Dive Brief:

• Modine Manufacturing’s climate solutions segment sales rose 8% year over year, which, along with improvements in its performance technologies segment,  drove a robust second quarter for its 2024 fiscal year, the company reported. Higher data center cooling product sales partially offset a drop in sales of heat transfer products and HVAC and refrigeration units.  
• The boost in its data center sales comes from strong demand from hyperscale and colocation customers, Modine President and CEO Neil D. Brinker said in a Nov. 1 earnings release. 
• While Modine expects year-over-year improvements to continue in the second half of its fiscal year, management is maintaining a cautious outlook for its HVAC&R and heat transfer products due to a softening of commercial refrigeration markets, CFO Michael Lucareli said during the company’s Q2 2024 earnings call. 

Dive Insight:

Growth in Modine’s climate solutions segment was driven by a 117% increase in data center sales to $43 million, Lucareli said on the call, pointing to continued strong demand for its products in North America and Europe. 

Modine’s data center sales reached $79 million, more than doubling from the prior year. A strong backlog is expected to support the segment over the next 12 to 18 months, with robust performance in the data center vertical expected to help offset some weaknesses in other HVAC markets, Brinker said on the call. 

However, Brinker said the company projects a decline in data center volume during the third quarter of FY 2024. The business can exhibit fluctuations, in part due to the timing of product shipments on large data center projects, Brinker noted on the call, adding that the company expects volumes to rebound in the last quarter of FY 2024. “While the timing can be hard to predict between quarters, our full-year outlook has not changed, with growth expected to exceed 60%” for the climate solutions segment, Lucareli said on the call. 

In its Q2 2024 earnings presentation, the company said it is designing and developing a cooling distribution unit for liquid cooling in data centers. The unit supplies coolant for heat exchangers as well as direct-to-chip and immersion cooling systems to effectively manage heat loads. 

Modine’s HVAC&R sales dipped 2% to $2 million, while sales of heat transfer products dropped 16% year over year, to $21 million. Lucareli attributed that segment’s sales decline to a soft heating market, reduced market demand for commercial refrigeration and a decline in commercial and residential HVAC&R customers. 

Modine’s performance technologies segment sales increased 7% year over year, to $351.7 million.  

Although the company announced plans to expand heat pump production capacity in Europe earlier this year, Brinker said growth expectations were fueled by gas-to-electric regulations. A delay in enforcement dates for these regulations has resulted in the company reducing its forecasted expectations and adjusting its overall production schedule. 

Overall, the company’s net sales climbed 7% year over year, to $620.5 million, in the second quarter of FY 2024..