Marel Food Systems hf. - Financial Statement Release

- Q3 2008 Results - Robust 16.2% sales growth and 9.9% EBIT from core business

Robust 16.2% proforma sales growth and 9.9% EBIT from core business in third
quarter 

•  Sales for the third quarter totalled EUR 170.6 million, compared with 66.1
   million for the same period the year before, representing an increase of
   158.1%. Proforma sales of Marel Food System and Stork Food Systems core
   business (excluding the Food and Dairy division of Stork) in the third
   quarter of 2008 totalled EUR 157.4 million, which is an increase of 16.2%
   compared with the same period in 2007.
•  Profit from operations (EBIT) for the third quarter was EUR 14.5 million,
   which is 8.5% of sales, compared with EUR 1.8 million (2.7% of sales) for the
   same period the year before. Proforma profit from operations (EBIT) from the
   core business was EUR 15.7 million, which is 9.9% of sales, compared with 7.3
   million (5.4%) the year before. 

   Good 11% proforma sales growth for the first nine months with 9.1% EBIT from
   core business 

•  Sales for the first nine months of 2008 totalled EUR 389.6 million compared
   with 210.9 million for the same period the year before, which is an increase
   of 84.7%. Proforma sales of Marel Food Systems and Stork Food Systems core
   business for the first nine months of the year amounted to EUR 475.2 million,
   which is an increase of 11% compared with the same period in 2007.
•  Profit from operations (EBIT) for the period January to September 2008 was
   EUR 27.9 million, which is 7.1% of sales, compared with EUR 8.4 million (4.0%
   of sales) the year before. Proforma profit from operations (EBIT) for the
   first nine months of the year was EUR 43.4 million, which is 9.1% of sales,
   compared with 30.0 million (7.0% of sales) for the same period the year
   before, representing an increase of 45%. 

•  Net profit for the first nine months of 2008 was EUR 15.3 million compared
   with 2.7 million in 2007. 

•  Net interest bearing debt amounted to EUR 384.4 million at the end of
   September 2008.
•  Equity totalled EUR 307.5 million and the equity ratio was 32.5% at the end
   of September 2008. 

•  A successful private placement for approximately EUR 10 million, mainly to
   pension funds, completed on 16 October. 


Hörður Arnarson, CEO:

 “We are pleased with the operational results for the third quarter and the
first nine months of the year. Proforma results of the company's core business
for the third quarter are characterised by strong 16% internal growth. At the
same time, sales and administration costs remain unchanged resulting in a 45%
increase in proforma profit from operations (EBIT) from core business for the
first nine months of the year, which corresponds to 9.1% of sales. This is
fully in line with the company's goals. 

In the third quarter, we continued to focus on the integration of the companies
that we bought in the past three years and which have transformed us into the
leading producer of equipment and systems for the food processing industry
worldwide. The rationalisation measures we have undertaken have delivered the
improved operational results that we see today, with Marel Food Systems‘ profit
from operations having steadily grown during the course of the year. 

Conditions in the financial markets are unusual, to say the least. The
financial crisis will affect all industries to some degree but we believe that
the food industry, where we operate, will not be as affected as most other
industries. Consumers will without a doubt cut expenditures on travel, new cars
or luxury goods but they will continue to eat, even if their consumption habits
will change. The food industry has always adapted very quickly to changes in
the environment and that is why we believe that a possible slowdown in the
industry will not last as long as in most other sectors.“ 


Prospects

The operational results are fully in line with expectations at the beginning of
the year that performance would improve considerably during the course of the
year. The past three years have been characterised by rapid external growth but
in the last two quarters the emphasis has been placed on internal growth and
increased profitability. The integration and reorganisation of the companies
that were acquired has gone well and the expected synergies and increased
efficiency are beginning to materialise. At the beginning of the year, it was
expected that the measures undertaken - which included integration of the
companies‘ sales networks and product lines, as well as a reduction in the
number of employees - would begin to materialise fully in the third and
especially fourth quarters. Proforma profit from operations (EBIT) for the
third quarter is 9.9% of sales (9.1% for the first nine months of the year) and
the company‘s stated goal of 9% for the year as a whole remains unchanged. 

The substantial drop in raw material prices in recent weeks will have a
positive effect on the company, both directly through reduced production costs
related to the decrease in the price of stainless steel, and indirectly through
lower corn prices, which will improve the operational results of our customers. 

The effects of the international financial crisis on the company‘s operations
have so far been minimal and the results for the year are expected to be more
or less in line with expectations at the beginning of the year. There has not
been a material change in sales activity. However, it is beginning to take more
time for the company‘s customers to secure financing and this could result in
reduced order intake as projects are delayed. The company‘s growth in coming
quarters can therefore be expected to be reduced compared to what it has been
in past quarters. Actions have already been taken to achieve further economies
of scale by harnessing the synergies between the companies. 

Nevertheless, the food industry is relatively well placed and the effects of
the financial crisis are expected to be smaller in magnitude and shorter in
duration than in other sectors. In fact, the downturn of the international
economy will create opportunities for companies in the food processing industry
in the months ahead. Consumer habits will change and they have already begun to
do so. The consumption of less expensive proteins, primarily poultry and fish,
is likely to increase substantially. Consumers will also eat out less in fine
restaurants and shop more for “ready-made meals“. Moreover, the drop in base
interest rates will make it easier for food processing companies to make the
investment required to be able to respond to changing consumer demands. The
long-term prospects of the company are therefore good and our long term
expectations about the future remain unchanged. 


For further information, contact:

Hörður Arnarson, CEO
Tel: (+354) 563-8000

Attachments:

news release q3.docx

marel group 3quarter.pdf