AI assistant
Marel — Interim / Quarterly Report 2022
Jul 27, 2022
2191_rns_2022-07-27_36623a70-b365-4b67-83a0-98d1c0ad8592.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
imarel
30 June 2022
Condensed Consolidated Interim Financial Statements
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Contents Condensed Consolidated Interim Financial Statements
The Board of Directors' and CEO's Report 3
Consolidated Statement of Income 6
Consolidated Statement of Comprehensive Income 7
Consolidated Statement of Financial Position 8
Consolidated Statement of Changes in Equity 9
Consolidated Statement of Cash Flows 10
Notes to the Condensed Consolidated Interim Financial Statements 11
1 General information 11
2 Basis of preparation and use of judgments and estimates 11
3 Accounting policies 12
4 Business combinations 12
5 Non-IFRS measurement 13
6 Segment information 14
7 Revenues 16
8 Expenses by nature 17
9 Net finance costs 17
10 Income tax 17
11 Earnings per share 18
12 Property, plant and equipment 19
13 Right of use assets 20
14 Goodwill 21
15 Intangible assets 22
16 Investments in associates 23
17 Trade receivables, other receivables and prepayments 23
18 Deferred income tax 23
19 Inventories 24
20 Equity 24
21 Borrowings and lease liabilities 25
22 Provisions 27
23 Trade and other payables 27
24 Financial instruments and risks 27
25 Contingencies 29
26 Related party transactions 29
27 Subsequent events 29
Appendices 30
1 Quarterly results 30
2 Definitions and abbreviations 31
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
The Board of Directors' and CEO's Report
Marel is a leading global provider of advanced solutions, software and services to food processing industries. Marel has a global reach with local presence in over 30 countries, with sales and service engineers servicing customers in over 140 countries.
The Condensed Consolidated Interim Financial Statements for the six-month period ended 30 June 2022 comprise the financial statements of Marel hf. ("the Company") and its subsidiaries (together "the Group" or "Marel"). The Condensed Consolidated Interim Financial Statements are prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's Annual Consolidated Financial Statements as at and for the year ended 31 December 2021.
The Condensed Consolidated Interim Financial Statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to understand the changes in the Group's financial position and performance from year end 2021.
Operations in six-month period ended 30 June 2022
The consolidated revenues for Marel for the six-month period ended 30 June 2022 are EUR 768.9 million (2021: EUR 661.5 million). The adjusted result from operations for the same period is EUR 56.3 million or 7.3% of revenues (2021: EUR 76.6 million or 11.6% of revenues).
The bridge between adjusted result from operations and result from operations as shown in the Consolidated Statement of Income is as follows:
| YTD 2022 | YTD 2021 | |
|---|---|---|
| Adjusted result from operations¹ | 56.3 | 76.6 |
| Non-IFRS adjustments | (16.5) | (13.5) |
| Result from operations | 39.8 | 63.1 |
¹ Result from operations is adjusted for PPA related costs, including depreciation and amortization, and acquisition related expenses.
At 30 June 2022 the Company's order book amounted to EUR 774.5 million (at 31 December 2021: EUR 569.0 million). Orders received for six-month period ended 30 June 2022 amounted to EUR 893.5 million (2021: EUR 740.7 million). EUR 80.9 million order book was acquired in 2022 from Wenger and Sleegers.
Net cash from operating activities for the six-month period ended 30 June 2022 was EUR 38.6 million (2021: EUR 122.2 million).
Capital expenditures for the six-month period ended 30 June 2022 were EUR 41.5 million (2021: EUR 33.0 million). Ahead of the foreseen growth curve, Marel stepped up its focus on important initiatives to automate and digitize our manufacturing platform, supply chain and aftermarket business. Marel will continue to invest 4-5% of revenues in the period 2021-2025 with the objective to create a more scalable growth platform allowing for agility and flexibility of operations and to position the business for future growth.
At 30 June 2022, net cash and cash equivalents were EUR 100.2 million (31 December 2021: EUR 77.1 million). Net interest-bearing debt increased from EUR 199.2 million at the end of 2021 to EUR 770.0 million as per 30 June 2022. In Q2 2022, the Group drew USD 530.0 million on its committed revolving facility in order to finance the Wenger acquisition. In addition, the Group utilized the full EUR 150.0 million bridge facility to provide operational liquidity. EUR 100.0 million was repaid on the revolving facility in the quarter.
Based on the Company's 2022 Annual General Meeting resolution, a dividend of EUR 38.7 million (EUR 5.12 cents per share) was declared and paid to the shareholders in Q1 2022 for the operational year 2021. This corresponds to approximately 40% of net result for the operational year 2021 (in 2021: a dividend of EUR 41.0 million, EUR 5.45 cents per share, corresponding to 40% of net result for the year 2020, was declared and paid out to shareholders for the operational year 2020).
Acquisitions in 2022
On 1 February 2022, Marel acquired an additional 50.0% of the share capital of Curio ehf. ("Curio") bringing Marel's total share to 100%. Curio and Marel have worked closely together since Marel's initial investment in Curio on 22 October 2019 and as such, Marel initiated the acquisition of the remaining shares ahead of the timing agreed in the put option.
On 21 April 2022, Marel concluded the acquisition of the entire share capital of Sleegers Techniek B.V. ("Sleegers"). Sleegers is a Dutch provider of interleaving, stacking, loading, and slicing solutions for food processors globally. The joint offering by the two companies will strengthen Marel's position in the case-ready and prepared foods segments.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
On 9 June 2022, Marel concluded the acquisition of the entire share capital of Wenger Manufacturing LLC ("Wenger"), including all relevant business activities of the group. Wenger is a global leader in processing solutions focused on pet food, plant based proteins and aqua feed. The acquisition of Wenger is a platform investment into new and attractive growth markets where Wenger's industry-leading extrusion and dryer technologies forms the anchor point in a new segment in Marel's business model. The acquisition is fully in line with Marel's growth strategy and increased focus on adjacent markets.
Further information on acquisitions in 2022 is provided in note 4 of the Condensed Consolidated Interim Financial Statements.
In relation to the Wenger acquisition, Marel signed a new EUR 150.0 million multi-currency bridge facility in order to provide operational headroom. The facility is provided by BNP PARIBAS SA/NV, has up to a 2-year term and an initial interest rate of EURIBOR/SOFR + 50 bps margin. The bridge facility is expected to be replaced by long term structural funding in the next 12 months. Further information is provided in note 21 of the Condensed Consolidated Interim Financial Statements.
Share buyback program
On 1 June 2022, the Board of Directors of Marel decided to initiate a share buyback program on Nasdaq Iceland for up to 4,000,000 shares, or about 0.52% of the total issued share capital in the Company. In addition, the Board of Directors of Marel decided to initiate a share buyback program on Euronext Amsterdam for up to 1,000,000 shares, or about 0.13% of the total issued share capital in the Company. The purpose of the buyback program is to meet the Company's obligations under share incentive programs with employees.
As part of the buyback program, Marel has purchased 4.1 million shares (EUR 17.6 million) in the period 1 June 2022 to 30 June 2022. The buyback program on Nasdaq Iceland was in effect from 1 June 2022 and was discontinued after 1 July 2022, when the maximum number of shares to be purchased was reached. The buyback program on Euronext Amsterdam is in effect from 2 June 2022 until and including 2 September 2022.
Outlook
Marel is experiencing strong demand for its solutions, software and services driven by an accelerating focus on automation, robotics technology and digital solutions that support sustainable food processing. Orders received in the first half year of 2022 of EUR 893.5 million and order book as per 30 June 2022 of EUR 774.5 million are at a record high level.
Market conditions remain challenging due to continued supply chain disruption and inflation at high levels resulting in inefficiencies in manufacturing and aftermarket, and higher costs associated with timely delivery. To lower costs, the difficult decision has been made to reduce headcount by 5% across the global Marel workforce, resulting in estimated annualized cost saving of EUR 20.0 million with one-off cost of around EUR 10.0 million. Marel is targeting a gradual build-up of revenues and operational performance in the second half of 2022, based on a strong order book with better price/cost coverage in new orders.
Marel has revised its year-end 2023 financial target to a run-rate of 14-16% EBIT, from the previously stated 16%, allowing for 2% contingency buffer due to volatility in market conditions. Other 2023 financial targets are unchanged, gross profit of around 40%, SG&A of around 18% and innovation at the 6% strategic level.
Statement by the Board of Directors and the CEO
According to the Board of Directors' and CEO's best knowledge, the Condensed Consolidated Interim Financial Statements give a true and fair view of the consolidated financial performance of the Group for the six-month period ended 30 June 2022, its assets, liabilities and consolidated financial position as at 30 June 2022 and its consolidated cash flows for the six-month period ended 30 June 2022.
Furthermore, in our opinion the Condensed Consolidated Interim Financial Statements and the endorsement of the Board of Directors and the CEO give a fair view of the development and performance of the Group's operations and its position and describe the principal risks and uncertainties faced by the Group.
The Board of Directors and CEO of Marel hf. hereby ratify the Condensed Consolidated Interim Financial Statements of Marel hf. for the six-month period ended 30 June 2022 with their signatures.
Gardabaer, 27 July 2022
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Board of Directors
| Ann Elizabeth Savage | Arnar Thor Masson
Chairman of the Board
Astvaldur Johannsson |
| --- | --- |
| Lillie Li Valeur | Olafur S. Gudmundsson |
| Svafa Grönfeldt | Ton van der Laan |
Chief Executive Officer
Arni Oddur Thordarson
5
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Consolidated Statement of Income
| Q2 | Q2 | YTD | YTD | ||
|---|---|---|---|---|---|
| In EUR million unless stated otherwise | Notes | 2022 | 2021 | 2022 | 2021 |
| Revenues | 5 & 6 & 7 | 397.3 | 327.5 | 768.9 | 661.5 |
| Cost of sales | 5 & 8 | (265.5) | (210.0) | (503.4) | (422.2) |
| Gross profit | 5 | 131.8 | 117.5 | 265.5 | 239.3 |
| Selling and marketing expenses | 5 & 8 | (58.6) | (42.3) | (112.7) | (84.9) |
| General and administrative expenses | 5 & 8 | (33.6) | (20.4) | (64.1) | (47.3) |
| Research and development expenses | 5 & 8 | (24.8) | (21.8) | (48.9) | (44.0) |
| Result from operations | 5 | 14.8 | 33.0 | 39.8 | 63.1 |
| Finance costs | 9 | (3.1) | (2.1) | (4.6) | (6.5) |
| Finance income | 9 | 1.2 | 0.2 | 6.1 | 0.2 |
| Net finance costs | 9 | (1.9) | (1.9) | 1.5 | (6.3) |
| Share of result of associates | 16 | (0.8) | (0.4) | (1.6) | (0.5) |
| Result before income tax | 12.1 | 30.7 | 39.7 | 56.3 | |
| Income tax | 10 | (2.5) | (7.4) | (8.4) | (11.8) |
| Net result | 9.6 | 23.3 | 31.3 | 44.5 | |
| Of which: | |||||
| - Net result attributable to Shareholders of the Company | 11 | 9.6 | 23.6 | 31.3 | 44.8 |
| - Net result attributable to non-controlling interests | 20 | 0.0 | (0.3) | 0.0 | (0.3) |
| Earnings per share for result attributable to Shareholders of the Company during the period (expressed in EUR cent per share): | |||||
| - Basic | 11 | 1.27 | 3.14 | 4.14 | 5.95 |
| - Diluted | 11 | 1.26 | 3.11 | 4.11 | 5.89 |
The notes on pages 11-29 are an integral part of the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Consolidated Statement of Comprehensive Income
| In EUR million | Notes | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|---|
| Net result | 9.6 | 23.3 | 31.3 | 44.5 | |
| Items that are or may be reclassified to profit or loss: | |||||
| Currency translation differences | 20 | (2.4) | (1.2) | 2.9 | 4.1 |
| Cash flow hedges | 20 | 1.1 | 0.1 | 2.3 | 1.5 |
| Deferred income taxes | 18 & 20 | (0.2) | (0.0) | (0.5) | (0.3) |
| Other comprehensive income / (loss) for the period, net of tax | (1.5) | (1.1) | 4.7 | 5.3 | |
| Total comprehensive income for the period | 8.1 | 22.2 | 36.0 | 49.8 | |
| Of which: | |||||
| - Total comprehensive income attributable to Shareholders of the Company | 8.1 | 22.5 | 36.0 | 50.1 | |
| - Total comprehensive income attributable to non-controlling interests | 20 | 0.0 | (0.3) | 0.0 | (0.3) |
The notes on pages 11-29 are an integral part of the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Consolidated Statement of Financial Position
| In EUR million | Notes | 30/06 | 31/12 |
|---|---|---|---|
| 2022 | 2021 | ||
| Assets | |||
| Property, plant and equipment | 12 | 316.2 | 228.7 |
| Right of use assets | 13 | 41.1 | 40.5 |
| Goodwill | 14 | 898.0 | 705.2 |
| Intangible assets | 15 | 556.0 | 357.2 |
| Investments in associates | 16 | 11.1 | 12.7 |
| Other non-current financial assets | 0.9 | - | |
| Derivative financial instruments | 24 | 0.7 | - |
| Deferred income tax assets | 18 | 22.3 | 18.1 |
| Non-current assets | 1,846.3 | 1,362.4 | |
| Inventories | 19 | 392.6 | 273.4 |
| Contract assets | 7 | 74.4 | 69.6 |
| Trade receivables | 7 & 17 | 215.7 | 154.7 |
| Derivative financial instruments | 24 | 2.5 | 1.1 |
| Other receivables and prepayments | 17 | 104.4 | 66.7 |
| Cash and cash equivalents | 100.2 | 77.1 | |
| Current assets | 889.8 | 642.6 | |
| Total assets | 2,736.1 | 2,005.0 | |
| Equity and liabilities | |||
| Share capital | 20 | 6.7 | 6.7 |
| Share premium reserve | 20 | 438.4 | 450.3 |
| Other reserves | 20 | (17.1) | (22.1) |
| Other equity | 20 | - | (13.6) |
| Retained earnings | 20 | 586.4 | 593.8 |
| Shareholders' equity | 1,014.4 | 1,015.1 | |
| Non-controlling interests | 20 | - | 8.0 |
| Total equity | 1,014.4 | 1,023.1 | |
| Liabilities | |||
| Borrowings | 21 | 828.2 | 234.9 |
| Lease liabilities | 21 | 31.4 | 30.9 |
| Deferred income tax liabilities | 18 | 91.7 | 92.1 |
| Provisions | 22 | 5.2 | 4.0 |
| Other payables | 23 | 6.6 | 22.7 |
| Derivative financial instruments | 24 | - | 0.4 |
| Non-current liabilities | 963.1 | 385.0 | |
| Contract liabilities | 7 | 384.3 | 306.0 |
| Trade and other payables | 23 | 339.1 | 259.4 |
| Derivative financial instruments | 24 | - | 0.8 |
| Current income tax liabilities | 15.0 | 10.7 | |
| Borrowings | 21 | 0.0 | 0.0 |
| Lease liabilities | 21 | 10.6 | 10.5 |
| Provisions | 22 | 9.6 | 9.5 |
| Current liabilities | 758.6 | 596.9 | |
| Total liabilities | 1,721.7 | 981.9 | |
| Total equity and liabilities | 2,736.1 | 2,005.0 |
The notes on pages 11-29 are an integral part of the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Consolidated Statement of Changes in Equity
| In EUR million | Share capital | Share premium reserve¹ | Other reserves² | Other equity³ | Retained earnings⁴ | Share-holders' equity | Non-controlling interests | Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2022 | 6.7 | 450.3 | (22.1) | (13.6) | 593.8 | 1,015.1 | 8.0 | 1,023.1 |
| Net result for the period | 31.3 | 31.3 | 0.0 | 31.3 | ||||
| Total other comprehensive income | 5.0 | (0.3) | 4.7 | 4.7 | ||||
| Transactions with owners of the Company | ||||||||
| Treasury shares purchased | (0.0) | (17.6) | (17.6) | (17.6) | ||||
| Treasury shares sold | 0.0 | 3.9 | 3.9 | 3.9 | ||||
| Options granted / exercised / canceled | 0.0 | 1.8 | 0.5 | 2.3 | 2.3 | |||
| Transactions with non-controlling interests | 13.9 | (0.5) | 13.4 | (8.0) | 5.4 | |||
| Dividend | (38.7) | (38.7) | (38.7) | |||||
| 0.0 | (11.9) | 5.0 | 13.6 | (7.4) | (0.7) | (8.0) | (8.7) | |
| Balance at 30 June 2022 | 6.7 | 438.4 | (17.1) | - | 586.4 | 1,014.4 | - | 1,014.4 |
| In EUR million | Share capital | Share premium reserve¹ | Other reserves² | Other equity³ | Retained earnings⁴ | Share-holders' equity | Non-controlling interests | Total equity |
| Balance at 1 January 2021 | 6.7 | 442.8 | (27.5) | - | 536.4 | 958.4 | 0.3 | 958.7 |
| Net result for the period | 44.8 | 44.8 | (0.3) | 44.5 | ||||
| Total other comprehensive income | 6.1 | (0.8) | 5.3 | 5.3 | ||||
| Transactions with owners of the Company | ||||||||
| Options granted / exercised / canceled | 0.0 | (4.0) | 1.3 | (2.7) | (2.7) | |||
| Non-controlling interests on acquisition of subsidiary | 8.5 | 8.5 | ||||||
| Transactions with non-controlling interests | (12.8) | (12.8) | (12.8) | |||||
| Dividend | (41.0) | (41.0) | 0.0 | (41.0) | ||||
| 0.0 | (4.0) | 6.1 | (13.6) | 5.1 | (6.4) | 8.2 | 1.8 | |
| Balance at 30 June 2021 | 6.7 | 438.8 | (21.4) | (13.6) | 541.5 | 952.0 | 8.5 | 960.5 |
| Net result for the period | 52.0 | 52.0 | (0.3) | 51.7 | ||||
| Total other comprehensive income | (0.7) | (0.7) | (0.7) | |||||
| Treasury shares sold | 0.0 | 9.9 | 9.9 | 9.9 | ||||
| Options granted / exercised / canceled | 0.0 | 1.6 | 0.3 | 1.9 | 1.9 | |||
| Dividend | (0.2) | (0.2) | ||||||
| 0.0 | 11.5 | (0.7) | - | 52.3 | 63.1 | (0.5) | 62.6 | |
| Balance at 31 December 2021 | 6.7 | 450.3 | (22.1) | (13.6) | 593.8 | 1,015.1 | 8.0 | 1,023.1 |
¹ Includes reserve for share-based payments as per 30 June 2022 of EUR 9.8 million (31 December 2021: EUR 7.3 million).
² For details on other reserves refer to note 20.
³ Includes equity impact of the option to acquire the remaining shares of non-controlling interests. For further information refer to note 20.
⁴ Includes a legal reserve for capitalized intangible assets related to product development projects as per 30 June 2022 of EUR 95.8 million (31 December 2021: EUR 88.1 million).
The notes on pages 11-29 are an integral part of the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Consolidated Statement of Cash Flows
| In EUR million | Notes | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|---|
| Cash Flow from operating activities | |||||
| Result from operations | 14.8 | 33.0 | 39.8 | 63.1 | |
| Adjustments to reconcile result from operations to net cash provided by / (used in) operating activities: | |||||
| Depreciation and impairment of property, plant and equipment and right of use assets | 12 & 13 | 8.6 | 7.0 | 16.3 | 14.1 |
| Amortization and impairment of intangible assets | 15 | 10.0 | 9.8 | 18.9 | 19.9 |
| Adjustments for other non-cash income and expenses | 1.4 | 1.0 | 2.6 | 1.9 | |
| Working capital provided by / (used in) operating activities | 34.8 | 50.8 | 77.6 | 99.0 | |
| Changes in working capital: | |||||
| Inventories and contract assets and liabilities | (32.2) | 36.5 | (25.1) | 28.7 | |
| Trade and other receivables | (1.7) | (3.8) | (38.8) | (2.6) | |
| Trade and other payables | 18.2 | (4.1) | 37.7 | 11.3 | |
| Provisions | (0.7) | (1.5) | (0.3) | 1.7 | |
| Changes in operating assets and liabilities | (16.4) | 27.1 | (26.5) | 39.1 | |
| Cash generated from operating activities | 18.4 | 77.9 | 51.1 | 138.1 | |
| Taxes paid | (5.3) | (8.6) | (10.3) | (13.3) | |
| Interest and finance income | (0.4) | 0.2 | 0.2 | 0.3 | |
| Interest and finance costs | (2.3) | (2.2) | (2.4) | (2.9) | |
| Net cash from operating activities | 10.4 | 67.3 | 38.6 | 122.2 | |
| Cash Flow from investing activities | |||||
| Purchase of property, plant and equipment | 12 | (12.5) | (8.7) | (18.8) | (14.0) |
| Investments in intangibles | 15 | (8.8) | (6.2) | (15.9) | (12.3) |
| Proceeds from sale of non-current assets and assets held for sale | 12 & 15 | 0.3 | 0.2 | 0.6 | 1.6 |
| Investments in associates | 16 | - | - | - | (8.6) |
| Acquisition of subsidiary, net of cash acquired | 4 | (480.4) | (6.0) | (496.3) | (19.1) |
| Net cash provided by / (used in) investing activities | (501.4) | (20.7) | (530.4) | (52.4) | |
| Cash Flow from financing activities | |||||
| Purchase of treasury shares | 20 | (17.6) | - | (17.6) | - |
| Sale of treasury shares and options exercised | 20 | 0.3 | 0.4 | 0.6 | 0.4 |
| Dividends paid | 20 | - | (41.0) | (38.7) | (41.0) |
| Proceeds from borrowings | 21 | 644.8 | 10.0 | 709.8 | 22.5 |
| Repayments of borrowings | 21 | (101.3) | (30.3) | (141.3) | (43.5) |
| Payments of lease liabilities | 21 | (2.8) | (2.7) | (6.1) | (5.4) |
| Net cash provided by / (used in) financing activities | 523.4 | (63.6) | 506.7 | (67.0) | |
| Net increase / (decrease) in net cash | 32.4 | (17.0) | 14.9 | 2.8 | |
| Exchange gain / (loss) on net cash | 4.2 | 1.0 | 8.2 | 4.2 | |
| Net cash at beginning of the period | 63.6 | 101.6 | 77.1 | 78.6 | |
| Net cash at end of the period | 100.2 | 85.6 | 100.2 | 85.6 |
The notes on pages 11-29 are an integral part of the Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Notes to the Condensed Consolidated Interim Financial Statements
1 General information
Reporting entity
Marel hf. ("the Company") is a limited liability company incorporated and domiciled in Iceland. The address of its registered office is Austurhraun 9, Gardabaer.
The Condensed Consolidated Interim Financial Statements of the Company as at and for the six-month period ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as "the Group" or "Marel").
The Group is a leading global provider of advanced solutions, software and services to food processing industries and is involved in the manufacturing, development, distribution and sales of solutions for these industries.
These Condensed Consolidated Interim Financial Statements for the six-month period ended 30 June 2022 have not been audited nor reviewed by an external auditor.
All amounts are in millions of EUR unless otherwise indicated.
These Condensed Consolidated Interim Financial Statements have been approved for issue by the Board of Directors and CEO on 27 July 2022.
The Company is listed on the Nasdaq Iceland ("Nasdaq") and on Euronext Amsterdam ("Euronext") exchanges.
2 Basis of preparation and use of judgments and estimates
Base of preparation
These Condensed Consolidated Interim Financial Statements of the Company and its subsidiaries are for the six-month period ended 30 June 2022 and have been prepared in accordance with IAS 34 as adopted by the European Union.
The Condensed Consolidated Interim Financial Statements should be read in conjunction with the Group's Annual Consolidated Financial Statements for the year ended 31 December 2021. The Consolidated Financial Statements for the Group for the period ended 31 December 2021 are available upon request from the Company's registered office at Austurhraun 9, Gardabaer, Iceland or at www.marel.com.
These Condensed Consolidated Interim Financial Statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.
These Condensed Consolidated Interim Financial Statements have been prepared under the historical cost convention, except for the valuation of financial assets and liabilities (including derivative instruments) which are valued at fair value through the Consolidated Statement of Comprehensive Income.
Items of each entity in the Group, as included in the Condensed Consolidated Interim Financial Statements, are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity ("the functional currency"). The Condensed Consolidated Interim Financial Statements are presented in Euro (EUR), which is the Group's reporting currency.
Use of judgments and estimates
In preparing these Condensed Consolidated Interim Financial Statements, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the Group's Annual Consolidated Financial Statements for the year ended 31 December 2021.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
3 Accounting policies
The accounting policies applied in these Condensed Consolidated Interim Financial Statements are consistent with those applied and described in the Annual Consolidated Financial Statements for the year ended 31 December 2021.
The accounting policies have been applied consistently for all periods presented in these Condensed Consolidated Interim Financial Statements.
4 Business combinations
Under IFRS 3, up to one year from the acquisition date, the initial accounting for business combinations is to be adjusted to reflect new information that has been received about facts and circumstances that existed at the acquisition date and would have affected the measurement of amounts recognized as of that date. As a result of such adjustments the values of assets and liabilities recognized may change in the one-year period from the acquisition date.
Curio
On 1 February 2022, Marel acquired the remaining 50.0% of the shares of Curio for an additional investment of EUR 15.9 million. Curio and Marel have worked closely together since Marel's initial investment in Curio on 22 October 2019 and as such, Marel initiated the acquisition of the remaining shares ahead of the timing agreed in the put option. Curio was consolidated in Marel's financial results as of Q1 2021 at the moment Marel assessed it had control over Curio. Immediately after obtaining control, the purchase price allocation ("PPA") activities started which were finalized in 2021. For further information on the outcomes of the PPA, we refer to the Group's Annual Consolidated Financial Statements for the year ended 31 December 2021.
Since this additional investment in Curio does not result in a change of control, it is treated as an equity transaction. As a result, no changes in the carrying amounts of Curio's assets (including goodwill) were recognized. The difference between the change in non-controlling interest and the consideration paid is recognized directly in equity.
Sleegers
On 21 April 2022, Marel concluded the acquisition of the entire share capital of Sleegers, a Dutch provider of interleaving, stacking, loading, and slicing solutions for food processors globally. Sleegers was founded in 1993, has 27 employees and around EUR 5.0 million in annual revenues. The joint offering by the two companies will strengthen Marel's position in the case-ready and prepared foods segments. The purchase consideration was paid with EUR 12.9 million in cash. The acquisition was financed through Marel's strong cash position and existing credit facilities.
Provisional goodwill amounted to EUR 5.9 million is allocated to the meat and other segments and is primarily related to the strategic fit of Sleegers and Marel with a highly complementary product portfolio in the case-ready and prepared foods segments. The goodwill for the Sleegers acquisition is not deductible for corporate income tax.
Acquisition of Wenger
On 9 June 2022, Marel concluded the acquisition of the entire share capital of Wenger, including all relevant business activities of the group. The acquisition of Wenger is a platform investment into new and attractive growth markets where Wenger's industry-leading extrusion and dryer technologies forms the anchor point in a new segment in Marel's business model. Wenger shares Marel's passion for innovation and commitment to best-in-class products, backed by an experienced team, and long-standing partnerships with customers. The acquisition is fully in line with Marel's growth strategy and increased focus on adjacent markets.
Wenger is a global leader in processing solutions focused on pet food, plant based proteins and aqua feed. Founded in 1935, Wenger is a family-owned business headquartered in Sabetha, Kansas, USA, has around 500 employees and revenues in 2022 are expected to be around USD 190.0 million.
Closing was subject to customary closing conditions, including anti-trust and approval of Wenger's shareholders. The purchase consideration includes cash consideration of USD 521.6 million (EUR 487.1 million), 1.0 million Marel shares (EUR 4.2 million) and a cash contribution of USD 4.0 million (EUR 3.7 million) into a not-for-profit private foundation, to continue the legacy of Wenger and its meaningful impact on the community. The purchase consideration is preliminary and may be adjusted when the net working capital calculations are finalized. The fair value of the Marel shares transferred was based on the listed share price of the Company at 9 June 2022 of EUR 4.37 per share. The acquisition was financed through Marel's strong cash position, existing credit facilities and available treasury shares.
Immediately after the acquisition date the PPA activities started. The amounts recorded for the acquisition are
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
provisional. The preliminary purchase price allocation may be further revised within the one year period from the acquisition date if additional information is obtained which might impact the purchase consideration and / or fair value of assets and liabilities.
Provisional goodwill amounted to EUR 183.4 million and is primarily related to the strategic and cultural fit and a highly complementary product portfolio into a new segment in Marel's business model. The goodwill will be allocated to this new segment which will become part of Marel's segment reporting alongside the poultry,
meat and fish business segments as of Q3 2022. In the Condensed Consolidated Interim Financial Statements for the six-month period ended 30 June 2022, the results from operations, assets and goodwill of Wenger have been allocated to the other segment.
The goodwill for Wenger is tax deductible in the US if certain conditions are met.
The impact to Marel's Consolidated Statement of Financial Position of acquisitions in 2022 is shown in the below table.
| Impact on the Consolidated Statement of Financial Position in 2022 | Wenger | Sleegers | Total |
|---|---|---|---|
| Property, plant and equipment | 74.0 | 0.3 | 74.3 |
| Right of use assets | 1.1 | - | 1.1 |
| Intangible assets | 193.5 | 5.1 | 198.6 |
| Other non-current assets | 1.2 | - | 1.2 |
| Inventories | 52.4 | 1.7 | 54.1 |
| Contract assets | - | - | - |
| Trade receivables | 22.3 | 0.9 | 23.2 |
| Other receivables and prepayments | 11.5 | 0.8 | 12.3 |
| Cash and cash equivalents | 19.8 | 0.2 | 20.0 |
| Assets acquired | 375.8 | 9.0 | 384.8 |
| Borrowings, current and non-current | 12.1 | - | 12.1 |
| Lease liabilities, current and non-current | 1.1 | - | 1.1 |
| Provisions, current and non-current | 1.3 | - | 1.3 |
| Deferred and other tax liabilities | 0.4 | 1.2 | 1.6 |
| Contract liabilities | 33.2 | 0.3 | 33.5 |
| Trade and other payables | 16.1 | 0.5 | 16.6 |
| Liabilities assumed | 64.2 | 2.0 | 66.2 |
| Total net identified assets | 311.6 | 7.0 | 318.6 |
| Purchase consideration | 495.0 | 12.9 | 507.9 |
| of which paid / to be paid in cash | 490.8 | 12.9 | 503.7 |
| of which paid / to be paid in shares | 4.2 | - | 4.2 |
| Goodwill on acquisition | 183.4 | 5.9 | 189.3 |
5 Non-IFRS measurement
In this note to the Condensed Consolidated Interim Financial Statements Marel presents certain financial measures when discussing Marel's performance that are not measures of financial performance or liquidity under IFRS ("non-IFRS"). Non-IFRS measures do not have standardized meanings under IFRS and not all companies calculate non-IFRS measures in the same manner or on a consistent basis. As a result, these measures may not be comparable to measures used by other companies that have the same or similar names. The non-IFRS measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures and should be read only in conjunction
with our Condensed Consolidated Interim Financial Statements prepared in accordance with IFRS.
Management has presented adjusted result from operations as a performance measure because it monitors this performance measure at a consolidated level and believes that this measure is relevant to an understanding of the Group's financial performance. Adjusted result from operations is calculated by adjusting result from operations to exclude the impact of PPA related costs (consisting of depreciation and amortization of acquisition related (in)tangible assets) and acquisition related expenses. No other adjustments are included in adjusted result from operations.
The reconciliation of adjusted result from operations to the most directly comparable IFRS measure, result from operations, is included in the following table.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
| Non-IFRS | Non-IFRS | Non-IFRS | ||||
|---|---|---|---|---|---|---|
| As reported | adjustments | measures | As reported | adjustments | measures | |
| Q2 2022 | Q2 2022 | Q2 2022 | Q2 2021 | Q2 2021 | Q2 2021 | |
| Revenues | 397.3 | - | 397.3 | 327.5 | - | 327.5 |
| Cost of sales | (265.5) | 1.3 | (264.2) | (210.0) | 1.1 | (208.9) |
| Gross profit | 131.8 | 1.3 | 133.1 | 117.5 | 1.1 | 118.6 |
| Selling and marketing expenses | (58.6) | 3.3 | (55.3) | (42.3) | 2.5 | (39.8) |
| General and administrative expenses | (33.6) | 3.9 | (29.7) | (20.4) | 0.2 | (20.2) |
| Research and development expenses | (24.8) | 1.7 | (23.1) | (21.8) | 1.8 | (20.0) |
| Adjusted result from operations | 10.2 | 25.0 | 5.6 | 38.6 | ||
| Non-IFRS adjustments | (10.2) | (10.2) | (5.6) | (5.6) | ||
| Result from operations | 14.8 | - | 14.8 | 33.0 | - | 33.0 |
| Non-IFRS | Non-IFRS | Non-IFRS | ||||
| As reported | adjustments | measures | As reported | adjustments | measures | |
| YTD 2022 | YTD 2022 | YTD 2022 | YTD 2021 | YTD 2021 | YTD 2021 | |
| Revenues | 768.9 | - | 768.9 | 661.5 | - | 661.5 |
| Cost of sales | (503.4) | 1.6 | (501.8) | (422.2) | 3.7 | (418.5) |
| Gross profit | 265.5 | 1.6 | 267.1 | 239.3 | 3.7 | 243.0 |
| Selling and marketing expenses | (112.7) | 6.1 | (106.6) | (84.9) | 5.1 | (79.8) |
| General and administrative expenses | (64.1) | 5.8 | (58.3) | (47.3) | 1.4 | (45.9) |
| Research and development expenses | (48.9) | 3.0 | (45.9) | (44.0) | 3.3 | (40.7) |
| Adjusted result from operations | 16.5 | 56.3 | 13.5 | 76.6 | ||
| Non-IFRS adjustments | (16.5) | (16.5) | (13.5) | (13.5) | ||
| Result from operations | 39.8 | - | 39.8 | 63.1 | - | 63.1 |
The non-IFRS adjustments to the result from operations includes the following:
| Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | |
|---|---|---|---|---|
| PPA related charges | 5.6 | 5.4 | 10.1 | 12.2 |
| Acquisition related expenses | 4.6 | 0.2 | 6.4 | 1.3 |
| Total non-IFRS adjustments | 10.2 | 5.6 | 16.5 | 13.5 |
The reconciliation of earnings before interest (net finance costs), tax (income tax), depreciation and amortization ("EBITDA") to the most directly comparable IFRS measurement, result from operations, for the period indicated is included in the table below.
| Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | |
|---|---|---|---|---|
| Result from operations (EBIT) | 14.8 | 33.0 | 39.8 | 63.1 |
| Depreciation, amortization and impairment | 18.6 | 16.8 | 35.2 | 34.0 |
| Result before depreciation & amortization (EBITDA) | 33.4 | 49.8 | 75.0 | 97.1 |
6 Segment information
Operating segments
The identified operating segments comprise the three core industries and other, which are the reporting segments. These operating segments form the basis for managerial decision taking. As of Q3 2022, the revenues, results from operations and assets of Wenger will be reported into a new segment alongside the poultry, meat and fish business segments. In the Condensed Consolidated Interim Financial Statements for the six-month period ended 30 June 2022, the revenues, results from operations and assets of Wenger have been allocated to the other segment. For more information refer to note 4.
The following summary describes the operations in each of the Group's reportable segments:
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
- Poultry processing: Our poultry full-line product range offers integrated systems, software and services for processing broilers, turkeys and ducks;
- Meat processing: Our meat industry is a full-line supplier for primary, secondary and further processing equipment, systems, software and services of pork, beef, veal and sheep;
- Fish processing: Marel provides advanced equipment, systems, software and services for processing salmon and whitefish, both farmed and wild, on-board and ashore;
- The 'other' segment includes any revenues, result from operations and assets which do not belong to the three core industries. For Q2 2022 it also includes the revenues, results from operations and assets of Wenger.
The reporting entities are reporting their revenues per operating segment based on the industry for which the customer is using Marel's product range. Therefore inter-segment revenues do not exist, only intercompany revenues within the same segment.
Results are monitored and managed at the operating segment level, up to the adjusted result from operations. Adjusted result from operations is used to measure performance as management believes that this information is the most relevant in evaluating the results of the respective Marel segments relative to other entities that operate in the same industries.
The Group's CEO reviews the internal management reports of each segment on a monthly basis.
Fluctuations between quarters are mainly due to general economic developments, timing of receiving and delivery of orders, margin on projects and business mix. Decisions on tax and financing structures including cash and cash equivalents are taken at a corporate level, therefore no financial income and expenses nor tax are allocated to the operating segments. The profit or loss per operating segment is the adjusted result from operations; finance costs and taxes are reported in the column total.
Intercompany transactions are entered at arm's length terms and conditions comparable to those available to unrelated parties. Information on assets per operating segment is reported; however, decisions on liabilities are taken at a corporate level and as such are not included in this disclosure.
| 30 June 2022 | Poultry | Meat | Fish | Other | Total |
|---|---|---|---|---|---|
| Revenues | 384.4 | 249.4 | 95.6 | 39.5 | 768.9 |
| Adjusted result from operations | 44.6 | 6.4 | 0.7 | 4.6 | 56.3 |
| PPA related charges | (0.2) | (7.2) | (1.5) | (1.2) | (10.1) |
| Acquisition related expenses | - | - | - | (6.4) | (6.4) |
| Result from operations | 44.4 | (0.8) | (0.8) | (3.0) | 39.8 |
| Net finance costs | 1.5 | ||||
| Share of result of associates | (1.6) | ||||
| Result before income tax | 39.7 | ||||
| Income tax | (8.4) | ||||
| Net result for the period | 31.3 | ||||
| Assets | 869.2 | 902.9 | 250.8 | 713.2 | 2,736.1 |
| Capital expenditures | 15.8 | 15.6 | 7.1 | 3.0 | 41.5 |
| Depreciation and amortization | (12.8) | (16.2) | (4.2) | (2.0) | (35.2) |
| 30 June 2021 | Poultry | Meat | Fish | Other | Total |
| Revenues | 304.2 | 260.6 | 77.7 | 19.0 | 661.5 |
| Adjusted result from operations | 43.5 | 26.8 | 4.5 | 1.8 | 76.6 |
| PPA related charges | (0.2) | (9.9) | (0.9) | (1.2) | (12.2) |
| Acquisition related expenses | - | - | - | (1.3) | (1.3) |
| Result from operations | 43.3 | 16.9 | 3.6 | (0.7) | 63.1 |
| Net finance costs | (6.3) | ||||
| Share of result of associates | (0.5) | ||||
| Result before income tax | 56.3 | ||||
| Income tax | (11.8) | ||||
| Net result for the period | 44.5 | ||||
| Assets | 809.7 | 769.5 | 181.9 | 111.9 | 1,873.0 |
| Capital expenditures | 15.1 | 13.0 | 3.9 | 1.0 | 33.0 |
| Depreciation and amortization | (12.7) | (16.6) | (3.6) | (1.1) | (34.0) |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Geographical information
The Group's operating segments operate in three main geographical areas, although they are managed on a global basis. The Group is domiciled in Iceland.
| Assets excluding cash and cash equivalents | 30/06 2022 | 31/12 2021 |
|---|---|---|
| Europe, Middle East and Africa¹ | 1,767.9 | 1,669.4 |
| Americas | 833.7 | 228.3 |
| Asia and Oceania | 34.3 | 30.2 |
| Total | 2,635.9 | 1,927.9 |
¹ Iceland accounts for EUR 290.9 million (31 December 2021: EUR 270.8 million).
Total assets exclude the Group's cash pool which the Group manages at a corporate level. Capital expenditures include investments in property, plant and equipment, right of use assets and intangible assets (including capitalized technology and development costs, refer to note 15).
| Capital expenditure | YTD 2022 | YTD 2021 |
|---|---|---|
| Europe, Middle East and Africa¹ | 36.7 | 25.2 |
| Americas | 4.5 | 5.3 |
| Asia and Oceania | 0.3 | 2.5 |
| Total | 41.5 | 33.0 |
¹ Iceland accounts for EUR 8.3 million (2021: EUR 8.9 million).
Cash capital expenditures are made up of capital expenditures excluding the investments in right of use assets. Cash capital expenditures for the six-month period ended 30 June 2022 amount to EUR 34.7 million (2021: EUR 26.3 million).
7 Revenues
Revenues
The Group's revenue is derived from contracts with customers. Within the segments and within the operating companies, Marel is not relying on any individual major customers.
Disaggregation of revenue
In the following table, revenue is disaggregated by primary geographical markets (revenue is allocated based on the country where the customer is located):
| Revenue by geographical markets | YTD 2022 | YTD 2021 |
|---|---|---|
| Europe, Middle East and Africa¹ | 377.6 | 340.2 |
| Americas | 302.1 | 223.4 |
| Asia and Oceania | 89.2 | 97.9 |
| Total | 768.9 | 661.5 |
¹ Iceland accounts for EUR 10.5 million (2021: EUR 5.7 million).
In the following table revenue is disaggregated by equipment revenue (comprised of revenue from greenfield and large projects, standard equipment and modernization equipment) and aftermarket revenue (comprised of maintenance, service and spare parts):
| Revenue by business mix | YTD 2022 | YTD 2021 |
|---|---|---|
| Equipment revenue | 457.5 | 398.4 |
| Aftermarket revenue | 311.4 | 263.1 |
| Total | 768.9 | 661.5 |
Trade receivables and contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
| Trade receivables and contract balances | 30/06 2022 | 31/12 2021 |
|---|---|---|
| Trade receivables | 215.7 | 154.7 |
| Contract assets | 74.4 | 69.6 |
| Contract liabilities | (384.3) | (306.0) |
The contract assets (cost exceed billing) primarily relate to the Group's rights to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer.
The contract liabilities (billing exceed cost) primarily relate to the advance consideration received from customers for standard equipment for which revenue is recognized at a point in time and for the sale of complete solutions or systems for which revenue is recognized over time.
No information is provided about remaining performance obligations at 30 June 2022 that have an original expected duration of one year or less, as allowed by IFRS 15.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
8 Expenses by nature
| YTD | YTD | |
|---|---|---|
| Expenses by nature | 2022 | 2021 |
| Cost of goods sold | 273.3 | 236.2 |
| Employee benefits | 313.5 | 257.9 |
| Depreciation, amortization and impairment | 35.2 | 34.0 |
| Maintenance and rent of buildings and equipment | 10.2 | 7.9 |
| Other | 96.9 | 62.4 |
| Total | 729.1 | 598.4 |
9 Net finance costs
| YTD | YTD | |
|---|---|---|
| Net finance costs | 2022 | 2021 |
| Finance costs: | ||
| Interest on borrowings | (2.3) | (2.7) |
| Interest on leases | (0.5) | (0.4) |
| Other finance expenses | (1.8) | (0.7) |
| Net foreign exchange transaction losses | - | (2.7) |
| Subtotal finance costs | (4.6) | (6.5) |
| Finance income: | ||
| Interest income | 0.5 | 0.2 |
| Net foreign exchange transaction gains | 5.6 | - |
| Subtotal finance income | 6.1 | 0.2 |
| Total | 1.5 | (6.3) |
10 Income tax
| Income tax recognized in the Consolidated Statement of Income | YTD 2022 | YTD 2021 |
|---|---|---|
| Current tax | (15.2) | (16.4) |
| Deferred tax | 6.8 | 4.6 |
| Total | (8.4) | (11.8) |
Income tax expense is recognized at an amount determined by multiplying the profit (loss) before tax for the interim reporting period by management's best estimate of the weighted average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognized in the interim period. As such, the effective tax rate in the Condensed Consolidated Interim Financial Statements may differ from the effective tax rate for the Annual Consolidated Financial Statements.
The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax laws and prior experience.
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as shown in the next table.
| Reconciliation of effective income tax | YTD | YTD | ||
|---|---|---|---|---|
| 2022 | % | 2021 | % | |
| Result before income tax | 39.7 | 56.3 | ||
| Income tax using Icelandic rate | (7.9) | 20.0 | (11.3) | 20.0 |
| Effect of tax rates in other jurisdictions | (2.2) | 5.4 | (2.2) | 3.9 |
| Weighted average applicable tax | (10.1) | 25.4 | (13.5) | 23.9 |
| Foreign exchange effect Iceland | 0.7 | (1.8) | 0.7 | (1.2) |
| Research and development tax incentives | 2.2 | (5.5) | 2.2 | (3.9) |
| Permanent differences | (0.9) | 2.3 | (0.8) | 1.5 |
| (Impairment)/reversal of tax losses | (0.3) | 0.8 | - | - |
| Effect of changes in tax rates | (0.2) | 0.5 | (0.0) | 0.0 |
| Others | 0.2 | (0.5) | (0.4) | 0.7 |
| Tax charge included in the Consolidated Statement of Income | (8.4) | 21.2 | (11.8) | 21.0 |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
11 Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to Shareholders by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held as treasury shares.
| Basic earnings per share
(EUR cent per share) | YTD 2022 | YTD 2021 |
| --- | --- | --- |
| Net result attributable to Shareholders
(EUR millions) | 31.3 | 44.8 |
| Weighted average number of
outstanding shares issued (millions) | 755.8 | 752.8 |
| Basic earnings per share (EUR cent
per share) | 4.14 | 5.95 |
The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
The Company has one category of dilutive potential ordinary shares: stock options. For the stock options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding stock options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the stock options.
| Diluted earnings per share
(EUR cent per share) | YTD 2022 | YTD 2021 |
| --- | --- | --- |
| Net result attributable to Shareholders
(EUR millions) | 31.3 | 44.8 |
| Weighted average number of outstanding shares issued (millions) | 755.8 | 752.8 |
| Adjustments for stock options (millions) | 5.2 | 7.8 |
| Weighted average number of outstanding shares for diluted earnings per share (millions) | 761.0 | 760.6 |
| Diluted earnings per share (EUR cent per share) | 4.11 | 5.89 |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
12 Property, plant and equipment
| Land & buildings | Plant & machinery | Vehicles & equipment | Under construction | Total | |
|---|---|---|---|---|---|
| 1 January 2022 | |||||
| Cost | 233.0 | 103.9 | 61.4 | 16.1 | 414.4 |
| Accumulated depreciation | (72.7) | (64.6) | (48.4) | - | (185.7) |
| Net book value | 160.3 | 39.3 | 13.0 | 16.1 | 228.7 |
| Six months ended 30 June 2022 | |||||
| Opening net book value | 160.3 | 39.3 | 13.0 | 16.1 | 228.7 |
| Divestments | - | (0.2) | (0.4) | - | (0.6) |
| Effect of movements in exchange rates | 2.3 | 1.3 | 1.0 | 0.6 | 5.2 |
| Additions | 3.8 | 4.8 | 3.3 | 6.9 | 18.8 |
| Business combinations, note 4 | 37.1 | 30.0 | 4.3 | 2.9 | 74.3 |
| Transfer between categories | 7.7 | 1.2 | 1.3 | (10.2) | - |
| Depreciation charge | (3.4) | (4.6) | (2.2) | - | (10.2) |
| Closing net book value | 207.8 | 71.8 | 20.3 | 16.3 | 316.2 |
| At 30 June 2022 | |||||
| Cost | 291.4 | 170.1 | 75.3 | 16.3 | 553.1 |
| Accumulated depreciation | (83.6) | (98.3) | (55.0) | - | (236.9) |
| Net book value | 207.8 | 71.8 | 20.3 | 16.3 | 316.2 |
| Land & buildings | Plant & machinery | Vehicles & equipment | Under construction | Total | |
| At 1 January 2021 | |||||
| Cost | 204.4 | 91.6 | 56.9 | 4.5 | 357.4 |
| Accumulated depreciation | (58.1) | (58.3) | (44.3) | - | (160.7) |
| Net book value | 146.3 | 33.3 | 12.6 | 4.5 | 196.7 |
| Year ended 31 December 2021 | |||||
| Opening net book value | 146.3 | 33.3 | 12.6 | 4.5 | 196.7 |
| Divestments | (0.1) | (0.5) | (0.5) | 0.0 | (1.1) |
| Effect of movements in exchange rates | 1.0 | 0.7 | 0.1 | 0.0 | 1.8 |
| Additions | 17.9 | 7.9 | 3.2 | 17.1 | 46.1 |
| Business combinations, note 4 | 0.1 | 2.0 | 0.7 | - | 2.8 |
| Transfer between categories | 1.1 | 3.5 | 0.9 | (5.5) | - |
| Depreciation charge | (6.0) | (7.6) | (4.0) | - | (17.6) |
| Closing net book value | 160.3 | 39.3 | 13.0 | 16.1 | 228.7 |
| At 31 December 2021 | |||||
| Cost | 233.0 | 103.9 | 61.4 | 16.1 | 414.4 |
| Accumulated depreciation | (72.7) | (64.6) | (48.4) | - | (185.7) |
| Net book value | 160.3 | 39.3 | 13.0 | 16.1 | 228.7 |
Depreciation of property, plant and equipment analyzes as follows in the Consolidated Statement of Income:
| Depreciation of property, plant and equipment | YTD 2022 | YTD 2021 |
|---|---|---|
| Cost of sales | 4.6 | 3.6 |
| Selling and marketing expenses | 0.4 | 0.3 |
| General and administrative expenses | 5.1 | 4.7 |
| Research and development expenses | 0.1 | 0.1 |
| Total | 10.2 | 8.7 |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
13 Right of use assets
| Land & buildings | Plant & machinery | Vehicles & equipment | Total | |
|---|---|---|---|---|
| At 1 January 2022 | ||||
| Cost | 39.5 | 1.8 | 27.7 | 69.0 |
| Accumulated depreciation | (13.4) | (0.8) | (14.3) | (28.5) |
| Net book value | 26.1 | 1.0 | 13.4 | 40.5 |
| Six months ended 30 June 2022 | ||||
| Opening net book value | 26.1 | 1.0 | 13.4 | 40.5 |
| Divestments | - | (0.1) | (2.4) | (2.5) |
| Effect of movements in exchange rates | 1.2 | 0.0 | 0.1 | 1.3 |
| Business combinations, note 4 | 1.1 | - | - | 1.1 |
| Additions | 0.3 | 0.7 | 5.8 | 6.8 |
| Depreciation charge | (2.7) | (0.2) | (3.2) | (6.1) |
| Closing net book value | 26.0 | 1.4 | 13.7 | 41.1 |
| At 30 June 2022 | ||||
| Cost | 42.5 | 2.4 | 29.5 | 74.4 |
| Accumulated depreciation | (16.5) | (1.0) | (15.8) | (33.3) |
| Net book value | 26.0 | 1.4 | 13.7 | 41.1 |
| Land & buildings | Plant & machinery | Vehicles & equipment | Total | |
| At 1 January 2021 | ||||
| Cost | 38.8 | 1.2 | 24.4 | 64.4 |
| Accumulated depreciation | (9.3) | (0.7) | (11.7) | (21.7) |
| Net book value | 29.5 | 0.5 | 12.7 | 42.7 |
| Year ended 31 December 2021 | ||||
| Opening net book value | 29.5 | 0.5 | 12.7 | 42.7 |
| Divestments¹ | (10.4) | (0.1) | (0.3) | (10.8) |
| Effect of movements in exchange rates | 0.8 | 0.1 | 0.2 | 1.1 |
| Business combinations, note 4 | 5.4 | - | 0.1 | 5.5 |
| Additions | 5.8 | 0.7 | 7.7 | 14.2 |
| Depreciation charge | (5.0) | (0.2) | (7.0) | (12.2) |
| Closing net book value | 26.1 | 1.0 | 13.4 | 40.5 |
| At 31 December 2021 | ||||
| Cost | 39.5 | 1.8 | 27.7 | 69.0 |
| Accumulated depreciation | (13.4) | (0.8) | (14.3) | (28.5) |
| Net book value | 26.1 | 1.0 | 13.4 | 40.5 |
¹ Divestments in land & buildings in 2021 include the impact of reassessing remaining estimated lease terms.
For the annual maturity of the lease liabilities, refer to note 21.
Depreciation of right of use assets analyzes as follows in the Consolidated Statement of Income:
| YTD | YTD | |
|---|---|---|
| Depreciation of right of use assets | 2022 | 2021 |
| Cost of sales | 1.7 | 1.6 |
| Selling and marketing expenses | 1.2 | 1.0 |
| General and administrative expenses | 3.1 | 2.7 |
| Research and development expenses | 0.1 | 0.1 |
| Total | 6.1 | 5.4 |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
14 Goodwill
| 30/06 | 31/12 | |
|---|---|---|
| 2022 | 2021 | |
| At 1 January | ||
| Cost | 705.2 | 678.8 |
| Net book value | 705.2 | 678.8 |
| Period ended 30 June / 31 December | ||
| Opening net book value | 705.2 | 678.8 |
| Business combinations, note 4 | 189.3 | 25.7 |
| Effect of movements in exchange rates | 3.5 | 0.7 |
| Closing net book value | 898.0 | 705.2 |
| At 30 June / 31 December | ||
| Cost | 898.0 | 705.2 |
| Net book value | 898.0 | 705.2 |
For 2022 business combinations relate to the acquisition of Wenger (increase in provisional goodwill of EUR 183.4 million) and Sleeger (increase in provisional goodwill of EUR 5.9 million).
For 2021 business combinations relate to the acquisition of PMJ (increase in goodwill of EUR 6.7 million), Curio (increase in goodwill of EUR 3.7 million), Valka (increase in provisional goodwill of EUR 17.3 million) and TREIF (decrease in goodwill of EUR 2.0 million due to finalization of the PPA).
Impairment testing
The Group tested at the end of 2021 whether goodwill had suffered any impairment. The conclusion was there were no triggers indicating that impairment was necessary. At 30 June 2022, there is no reason to deviate from the conclusions taken at year end.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
15 Intangible assets
| Technology & development costs | Customer relations, patents & trademarks | Other intangibles | Total | |
|---|---|---|---|---|
| At 1 January 2022 | ||||
| Cost | 351.6 | 261.5 | 94.1 | 707.2 |
| Accumulated amortization | (189.3) | (86.2) | (74.5) | (350.0) |
| Net book value | 162.3 | 175.3 | 19.6 | 357.2 |
| Six months ended 30 June 2022 | ||||
| Opening net book value | 162.3 | 175.3 | 19.6 | 357.2 |
| Business combinations, note 4 | 89.1 | 109.5 | - | 198.6 |
| Effect of movements in exchange rates | 1.6 | 1.6 | 0.0 | 3.2 |
| Additions | 12.8 | - | 3.1 | 15.9 |
| Amortization charge | (9.1) | (6.7) | (3.1) | (18.9) |
| Closing net book value | 256.7 | 279.7 | 19.6 | 556.0 |
| At 30 June 2022 | ||||
| Cost | 457.9 | 375.3 | 97.3 | 930.5 |
| Accumulated amortization | (201.2) | (95.6) | (77.7) | (374.5) |
| Net book value | 256.7 | 279.7 | 19.6 | 556.0 |
| Technology & development costs | Customer relations, patents & trademarks | Other intangibles | Total | |
| At 1 January 2021 | ||||
| Cost | 313.3 | 233.5 | 89.7 | 636.5 |
| Accumulated amortization | (166.5) | (72.1) | (66.9) | (305.5) |
| Net book value | 146.8 | 161.4 | 22.8 | 331.0 |
| Year ended 31 December 2021 | ||||
| Opening net book value | 146.8 | 161.4 | 22.8 | 331.0 |
| Divestments | - | - | (0.9) | (0.9) |
| Business combinations, note 4 | 13.8 | 25.2 | - | 39.0 |
| Effect of movements in exchange rates | 1.1 | 1.0 | 0.0 | 2.1 |
| Additions | 19.5 | - | 5.3 | 24.8 |
| Impairment charge | (0.6) | - | (0.1) | (0.7) |
| Amortization charge | (18.3) | (12.3) | (7.5) | (38.1) |
| Closing net book value | 162.3 | 175.3 | 19.6 | 357.2 |
| At 31 December 2021 | ||||
| Cost | 351.6 | 261.5 | 94.1 | 707.2 |
| Accumulated amortization | (189.3) | (86.2) | (74.5) | (350.0) |
| Net book value | 162.3 | 175.3 | 19.6 | 357.2 |
Business combinations for 2022 relate to the acquisition of Wenger and Sleegers. For 2021, business combinations relate to the acquisitions of PMJ, Curio and Valka. Further information on the acquisitions is disclosed in note 4 of the Condensed Consolidated Interim Financial Statements.
The additions for 2022 predominantly comprise internally generated assets of EUR 15.9 million (31 December 2021: EUR 24.8 million) for product development and for development of software products.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Amortization of intangible assets analyzes as follows in the Consolidated Statement of Income:
| YTD | YTD | |
|---|---|---|
| Amortization of intangible assets | 2022 | 2021 |
| Selling and marketing expenses | 6.6 | 5.8 |
| General and administrative expenses | 3.2 | 4.5 |
| Research and development expenses | 9.1 | 9.6 |
| Total | 18.9 | 19.9 |
Impairment testing
The Group tested at the end of 2021 whether indefinite intangible assets had suffered any impairment. The conclusion was there were no triggers indicating that impairment was necessary. At 30 June 2022, there is no reason to deviate from the conclusions taken at year end.
16 Investments in associates
The investments in associates relate to a $40.0\%$ stake in Stranda, a Norwegian provider of salmon processing solutions and a $25.3\%$ interest in the Canadian software company Worximity Technology ("Worximity").
17 Trade receivables, other receivables and prepayments
| Trade receivables, other | 30/06 | 31/12 |
|---|---|---|
| receivables and prepayments | 2022 | 2021 |
| Trade receivables | 218.0 | 156.1 |
| Less: write-down to net-realizable value | (2.3) | (1.4) |
| Trade receivables - net | 215.7 | 154.7 |
| Prepayments | 12.7 | 14.2 |
| Other receivables | 91.7 | 52.5 |
| Other receivables and prepayments | 104.4 | 66.7 |
The carrying amounts of trade receivables and other receivables and prepayments approximate their fair value.
Trade receivables in 2022 increased by EUR 23.2 million and other receivables and prepayments increased by EUR 12.3 million due to the acquisition of Wenger and Sleegers. Further information on the acquisitions is disclosed in note 4 of the Condensed Consolidated Interim Financial Statements.
There were no material reversals of write-downs of trade receivables. Due to the insignificant amount of write-downs, these are not shown separately in the Consolidated Statement of Income. The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations.
18 Deferred income tax
Deferred income taxes are calculated in full on temporary differences under the liability method.
The gross movement on the deferred income tax account is as follows:
| Deferred income taxes | 2022 | 2021 |
|---|---|---|
| At 1 January | (74.0) | (71.6) |
| Exchange differences and changes within the Group | (0.3) | (0.5) |
| Consolidated Statement of Income charge (excluding tax rate change) | 7.0 | 7.6 |
| Effect of changes in tax rates | (0.2) | (1.4) |
| Business combinations, note 4 | (1.4) | (8.3) |
| Recognized in other comprehensive income | (0.5) | 0.2 |
| At 30 June / 31 December | (69.4) | (74.0) |
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
Deferred income taxes recognized in the Consolidated Statement of Financial Position are as follows:
| 30/06 | 31/12 | |
|---|---|---|
| Deferred income taxes | 2022 | 2021 |
| Deferred income tax assets | 22.3 | 18.1 |
| Deferred income tax liabilities | (91.7) | (92.1) |
| Total | (69.4) | (74.0) |
Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The recoverability has been tested by the Group at the end of 2021. At 30 June 2022, there is no reason to deviate from the conclusions taken at year end.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
19 Inventories
| 30/06 | 31/12 | |
|---|---|---|
| Inventories | 2022 | 2021 |
| Raw materials | 46.3 | 54.6 |
| Semi-finished goods | 308.9 | 193.8 |
| Finished goods | 73.0 | 58.1 |
| Gross inventories | 428.2 | 306.5 |
| Allowance for obsolescence and/or lower market value | (35.6) | (33.1) |
| Net inventories | 392.6 | 273.4 |
Inventories in 2022 increased by EUR 54.1 million due to the acquisition of Wenger and Sleegers. Further information on the acquisitions is disclosed in note 4 of the Condensed Consolidated Interim Financial Statements.
There were no material reversals of write-downs to net realizable value. The write-downs recognized following a recoverability analysis are included in cost of sales.
20 Equity
| Share capital | Ordinary shares (thousands) | Treasury shares (thousands) | Outstanding number of shares (thousands) |
|---|---|---|---|
| At 1 January 2022 | 771,008 | (15,263) | 755,745 |
| Treasury shares - purchased | - | (4,087) | (4,087) |
| Treasury shares - sold | - | 1,559 | 1,559 |
| At 30 June 2022 | 771,008 | (17,791) | 753,217 |
| 100.00% | 2.31% | 97.69% | |
| At 1 January 2021 | 771,008 | (18,768) | 752,240 |
| Treasury shares - sold | - | 3,505 | 3,505 |
| At 31 December 2021 | 771,008 | (15,263) | 755,745 |
| 100.00% | 1.98% | 98.02% | |
| 30/06 | 31/12 | ||
| Class of share capital | 2022 | 2021 | |
| Nominal value | 6.7 | 6.7 | |
| Share premium reserve | 428.6 | 443.0 | |
| Reserve for share based payments | 9.8 | 7.3 | |
| Total share premium reserve | 438.4 | 450.3 |
Share capital
The total authorized number of ordinary shares on the Nasdaq and Euronext exchanges is 771.0 million (31 December 2021: 771.0 million) with a par value of ISK 1 per share. All issued shares are fully paid.
Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at shareholders meetings of the Company. Shareholders who hold shares in Marel on Nasdaq and Euronext have identical voting rights and the same rights to dividends. All rights attached to the Company's treasury shares are suspended until those shares are sold again.
Dividends
In March 2022, a dividend of EUR 38.7 million (EUR 5.12 cents per share) was declared and paid to the shareholders for the operational year 2021. This corresponds to approximately 40% of net result for the operational year 2021 (in 2021, a dividend of EUR 41.0 million (EUR 5.45 cents per share) was declared and paid for the operational year 2020).
Treasury shares
From time to time the Company purchases its own shares in the market. Treasury shares purchased by the Company are intended to be used for issuing stock options and as payment for potential future acquisitions. Buy and sell decisions are taken by the Board of Directors. Based on a motion approved in the Annual General Meeting of shareholders on 16 March 2022, the Board of Directors can purchase up to 10% of the Company's own shares at a price which is not higher than 10% over and not lower than 10% under the average share price of the Company for the two weeks immediately preceding the transaction. This authorization is effective for 18 months following the motions approval.
In 2022, Marel purchased 4.1 million treasury shares for a total amount of EUR 17.6 million. Marel used 0.6 million treasury shares (EUR 0.5 million) to fulfill obligations of stock option agreements to its employees and used 1.0 million treasury shares (EUR 4.2 million) as part of the purchase consideration for the acquisition of Wenger.
Share premium reserve
The share premium reserve is comprised of payments in excess of par value of ISK 1 per share that shareholders have paid for shares sold by the Company, less payments in excess of par value that the Company has paid for treasury shares. According to the Icelandic Companies Act, 25% of the nominal value share capital must be held in reserve which cannot be paid out as dividend to shareholders. Marel is compliant with this requirement.
Other reserves
Other reserves in shareholder's equity include the following reserves:
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
- hedge reserve: comprises revaluations on derivatives, on which hedge accounting is applied. The value relates to derivatives for the Group, the interest rate swap contracts and the foreign exchange contracts; and
- translation reserve: comprises the translation results of the consolidation of subsidiaries reporting in foreign currencies, as well as a currency revaluation related to financing of subsidiaries.
| Other reserves | Hedge reserve | Translation reserve | Total other reserves |
|---|---|---|---|
| Balance at 1 January 2022 | 0.6 | (22.7) | (22.1) |
| Total other comprehensive income | 1.7 | 3.3 | 5.0 |
| Balance at 30 June 2022 | 2.3 | (19.4) | (17.1) |
| Other reserves | Hedge reserve | Translation reserve | Total other reserves |
| --- | --- | --- | --- |
| Balance at 1 January 2021 | 0.9 | (28.4) | (27.5) |
| Total other comprehensive income | (0.3) | 5.7 | 5.4 |
| Balance at 31 December 2021 | 0.6 | (22.7) | (22.1) |
Other equity
Other equity included the impact of the option to acquire the remaining shares of non-controlling interests. In Q1 2022, following the acquisition of the remaining shares of Curio ahead of the timing agreed in the put option, the non-current liability recorded for the option was released through other equity.
Limitation in the distribution of Shareholders' equity
As at 30 June 2022, pursuant to Icelandic law, certain limitations exist relating to the distribution of shareholders' equity. Such limitations relate to legal reserves required by Icelandic law included under retained earnings for capitalized intangible assets related to product development projects and for legal reserves relating to any legal or economic restrictions to the ability of affiliated companies to transfer funds to the parent company in the form of dividends.
The legal reserve included under retained earnings for capitalized intangible assets related to product development projects amounted to EUR 95.8 million as at 30 June 2022 (31 December 2021: EUR 88.1 million).
Since the profits retained in Marel hf's subsidiaries can be distributed and received in Iceland, no legal reserve for any legal or economic restrictions to the ability of affiliated companies to transfer funds to the parent company in the form of dividends is required.
The amount of the legal reserve for the share of profit of affiliates is reduced by dividends received from those companies and those dividends from them which can be claimed. Therefore Marel could, based on its control as the parent company, decide to let its subsidiaries pay dividends. The dividends would lower the amount of legal reserves within equity and therefore leave more room for Marel to make dividend payments to its shareholders. The provision of the Icelandic Financial Statement Act No. 3/2006 does not prevent Marel from making dividend payments to its shareholders as the Company has sufficient retained earnings from previous years.
The legal reserves as required by Icelandic law are required as of effective date 1 January 2016.
Non-controlling Interests
Non-controlling interests relate to minority shares held by third parties in consolidated Group companies. The net result attributable to NCI amounted to EUR 0.0 million for the six-month period ended 30 June 2022 (30 June 2021: loss of EUR 0.3 million).
In 2022, Marel acquired the remaining shares of Curio ehf. and MPS France S.A.R.L.
21 Borrowings and lease liabilities
| 30/06 | 31/12 | |
|---|---|---|
| Borrowings and lease liabilities | 2022 | 2021 |
| Borrowings | 828.2 | 234.9 |
| Lease liabilities | 31.4 | 30.9 |
| Non-current | 859.6 | 265.8 |
| Borrowings | 0.0 | 0.0 |
| Lease liabilities | 10.6 | 10.5 |
| Current | 10.6 | 10.5 |
| Total | 870.2 | 276.3 |
| Borrowings | 828.2 | 234.9 |
| Lease liabilities | 42.0 | 41.4 |
| Total | 870.2 | 276.3 |
The Group loan agreements contain restrictive covenants, relating to interest cover and leverage. At 30 June 2022 and 31 December 2021 the Group complies with all restrictive covenants.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
On 27 April 2022, Marel signed a new EUR 150.0 million multi-currency bridge facility. The facility is provided by BNP PARIBAS SA/NV and has a 12 month term and two six month extension options at Marel's discretion. The facility is largely based on the existing syndicated revolving facility and has an initial interest rate of EURIBOR/SOFR + 50 bps margin. The bridge facility is expected to be replaced by long term structural funding in the next 12 months.
In Q2 2022, the Group drew USD 530.0 million on its committed revolving facility in order to finance the Wenger acquisition. In addition, the Group utilized the full EUR 150.0 million bridge facility to provide operational liquidity. EUR 100.0 million was repaid on the revolving facility in the quarter.
The Group has the following headroom in committed facilities:
| 30/06 | 31/12 | |
|---|---|---|
| Available headroom | 2022 | 2021 |
| Expiring within one year | - | - |
| Expiring beyond one year | 137.1 | 589.4 |
| Total | 137.1 | 589.4 |
| Liabilities in currency recorded in EUR at 30 June 2022 | Capitalized | |
| --- | --- | --- |
| Borrowings | finance charges | |
| Liabilities in EUR | 310.0 | (0.9) |
| Liabilities in USD | 518.5 | (0.3) |
| Liabilities in other currencies | 0.9 | - |
| Total | 829.4 | (1.2) |
| Current maturities | (0.7) | 0.7 |
| Non-current maturities | 828.7 | (0.5) |
| Liabilities in currency recorded in EUR at 31 December 2021 | Capitalized | |
| --- | --- | --- |
| Borrowings | finance charges | |
| Liabilities in EUR | 236.5 | (1.3) |
| Liabilities in USD | - | (0.3) |
| Liabilities in other currencies | - | - |
| Total | 236.5 | (1.6) |
| Current maturities | (0.7) | 0.7 |
| Non-current maturities | 235.8 | (0.9) |
| Annual maturity of non-current borrowings at 30 June 2022 | Capitalized | |
| --- | --- | --- |
| Borrowings | finance charges | |
| Between 1 and 2 years | 283.1 | (0.5) |
| Between 2 and 3 years | 527.1 | - |
| Between 3 and 4 years | 18.5 | - |
| Between 4 and 5 years | - | - |
| After 5 years | - | - |
| Total | 828.7 | (0.5) |
| Annual maturity of non-current borrowings at 31 December 2021 | Capitalized | |
| --- | --- | --- |
| Borrowings | finance charges | |
| Between 1 and 2 years | 120.8 | (0.8) |
| Between 2 and 3 years | - | (0.1) |
| Between 3 and 4 years | 113.5 | - |
| Between 4 and 5 years | 0.2 | - |
| After 5 years | 1.3 | - |
| Total | 235.8 | (0.9) |
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
22 Provisions
| Guarantee commitments | Pension commitments | Other provisions | Total | |
|---|---|---|---|---|
| Balance at 1 January 2022 | 6.6 | 3.4 | 3.5 | 13.5 |
| Additions | 1.6 | 0.3 | 1.1 | 3.0 |
| Business combinations, note 4 | 1.3 | - | - | 1.3 |
| Effect of movements in exchange rates | 0.1 | 0.1 | 0.1 | 0.3 |
| Used | (0.5) | (0.1) | (0.9) | (1.5) |
| Released | (0.2) | - | (1.6) | (1.8) |
| Balance at 30 June 2022 | 8.9 | 3.7 | 2.2 | 14.8 |
| Guarantee commitments | Pension commitments | Other provisions | Total | |
| Balance at 1 January 2021 | 6.1 | 3.9 | 4.6 | 14.6 |
| Additions | 2.4 | 0.2 | 6.2 | 8.8 |
| Business combinations, note 4 | - | - | 0.5 | 0.5 |
| Effect of movements in exchange rates | 0.2 | 0.3 | 0.0 | 0.5 |
| Used | (1.3) | (0.3) | (7.5) | (9.1) |
| Released | (0.8) | (0.7) | (0.3) | (1.8) |
| Balance at 31 December 2021 | 6.6 | 3.4 | 3.5 | 13.5 |
| 30/06 | 31/12 | |||
| Analysis of provisions | 2022 | 2021 | ||
| Non-current | 5.2 | 4.0 | ||
| Current | 9.6 | 9.5 | ||
| Total | 14.8 | 13.5 |
23 Trade and other payables
| 30/06 | 31/12 | |
|---|---|---|
| Trade and other payables | 2022 | 2021 |
| Trade payables | 133.8 | 117.1 |
| Accruals | 30.3 | 11.0 |
| Personnel payables | 88.5 | 65.5 |
| Other payables | 93.1 | 88.5 |
| Total | 345.7 | 282.1 |
| Less non-current portion | (6.6) | (22.7) |
| Current portion of trade and other payables | 339.1 | 259.4 |
Trade and other payables increased by EUR 16.6 million due to the acquisition of Wenger and Sleegers. Further information on the acquisitions is disclosed in note 4 of the Condensed Consolidated Interim Financial Statements.
24 Financial instruments and risks
Risk management framework
The main financial risks faced by Marel relate to market risk, credit risk and liquidity risk. Risk management is carried out by a central treasury department (Group Treasury) under policies and with instruments approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group's operating units. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures and does not enter into financial contracts for speculative purposes.
The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Market risk
Market risk is the risk that changes in market prices will affect the Group's income or the value of its holdings of financial instruments. Market risk comprises (a) foreign exchange risk and (b) interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(a) Foreign exchange risk
The Group operates internationally and is exposed to currency risk arising from mainly the USD, GBP, ISK and BRL, primarily with respect to the EUR, as the EUR is the Group's reporting currency. Financial exposure is hedged in accordance with the Group's general policy and within set limits. The Group monitors foreign exchange risk arising from commercial transactions, recognized assets and liabilities (transaction risk) that are determined in a currency other than the entity's functional currency. Derivative hedging is applied if the exposure is outside of the risk tolerance band on a consolidated basis. Generally Marel maintains a good natural hedge in its operations with a good match between revenues and costs in most currencies although less than 1% of revenues are denominated in ISK, while around 7% of costs are in ISK. In line with Marel's risk management policy, the Group hedges up to 80% of its estimated foreign currency exposure in ISK relating to forecasted transactions over the following 12 months. No other currency exposure is hedged.
(b) Interest rate risk
The Group is exposed to interest rate risk on borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The risk is managed by maintaining a mix between fixed and floating interest rates on borrowings.
Generally the Group raises long term borrowings and pays a floating interest rate. To hedge the resulting cash flow interest rate risk the Group uses interest rate swaps, where it pays a fixed interest rate and receives a floating interest rate. The floating rates are fixed on a quarterly or semi-annual basis. The Group adopts a policy of ensuring that between 50 – 70% of its exposure to changes in interest rates on core debt is hedged with an interest rate swap with a maximum maturity of 5 years.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The credit quality of the customer is assessed, taking into account its financial position, past experience and other factors. Each customer has a set credit limit and the utilization of the credit limit is regularly monitored.
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and products are not delivered until payments are secured. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. No significant credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by its customers.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Prudent liquidity risk management implies maintaining sufficient cash and committed credit facilities to give reasonable operating headroom. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by maintaining availability under committed credit lines.
In relation to the Wenger acquisition, Marel has signed a new EUR 150.0 million multi-currency bridge facility in order to provide operational headroom. The bridge facility is expected to be replaced by long term structural funding in the next 12 months.
The Group has EUR 700.0 million of committed facilities (31 December 2021: EUR 700.0 million), which can be used both as a revolver and to issue guarantees for down payments. As per 30 June 2022, the Group had drawn EUR 527.1 million on the syndicated revolving credit facility (31 December 2021: EUR 95.0 million), and issued guarantees for EUR 35.8 million (31 December 2021: EUR 15.6 million), therefore the total usage is EUR 562.9 million (31 December 2021: EUR 110.6 million), leaving a headroom of EUR 137.1 million (31 December 2021: EUR 589.4 million). All facilities are subject to operational and Consolidated Statement of Financial Position covenants (interest cover and leverage). At 30 June 2022 Marel complies with all covenants.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
At 30 June 2022, net cash and cash equivalents were EUR 100.2 million (31 December 2021: EUR 77.1 million).
25 Contingencies
Contingent liabilities
At 30 June 2022 the Group had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise. In the ordinary course of business the Group has given guarantees amounting to EUR 60.0 million (31 December 2021: EUR 33.8 million) to third parties.
Legal proceedings
As part of doing business and acquisitions the Group is involved in claims and litigations, under such indemnities and guarantees. These claims are pending and all are contested. Provisions are recognized when an outflow of economic benefits for settlement is probable and the amount can be estimated reliably. It should be understood that, in light of possible future developments, such as (a) potential additional lawsuits, (b) possible future settlements, and (c) rulings or judgments in pending lawsuits, certain cases may result in additional liabilities and related costs.
At this point in time, we cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts with sufficient certainty to allow such amount or range of amounts to be meaningful. Moreover, if and to the extent that the contingent liabilities materialize, they are often resolved over a number of years and the timing of such payments cannot be predicted with confidence. While the outcome of said cases, claims and disputes cannot be predicted with certainty, we believe, based upon legal advice and information received, that the final outcome will not materially affect our consolidated financial position but could be material to our results of operations or cash flows in any one accounting period.
Environmental remediation
The Company and its subsidiaries are subject to environmental laws and regulations. Under these laws, the Company and/or its subsidiaries may be required to remediate the effects of certain incidents on the environment.
26 Related party transactions
At 30 June 2022 and 31 December 2021 there are no loans to the members of the Board of Directors and the CEO. In addition, there were no transactions carried out (purchases of goods and services) between the Group and members of the Board of Directors nor the CEO in the six-month period ended 30 June 2022 and the year 2021.
27 Subsequent events
On 19 July 2022, Marel announced plans to lower costs by reducing the global workforce by 5%, resulting in estimated annualized cost saving of around EUR 20.0 million with one-off cost of around EUR 10.0 million.
No other significant events have taken place since the reporting date, 30 June 2022.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
Appendices
1 Quarterly results
| | 2022
Q2 | 2022
Q1 | 2021
Q4 | 2021
Q3 | 2021
Q2 |
| --- | --- | --- | --- | --- | --- |
| Revenues | 397.3 | 371.6 | 367.4 | 331.9 | 327.5 |
| Cost of sales | (265.5) | (237.9) | (235.8) | (209.0) | (210.0) |
| Gross profit | 131.8 | 133.7 | 131.6 | 122.9 | 117.5 |
| Selling and marketing expenses | (58.6) | (54.1) | (48.3) | (47.2) | (42.3) |
| General and administrative expenses | (33.6) | (30.5) | (26.0) | (22.9) | (20.4) |
| Research and development expenses | (24.8) | (24.1) | (21.5) | (21.4) | (21.8) |
| Result from operations (EBIT) | 14.8 | 25.0 | 35.8 | 31.4 | 33.0 |
| Net finance costs | (1.9) | 3.4 | (0.3) | (2.1) | (1.9) |
| Share of result of associates | (0.8) | (0.8) | (0.4) | 0.0 | (0.4) |
| Result before income tax | 12.1 | 27.6 | 35.1 | 29.3 | 30.7 |
| Income tax | (2.5) | (5.9) | (6.6) | (6.1) | (7.4) |
| Net result for the period | 9.6 | 21.7 | 28.5 | 23.2 | 23.3 |
| Result before depreciation & amortization (EBITDA) | 33.4 | 41.6 | 53.8 | 48.0 | 49.8 |
The below table provides an overview of the quarterly adjusted result from operations, which management believes to be a relevant Non-IFRS measurement, as mentioned in note 5.
| | 2022
Q2 | 2022
Q1 | 2021
Q4 | 2021
Q3 | 2021
Q2 |
| --- | --- | --- | --- | --- | --- |
| Revenues | 397.3 | 371.6 | 367.4 | 331.9 | 327.5 |
| Cost of sales | (264.2) | (237.6) | (235.5) | (208.7) | (208.9) |
| Gross profit | 133.1 | 134.0 | 131.9 | 123.2 | 118.6 |
| Selling and marketing expenses | (55.3) | (51.3) | (45.6) | (44.6) | (39.8) |
| General and administrative expenses | (29.7) | (28.6) | (25.0) | (22.8) | (20.2) |
| Research and development expenses | (23.1) | (22.8) | (20.3) | (19.8) | (20.0) |
| Adjusted result from operations¹ | 25.0 | 31.3 | 41.0 | 36.0 | 38.6 |
| Non-IFRS adjustments | (10.2) | (6.3) | (5.2) | (4.6) | (5.6) |
| Result from operations (EBIT) | 14.8 | 25.0 | 35.8 | 31.4 | 33.0 |
¹ Result from operations is adjusted for PPA related costs, including depreciation and amortization, and acquisition related expenses.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 30 JUNE 2022
2 Definitions and abbreviations
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and amortization
EURIBOR
Euro interbank offered rates
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
NCI
Non-controlling interest
PPA
Purchase Price Allocation
SOFR
Secured Overnight Financing Rate
31