Marel — Interim / Quarterly Report 2022

Apr 27, 2022

31 March 2022

marel

Condensed Consolidated Interim Financial Statements

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Contents Condensed Consolidated Interim Financial Statements

The Board of Directors' and CEO's Report 3

Consolidated Statement of Income 5

Consolidated Statement of Comprehensive Income 6

Consolidated Statement of Financial Position 7

Consolidated Statement of Changes in Equity 8

Consolidated Statement of Cash Flows 9

Notes to the Condensed Consolidated Interim Financial Statements 10

1 General information 10
2 Basis of preparation and use of judgments and estimates 10
3 Accounting policies 11
4 Business combinations 11
5 Non-IFRS measurement 11
6 Segment information 12
7 Revenues 14
8 Expenses by nature 14

9 Net finance costs 14
10 Income tax 14
11 Earnings per share 15
12 Property, plant and equipment 16
13 Right of use assets 17
14 Goodwill 18
15 Intangible assets 19
16 Investments in associates 20
17 Trade receivables, other receivables and prepayments 20
18 Deferred income tax 20
19 Inventories 20
20 Equity 21
21 Borrowings and lease liabilities 23
22 Provisions 24
23 Trade and other payables 24
24 Financial instruments and risks 24
25 Contingencies 25
26 Related party transactions 26
27 Subsequent events 26

Appendices 28

1 Quarterly results 28
2 Definitions and abbreviations 29

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

The Board of Directors' and CEO's Report

Marel is a leading global provider of advanced processing equipment, systems, software and services to the poultry, meat and fish 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 three-month period ended 31 March 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 three-month period ended 31 March 2022

The consolidated revenues for Marel for the three-month period ended 31 March 2022 are EUR 371.6 million (2021: EUR 334.0 million). The adjusted result from operations for the same period is EUR 31.3 million or 8.4% of revenues (2021: EUR 38.0 million or 11.4% 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	31.3	38.0
Non-IFRS adjustments	(6.3)	(7.9)
Result from operations	25.0	30.1

¹ Result from operations is adjusted for PPA related costs, including depreciation and amortization, and acquisition related expenses.

At 31 March 2022 the Company's order book amounted to EUR 619.1 million (at 31 December 2021: EUR 569.0 million). Orders received for three-month period ended 31 March 2022 amounted to EUR 421.7 million (2021: EUR 369.4 million).

Net cash from operating activities for the three-month period ended 31 March 2022 was EUR 28.2 million (2021: EUR 54.9 million).

Capital expenditures for the three-month period ended 31 March 2022 EUR 16.1 million (2021: EUR 14.5 million). Marel is stepping up in market coverage and focusing on important initiatives to automate and digitize our manufacturing platform, supply chain and aftermarket business to create more agility and flexibility in our operations ahead of the anticipated growth curve.

At 31 March 2022, net cash and cash equivalents were EUR 63.6 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 238.1 million as per 31 March 2022.

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. Further information is provided in note 4 of the Condensed Consolidated Interim Financial Statements.

Russian military invasion of Ukraine

Marel strongly condemns the military actions of the Russian government in Ukraine. Following the invasion, Marel has taken the decision to pause all new projects in Russia. Marel operates a sales and service office in Russia and employs a team of approximately 70 people. We have limited reliance on vendors and do not operate any manufacturing facilities in the area. Marel continues to comply with all applicable sanctions.

Marel's highest priority is the safety and wellbeing of its employees. Marel is maintaining its dedicated teams in the Ukraine and Russia and the office in Russia, despite expected lower utilization in the near future. Marel's

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

annual revenues and order book in Russia and Ukraine amount to approximately 4% of total, most weighted towards the meat segment.

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. Market conditions have been challenging due to geopolitical uncertainty and the peak of pandemic related absenteeism in 1Q22. Current supply chain challenges are resulting in inefficiencies in manufacturing and higher costs associated with timely delivery. Marel is targeting a gradual build up of revenues during 2022 and better price/cost coverage in new orders.

Marel has a balanced exposure to global economies and local markets through its global reach, innovative product portfolio and diversified business mix. Marel's business model has proven to be resilient during times of turbulence. Marel is committed to achieve its mid- and long-term growth targets.

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 three-month period ended 31 March 2022, its assets, liabilities and consolidated financial position as at 31 March 2022 and its consolidated cash flows for the three-month period ended 31 March 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 three-month period ended 31 March 2022 with their signatures.

Gardabaer, 27 April 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

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Consolidated Statement of Income

In EUR million unless stated otherwise	Notes	YTD	YTD
		2022	2021
Revenues	5 & 6 & 7	371.6	334.0
Cost of sales	5 & 8	(237.9)	(212.2)
Gross profit	5 & 6	133.7	121.8
Selling and marketing expenses	5 & 8	(54.1)	(42.6)
General and administrative expenses	5 & 8	(30.5)	(26.9)
Research and development expenses	5 & 8	(24.1)	(22.2)
Result from operations	5	25.0	30.1
Finance costs	9	(1.5)	(4.4)
Finance income	9	4.9	0.0
Net finance costs	9	3.4	(4.4)
Share of result of associates	16	(0.8)	(0.1)
Result before income tax		27.6	25.6
Income tax	10	(5.9)	(4.4)
Net result		21.7	21.2
Of which:
- Net result attributable to Shareholders of the Company	11	21.7	21.2
- Net result attributable to non-controlling interests	20	0.0	0.0
Earnings per share for result attributable to Shareholders of the Company during the period (expressed in EUR cent per share):
- Basic	11	2.87	2.82
- Diluted	11	2.82	2.79

The notes on pages 10-27 are an integral part of the Condensed Consolidated Interim Financial Statements.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Consolidated Statement of Comprehensive Income

In EUR million	Notes	YTD	YTD
		2022	2021
Net result		21.7	21.2
Items that are or may be reclassified to profit or loss:
Currency translation differences	20	5.3	5.3
Cash flow hedges	20	1.2	1.4
Deferred income taxes	18 & 20	(0.3)	(0.3)
Other comprehensive income / (loss) for the period, net of tax		6.2	6.4
Total comprehensive income for the period		27.9	27.6
Of which:
- Total comprehensive income attributable to Shareholders of the Company		27.9	27.6
- Total comprehensive income attributable to non-controlling interests	20	0.0	0.0

The notes on pages 10-27 are an integral part of the Condensed Consolidated Interim Financial Statements.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Consolidated Statement of Financial Position

In EUR million	Notes	31/03	31/12
		2022	2021
Assets
Property, plant and equipment	12	233.4	228.7
Right of use assets	13	40.6	40.5
Goodwill	14	707.6	705.2
Intangible assets	15	357.2	357.2
Investments in associates	16	11.9	12.7
Deferred income tax assets	18	18.9	18.1
Non-current assets		1,369.6	1,362.4
Inventories	19	301.0	273.4
Contract assets	7	71.1	69.6
Trade receivables	7 & 17	181.2	154.7
Derivative financial instruments	24	2.2	1.1
Other receivables and prepayments	17	82.5	66.7
Cash and cash equivalents		63.6	77.1
Current assets		701.6	642.6
Total assets		2,071.2	2,005.0
Equity and liabilities
Share capital	20	6.7	6.7
Share premium reserve	20	450.9	450.3
Other reserves	20	(15.6)	(22.1)
Other equity	20	-	(13.6)
Retained earnings	20	576.8	593.8
Shareholders' equity		1,018.8	1,015.1
Non-controlling interests	20	0.1	8.0
Total equity		1,018.9	1,023.1
Liabilities
Borrowings	21	260.1	234.9
Lease liabilities	21	31.4	30.9
Deferred income tax liabilities	18	89.6	92.1
Provisions	22	3.7	4.0
Other payables	23	9.1	22.7
Derivative financial instruments	24	-	0.4
Non-current liabilities		393.9	385.0
Contract liabilities	7	340.8	306.0
Trade and other payables	23	282.9	259.4
Derivative financial instruments	24	0.1	0.8
Current income tax liabilities		14.0	10.7
Borrowings	21	0.0	0.0
Lease liabilities	21	10.2	10.5
Provisions	22	10.4	9.5
Current liabilities		658.4	596.9
Total liabilities		1,052.3	981.9
Total equity and liabilities		2,071.2	2,005.0

The notes on pages 10-27 are an integral part of the Condensed Consolidated Interim Financial Statements.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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					21.7	21.7	0.0	21.7
Total other comprehensive income			6.5	(0.3)		6.2		6.2
Transactions with owners of the Company
Treasury shares sold	0.0	(0.4)				(0.4)		(0.4)
Options granted / exercised / canceled	0.0	1.0			0.2	1.2		1.2
Transactions with non-controlling interests				13.9	(0.2)	13.7	(7.9)	5.8
Dividend					(38.7)	(38.7)		(38.7)
	0.0	0.6	6.5	13.6	(17.0)	3.7	(7.9)	(4.2)
Balance at 31 March 2022	6.7	450.9	(15.6)	-	576.8	1,018.8	0.1	1,018.9
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					21.2	21.2	0.0	21.2
Total other comprehensive income			6.4			6.4		6.4
Transactions with owners of the Company
Treasury shares sold	0.0	(0.5)				(0.5)		(0.5)
Options granted / exercised / canceled		0.8				0.8		0.8
Non-controlling interests on acquisition of subsidiary							8.5	8.5
Transactions with non-controlling interests				(13.4)		(13.4)		(13.4)
Dividend					(41.0)	(41.0)	-	(41.0)
	0.0	0.3	6.4	(13.4)	(19.8)	(26.5)	8.5	(18.0)
Balance at 31 March 2021	6.7	443.1	(21.1)	(13.4)	516.6	931.9	8.8	940.7
Net result for the period					75.6	75.6	(0.6)	75.0
Total other comprehensive income			(1.0)	(0.8)		(1.8)		(1.8)
Treasury shares sold	0.0	10.4				10.4		10.4
Options granted / exercised / canceled	0.0	(3.2)			1.6	(1.6)		(1.6)
Non-controlling interests on acquisition of subsidiary
Transactions with non-controlling interests				0.6		0.6		0.6
Dividend							(0.2)	(0.2)
	0.0	7.2	(1.0)	(0.2)	77.2	83.2	(0.8)	82.4
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 31 March 2022 of EUR 8.1 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 31 March 2022 of EUR 91.1 million (31 December 2021: EUR 88.1 million).

The notes on pages 10-27 are an integral part of the Condensed Consolidated Interim Financial Statements.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Consolidated Statement of Cash Flows

In EUR million	Notes	YTD 2022	YTD 2021
Cash Flow from operating activities
Result from operations		25.0	30.1
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	7.7	7.1
Amortization and impairment of intangible assets	15	8.9	10.1
Adjustments for other non-cash income and expenses		1.2	0.9
Working capital provided by / (used in) operating activities		42.8	48.2
Changes in working capital:
Inventories and contract assets and liabilities		7.1	(7.8)
Trade and other receivables		(37.1)	1.2
Trade and other payables		19.5	15.4
Provisions		0.4	3.2
Changes in operating assets and liabilities		(10.1)	12.0
Cash generated from operating activities		32.7	60.2
Taxes paid		(5.0)	(4.7)
Interest and finance income		0.6	0.1
Interest and finance costs		(0.1)	(0.7)
Net cash from operating activities		28.2	54.9
Cash Flow from investing activities
Purchase of property, plant and equipment	12	(6.3)	(5.3)
Investments in intangibles	15	(7.1)	(6.1)
Proceeds from sale of non-current assets and assets held for sale	12 & 15	0.3	1.4
Investments in associates	16	-	(8.6)
Acquisition of subsidiary, net of cash acquired	4	(15.9)	(13.1)
Net cash provided by / (used in) investing activities		(29.0)	(31.7)
Cash Flow from financing activities
Sale of treasury shares and options exercised	20	0.3	-
Dividends paid	20	(38.7)	-
Proceeds from borrowings	21	65.0	12.5
Repayments of borrowings	21	(40.0)	(13.2)
Payments of lease liabilities	21	(3.3)	(2.7)
Net cash provided by / (used in) financing activities		(16.7)	(3.4)
Net increase / (decrease) in net cash		(17.5)	19.8
Exchange gain / (loss) on net cash		4.0	3.2
Net cash at beginning of the period		77.1	78.6
Net cash at end of the period		63.6	101.6

The notes on pages 10-27 are an integral part of the Condensed Consolidated Interim Financial Statements.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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 three-month period ended 31 March 2022 comprise the Company and its subsidiaries (together referred to as "the Group" or "Marel").

The Group is a leading global provider of advanced processing equipment, systems, software and services to the poultry, meat and fish industries and is involved in the manufacturing, development, distribution and sales of solutions for these industries.

These Condensed Consolidated Interim Financial Statements for the three-month period ended 31 March 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 April 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 three-month period ended 31 March 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.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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.

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.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

	YTD 2022	YTD 2022	YTD 2022	YTD 2021	YTD 2021
	As reported	Non-IFRS adjustments	Non-IFRS measures	As reported	Non-IFRS adjustments
Revenues	371.6	-	371.6	334.0	-
Cost of sales	(237.9)	0.3	(237.6)	(212.2)	2.6
Gross profit	133.7	0.3	134.0	121.8	2.6
Selling and marketing expenses	(54.1)	2.8	(51.3)	(42.6)	2.6
General and administrative expenses	(30.5)	1.9	(28.6)	(26.9)	1.2
Research and development expenses	(24.1)	1.3	(22.8)	(22.2)	1.5
Adjusted result from operations		6.3	31.3		7.9
Non-IFRS adjustments		(6.3)	(6.3)		(7.9)
Result from operations	25.0	-	25.0	30.1	-

The non-IFRS adjustments to the result from operations includes the following:

	YTD 2022	YTD 2021
PPA related charges	4.5	6.8
Acquisition related expenses	1.8	1.1
Total non-IFRS adjustments	6.3	7.9

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.

	YTD 2022	YTD 2021
Result from operations (EBIT)	25.0	30.1
Depreciation, amortization and impairment	16.6	17.2
Result before depreciation & amortization (EBITDA)	41.6	47.3

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. The following summary describes the operations in each of the Group's reportable segments:

• 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; and
• The 'Other' segment includes any revenues, result from operations and assets which do not belong to the three core industries.

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

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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.

31 March 2022	Poultry	Meat	Fish	Other	Total
Revenues	188.6	125.9	43.6	13.5	371.6
Adjusted result from operations	22.7	8.4	(1.0)	1.2	31.3
PPA related charges	(0.1)	(3.4)	(0.8)	(0.2)	(4.5)
Acquisition related expenses	-	-	-	(1.8)	(1.8)
Result from operations	22.6	5.0	(1.8)	(0.8)	25.0
Net finance costs					3.4
Share of result of associates					(0.8)
Result before income tax					27.6
Income tax					(5.9)
Net result for the period					21.7
Assets	849.6	867.3	232.8	121.5	2,071.2
Capital expenditures	8.6	5.8	1.1	0.6	16.1
Depreciation and amortization	(6.2)	(8.0)	(1.8)	(0.6)	(16.6)
31 March 2021	Poultry	Meat	Fish	Other	Total
Revenues	159.1	125.8	39.8	9.3	334.0
Adjusted result from operations	25.8	9.8	2.1	0.3	38.0
PPA related charges	(0.1)	(5.5)	(0.5)	(0.7)	(6.8)
Acquisition related expenses	-	-	-	(1.1)	(1.1)
Result from operations	25.7	4.3	1.6	(1.5)	30.1
Net finance costs					(4.4)
Share of result of associates					(0.1)
Result before income tax					25.6
Income tax					(4.4)
Net result for the period					21.2
Assets	799.7	765.7	186.0	120.9	1,872.3
Capital expenditures	6.9	5.5	1.7	0.4	14.5
Depreciation and amortization	(6.4)	(8.3)	(1.9)	(0.6)	(17.2)

(including capitalized technology and development costs, refer to note 15).

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	31/03 2022	31/12 2021
Europe, Middle East and Africa1	1,721.7	1,669.4
Americas	252.4	228.3
Asia and Oceania	33.5	30.2
Total	2,007.6	1,927.9

1 Iceland accounts for EUR 274.6 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

	YTD	YTD
Capital expenditure	2022	2021
Europe, Middle East and Africa1	14.1	11.6
Americas	1.8	1.3
Asia and Oceania	0.2	1.6
Total	16.1	14.5

1 Iceland accounts for EUR 2.9 million (2021: EUR 3.1 million).

Cash capital expenditures are made up of capital expenditures excluding the investments in right of use assets. Cash capital expenditures for the three-month period ended 31 March 2022 amount to EUR 13.4 million (2021: EUR 11.4 million)

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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 Africa^{1}	189.1	169.8
Americas	139.1	115.2
Asia and Oceania	43.4	49.0
Total	371.6	334.0

1 Iceland accounts for EUR 4.6 million (2021: EUR 2.7 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):

	YTD	YTD
Revenue by business mix	2022	2021
Equipment revenue	222.4	202.6
Aftermarket revenue	149.2	131.4
Total	371.6	334.0

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	31/03 2022	31/12 2021
Trade receivables	181.2	154.7
Contract assets	71.1	69.6
Contract liabilities	(340.8)	(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 31 March 2022 that have an original expected duration of one year or less, as allowed by IFRS 15.

8 Expenses by nature

	YTD	YTD
Expenses by nature	2022	2021
Cost of goods sold	130.8	121.0
Employee benefits	152.6	128.9
Depreciation, amortization and impairment	16.6	17.2
Maintenance and rent of buildings and equipment	4.8	3.9
Other	41.8	32.9
Total	346.6	303.9

9 Net finance costs

	YTD	YTD
Net finance costs	2022	2021
Finance costs:
Interest on borrowings	(0.8)	(1.4)
Interest on leases	(0.2)	(0.2)
Other finance expenses	(0.5)	(0.4)
Net foreign exchange transaction losses	-	(2.4)
Subtotal finance costs	(1.5)	(4.4)
Finance income:
Interest income	0.5	0.0
Net foreign exchange transaction gains	4.4	-
Subtotal finance income	4.9	0.0
Total	3.4	(4.4)

10 Income tax

Income tax recognized in the Consolidated Statement of Income	YTD 2022	YTD 2021
Current tax	(9.4)	(8.8)
Deferred tax	3.5	4.4
Total	(5.9)	(4.4)

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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	27.6		25.6
Income tax using Icelandic rate	(5.5)	20.0	(5.1)	20.0
Effect of tax rates in other jurisdictions	(1.9)	6.8	(1.1)	4.3
Weighted average applicable tax	(7.4)	26.8	(6.2)	24.3
Foreign exchange effect Iceland	0.4	(1.4)	0.5	(2.0)
Research and development tax incentives	1.9	(6.9)	1.3	(5.1)
Permanent differences	(0.3)	1.1	(0.5)	2.0
(Impairment)/reversal of tax losses	(0.2)	0.7	(0.0)	(0.0)
Effect of changes in tax rates	(0.3)	1.1	(0.0)	(0.0)
Others	0.0	(0.0)	0.5	(2.0)
Tax charge included in the Consolidated Statement of Income	(5.9)	21.4	(4.4)	17.2

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) | 21.7 | 21.2 |
| Weighted average number of
outstanding shares issued (millions) | 755.9 | 752.3 |
| Basic earnings per share (EUR cent
per share) | 2.87 | 2.82 |

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) | 21.7 | 21.2 |
| Weighted average number of
outstanding shares issued (millions) | 755.9 | 752.3 |
| Adjustments for stock options (millions) | 13.1 | 8.2 |
| Weighted average number of
outstanding shares for diluted earnings
per share (millions) | 769.0 | 760.5 |
| Diluted earnings per share (EUR cent
per share) | 2.82 | 2.79 |

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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
Three months ended 31 March 2022
Opening net book value	160.3	39.3	13.0	16.1	228.7
Divestments	-	(0.2)	(0.1)	-	(0.3)
Effect of movements in exchange rates	1.9	0.7	0.5	0.3	3.4
Additions	0.3	3.2	1.1	1.7	6.3
Transfer between categories	7.7	1.0	0.5	(9.2)	-
Depreciation charge	(1.6)	(2.1)	(1.0)	-	(4.7)
Closing net book value	168.6	41.9	14.0	8.9	233.4
At 31 March 2022
Cost	243.4	107.9	63.9	8.9	424.1
Accumulated depreciation	(74.8)	(66.0)	(49.9)	-	(190.7)
Net book value	168.6	41.9	14.0	8.9	233.4
	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	2.1	1.8
Selling and marketing expenses	0.2	0.2
General and administrative expenses	2.4	2.4
Research and development expenses	0.0	0.0
Total	4.7	4.4

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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
Three months ended 31 March 2022
Opening net book value	26.1	1.0	13.4	40.5
Divestments	-	-	(0.5)	(0.5)
Effect of movements in exchange rates	0.7	0.0	0.2	0.9
Additions	0.2	-	2.5	2.7
Depreciation charge	(1.2)	(0.1)	(1.7)	(3.0)
Closing net book value	25.8	0.9	13.9	40.6
At 31 March 2022
Cost	40.7	1.8	29.1	71.6
Accumulated depreciation	(14.9)	(0.9)	(15.2)	(31.0)
Net book value	25.8	0.9	13.9	40.6
	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	0.9	0.8
Selling and marketing expenses	0.6	0.5
General and administrative expenses	1.4	1.3
Research and development expenses	0.1	0.1
Total	3.0	2.7

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

14 Goodwill

	31/03	31/12
	2022	2021
At 1 January
Cost	705.2	678.8
Net book value	705.2	678.8
Period ended 31 March / 31 December
Opening net book value	705.2	678.8
Business combinations, note 4	-	25.7
Effect of movements in exchange rates	2.4	0.7
Closing net book value	707.6	705.2
At 31 March / 31 December
Cost	707.6	705.2
Net book value	707.6	705.2

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 31 March 2022, there is no reason to deviate from the conclusions taken at year end.

18

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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
Three months ended 31 March 2022
Opening net book value	162.3	175.3	19.6	357.2
Effect of movements in exchange rates	0.6	1.2	0.0	1.8
Additions	5.7	-	1.4	7.1
Amortization charge	(4.3)	(3.2)	(1.4)	(8.9)
Closing net book value	164.3	173.3	19.6	357.2
At 31 March 2022
Cost	358.3	263.5	95.8	717.6
Accumulated amortization	(194.0)	(90.2)	(76.2)	(360.4)
Net book value	164.3	173.3	19.6	357.2
	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

For 2021, business combinations relate to the acquisition of PMJ, Curio and Valka.

The additions for 2022 predominantly comprise internally generated assets of EUR 7.1 million (31 December 2021: EUR 24.8 million) for product development and for development of software products.

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	3.1	2.9
General and administrative expenses	1.5	2.5
Research and development expenses	4.3	4.7
Total	8.9	10.1

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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 31 March 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	31/03	31/12
receivables and prepayments	2022	2021
Trade receivables	182.9	156.1
Less: write-down to net-realizable value	(1.7)	(1.4)
Trade receivables - net	181.2	154.7
Prepayments	12.4	14.2
Other receivables	70.1	52.5
Other receivables and prepayments	82.5	66.7

The carrying amounts of trade receivables and other receivables and prepayments approximate their fair value.

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	0.1	(0.5)
Consolidated Statement of Income
charge (excluding tax rate change)	3.8	7.6
Effect of changes in tax rates	(0.3)	(1.4)
Business combinations, note 4	-	(8.3)
Recognized in other comprehensive income	(0.3)	0.2
At 31 March / 31 December	(70.7)	(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:

	31/03	31/12
Deferred income taxes	2022	2021
Deferred income tax assets	18.9	18.1
Deferred income tax liabilities	(89.6)	(92.1)
Total	(70.7)	(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 31 March 2022, there is no reason to deviate from the conclusions taken at year end.

19 Inventories

	31/03	31/12
Inventories	2022	2021
Raw materials	53.6	54.6
Semi-finished goods	220.7	193.8
Finished goods	61.3	58.1
Gross inventories	335.6	306.5
Allowance for obsolescence and/or lower market value	(34.6)	(33.1)
Net inventories	301.0	273.4

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.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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	-	-	-
Treasury shares - sold	-	317	317
At 31 March 2022	771,008	(14,946)	756,062
	100.00%	1.94%	98.06%
At 1 January 2021	771,008	(18,768)	752,240
Treasury shares
- purchased	-	-	-
Treasury shares - sold	-	3,505	3,505
At 31 December 2021	771,008	(15,263)	755,745
	100.00%	1.98%	98.02%
		31/03	31/12
Class of share capital		2022	2021
Nominal value		6.7	6.7
Share premium reserve		442.8	443.0
Reserve for share based payments		8.1	7.3
Total share premium reserve		450.9	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).

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:

• 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	0.9	5.6	6.5
Balance at 31 March 2022	1.5	(17.1)	(15.6)
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.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Limitation in the distribution of Shareholders' equity

As at 31 March 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 91.1 million as at 31 March 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 three-month period ended 31 March 2022 (31 March 2021: EUR 0.0 million).

The NCI relates to MPS France S.A.R.L., France, in which the managing director of MPS France holds an ownership percentage of 24.0%.

22

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

21 Borrowings and lease liabilities

	31/03	31/12
Borrowings and lease liabilities	2022	2021
Borrowings	260.1	234.9
Lease liabilities	31.4	30.9
Non-current	291.5	265.8
Borrowings	0.0	0.0
Lease liabilities	10.2	10.5
Current	10.2	10.5
Total	301.7	276.3
Borrowings	260.1	234.9
Lease liabilities	41.6	41.4
Total	301.7	276.3

The Group loan agreements contain restrictive covenants, relating to interest cover and leverage. At 31 March 2022 and 31 December 2021 the Group complies with all restrictive covenants.

The Group has the following headroom in committed facilities:

	31/03	31/12
Available headroom	2022	2021
Expiring within one year	-	-
Expiring beyond one year	558.5	589.4
Total	558.5	589.4

Liabilities in currency recorded in EUR at 31 March 2022

Liabilities in EUR

Liabilities in USD

Liabilities in other currencies

Total

Current maturities

Non-current maturities

Capitalized
Borrowings	finance charges	Lease liabilities	Total
261.5	(1.1)	14.8	275.2
-	(0.3)	8.7	8.4
-	-	18.1	18.1
261.5	(1.4)	41.6	301.7
(0.7)	0.7	(10.2)	(10.2)
260.8	(0.7)	31.4	291.5

Liabilities in currency recorded in EUR at 31 December 2021

Liabilities in EUR

Liabilities in USD

Liabilities in other currencies

Total

Current maturities

Non-current maturities

Capitalized
Borrowings	finance charges	Lease liabilities	Total
236.5	(1.3)	17.3	252.5
-	(0.3)	6.3	6.0
-	-	17.8	17.8
236.5	(1.6)	41.4	276.3
(0.7)	0.7	(10.5)	(10.5)
235.8	(0.9)	30.9	265.8

Annual maturity of non-current borrowings at 31 March 2022

Between 1 and 2 years

Between 2 and 3 years

Between 3 and 4 years

Between 4 and 5 years

After 5 years

Total

Capitalized
Borrowings	finance charges	Lease liabilities	Total
121.0	(0.7)	11.1	131.4
-	-	6.0	6.0
138.5	-	4.3	142.8
-	-	4.3	4.3
1.3	-	5.7	7.0
260.8	(0.7)	31.4	291.5

Annual maturity of non-current borrowings at 31 December 2021

Between 1 and 2 years

Between 2 and 3 years

Between 3 and 4 years

Between 4 and 5 years

After 5 years

Total

Capitalized
Borrowings	finance charges	Lease liabilities	Total
120.8	(0.8)	10.7	130.7
-	(0.1)	6.0	5.9
113.5	-	4.1	117.6
0.2	-	4.2	4.4
1.3	-	5.9	7.2
235.8	(0.9)	30.9	265.8

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

22 Provisions

	Guarantee commitments	Pension commitments	Other provisions	Total
Balance at 1 January 2022	6.6	3.4	3.5	13.5
Additions	0.7	0.2	0.4	1.3
Effect of movements in exchange rates	0.2	0.0	0.0	0.2
Used	(0.2)	-	(0.5)	(0.7)
Release	-	-	(0.2)	(0.2)
Balance at 31 March 2022	7.3	3.6	3.2	14.1
	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)
Release	(0.8)	(0.7)	(0.3)	(1.8)
Balance at 31 December 2021	6.6	3.4	3.5	13.5
			31/03	31/12
Analysis of provisions			2022	2021
Non-current			3.7	4.0
Current			10.4	9.5
Total			14.1	13.5

23 Trade and other payables

	31/03	31/12
Trade and other payables	2022	2021
Trade payables	110.7	117.1
Accruals	14.5	11.0
Personnel payables	83.7	65.5
Other payables	83.1	88.5
Total	292.0	282.1
Less non-current portion	(9.1)	(22.7)
Current portion of trade and other payables	282.9	259.4

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 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.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

(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 started to hedge 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.

The Group has EUR 700.0 million of committed facilities, which can be used both as a revolver and to issue guarantees for down payments. As per 31 March 2022, the Group had drawn EUR 120.0 million on the syndicated revolving credit facility (31 December 2021: EUR 95.0 million), and issued guarantees for EUR 21.5 million (31 December 2021: EUR 15.6 million), therefore the total usage is EUR 141.5 million (31 December 2021: EUR 110.6 million), leaving a headroom of EUR 558.5 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 31 March 2022 there is sufficient headroom.

At 31 March 2022, net cash and cash equivalents were EUR 63.6 million (31 December 2021: EUR 77.1 million).

25 Contingencies

Contingent liabilities

At 31 March 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 44.5 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

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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 31 March 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 three-month period ended 31 March 2022 and the year 2021.

27 Subsequent events

Acquisition of Sleegers

On 22 April 2022, Marel announced 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. Sleegers was founded in 1993, has 27 FTEs 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.

In accordance with IFRS 3, business combinations, the purchase price of Sleegers will be allocated to identifiable assets and liabilities acquired. Due to the short timeframe between closing of the acquisition and issuance of the Condensed Consolidated Interim Financial Statements, this has not been completed and as such the allocation of the purchase price to acquired assets and liabilities assumed is not disclosed.

Acquisition of Wenger

On 27 April 2022, Marel announced it has entered into an agreement to acquire Wenger Manufacturing LLC ("Wenger"), 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 around USD 190.0 million in annual revenues.

The acquisition of Wenger is a platform investment into new and attractive growth markets for Marel and will form the fourth business segment alongside poultry, meat and fish. The two companies have a great strategic and cultural fit with highly complementary product portfolios and geographic presence, creating a strong platform to enhance further growth. 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.

Marel has agreed to acquire the entire share capital of Wenger, including all relevant business activities of the group. The total investment for the acquisition is USD 540.0 million, of which USD 530.0 million is the purchase price on a cash and debt-free basis (enterprise value). The remaining USD 10 million is a combination of a contribution to a not-for-profit private foundation, to continue the legacy of Wenger and its meaningful impact on the community, as well as Marel shares for Wenger employees. The purchase price will be paid with cash at hand and existing credit facilities. Discussion with selling shareholders regarding partial consideration in Marel shares is ongoing and will be concluded prior to closing. The transaction will result in expected tax benefits of USD 60-70 million. The closing of the acquisition is subject to customary closing conditions, including anti-trust and approval of Wenger's shareholders.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

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 facility is provided by BNP PARIBAS SA/NV and has up to a 2-year term. 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 during 2022. The facility was signed on 27 April 2022; closing and utilization is subject to standard conditions precedent.

No other significant events have taken place since the reporting date, 31 March 2022.

27

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 2022

Appendices

1 Quarterly results

| | 2022
Q1 | 2021
Q4 | 2021
Q3 | 2021
Q2 | 2021
Q1 |
| --- | --- | --- | --- | --- | --- |
| Revenues | 371.6 | 367.4 | 331.9 | 327.5 | 334.0 |
| Cost of sales | (237.9) | (235.8) | (209.0) | (210.0) | (212.2) |
| Gross profit | 133.7 | 131.6 | 122.9 | 117.5 | 121.8 |
| Selling and marketing expenses | (54.1) | (48.3) | (47.2) | (42.3) | (42.6) |
| General and administrative expenses | (30.5) | (26.0) | (22.9) | (20.4) | (26.9) |
| Research and development expenses | (24.1) | (21.5) | (21.4) | (21.8) | (22.2) |
| Result from operations (EBIT) | 25.0 | 35.8 | 31.4 | 33.0 | 30.1 |
| Net finance costs | 3.4 | (0.3) | (2.1) | (1.9) | (4.4) |
| Share of result of associates | (0.8) | (0.4) | 0.0 | (0.4) | (0.1) |
| Result before income tax | 27.6 | 35.1 | 29.3 | 30.7 | 25.6 |
| Income tax | (5.9) | (6.6) | (6.1) | (7.4) | (4.4) |
| Net result for the period | 21.7 | 28.5 | 23.2 | 23.3 | 21.2 |
| Result before depreciation & amortization (EBITDA) | 41.6 | 53.8 | 48.0 | 49.8 | 47.3 |

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
Q1 | 2021
Q4 | 2021
Q3 | 2021
Q2 | 2021
Q1 |
| --- | --- | --- | --- | --- | --- |
| Revenues | 371.6 | 367.4 | 331.9 | 327.5 | 334.0 |
| Cost of sales | (237.6) | (235.5) | (208.7) | (208.9) | (209.6) |
| Gross profit | 134.0 | 131.9 | 123.2 | 118.6 | 124.4 |
| Selling and marketing expenses | (51.3) | (45.6) | (44.6) | (39.8) | (40.0) |
| General and administrative expenses | (28.6) | (25.0) | (22.8) | (20.2) | (25.7) |
| Research and development expenses | (22.8) | (20.3) | (19.8) | (20.0) | (20.7) |
| Adjusted result from operations¹ | 31.3 | 41.0 | 36.0 | 38.6 | 38.0 |
| Non-IFRS adjustments | (6.3) | (5.2) | (4.6) | (5.6) | (7.9) |
| Result from operations (EBIT) | 25.0 | 35.8 | 31.4 | 33.0 | 30.1 |

¹ Result from operations is adjusted for PPA related costs, including depreciation and amortization, and acquisition related expenses.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 31 MARCH 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

29