Marel hf. - Financial Statement Release

Marel Q2 2015 results- Organic growth and strong operational performance

Organic growth and strong operational performance

  --  Revenue for Q2 2015 totaled 218.3m [Q2 2014: 169.8m].
  --  Adjusted EBITDA* for Q2 2015 was 37.2m or 17.1% of revenue [Q2 2014:
     18.0m]. EBITDA was 38.1m or 17.5% of revenue [Q2 2014: 13.0m].
  --  Adjusted operating profit* (adj.EBIT) for Q2 2015 was 29.7m or 13.6% of
     revenue [Q2 2014: 10.7m]. EBIT was 28.5m or 13.1% of revenue [Q2 2014:
     3.6m].
  --  Net result for Q2 2015 was 19.5m [Q2 2014: 0.8m]. Earnings per share was
     2.71 euro cents compared with 0.10 euro cents in Q2 2014.
  --  Cash flow from operating activities before interest and tax was 23.7m [Q2
     2014: 20.4m]. Net interest bearing debt was 156.0m [Q2 2015: 204.5m].
  --  The order book was at 165.9m at the end of the quarter compared with 178m
     at the end of Q1 2015.

Orders in Q2 are well balanced both geographically and between different
product groups: Greenfield projects, modernization projects and maintenance
business. Poultry and fish continue to show strong order intake while market
conditions are softer in the meat and further processing segments. Third
quarter revenues are expected to be lower than second quarter revenues due to
seasonal effects and timing in delivery of orders. Overall market conditions
remain favorable. 

The first half of the year 2015 was good for Marel with a solid increase in
sales and profits. Revenues in the first half of the year are 428 million with
12.5% adjusted EBIT (53.5 million) compared with 325 million and 4.7% adjusted
EBIT in 1H 2014. 


Arni Oddur Thordarson, CEO:

“It is an excellent first half of the year for Marel with significant organic
growth and operational improvements. Revenues in the first 6 months are 428
million with adjusted EBIT of 12.5%. We are proud of this achievement which is
based on strong commercial product portfolio, deep customer engagement and
general good market conditions. 

Our financials are strong giving us ample room to explore various growth
opportunities. The Marel team is committed to stay at the forefront of the
dynamic and fast growing industry of providing innovative and high performing
solutions to poultry, meat and fish processors on a global scale.” 

Simpler, Smarter, Faster refocusing program
The Simpler, Smarter, Faster two year refocusing program is fully on track and
nearing its finalization at year-end 2015. The program focuses on simplifying
market approach to better serve the customer needs and streamlining operations
to increase quality and efficiency in the company while lowering the recurring
cost base. 

High Speed Slicing operations in Norwich, U.K. were sold to the Middleby
Corporation in Q2 2015. The sale of the High Speed Slicing operations was made
in February and closed in April with a slightly positive P/L effect and total
cash proceeds of 9 million. Marel's real estate in Oss, Netherlands, was sold
in April delivering cash proceeds of 2.4 million. The Oss operations had
previously been  transferred to the multi-industry center in Boxmeer. 

Several actions have been taken to optimize the manufacturing footprint and it
has been transformed from 19 manufacturing and innovation sites to 11 today. It
is estimated that one-off costs related to refocusing will increase during the
second half of the year compared with Q2  as previously announced actions of
manufacturing optimization will be fully implemented and finalized before
year-end. These actions include the transfer of manufacturing activities from
Des Moines to Gainesville in the U.S., transfer of operations from Bornholm to
Aarhus in Denmark and finalization of various other streamlining activities
that have already been started. 

From the beginning of the refocusing program until the end of Q2 2015, taking
into account the proceeds from sales of operations the total cash-out cost of
the refocusing program is at 14 million with 28 million in P/L effect for the
same period, thereof 1.1 million in Q2. Total estimated cash-out costs related
to refocusing actions will remain under 25 million over the total refocusing
period. 

New organizational blueprint

During 2015, a new organizational blueprint for Marel has been implemented step
by step. The new structure simplifies Marel and strengthens innovation, supply
chain and commercial activities across the company. These functions operate
across the industry segments, creating a solid foundation for increased
efficiency, sharing of best practices and optimization of the use of resources.
The aim is to serve the customer better, reduce time to market and penetrate
markets faster and more efficiently. 

With the new organization structure, Marel views and manages the business in a
new way with changes in resource allocation and internal reporting. The
reporting changes do not have any impact on consolidated revenue, operational
profit or net profit. Alignment of reporting between different business units
results in movement from cost of sales to sales and marketing cost. Cost
allocation from the shared services by functions across industry segments is
now better reflecting the utilization of internal resources resulting in
increased transparency and accountability.Year to date EBIT per industry better
reflects the resource allocation based on the new organizational blueprint than
the quarterly figure. 

Markets
Market conditions in Marel's main markets remained good during Q2 resulting in
yet another quarter of record sales. There was a good increase in revenues and
operational profits which was fueled by the poultry and salmon segments where
Marel is in the position to deliver turn-key solutions. Poultry and fish
continue to show strong order intake while market conditions in the meat and
further processing segments are softer. 

Poultry
Marel's poultry segment had a good first half of the year with strong
operational profit margins and volumes. The poultry segment generated 231.5
million in revenue and adj.EBIT of 39.6 million (17.1%) in the first six months
2015. Market conditions in poultry remain favorable and the outlook for the
remainder of the year is positive although negative seasonal effects are
expected in Q3. Projects during Q2 are well distributed geographically,
including large projects in Poland and the U.K. 

During the quarter Marel's poultry segment participated in the VIV Russia
poultry exhibition in Moscow and VIV Turkey in Istanbul where Marel presented
the multiple award-winning SmartWeigher, the AeroScalder and the brand new
LegPositioner. Marel has been nominated for the Dutch Food Valley Award 2015
for its highly innovative AeroScalder that uses moisturized hot air for
scalding instead of water immersion. This revolutionary scalding method saves
energy and reduces water consumption by 50-75%. 

Fish
The fish segment generated 70.1 million in revenue and adj.EBIT of 7.0 million
(9.9%) in the first half of 2015.  Market conditions in salmon and white fish
are favorable and Marel has secured several projects and standard equipment
sales, including sizeable  projects in Chile and Alaska. 

During the quarter, Marel's fish segment exhibited all its latest solutions and
equipment for the fish industry at the annual seafood processing global
exhibition in Brussels. During the exhibition, the FleXicut waterjet cutter
drew the crowd's attention, leading to several sales during and after the
exhibition. 

Meat
Marel's meat segment generated 64.0 million in revenue and adj.EBIT of 6.0
million (9.4%) in the first half of 2015, which is a significant improvement
compared to previous years due to good market conditions and streamlined
operations. Market conditions in meat have softened and revenue and
profitability is expected to be lower during the second half of the year
compared to the first half of the year. 

During the quarter, Marel's meat segment gained certification from Oz Meats
that will allow Marel's customers in Australia to export their meat trimmings
to global markets. Marel was also named as the best equipment supplier in 2015
at the U.K Meat awards. 

Further processing
The further processing segment generated 55.0 million in revenue with negative
adj.EBIT of 0.2 million (-0.4%) in the first half of 2015. Profitability is
expected to be at a low level throughout the year. 

Streamlining of further processing activities continued during Q2 2015. The
transfer of manufacturing operations in Des Moines to an existing facility in
Gainesville is ongoing and will be concluded before year-end. 

The segment is strategically important in supporting customers in the poultry,
meat and fish segments to move from volume to value. Innovation efforts will be
stepped up in order to increase profitability going forward as can be seen by
the investment in the new innovation center in Des Moines which will serve the
large sausage and meat market. 

During the quarter, Marel's further processing segment continued to strengthen
its market approach and participated in the seafood processing global
exhibition in Brussels with the RevoPortioner that is now entering the fish
segment building on its past success in poultry. 


Financial items

Cash flow
Operational cash flow before interest and tax is 23.7 million for Q2 2015,
compared with 20.4 million in Q2 2014.  Total operating working capital
increased compared to Q1 2015 and Year-end 2014 because of increase in business
volume and timing of delivery and payment of orders. At the same time Marel
returned healthy cash flow from operations. 

In Q2 2015, Marel acquired 15.0 million treasury shares for a total amount of
18.2 million. This purchase was made after the Board of Directors of Marel hf.
authorized management to purchase up to 25 million own shares to be used as
payment for potential future acquisitions, per the Company's announcement on 29
April 2015. After the purchase and exercise of stock options during the quarter
with net cash outflow of 16.5 million the company holds 21.7 million treasury
shares. Total outstanding stock options at the end of Q2 2015 are 9.3 million
shares. 

Financing
The balance sheet is healthy and net interest bearing debt amounts to 156.0
million in Q2 2015 compared with 204.5 million in Q2 2014. Strong EBITDA and
cash flow results in a total net leverage ratio of 1.22 at the end of Q2 2015
compared to 1.48 at the end of Q1 2015 and 2.08 at the end of Q4 2014. 

The strong financial position with net debt/EBITDA at 1.22 enables Marel to
further stimulate growth and strengthen its competitive position. 

Outlook
Management guidance for 2015 is organic revenue growth, with a solid increase
in operational and net profit. Full focus remains on strengthening the market
approach and operational improvement with the aim to reach EBIT of over 100
million in 2017. 

In the mid- and long-term, the company believes its innovative products and
global presence in all segments will secure good growth and increased
profitability. The long-term outlook in the industry remains favorable and the
estimated annual market growth for providing advanced solutions and equipment
for meat, poultry and fish processing is 4-6%. Marel's goal is to continue to
grow faster than the market, based on its innovative customer solutions and
extensive sales and service network. 
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 30, 2015
Marel will present its results at an investor meeting on Thursday, July 30, 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 2015


  --  3rd quarter 2015                            October 28, 2015
  --  4th quarter 2015                            February 3, 2016

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:

Final financial statements Q2 2015.pdf

Marel Q2 2015 Press Release_FINAL_PDF.pdf