Modine's Data Center Strategy: Contradictions in Capacity, M&A, and Revenue Split

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Record Performance and Strategic Shift:
- Modine Manufacturing Company reported the highest sales and profitability in their history for the third year in a row in fiscal 2025.
- The growth was driven by a strategic shift in business mix, focusing on the Climate Solutions segment, which reported higher revenues than Performance Technologies.

Data Center Revenue and Capacity Expansion:
- Data center revenue grew by 30%, with significant contributions from North America, particularly in the Grenada, Mississippi facility.
- This growth was driven by strong demand for chillers, leading to capacity expansion in North America to meet customer needs.

Climate Solutions Segment Performance:
- The Climate Solutions segment reported a 30% increase in revenues and a 45% increase in adjusted EBITDA.
- The increase was due to benefits from the Scott Springfield acquisition and a 220 basis point improvement in adjusted EBITDA margins.

Cost Management and Margin Improvement:
- Modine achieved a 13.5% adjusted EBITDA margin for the fiscal year, a 200 basis point year-over-year improvement.
- This was attributed to proactive restructuring and cost initiatives in the Performance Technologies segment, focusing on 80/20 principles.

Global Tariff Uncertainty and Supply Chain Agility:
- Modine anticipates sales to grow 2% to 10% for fiscal 2026, with a focus on growing data center and commercial IAQ products.
- The company is navigating global tariff uncertainties by leveraging its global manufacturing footprint and adopting a local-for-local supply chain strategy.