Marel Food Systems hf. - Financial Statement Release

Marel Food Systems hf. Q3 Financial results

Good operating performance; new cost base and improved market conditions

- Revenues from core business for Q3 2009 totalled EUR 111.9 mln, an increase
of 4.4% compared to the previous quarter (Q3 2008: EUR 143.1 mln). 
- EBITDA from core businesses was EUR 18.6 mln, or 16.6% of sales (Q3 2008: EUR
20.9 mln; 14.6% of sales). 
- EBIT from core business was EUR 13.1 mln, or 11.7% of sales (Q3 2008: EUR
15.7 mln; 11% of sales). 
- International shareholding increased to 16% following Columbia Wanger's
acquisition of a 5.2% share in Marel. 

Consolidated  
- Consolidated revenues for Q3 2009 amounted to EUR 133.7 mln (Q3 2008: EUR
170.6 mln). 
- Consolidated EBITDA was EUR 18.0 mln in Q3 2009 (Q3 2008: EUR 20.8 mln) and
consolidated operating profit (EBIT) was EUR 11.8 mln (Q3 2008: EUR 14.5 mln). 
- Net result was EUR 0.9 mln for Q3 2009 (Q3 2008: EUR 4.5 mln). 
- Net interest bearing debt was EUR 348.0 mln.
- Bridge loan for Food and Dairy operation was extended by two years, until
October 2011. 


Theo Hoen, CEO:
 “We are pleased with our quarterly operating results.  We remain cost
conscious in view of the slow pace of recovery.  Orders received in our core
business remain stable in the third quarter after good growth in the first two
quarters. Our cost discipline has enabled us to increase gross margins and EBIT
return on sales.  With the rationalization measures implemented over the past
year, we are now operating with a new and substantially lower cost base. 

We are focused on capturing the synergies between Marel and Stork Food Systems.
We look forward to presenting our customers with innovative new systems that
combine the industry-leading technologies that the merged companies are capable
of offering as ‘One Company'. 

We are proud that Columbia Wanger Asset Management, a subsidiary of Bank of
America, has acquired a substantial share in the company. Our shareholders have
supported our strategy well in recent years, and it is encouraging to
experience that  the international investment community has confidence in the
future of our market and our company.” 


Operating environment

• Marel's key markets for the sale of food processing machinery and equipment
are gradually improving but more slowly than anticipated. 
• Order intake has only slightly decreased, by 4% between quarters, despite the
summer holiday season. 
Following an increase for two quarters in a row, Marel's order intake decreased
only slightly, despite the summer holiday period when business activity is
traditionally at a lower level. Order intake may nevertheless vary in coming
quarters due to business cycle fluctuations and the timing of large projects. 

Financial institutions are still hesitant about financing major investments and
transactions, causing delays in order intake for larger systems in some
markets, including North America and parts of Eastern Europe. However, there is
a noticeable improvement in the sale of medium-sized projects, with a
substantial increase in the number of projects in the pipeline. Maintenance and
the sale of spare parts as revenue sources remain roughly at the same level as
they were in 2008. 

The food industry

• Increased activity in all industry segments.
• The poultry industry is leading the way with the biggest growth. 
• Investment is on the rise in the fish processing industry, particularly in
whitefish and salmon. 
• The fresh meat market has improved noticeably, especially for medium-sized
projects. 
• The level of activity is high in further processing but conversion to sales
is slow. 

Despite a continuing focus on cost control, Marel gives high priority to
research and development to ensure a steady pipeline of innovative new products
to our customers in all four industry segments. There is increased activity in
all segments, though market conditions vary from one segment to another. 

- Fish: Sales in the fish industry are close to target. Norway is currently by
far the largest market in fish as exemplified by several recent large-scale
projects in both the salmon and whitefish industries. While sales in some
countries are lagging, other countries are exceeding expectations, such as
Lithuania and Canada. In general, the salmon industry is performing well and
salmon prices are still high.  In January 2010 new regulations will take effect
in the EU requiring all fish imports to have validated catch certificates.
Companies will have to reform their management procedures in order to keep
track of catch origin, which will create opportunities for Marel. 

- Meat: The meat industry is slowly recovering after a year-long recession. The
market has responded very favourably to Marel‘ integrated meat processing
solutions. The decision two years ago to focus in particular on medium-sized
projects for medium-sized companies is yielding good results and there are
currently many such projects in the pipeline. The U.S. and EU pork markets are
improving though prices are still under pressure and margins are tight.
Attendance was good at the Worldwide Food Expo/AMI Exhibition in Chicago (28-30
October), where the company exhibited a new integrated system that features a
Townsend injector combined with a Marel injection monitoring system. 

- Poultry: Most markets in the poultry industry have rebounded well and sales
activity has picked up. Delayed grain harvests have pushed corn and soybean
prices up in North America. However, this has not impacted the conclusion of
several large-scale projects with processors in Canada and Latin America.
Processors are continuing to invest in Stork's deboning systems, as well as
complete poultry processing lines. Nevertheless, it is unlikely that large
greenfield projects will materialise until Q1 or Q2 2010. In 2010 it is
expected that poultry production will increase by more than 10% in markets like
Russia, India, Argentina and Iran. 

- Further processing: Added value processors are profiting from the fact that
the economic slowdown has caused consumers to increase consumption of less
expensive proteins like poultry and processed products like sausages. They have
also benefitted from the increase in stay-at-home dining, with consumers
choosing to eat more luxuriously at home rather than dining out. Already in
spring 2008 close to half of Americans were feeling the effects of higher food
prices and some 30% had responded by eating at home more, according to a Gallup
poll.   Processors are responding by adapting and updating their production
processes and systems. 

- Customer focus - Sysco Corporation: Sysco Corporation, a global leader in the
foodservice industry, owns and operates 17 meat processing plants in the United
States and Canada. When the company decided to replace one of its production
facilities in Buckhead, New Jersey, with a new facility, it turned to Marel for
a fully integrated meat processing solution. Sysco's goal was to increase
production capacity by at least 50% of the current plant capacity, as well as
to be able to monitor individual performance and improve process flow. The
solution presented by Marel is based on the innovative new StreamLine
processing line, which is fully integrated with Innova, the company's
state-of-the-art production management software. The system provides Sysco with
much better control over their production process and allows the company to
monitor the yield, throughput and quality of individual operators throughout
the entire processing cycle. Process flow is improved with the ability to pace
the line and deliver raw material to each production stage automatically. “The
solution offered by Marel will enable us to increase production up to 50%
without adding labour and pick up a 2-3 point yield gain.  We are excited to be
the first meat processing facility in the United States to utilize this
state-of-the-art production line,” says Gary F. Szura, Sr. Vice President and
General Manager of Buckhead Beef NE, A Sysco Company. The success of these
integrated systems demonstrates how important innovation and research and
development are to Marel' business. That is why the company invests an
industry-leading 6-8% of its revenues in its innovation capacity. For further
information on Sysco Corporation, visit www.sysco.com. 
Key events during the period

Integration and cost efficiency
The integration process of the Marel and Stork companies has begun with the aim
of capturing the potential synergies from the merger. Work has begun on the
development of new products that combine the advanced technologies that each
company has to offer with the aim of providing the customer with the highest
added value possible. Furthermore, the global network of subsidiaries and
offices is being integrated in order to present one unified front to the
customer and to increase the effectiveness and efficiency of the company's
presence in markets around the world. The implementation is being carried out
step-by-step in order to minimize disruptions to daily operations. 

Marel is maintaining a strict focus on rationalization and cost control. At the
corporate level, the total annual savings achieved with the rationalization
measures implemented during the course of the year amount to EUR 25 mln. As a
result of these measures, the company is now operating with a new and
substantially lower cost base. The savings have been mainly driven by
reductions in personnel, from 4,108 employees at the end of Q2 2008 to 3,565 at
the end of Q3 2009. 

Cash flow
One of the main objectives for the year 2009 is to further increase operational
cash flows. For that reason, Marel launched a Working Capital Management
Programme roughly one year ago with the aim of substantially reducing working
capital through reductions in inventories and the number of debtors. 

Marel was operationally cash flow positive in Q3 by EUR 5.1 mln, even though
the business was growing compared to the previous quarter, which increased the
need for working capital. Overall the business remains well invested and
investments in capital goods were limited during the quarter. 

Marel is committed to continuing the working capital programme at least through
2010 with the aim of achieving further reductions in inventory turnover and
debtor days. However, with a growing business, this may not necessarily lead to
an increase in operational cash flow. 

Financing 
On 25 September 2009 it was announced that funds managed by Columbia Wanger
Asset Management, a wholly owned subsidiary of Bank of America Corporation, had
acquired close to 32.2 million shares in Marel, equivalent to a 5.2% ownership,
at the price of ISK 59.0 per share. The payment actually took place at the
beginning of October. The transaction increases Marel's foreign ownership from
11% to 16%, which is in line with the company‘s stated goal to strengthen and
internationalize its shareholder base. 

Marel has now refinanced a facility provided originally in relation to the
acquisition of Food and Dairy Systems.  The new maturity date is October 2011.
After the refinancing, Marel has no short-term maturities. 

The liquidity position of EUR 51.1 million remains relatively strong and the
business remains well equipped to deal with the current market environment. 

Non-core assets
One of two manufacturing sites in Denmark belonging to the non-core operations
of Carnitech was closed. The activities were consolidated at the remaining
site. 

As previously announced, two transactions for the sale of non-core assets were
completed in Q2 involving real estate formerly belonging to the Food & Dairy
part of Stork Food Systems, and the company Scanvaegt Nordic A/S. The
divestment of other non-core activities is still under consideration. 

Outlook

Market activity is expected to remain at the current level or to slightly
improve in coming months. The expectation is that the year 2010 will have a
better start than 2009. Operational results will improve in accordance with
market developments, supported by the company's continued focus on cost
control. Results could vary quarter by quarter but long-term prospects are
good. 


Presentation of results, 4 November 2009

Marel will present its results at a meeting on Wednesday, 4 November, at 8:30
a.m., at the company‘s headquarters at Austurhraun 9, Gardabaer. 


Publication days of the Consolidated Financial Statements in 2009 and the
Annual General Meeting 2010 

Publication dates of the Financial Statements for 2009: 
4th quarter 					                4 February 2010 
Annual General Meeting of Marel Food Systems hf 	     3 March 2010 

Publication dates of the Financial Statements for 2010:
1st quarter 2010					           28 April 2010
2nd quarter 2010					           28 July 2010
3rd quarter 2010					           27 October 2010
4th quarter 2010					            2 February 2011
Annual General Meeting of Marel Food Systems hf 	      2 March 2010


For further information, contact: 
Erik Kaman, CFO Tel: (+354) 563-8072 
Sigsteinn Grétarsson, Managing Director of Marel ehf. Tel: (+354) 563-8072)


About Marel
Marel is the leading global provider of advanced equipment and systems for the
fish, meat and poultry processing industry. Our internationally renowned brands
include AEW Delford, Carnitech, Dantech, Marel, Scanvaegt, Stork and Townsend.
With offices and subsidiaries in over 30 countries and a global network of 60
agents and distributors, we work side-by-side with our customers to extend the
boundaries of food processing performance.

Attachments:

press release q3 2009.pdf

q3 report 2009.pdf