Marel hf. - Financial Statement Release

Marel Q2 2016-Record revenue and robust operational performance

Marel Q2 2016 Results
(All amounts in EUR)


Record revenue and robust operational performance

  --   Revenue for Q2 2016 totaled 264.2m [Q2 2015: 218.3m]. On a pro forma
     basis, revenue in Q2 2015 was 253.1m.
  --   EBITDA for Q2 2016 was 48.4m or 18.3% of revenue [Q2 2015: Adj. EBITDA**
     37.2m or 17.1% of revenue]. Pro forma  adj. EBITDA**  Q2 2015 was 47.7m or
     18.9% of revenue.
  --   EBIT* for Q2 2016 was 39.7m or 15.0% of revenue [Q2 2015: Adj. EBIT**
     29.7m or 13.6% of revenue].    Pro forma adj.  EBIT** in Q2 2015 was 38.4m
     or 15.2% of revenue.
  --   Net result for Q2 2016 was 22.1m [Q2 2015: 19.5m]. Earnings per share
     were 3.09 euro cents in Q2 2016 [Q2 2015: 2.71 euro cents].
  --   Cash flow from operating activities before interest and tax in Q2 2016
     was 43.7m [Q2 2015: 23.7m].  Net debt/EBITDA is 2.7x  at the end of Q2
     2016.
  --   The order book was at 306.5m at the end of Q2 2016 compared with 340.0m
     at the end of Q1 2016 [Q2 2015: 165.9m].  On a pro forma basis at the order
     book at end of Q2 2015 was 272.4m.

Q2 2016 was a good quarter for Marel with record revenue of 264 million and
15.0% EBIT*. In the first half of the year Marel saw good performance and
profitability. Pro forma revenue for 1H 2016 is 498 million with pro forma
EBIT* of 15.1%. 

Order intake in Q2 2016 was at 231 million and year to date 485 million. Order
intake of standard equipment and spare parts was strong across all industries.
Market conditions for large greenfield projects in the meat and fish industries
were soft in 1H while Marel Poultry has managed to secure several large
projects in 1H 2016. 

Cash flow from operating activities was strong and Marel continues to invest in
the business to prepare for future growth and full potential. Net debt/EBITDA
is 2.7x which is within the range of the targeted capital structure. 

Arni Oddur Thordarson, CEO:
“We are pleased with Marel’s second quarter results with record revenue and
robust operational performance. Revenue is 264 million with 15.0% EBIT. 

In 2016 we have introduced a steady flow of new innovative solutions enabling
poultry, meat and fish processors to advance their business further. The cash
generated from operations is strong and we are investing in the business to
improve premises, tools and processes to prepare for full potential and future
growth. Despite the temporary spike in investments we have continued to
deleverage and strengthen financials. 

Last year we saw significant organic revenue growth and increase in order
intake, both for Marel and MPS.  Marel increased significantly revenue and
profitability in first half of 2016 with MPS on board.  Long term growth
prospects for Marel are promising while short term economic uncertainty has
recently increased.  Our target for the year is modest organic growth and an
increase in operating profit  between years.” 

Streamlining in Seattle concluded
In the first half 2015 Marel discontinued several activities such as High Speed
Slicing and freezing. In the first half of 2016, Marel streamlined its
operations in Seattle.  Revenue and order intake from discontinued operations
are 15 million lower in 1H 2016 than for same period last year. 

Marel is now focusing its onboard business on innovative and standardized
solutions instead of customized ad-hoc solutions and is running the business
with 50 less employees going forward. 



Markets

Marel is the leading global provider of advanced processing systems and
services to the poultry, meat and fish industries. Marel has a commercially
strong product portfolio stemming from its continuous focus on innovation and
strategic acquisitions. During the first half of 2016, Marel has introduced
various innovative solutions to the market that will continue to advance food
processing and help Marel’s customers to increase value creation going forward.
These projects are a mixture of new breakthrough innovations, product upgrades
and incremental additions to existing machines and systems to maintain our
competitive edge. 

Order intake was at a strong level during the first half of 2016 across all
industries and geographies and a good increase was seen in standard equipment
and spare parts. Market activity has been strong in the poultry industry and
Marel Poultry has secured several large projects in 1H 2016. Market conditions
for large greenfield projects in the meat and fish industries have been softer
during the same period. Long term growth prospects for Marel are promising
while short term economic uncertainty has recently increased. 

Marel Poultry

Marel Poultry had an excellent start to the year, During the first half of 2016
Marel Poultry generated 271 million in revenue and EBIT of 47.8 million (17.6%
of revenue). Marel Poultry accounted for 54% of Marel’s revenue in 1H 2016.
Projects were well distributed geographically and between different product
groups and sizes, including large projects in the U.S., Hungary and China. 

Marel Fish

Marel Fish generated 63.4 million in revenue and EBIT of 3.1 million (4.9% of
revenue) in the first half of 2016. Marel Fish accounted for 13% of Marel’s
revenue in 1H 2016. Large projects were at a low level in the fish industry
during 1H 2016. Marel Fish managed to secure milestone sales of FleXicut
solutions during the period. 

Marel Fish’s results are colored by streamlining actions in its onboard
business in Seattle, which was concluded during Q2 2016 resulting in the
reduction of 50 employees. Marel is shifting focus in its Seattle operations
from customized ad-hoc solutions towards innovative high-end solutions to
better serve fish processors in North America. This is a significant step
towards a more streamlined and cost effective future operation in North America
and is fully in line with Marel's strategy to be a full-line supplier to the
poultry, meat, and fish industries. The step also represents Marel's continuous
effort on refocusing its product portfolio to concentrate on areas of
competitive advantage and to strengthen its market position. 

Marel Meat

Marel Meat generated 159.9 million on a pro forma basis in revenue and EBIT* of
22.4 million (14.0% of revenue) in 1H 2016. Marel Meat accounted for 32.1% of
Marel’s revenue in 1H 2016. Order intake and volume is at a good level and the
pipeline is promising. Integration of Marel and MPS is on track and is going
well. Sales teams have been trained to sell the whole product portfolio in
meat, from primary processing to secondary processing and further processing.
Marel, with MPS on board is a leading global provider in the primary and
secondary processing of meat. 

Financial items

Cash flow and investments

Marel returned a strong cash flow from operations with operational cash flow
before interest and tax being 43.7 million for Q2 2016 compared with 23.7
million at Q2 2015. 

Marel continues to invest in the business to prepare for future growth and full
potential in line with previous communication. Investment activities are
expected to be on average above depreciation level for the coming quarters. Net
debt/EBITDA is 2.7x which is within the range of the targeted capital
structure. 

In Q2 2016, Marel sold 2.0 million treasury shares for a total amount of 2.1
million in order to fulfill its obligations according to employee stock option
agreements. Marel now holds 18.1 million treasury shares. 

Acquisition related items

Purchase price allocation in relation to the acquisition of MPS is recorded as
provisional; the period during which adjustments are permitted is limited to 12
months from the date of acquisition. No material changes are foreseen from
previous publication. 

Outlook

Marel expects modest organic revenue growth and increase in EBIT* between years.

The industry that Marel operates in has a history of 4-6% annual growth and it
is expected that average annual growth will remain at that level in the long
term. Marel’s aim is to continue to grow faster than the market by leveraging
its market presence and with continuous investments in innovation. 

Long term growth prospects for Marel are promising while short term economic
uncertainty has recently increased. Results may vary from quarter to quarter
due to general economic developments, fluctuations in orders received and
deliveries of larger systems. 

Presentation of results, July 28, 2016

Marel will present its results at an investor meeting on Thursday, July 28, at
8:30 am (GMT), at the Company’s headquarters at Austurhraun 9, Gardabaer. The
meeting will also be webcasted at marel.com/webcast. 

Publication days of Consolidated Financial Statements in 2016

  -- 3rd quarter 2016                         October 26, 2016
  -- 4th quarter 2016                          February 1, 2017
  -- 1st quarter 2017                           May 5, 2017
  -- 2nd quarter 2017                         July 26,2017
  -- 3rd quarter 2017                           October 25, 2017
  -- 4th quarter 2017                           January 31,2018

Release of financial statements will take place after market closing on the
aforementioned dates. 

For further information, contact:

Audbjorg Olafsdottir, Corporate Director of Investor Relations and
Communications, tel: (+354) 563 8626 / mobile: (+354) 853 8626.

Attachments:

Financial statements.pdf

Marel_Q2 2016_FINAL.pdf