Annual report 2008 - Munters

HumiCool division
25
Cooling systems for all climates
The HVAC/GTEC business area accounts for 28 percent of
the division’s sales. The total defined global market for the
business area is estimated at about SEK 9 billion. Within the
HVAC segment, sales consist mainly of components to manufacturers
of evaporative cooling systems for homes, commercial
and industrial premises in warm and dry climates, such
as Australia and the southwestern US. Mobile heaters are
primarily sold in the European market. A small but growing
application are systems for pre-cooling air-cooled condensers.
HumiCool is the market leader, and competitors are often
local or specialized manufacturers. The most important customers
for heaters are distributors such as Vneshtechkontrakt
in Russia, Clarke International in the UK and Kroll GmbH
in Germany. Competitors include BM2 and DESA.
Component customers include Climate Technologies in
Australia and Coiltech in Sweden for industrial pre-cooling.
The GTEX application offers a cooling system for the intake
air to gas turbines, which increases the efficiency of the
turbine and produces more energy per cubic meter of gas.
Although traditional technology still dominates the market,
demand for the Munters cooling system is expected to gradually
increase in pace with rising energy costs and increased
use of gas as a source of energy. Customer are primarily suppliers
of gas turbines, such as General Electric and Siemens.
One example of a competitor is Mee Industries in the US.
Development during the year
The various business areas within HumiCool developed in
different ways during the year. The GTEC application developed
well during the year with favorable demand in both
Europe and the US.
The largest business area, AgHort, showed favorable growth
over the first three quarters, with the US as an exception, but
some weakening was noted during the third quarter. During the
fourth quarter, the effects of the financial crisis also reached the
AgHort segment, resulting in a rapid decline in demand.
Within Mist Elimination, order intake remained low as a
result of the uncertainty prevailing in the US with regard to
construction of FGD systems. After more than six months of
uncertainty surrounding the Clean Air Act, what is called the
CAIR rule was declared invalid in late-summer by a federal
court in the US. This rule regulated trading in emission rights.
Because trading of emission rights was one method of financing
investments, order intake declined dramatically. Sales of
mobile heaters in the HVAC business area were negatively
affected by the short and mild winter season in 2007/2008.
Sharply weakened demand from end-customers, accelerated by
turmoil in the credit markets, resulted in distributors of heaters
refraining from building up inventory levels.
During the fourth quarter, production of GLASdek® in
Tobo, Sweden closed as a result of consolidation of production
to Mexico.
During the year, a major HVAC customer in the US declared
bankruptcy, since it was unable to renew its loans due to
the financial crisis. This resulted in non-recurring costs of
SEK 10 M.
In China, the market developed according to expectations,
and the division increased its presence with more
products and larger production facilities to meet the expected
increase in demand over the coming years. The expanded
production capacity provides significant cost advantages not
only in China, but also increases Munters’ presence in the
entire Asian market.
Strategy
• Strengthen position in the value chain by expanding the
product portfolio, application know-how and logistics
• Develop energy-efficient products and systems based on
core technologies and components
• Selective geographic expansion with an emphasis on Asia,
South America and Eastern Europe
• Create long-term profitable growth through rationalization
of the production structure and an increased share of
production in low-cost countries.
Focus in 2009
In parallel with continued adjustment of the cost structure
to market conditions, work will continue to develop the
division’s business areas. The development plan primarily
includes organic growth, although new acquisitions will be
sought that broaden the existing product offering within
energy-efficient climate control. Munters is also focusing
on increasing the share of solution-oriented offerings and
expanding geographically.
In addition, Munters will continue the consolidation of
global operations with the primary objective of creating a flexible
and cost-effective logistics organization and production
apparatus. In part, this will mean relocating additional production
to China and Mexico to strengthen the market presence
in Asia and North America, but also to reduce cost levels.
Munters Annual Report 2008