Modine reports fourth quarter fiscal 2026 results

Modine, a diversified global leader in thermal management technology and solutions, today reported financial results for the quarter and fiscal year ended March 31, 2026.

"The team delivered a strong fourth quarter and a fourth consecutive year of record revenue, adjusted EBITDA and adjusted earnings per share," said Modine President and Chief Executive Officer, Neil D. Brinker. "I am incredibly proud of this exceptional performance as we continue to evolve our portfolio to become a more focused, high-growth company.

We took decisive action this year to advance our transformation including the completion of three acquisitions in our Climate Solutions segment, the launch of the largest capacity expansion in our company's history to meet growing demand for our data centre products, and the announced pending spin-off of the Performance Technologies business. Our future is bright, evidenced by a landmark USD 4 billion long-term agreement for chiller sales with a major hyperscale customer, cementing Modine's position as a critical partner for data centre cooling."

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Fourth quarter financial results

Net sales increased 47 percent to USD 954.4 million, compared with USD 647.2 million in the prior year. Sales growth was driven by higher sales in the Climate Solutions segment, driven primarily by strong demand from data centre customers and sales from acquired businesses. This performance was achieved despite a significant loss of production days from severe weather in multiple locations and shortages of key components from supply chain partners.  

Gross profit increased 29 percent to USD 214.7 million and gross margin decreased by 320 basis points to 22.5 percent. The decline in gross margin was largely expected and resulted primarily from higher temporary costs related to the capacity expansion for data centre products, increased tariffs, and higher material costs.

Selling, general and administrative ("SG&A") expenses increased 25 percent to USD 101.7 million. The increase was primarily due to higher expenses in the Climate Solutions segment, supporting the segment's growth and including incremental expenses from the recent acquisitions, and costs related to the pending spin-off of the Performance Technologies segment. These higher costs were partially offset by cost saving initiatives, including benefits from previous restructuring actions.

Operating income increased 39 percent to USD 103.9 million, compared to USD 74.5 million in the prior year. This increase was driven by higher earnings in the Climate Solutions segment. The Company recorded USD 5.2 million of restructuring expenses during the fourth quarter, primarily severance expenses related to headcount reductions and costs related to equipment transfers. In addition, the Company incurred USD 12.5 million of costs related to the pending spin-off of the Performance Technologies segment. Adjusted EBITDA, which excludes restructuring expenses, disposition costs, certain other charges, interest expense, the provision for income taxes, and depreciation and amortisation expense, was USD 146.1 million, an increase of USD 42.0 million, or 40 percent, compared to USD 104.1 million in the prior year. 

Earnings per share were USD 1.36, compared with earnings per share of USD 0.92 in the prior year, an increase of USD 0.44, or 48 percent. Adjusted earnings per share were USD 1.71, compared with adjusted earnings per share of USD 1.12 in the prior year, an increase of USD 0.59, or 53 percent.

Fourth Quarter Segment Review

Climate Solutions segment sales were USD 665.9 million, compared with USD 356.3 million one year ago, an increase of 87 percent. Data Centres sales increased 158 percent from the prior year, and HVAC Technologies sales increased 51 percent, including USD 38.2 million of incremental sales from acquired businesses. The segment reported gross margin of 24.6 percent, which was 510 basis points lower than the prior year.

This decline was largely expected and resulted primarily from the planned and temporary costs related to the rapid expansion of manufacturing capacity for data centre products, and, to a lesser extent, higher tariff and weather-related temporary labour and overtime costs. The segment reported operating income of USD 108.8 million, a 77 percent increase from the prior year, and adjusted EBITDA of USD 124.3 million, an increase of 63 percent from the prior year.

Performance Technologies segment sales were USD 294.0 million, compared with USD 294.8 million one year ago, a decrease of USD 0.8 million. This decrease primarily resulted from lower sales to stationary power customers, mostly offset by higher sales to automotive, commercial vehicle and off-highway customers. The segment reported gross margin of 16.5 percent, which was 390 basis points lower than the prior year, primarily due to higher material costs and tariffs. The segment reported operating income of USD 27.7 million, a 7 percent decrease from the prior year, and adjusted EBITDA of USD 37.4 million, a 15 percent decrease from the prior year.

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Full-Year Financial Results

Fiscal 2026 net sales increased 23 percent to USD 3,181.1 million compared with USD 2,583.5 million in the prior year. The increase was driven by higher sales in the Climate Solutions segment, with particularly strong growth in sales of data centre products, and USD 119.1 million in incremental sales from acquisitions. This was partially offset by lower sales in the Performance Technologies segment.

Gross margin of 23.0 percent was 190 basis points lower than the prior year, primarily due to higher temporary costs related to the capacity expansion for data centre products and higher material costs and tariffs.

The Company reported net earnings of USD 123.3 million compared to USD 185.5 million in the prior year, a decrease of USD 62.2 million. The current year results include a USD 116.1 million non-cash pension termination charge in the third quarter. The Company recorded USD 20.6 million of restructuring expenses during the year, primarily severance expenses related to headcount reductions and costs related to equipment transfers. In addition, the Company incurred USD 20.3 million of acquisition and disposition costs.  Adjusted EBITDA, which excludes restructuring expenses, the pension termination charge, acquisition and disposition costs, certain other charges, interest expense, the provision for income taxes, and depreciation and amortisation expense, was USD 471.0 million, an increase of USD 78.9 million, or 20 percent, compared to USD 392.1 million in the prior year. 

Earnings per share in fiscal 2026 was USD 2.26 compared with USD 3.42 in fiscal 2025, and adjusted earnings per share in fiscal 2026 was USD 5.02, compared with USD 4.05 in fiscal 2025.

Balance Sheet & Liquidity

Net cash provided by operating activities for the fiscal year ended March 31, 2026 was USD 248.7 million, an increase of USD 35.4 million compared to the prior year. Free cash flow for the fiscal year ended March 31, 2026 was USD 105.4 million, a decrease of USD 23.9 million from the prior year. This decrease was due to an increase in working capital and higher capital expenditures, both associated with the rapid growth of our Data Centres business.

These drivers, which decreased free cash flow, were partially offset by higher operating earnings and the favourable impact of customer deposits received during fiscal 2026.  Cash payments for restructuring activities, funding of the U.S. pension plan in connection with its termination, acquisition and disposition costs, and certain other costs totalled USD 49.6 million during the fiscal year ended March 31, 2026.

Total debt was USD 436.3 million as of March 31, 2026. Cash and cash equivalents totalled USD 73.5 million as of March 31, 2026. Net debt was USD 362.8 million as of March 31, 2026, an increase of USD 83.6 million from the end of fiscal 2025. This increase resulted from borrowings to fund working capital, acquisitions and capital expenditures. 

Outlook

"Our fiscal 2027 outlook implies a fifth consecutive year of record results," added Brinker. "We anticipate another strong year for our Data Centres business, supported by our strong customer relationships and significant order book. Our capacity expansion remains firmly on track and we will continue to invest in our fastest growing business to ensure we meet the future needs of our key customers. Altogether, we expect another terrific year for Modine and are confident in our ability to deliver value for our customers and shareholders."

Outlook includes the Performance Technologies business for all of fiscal 2027. This outlook will be updated for the remaining business once the timing of the spin-off of the Performance Technologies segment is finalised. 

Based on current exchange rates and market conditions, Modine provides its outlook for fiscal 2027:

Note: This article has been taken from PR Newswire and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.