Dive Brief:
- Modine Manufacturing’s data center sales grew 34% year over year, or $15 million, in the third quarter of its fiscal year, driven by a robust demand from hyperscale and colocation customers, according to the company’s quarterly earnings presentation.
- Its climate solutions segment sales dropped 2% year over year, to $242.5 million, while its performance technologies segment sales reached $323 million, reflecting a 2% increase from the year-earlier period, according to the earnings presentation. The company attributed the slight decline in its climate solutions segment sales to lower sales of its heat transfer products, partially offset by higher sales of its HVAC, refrigeration and data center cooling products.
- Despite anticipated year-over-year improvements in Q4 and continued expectations of data center revenue growth ranging from 60% to 70%, Modine’s management has revised down the full-year outlook for its climate solutions segment. The company attributed this adjustment, in part, to reduced expectations of heating and heat transfer product sales, particularly residential, commercial refrigeration and the heat pump market, Modine CFO and Executive Vice President Michael Lucareli said on the company’s earnings call Jan. 31.
Dive Insight:
CEO Neil Brinker noted that Modine’s investments in immersion cooling technology and its development of a cooling distribution unit will help broaden its product portfolio to bridge technology gaps and prepare for future needs. Brinker added that the company is transitioning its existing manufacturing plant in Grenada, Mississippi, to a data center facility. “We are making the right investments to ensure that our data center business continues to grow and are delivering strong year-over-year improvements, despite challenging markets for the heat transfer and heating products,” Brinker said.
Modine’s HVAC&R business also grew 2% in the quarter, driven by an increase in power industrial coolers, indoor air quality product sales and its acquisition of Napps Technology last July, despite a relatively flat heating market, the company said.
Modine attributed the 2% growth in its performance technologies segment sales to higher sales of advanced solutions and air-cooled products. The continued growth of electric vehicle systems and component sales, along with higher sales of coating products, drove a 27% growth in the sales of its advanced solutions, Lucarelli said on the call. Its air-cooling application sales grew $3 million, or 2%, due to higher sales to off-highway customers and those using generator sets, with growth partially offset by the impact of divested businesses during the quarter, management said.
Modine has cited a commitment to an 80/20 approach, which it describes as “a systematic way of examining the business, focusing resources and emphasizing the highest return opportunities.” The exit of low-margin businesses in connection with its 80/20 initiatives continue to strategically impact revenues and certain markets for its heat transfer products remain soft, Brinker said on the call.
Modine’s acquisition of TMG Core, announced earlier this month, expands its data center product offering, channeling support toward its customers’ future requirements, Brinker added.
On the call, Brinker alluded to “some softness” in the heat pump market and said the company is pacing its investments in heat pumps to align with a landscape of excess inventory in the system and elongated heat pump adoption across the market.
In the third quarter of FY 2024, the company reported overall net sales of $561.4 million, which it said is in line with the previous year.
