate solutions and digital solutions, efficiency measurements and on top of that, also continued net price increases.I love to talk about customers. And here, we have one, I think, a very good example of a customer in the more climate solution equipment-driven area. It's CELdek. It is our wet pads that drives high energy-efficient cooling, and it's our fans that circulate it and keep a good climate for in this case, then the vegetables or the plants that are being brought in here. This was towards an EMEA contractor targeted for the Middle East area. Middle East being a market that is investing more and more of this type of equipment for the future. Super good to see.Also very promising. I mean, yet another quarter with significant software-as-a-service growth. I mean 68%. We have now been in between 30% to up to 70% quarter-on-quarter, so to speak. And I continue to say like this, we are on our way to reach SEK 400 million ARR step-by-step. We will take it quarter by quarter. We are not yet there, but we will continue that journey. This case, a large U.S. Turkey company and not one of the largest, but still, we are upgrading their system with our modern Amino software, and that generates a good operational efficiency for them.Something to remind ourselves of that is our software generates on and about 85% gross margin, but we will continue to invest in order to drive growth in this area. If that is what we do for our customers, let's lean back a little bit and take a look upon what we're doing when it comes to our sustainability goals then. Those numbers here, they are including also our newly bought companies as well. All in all, we continue to progress well. We have renewable electricity in the factories about an 80% energy efficiency, a little bit less this quarter than 4 quarters ago, but still on a high level.The recycling rate, close to 50%. Something that is super pleasing to see, that is our health & safety measurements and our target to reach zero accident, the vision here. We are now down to 1.4 from a fairly good number of 2.0. I mean, this is industry-leading, and I'm very pleased to see, especially a week like this when we have a safety week across the globe then.Diversity, an area to continue to improve on. We are in our industry quite good, but we would like to continue to be a leading standard also in across industries. We are about 20% plus in this region then.So with that, fairly quick walkthrough, I hand over to you, Katharina and take us through the numbers a little bit more.

[Katharina Fischer, executive]

Yes. Thank you, Klas. So I'm very happy to present this quarterly results where we again saw a strengthening order backlog, good growth and also improved profitability. All business areas increased their order intake with strong growth in AirTech and FoodTech. Our net sales also increased. We grew organically 7% in the quarter. And including the recent acquisitions, we grew 13%, excluding currency impacts. And this strong net sales growth was driven mainly then by the Data Center, the high pace of deliveries within Data Center and also strong growth in FoodTech, both in climate solutions and digital solutions.Our adjusted EBITDA margin improved significantly, and I will come back to that a little bit later. In the fourth quarter, Data Center won some large orders, as you know. And as we alluded to then, we had during the first quarter received some customer advances partly -- parts of those customer advances in the first quarter, and that has then been the main driver for the improved operating working capital and good cash generation in the quarter. Our net debt increased slightly due to the partly debt finance acquisitions that we have made in the last 12 months. However, our leverage decreased due to the improved profitability.So our leverage ratio is now at 2.0. In the quarter, we recorded items affecting comparability relating to the strategic review of FoodTech equipment, also for M&A activities and some relating to the repositioning of the Cleantech technologies where we are exiting the Marine business. This, in combination with a higher tax rate and higher interest rate expenses, led to net income increasing 6% compared to the organic EBITDA margin increasing 25%. We had an impressive margin in the first quarter, 14.1%. And the main factors driving that was, of course, the strong volume increase in Data Center and FoodTech and also the high factory utilization.We also had the strong growth in software-as-a-service within digital solutions in FoodTech. We continue to increase prices in the quarter, mainly in Data Center and FoodTech. And all business area executed really well on operational excellence initiatives. In this strong margin, it's also included continued investments in the strategic initiatives for scalability and future growth. And this includes investments in digital competencies, systems and new ways of working.Here, we can look at the cash flow that has improved in the quarter, as you can see in the slide. We see a positive impact from the operating working capital, and this stems from many different initiatives that we are driving across the business, across the different components. But the main driver is the customer advances received in the Data Center, and that has really improved the working capital in the quarter.And as we have mentioned before, these large orders can create some volatility in our cash flow during the project lifetime. In terms of investments in the quarter, we have invested in one new minority company. And then we have also done 2 capital increases during the quarter. In terms of finance activities, we repaid some part of our loans, and we also paid the first dividend installment in the quarter. As we saw on the prior slide, we invested some SEK 230 million in the quarter. And out of that SEK 175 million relates to property, plant and equipment and intangible assets.So we continue to invest in our business to support the future growth. And it's across the business where we are strengthening competence, we are upgrading our facilities, and we are digitalizing and automating. In the first quarter, we started to roll out our main system support in the company. And that implementation will now continue over the next coming years. So that will require some investments. We are -- investments are also required for our net zero journey, where we have a target to reach net zero emissions for Scope 1 and 2 by 2030.Our investment in the Amesbury factory in Massachusetts in the U.S. is developing according to plan. And as you know, that is a major plant that we have. And as Klas talked about, we are also investing in Ireland in Cork, a new plant for Data Center to support their expansion in Europe.Looking at operating working capital, as I have already commented, we now have a lower level, thanks to the advances in Data Center. That is the main driver.Looking at leverage then. We are very pleased that we have managed to decrease leverage now for 3 quarters in a row. Our net debt has been stable if you compare also to the fourth quarter. And important to remember here is that the finalization on the Airprotech acquisition will happen in Q2.And then I just want to conclude by saying I'm very proud that we have been able to grow profitably in the quarter and also to lower leverage.And with that, I would like to hand it back to you, Klas.

[Klas Forsström, executive]

Thank you, Katharina, and let's move into a summary and then open up for Q&As.So all in all, you have heard me say many times, I mean it's a step-by-step journey that we are on to. And very pleased to see improved EBITDA margin, slightly below our organic growth target for net sales and then also improved operating working capital as such. This, we will continue to work with step-by-step, and I think it is a promising start of this year. So more than a promising start, a very strong start of the year. High demands continue to drive our continued momentum, a little bit shift in between the regions. Super pleasing to see what is happening in FoodTech coming back from very low levels in some regions. All this drives a good profitability and an improved leverage. And we continue to invest ahead of the curve where we see sustainable growth moving into the future.So with that, let's open up for Q&A and welcome Ann-Sofi.

[Ann-Sofi Jönsson, executive]

Thank you, Klas. So we open up for questions on the conference call as a start.

[Operator]

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

[Adela Dashian, analyst]

My first question relates to data centers. And the -- I guess, the time line as we're moving into 2024, we didn't see any larger orders, as you mentioned during the quarter, but you still have a pretty good order intake. And I guess with the visibility that you have and the communications that you're having with existing customers and potential new customers, what is their time line for the remainder of the year? And then how should we -- I guess, how should we position the growth or the order intake that you're expecting into the different quarters going forward? That's my first question.

[Klas Forsström, executive]

And as I think we all are aware of now that I constantly come back to, I mean, we have a volatile order pattern depending on what type of customers we have. Some are bundling together many orders and put one larger order in and others, they are coming with smaller orders. We are trying to not go into a clear forecasting moving forward. I can only say like this. I know that we have a very good talks with already existing customers and other customers, and I'm confident for the year that we will continue to deliver a very good order intake. And I can say like this.When it comes to Data Center, I foresee a strong market in the coming years, but predicting one quarter to another if that would be unfair for me to say, but I'm very confident for the year. It could be smaller orders or bundle orders coming forward.

[Adela Dashian, analyst]

And then maybe also if you could provide some update on the battery sub segment in AirTech, especially in APAC. Are we reaching a bottoming out there or is it going to be a couple of more quarters of weak developments?

[Klas Forsström, executive]

Very often, the pattern is in China because we talk predominantly about China here, that is that you have an expansion. And then for a couple of quarters, sometimes up to 1.5 years, I mean you have a little bit of more contraction then or a similar pattern. I have said earlier that perhaps at the end of this year, we can start to see an up pick. But what is good to see, we are not seeing it trending down anymore in Asia and especially in China.With that, if I turn it around then and let's point out Europe and EMEA, I mean, there, we had quite a weak quarters, the last 2 quarters and now that has started to pick up. So I think this will move in across the different regions then. But on a direct question, yes, I think it has bottomed out in China. And by the end of the year, it can start to pick up.

[Adela Dashian, analyst]

And then just lastly, on FoodTech, are you still -- should we still expect an announcement to be made on the strategic review in the first half of this year? And then secondly, on the margins. You mentioned that the margins that you achieved during the quarter is a good base. How sustainable is that going forward? And what kind of rooms for improvement is there if the FoodTech division is continuing to improve its momentum top line-wise?

[Klas Forsström, executive]

No but, first of all, I'm super pleased to see that all our efforts and the great work by our people in FoodTech is starting to pay off in all the different segments. The market is improving in EMEA when it comes to the more equipment-driven segment, and it's still continued strong in North America then. Then coming back to the first question, yes, before the end of this quarter -- this half year or at latest in conjunction with the quarter report, I mean, we will come with a very clear conclusion on this.

[Adela Dashian, analyst]

And you see room for margin improvement if you have better volumes coming through. So this is -- the 12% is sustainable.

[Klas Forsström, executive]

What we can see, and that is, of course, if we have more volumes into very lean and good factory output, I mean, that gives a positive effect on the bottom line. But I'm not predicting anything for the future. This quarter was a very good work by everyone involved.

[Ann-Sofi Jönsson, executive]

We'll take another question from the conference call.

[Operator]

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

[Karl Bokvist, analyst]

My first question is on the profitability in data centers, many plus signs working in your favor this quarter. I was just a bit curious thinking further ahead both into the next quarter and then also perhaps, let's say, a year from now, how much this quarter was supported by end of deliveries or finalization of particular projects that could have benefited as well.

[Klas Forsström, executive]

I can start and Katharina, I mean you follow this in details as well, please pitch in. But I mean, first of all, I mean, it is a quarter where we have had very, very good efficiency and good leverage in our factories. I think that sends one signal that our lean work and the way we operate our factories is really on the right move then. Then when it comes to, I mean, a 19% record margin in Data Center, I think it is a record margin in the industry across. I mean, super pleased about that.I'm confident that they will keep a good underlying margin, but I don't foresee that they will deliver 19% each and every quarter.Anything to add on how we work there?

[Katharina Fischer, executive]

No, I can just add that they also had a strong product mix, but no big one-time completion effects, I would say. And then we should also remember that going forward, we will continue to invest in data centers. So that they will continue to build their support structure going forward.

[Karl Bokvist, analyst]

And about this mix aspect, this is something that you have flagged historically in both low margin and high margin quarters. So when you talk about mix in data centers, what should we usually think about them?

[Klas Forsström, executive]

I think you can have a few triangulation points. First of all, we have become much better in what I call the modernization of the products, especially when it comes to SyCool. That is one example. SyCool is driving up margin. With that said, I mean, we are working with lean across all the different products. So I see that the margin, call it, difference in between the product lines have slightly decreased. So I expect all product lines to deliver a good margin. But SyCool has the highest margin.

[Karl Bokvist, analyst]

And then on the progress you are making in Europe, we have -- you're now investing in the factory and you talked a bit about it during your latest webinar, but when should we start to think about commercial orders from Europe?

[Klas Forsström, executive]

I mean, first of all, we have to say that, I mean, on the invoicing, I mean Europe is progressing very well. I mean, I think you've heard me say something like this. I mean, first, we double Europe and then we will double it again. And we are on invoicing close to double it already now then. So that's the reason why we're building the factories. What we need to do now and bear in mind then how it started in North America, we built the factories. We started to take medium-sized order, and then we moved into the very large orders.I mean, step-by-step, it will come into larger and larger orders here as well. But I mean I'm super confident. We have doubled it and we will double it again. And that, I think we should remember. We are just in the beginning in Europe when it comes to how we can impact the market.

[Ann-Sofi Jönsson, executive]

We'll take another question from the conference call.

[Operator]

The next question comes from Julia Utbult from SEB.

[Julia Utbult, analyst]

Julia Utbult with SEB. I have 3 quick questions and the first one is on service. We see that service is picking up again in AirTech. Can you give us some background to that?

[Klas Forsström, executive]

Julia, it was a very --

[Julia Utbult, analyst]

Take something up, if you could give something --

[Klas Forsström, executive]

But absolutely, as you know, I mean, service as such is a core area for where we focus efforts. We would like to have recurring revenue as such. I mean part of the service pick up is, of course, we have a large installed base then. And then some of our product lines needs to be replaced. It's super nice to see that we have progressed very well in Europe and continue to progress very well in North America. And then to some extent, then a little bit weaker service region in APAC this. But all in all, it's about how we work and how we attract customers, if I summarize it.

[Julia Utbult, analyst]

So would you say that there was anything specific that was the difference between Q4 '23 and this quarter?

[Klas Forsström, executive]

I mean sometimes we do receive more bundle service projects, and that can have a certain effect this quarter as such. But I mean, generally speaking, that we received year after year, so to speak. So to some extent, a little bit positive on larger bundle orders. But in general, it's the good underlying work.

[Julia Utbult, analyst]

And then a question on the SaaS development in FoodTech. We see good growth there. Is it mainly driven by new customers or is it add-on revenue from existing customers? Can you give us some color there, please?

[Klas Forsström, executive]

It is a combination. I mean, a large part is coming from the earlier announced customer -- larger customer contracts that we announced a couple of quarters ago up to a year plus. That is then advancements in those projects. So I think you all remember that I said in -- when it comes to one contract, it will generate a recurring revenue of about SEK 50 million on a yearly basis. But then we are adding, and I gave a small example of that in this quarter report, we're adding more customers as well.So you can say like this, I think it is without giving an exact number, but you can put it in 2 buckets, and they are at current and more coming from already taken orders, but it's increasingly coming from new customers that we roll in.

[Julia Utbult, analyst]

And my final question is on Cleantech. You mentioned that you are exiting Marine. Can you explain more about the background around that? And if you see any more potential for exiting other segments or how you're working with this area?

[Klas Forsström, executive]

A couple of years ago, we called Clean Technology as Mist Elimination. At that time, then the Marine segment was a fairly large sector. And as we all know, I mean, that has been affected that it is different regulations and the sulfur, the more dirty oil is not used there anymore. So we took a decision a couple of quarters ago to reposition ourselves. Then we started 2 quarters ago. And then we reallocate the focus and the resources using similar technology into other areas. And then we talk about VOC and we talk about carbon capture as an example.So I think it is just to be described as the never-ending story. We need to be focusing our efforts on the markets that we see are generating results for the future, so to speak.

[Ann-Sofi Jönsson, executive]

We'll take another question from the conference call.

[Operator]

The next question comes from Mats Liss from Kepler.

[Mats Liss, analyst]

A couple of questions. First, I mean we're talking about the European potential in Data Center and so on. And could you just sort of give some flavor about -- I mean, you mentioned you doubled the size in Europe already. And what do you see in profitability in Europe compared to the Americas, I guess, is the question?

[Klas Forsström, executive]

No but I can start, and then I also hand over to Katharina to give a couple of examples. But if I go back then, when we decided that we should put focus into Europe again, I mean, we evaluated the market. We came to the conclusion that the profit pool, the possibilities to regenerate profit in Europe is as good as in North America. So that is sort of the base then, so to speak. And then what we learned from -- I mean, before my arrival to the company that is the famous strategy, think big, think ahead, start small and take it step by step, and that is what we're doing right now then.And the market share in Europe, we say that it's below 5%. And then we also count in the market that we had generated several years ago until we sort of departed from Europe. So from that perspective, we have a similar profit pool, and then we have a larger market or untapped potential in the market. So I expect that step-by-step, I mean, the growth in Europe will accelerate and have a growth pattern that is similar to North America, but that will not come in 1 or 2 quarters. That is a journey for a couple of years.Anything, Katharina? I mean, you have looked into -- I mean, you don't have the background on Data Center, but any reflections on the investments that we're doing in Ireland and so on?

[Katharina Fischer, executive]

Yes. No. They are, of course, progressing very well. And I think in terms of margin going forward, I mean, we say the 13% to 16% also for data centers. So I think that is what you can have in mind.

[Mats Liss, analyst]

And secondly, I mean you talked about financial targets there and you're a bit below the sales organic targets and a bit above on the EBITDA margin target. Should we sort of see this -- well, you're focusing more on profitability than on sales. It's a bit provocative, I guess, given the outlook for opportunities, but could you say something there?

[Klas Forsström, executive]

No but if I start with the growth then, I reiterate myself then. If I go back 3 years, we have, on a CAGR delivery well above the 10%. If I would take away 1 year of that and add another year, I'm very confident that we will deliver a CAGR that is about that. And that I can repeat. And if I look 3 years ahead, I think that we will be on or very, very close to the organic growth also for the coming 3 years. And the reason for that is we are into transformative segments where we see strong underlying growth, being batteries, being carbon capture more and more, being Data Center.And with that then, I mean, then one or another quarter could be lower and one or another quarter will, of course, be higher. So I'm confident on that. And then what is very encouraging to see that is that when we are aligning the stars, then we can reach the 14%. The main focus is not reaching that. The main focus is doing it in a sustainable way. So 1 quarter is not a target reach. This, we need to continue to develop.

[Mats Liss, analyst]

Then I guess you have this new business segment that you're addressing carbon capture and VOC. Could you use the existing technology to grow in these areas or should we expect a lot of cost to -- well, development cost to be implemented in the years to come?

[Klas Forsström, executive]

If I divide it into 2 different sectors here, you can say the carbon capture, we have in our hand. And I mean, now we are not talking about that we will deliver large, super large systems for carbon capture. We are delivering critical components and sub-systems. We have in our hands then 2 of the main type of solutions, that is -- I mean either it's a different version of the wheel type of technology or its abatement. So those technologies we have at hand then, and they are already being used in existing installations.So there, we will invest based on our new own technology. Then we will cherry-pick certain smaller companies where we see that they can add to our portfolio. If I move into VOC then, we have the majority of the technology in hand here. And then what we need to complement it with that could be footprint, it could be a sales force, it could be very much what we did recently with the acquirement in Italy then to add on to this. So it is not overly substantial investments, but it's cherry picking in some areas, and we have quite a lot of the technology at hand.

[Mats Liss, analyst]

Finally, just about bookkeeping question that I mean you had some one-offs there in items affecting compatibility in FoodTech. Should we expect a similar level in the coming quarters?

[Katharina Fischer, executive]

Yes, we will continue to have expenses for the strategic review of FoodTech equipments, and we are also continuing on our M&A agenda. And the Cleantech technologies, their exit of the Marine business will continue through the year.

[Klas Forsström, executive]

And the good part then, we can talk about different one-offs. And now I say this with a smile. But when you conclude a strategic review, I mean then the one-offs from that perspective will, of course, not be repeated.

[Ann-Sofi Jönsson, executive]

We'll continue with the questions from the conference call.

[Operator]

The next question comes from Carl Deijenberg from Carnegie.

[Carl Deijenberg, analyst]

So I just have a follow-up on the margin development in the Data Center division. I'm just a little bit curious about sort of the mentioning of price effects having a positive effect here in Q1. Because I remember, just scrolled through your Q4 presentation deck and there were no mentioning of pricing previously, at least from what I see. So I'm just curious what are the sort of variable pricing components here in the Data Center backlog? And what have been the effect here in Q1 that makes you do that sort of mentioning?

[Klas Forsström, executive]

But a very good question. As you know, we have in -- some or I should say, most of the larger contracts worked in a one directional price clause that if the basket of certain components are above a certain level, we are entitled to increase the price, and we are not forced to lower the price if it's reversed. In this case, I would say it is not very much connected to this. It is more the smaller projects that we have been taking on and off, so to speak. And there, we have been able to drive price increases into the market.So we have not effectuated a large part of the, call it, the price clauses. It's more the general work in price and profitability management that has paid off.

[Carl Deijenberg, analyst]

And then just to follow-up on that also on sort of FX development here. I guess is it fair to assume also that the strong U.S. dollar appreciation has a quite tangible positive margin effect in the Data Center division given that it's a lot of North American exposure as it sits today. Does that also have an effect here in Q1?

[Katharina Fischer, executive]

Yes. But it was not a major effect in Q1.

[Klas Forsström, executive]

It was a couple of percentage. And I think you can see it; it's well described on the order intake and on the invoicing and in general terms. It's not a large effect. No.

[Katharina Fischer, executive]

No.

[Ann-Sofi Jönsson, executive]

So we'll take another question from the conference call.

[Operator]

The next question comes from Karl Oskar from Berenberg.

[Karl Vikstrom, analyst]

Just one quick one follow-up from my end also on Data Center margins. Thanks for clearing up that pricing impact and so forth. But I'm just wondering, you're mentioning sort of we shouldn't extrapolate this 19% as you quite clearly state and you say we expected. I think you said something like a good, stable underlying margin. I'm just thinking, what does that really mean? I mean do you see it as more kind of the margin level we've seen over the last, let's say, 3 quarters? Is that kind of what we should expect or are you now established at sort of a higher level than that? How should we think about sort of the margin here going forward?

[Klas Forsström, executive]

I can start and elaborate and then I expect that most probably, Katharina will pitch in and correct me perhaps. It is a little bit like this. If I take 3 triangulation points. I mean one point that I'm super pleased in that is that we've proven over and over again that we are driving efficiency into the system. And I mean that we will continue to drive. In order to drive efficiency, I mean, we need to lower the factories, then you have the bottom line effect. That we did very much in this quarter.Then the second part is, of course, that are we selling the right products. And here, you can hear me say that, I mean, the SyCools are the highest margin, but we are also driving up the margins in the other areas.And then the third combination is, okay, some quarters, I mean, those are lined up, and we have not been able to push out the increase in cost, et cetera when it comes to certain advancements in sales force, advancements in different, call it, support functions. But what I think you should take with you, that is, that when the system is working very well, I mean, then we have a fantastic margin opportunity in Data Center. But don't expect that the system will -- all stars will be aligned each and every quarter. I cannot give a better description than that, but Katharina, may be.

[Katharina Fischer, executive]

I think you described it very well. I would only add that remember that we will still continue to invest in the support structures.

[Ann-Sofi Jönsson, executive]

I think we have a follow-up question from a listener on the conference call. We will take that as well.

[Operator]

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

[Karl Bokvist, analyst]

Just a quick follow-up, and that was on the -- what you communicated at Q4 regarding planned maintenance shutdowns and so on. Have these all now been completed and we should not expect anything in future quarters?

[Klas Forsström, executive]

I think that refers to that we were pushing the factories extremely hard, and we've prolonged in some factories, we call it, Christmas break, if I use that expression. So I mean, Christmas is when Christmas is. And then, of course, if we come into the normal summer routines in some factories, I mean, then we will do it like that. But we are not foreseeing any larger maintenance work taking place in the coming quarters, more than the seasonal ones.

[Ann-Sofi Jönsson, executive]

Okay. So with that, we have covered all the questions. And I would like to thank everyone that has been viewing us and listening in to us. We will be back on the 21st of May when we have our Capital Market Day here in Stockholm. You can attend physically or through a webcast. So don't forget to tune in then. And with that, I would like to -- well, thank you for today. Have a good day.

[Klas Forsström, executive]

Thank you very much. Thank you, Ann-Sofi.

[Katharina Fischer, executive]

Thank you.