Marel hf. - Financial Statement Release

Marel Q1 2014 results

Refocusing for profitability improvement and growth

Marel Q1 2014 results
(All amounts in EUR)

Refocusing for profitability improvement and growth

  --  Revenue for Q1 2014 totaled 154.8m, [Q1 2013: 158m].
  --  Adjusted EBITDA before refocusing cost was 11.6m or 7.5% of revenue.
     EBITDA was 8.1m or 5.2% of revenue, [Q1 2013: 16.9m].
  --  Adjusted operating profit (EBIT) was 4.6m or 3% of revenue. EBIT was 1.0m
     or 0.7% of revenue, [Q1 2013: 10.3m].
  --  Net loss was 1.9m compared with 5.7m net profit in Q1 2013. Earnings per
     share were negative by 0.25 euro cents, [Q1 2013: 0.78 euro cents].
  --  Cash flow from operating activities before interest and tax was 19.4m,
     [Q1 2013: 17.2m]. Net interest bearing debt was 208.4m at the end of Q1
     2014, [Q1 2013: 239.3m].
  --  The order book was at 138.4m compared with 132.4m at the beginning of the
     year, [Q1 2013: 151.1m].

The market for large projects is still at a low level while sale of standard
equipment increased between years. Operating profit in the poultry segment was
lower than usual caused by underutilization in manufacturing and projects taken
on in a difficult market environment during 2013. Poultry is expected to show
improved profitability in Q2 based on current order book. 

The refocusing plan of becoming simpler, smarter and faster was launched in the
beginning of the year and is proceeding according to plan. The plan's objective
is to serve customers' needs more effectively and to reduce the annual cost
base by 20-25 million. Annual cost savings that have already been achieved in
Q1 amount to annual cost 3.6 million. 

First quarter results are as well affected by various non-recurring items
amounting to 2.4 million. Those items are not part of the formal refocusing
plan and are therefore not reported as one-off items. 

Arni Oddur Thordarson, CEO:

“Marel sales are 155 million in first quarter with an adjusted EBIT of 4.6
million that is below potential. Our refocusing plan, which was launched in
beginning of the year is proceeding according to plan. During the first quarter
we have achieved cost savings initiatives that lower our cost base by 3.6
million annually. 

We are taking clear steps to optimize our manufacturing footprint and overall
simplify the company structure. Marel is strategically and commercially strong
but needs to better align execution with strategy in order to reach its full
potential. 
In the poultry industry we introduced the RoboBatcher and the SensorX
SmartSort. At the same time we are excited about the FleXicut, which will
revolutionize whitefish processing. 

As stated in the beginning of the year, we believe that profitability will
improve over the course of the year. Our most promising markets in the short
term are the U.S. and South America. Expansion and modernization needs are
building up there and Marel is well placed to capitalize on these
opportunities. However, the sentiment in Europe is affected by current
geopolitical tension. Despite market volatility in emerging economies during
Q1, long-term outlook remains robust”. 

Simpler, smarter and faster
Marel ´s refocusing plan to become simpler, smarter and faster is proceeding
according to plan. The plan´s objectives are to increase efficiency in order to
serve customers better and reduce the annual cost base by 20-25 million.
Already achieved cost savings in Q1 amount to 3.6 million. 

The first steps towards this goal have already been realized. Actions during
the first quarter include: 

• The merging of three different business units in Marel meat activities into
one in order to better utilize existing sales and innovation capabilities 

• The narrowing of Marel's product portfolio in the freezing segment

• The reduction of 75 employees thereof 25 from middle management

Further steps will be taken where business units serving the same customer
needs and that rely on the same technical capabilities will be combined.
Additionally manufacturing footprint will be optimized, product portfolio
sharpened and overall operational efficiency increased. The company´s resources
will be aligned to execute strategy and reach full potential. The refocusing
plan will be the foundation to reach the long-term business goals. To support
the implementation of the refocusing plan and to accelerate the process Marel
has engaged the Enterprise improvement team of AlixPartners as advisors. 

Over the course of 2014 and 2015 the total refocusing cost is estimated to be
20-25 million which will improve results in the future on recurring basis and
support long-term growth and value creation. 

Order book growing marginally
The order book now stands at 138.4 million compared with 132.4 million at the
beginning of the year. Orders received amounted to 160.8 million compared with
162.4 million in Q4 2013. Large orders are still at low level while sales of
standard equipment increased between years. 

Outlook

Profitability is expected to improve over the course of the year. Management
guidance is to reach organic revenue growth with 55 million adjusted EBIT in
2014. 

Refocusing cost is estimated to be around 20-25 million in total over the
course of the years 2014-2015 with the aim of reaching 100 million in EBIT by
2017. 

In the mid- and long-term, the Company believes its innovative products and
global presence in all industries will secure good growth and increased
profitability. The long-term outlook in the industry remains favorable and
Marel's goal is to continue to grow faster than market. 

It should be kept in mind that results may vary from quarter to quarter due to
general economic developments, fluctuations in orders received, and deliveries
of larger systems. 

Presentation of results, April 29, 2014
Marel will present its results at an investor meeting on Tuesday, 29 April, at
8:30 am (GMT), at the Company's headquarters at Austurhraun 9, Gardabaer. The
meeting will also be webcast at marel.com/webcast. 

Publication days of Consolidated Financial Statements in 2014
 2nd quarter 2014   July 23, 2014
 3rd quarter 2014  October 22, 2014
 4th quarter 2014   February 4, 2015
 Annual General Meeting 2014    March 4, 2015

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

For further information, contact:
Linda Jonsdottir, Corporate Director of Treasury and IR, tel: (+354) 563 8464 /
mobile: (+354) 825 8464. 
Audbjorg Olafsdottir, Investor Relations specialist, tel: (+354) 563 8626 /
mobile: (+354) 853 8626.

Attachments:

Announcement_Q1_2014_PDF_VERSION.pdf

Financial statements Q1 2014.pdf