Dive Brief:
- Modine reported strong results for its second quarter of its 2025 fiscal year, with sales for its climate solutions segment rising 27% year over year to $366.4 million, the company reported Tuesday.
- Revenue growth in its climate solutions segment was driven by higher sales of data center cooling products, partially offset by lower sales of heat transfer products, Modine said in its earnings release. Data center sales climbed 102% in the quarter, driven by strong demand from hyperscale and colocation customers across North America, alongside sales from its acquired business, Scott Springfield, CFO Mick Lucareli said on an earnings call Wednesday.
- “We are currently focused on supporting trends like high-performance computing as the rapid expansion of AI and machine learning fuels demand for data center capacity and more advanced cooling solutions,” CEO Neil Brinker said on the call. “Although these trends can change over time, we believe that the need to meet ever increasing regulations and reduce the impact of fossil fuels on our environment [is] currently driving multi-year growth cycles.”
Dive Insight:
Within climate solutions, data center revenue growth “continues to exceed management expectations,” more than doubling from the prior year, including $53.4 million of sales from its recent acquisition of Scott Springfield Manufacturing, Modine said.
The company noted that it has been receiving inquiries regarding its recently launched 1-megawatt Cooling Distribution Unit from both colocation and hyperscale customers. The cooling distribution unit “is a critical component for our liquid and hybrid cooling systems for high density applications,” Brinker said on the call, noting that the management expects the first shipments of this product in the fourth fiscal quarter of the year. “All hyperscale customers are expressing interest in our high-performance chillers, in addition to custom air handlers,” Modine said in its earning presentation.
Brinker noted that designing and manufacturing custom air handlers for hyperscale customers “will continue to be a significant component of our business.” However, customers have been “increasingly interested in our high-performance chillers, especially now that we have production in both the U.S. and the U.K.,” Brinker said. He added that the company has received its first purchase order for chillers from a hyperscale customer this past quarter, with shipment expected during Modine’s fourth fiscal quarter. The market pricing for a chiller with a capacity of about 1.5 MW is about $500,000, Brinker noted on the call.
In addition to capacity expansion for data center products in the U.K. and Calgary, Canada, Modine is announcing a new capacity expansion program for data center products at a facility in Chennai, India. “This will bring the number of data center manufacturing locations to 10 and provide us with a capacity for continued growth around the globe,” Brinker said.
HVAC&R sales climbed 14%, or $13 million, Lucareli said. This increase was driven by indoor air quality sales from its Scott Springfield deal, as well as refrigeration coolers, according to Modine’s presentation. Heat transfer product sales, however, dropped 13% or $16 million, with lower sales to heat pump, commercial and residential HVAC customers in Europe, Lucareli said.
Overall, Modine’s climate solutions segment reported a gross margin of 29% in the second fiscal quarter, up 240 basis points from the year before. This margin growth was primarily due to higher sales volume, a favorable sales mix and benefits from commercial pricing settlements, according to its earnings release. “We were able to finalize some commercial settlements this quarter to help offset the lower [heat transfer product sales] volumes versus what was originally agreed to with certain customers,” Lucareli said.
Net sales for Modine’s performance technologies segment fell 12% to $297.5 million in its second fiscal quarter of 2025, driven by declines of 22% and 10% in liquid-cooled applications and air-cooled applications, respectively. On the call, Lucareli attributed the $27 million decrease in liquid-cooled application sales to a prior year divestiture and “lower end market demand across auto, commercial vehicle and off-highway markets.” Air-cooled application sales fell by $18 million as a result of divestitures and lower market demand from agriculture and construction equipment, Lucareli said. Advanced solutions in the segment rose 18% year over year, however, due to higher sales of EV systems to specialty vehicle and bus customers, according to Modine’s presentation.
For the full 2025 fiscal year, Modine expects a 100% to 110% year-over-year increase in data center sales, a 15% to 25% growth in HVAC&R sales and a 5% to 15% decline in heat transfer product sales within its climate solutions segment. For its performance technologies segment, liquid-cooled applications are expected to drop by 10% to 20% year over year, while air-cooled applications could either remain flat or drop by as much as 10%, according to Modine’s presentation.
