Marel — Investor Presentation 2014

Oct 23, 2014

Q3 2014
Presentation

Arni Oddur Thordarson, CEO
Erik Kaman, CFO
Sigsteinn Gretarsson, COO

23 October 2014

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Arni Oddur

Thordarson
CEO

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Record order intake and revenue with 9.3% adjusted EBIT

• Revenue €188 million compared to €157 million in Q3 2013
• Order book €169 million compared to €156 million in last quarter
• €201 million in orders received
• Adjusted EBIT of €17.4 million or 9.3%
• Strong cash flow
• The refocusing plan of becoming simpler, smarter, and faster is proceeding according to plan

* Refocusing costs in Q3 amount to €1.3 million

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At the customer, for the customer while refocusing

Order intake
€201 million

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Operational results improving with strong cash flow

Year-to-date revenue has increased by 4% compared to same period last year

Adjusted EBIT year-to-date EUR 32.7 million

Order book Q3 2014 is EUR 169 million compared to EUR 138 million Q3 2013

Management guidance for 2014 is organic growth and adjusted EBIT of EUR 40-50 million

EBITDA improvement and strong cash flow has driven Net Debt/adj.EBITDA down to 2.75

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Business overview

Poultry	Fish	Meat	Further Processing
Volume and profitability continue to increase	Significant improvement of profitability and volume	Greenfield projects secured and installed in Argentina, Mexico, Brazil and Russia	Order intake increasing and operational performance improving
Several small and medium size Greenfields in new emerging markets	Investments in the Whitefish segment are picking up with a healthy pipeline	Marel is establishing reference projects around the globe	RevoPortioner moving into red meat and fish building on past success in poultry
Important modernization projects in the U.S. and Europe	Salmon delivering increased volume and profits	The aim is to gradually improve profitability from 2015 and onwards

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Simpler, Smarter, Faster initiative began in January 2014

• Combine business units that serve the same customer needs and rely on the same technical capabilities

• Optimize manufacturing footprint to balance utilization of resources within the company

• Serve customer needs better

• Reduced “time to market” for innovative solutions
• Penetrate market faster after product launches
• Increase operational efficiency with a target of EBIT in excess of €100 million in 2017

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Refocusing on track

Focused market approach

• "At the customer for the customer while refocusing"
• ☑ Record order intake in Q3 on back of strong order intake in Q2 2014

Improved operational efficiency

• Transfer of salmon activities to modern facility in Stovring
• ☑ Cost of transfer fully absorbed. Running with increased efficiency in Q3
• Meat activities transferred from Oss to a multi-industry site in Boxmeer
• ☑ Transfer of operations according to schedule and will be concluded in Q4
• One-off cost in Q3 limited to preparation for further manufacturing optimization in coming quarters

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Head of Global Innovation

Will drive and implement innovation strategy and vision across the company

• Portfolio management and prioritizing of innovation projects
• Utilize resources better
• Shorten "time to market"

Vidar Erlingsson

• Born in 1975, married with three children
• Been with Marel since 2000.
• Vidar has been leading the build-up of the SensorX technology within Marel
• M.Sc. in engineering from DTU in Denmark and B.Sc. in electrical and computer engineering from the University of Iceland

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Erik Kaman CFO

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Business results

EUR thousands	Q3 2014	Q3 2013	Change in %
Revenue	187,931	156,896	19.8
Gross profit before refocusing cost	67,372	58,030	16.1
as a % of revenue	35.8	37.0
Before refocusing costs
Result from operations (adjusted EBIT)	17,409	12,854	35.4
as a % of revenue	9.3	8.2
Adjusted EBITDA	25,912	19,523	32.7
as a % of revenue	13.8	12.4
After refocusing costs
Result from operations (EBIT)	16,113	12,854	25.4
as a % of revenue	8.6	8.2
EBITDA	24.616	19,523	26.1
as a % of revenue	13.1	12.4
Orders received (including service revenues)	200,747	163,346	22.9
Order book	169,242	138,262	22.4

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Development of business results

Firm steps to improve profitability

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Order book stands at EUR 169 million at the end of Q3

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Condensed consolidated balance sheet

ASSETS	30/9 2014	31/12 2013
EUR thousands
Non-current assets
Property, plant and equipment	97,705	104,707
Goodwill	386,791	378,708
Other intangible assets	120,223	118,561
Receivables	93	691
Deferred income tax assets	9,307	9,611
	614,119	612,278
Current assets
Inventories	95,870	91,796
Production contracts	25,076	24,829
Trade receivables	75,226	68,737
Assets held for sale	2,500	-
Other receivables and prepayments	24,114	22,135
Cash and cash equivalents	25,839	19,793
	248,625	227,290
Total assets	862,744	839,568

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Condensed consolidated balance sheet (continued)

LIABILITIES AND EQUITY	30/9 2014	31/12 2013
EUR thousands
Equity	428,387	419,339
LIABILITIES
Non-current liabilities
Borrowings	198,493	214,846
Deferred income tax liabilities	11,963	13,885
Provisions	6,565	6,065
Derivative financial instruments	5,863	7,184
	222,614	241,980
Current liabilities
Production contracts	61,241	44,881
Trade and other payables	119,944	105,662
Current income tax liabilities	5,825	3,526
Borrowings	18,654	22,077
Provisions	6,079	2,103
	211,743	178,249
Total liabilities	434,357	420,229
Total equity and liabilities	862,744	839,568

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Q3 2014 cash flow composition and changes in net debt

| Operating activities (before interest & tax) | Tax
0.3 million | Investment activities
5.3 million | Free cash flow
24.1 million | Net finance cost
2.8 million | Treasury shares
2.3 million | Other items*
5.8 million | Changes in net debt
13.2 million |
| --- | --- | --- | --- | --- | --- | --- | --- |

• Currency effect and change in capitalized finance charges.

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Net interest bearing debt reduced by EUR 25.8 million YTD 2014

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Arni Oddur

Thordarson
CEO

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Planting seeds in future growth markets

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Global Animal Protein Surpluses and Deficits

Source: FAO

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Global Food Surpluses and Deficits

Net intra-regional trade, million tons

Cereals, rice, oilseeds, meals, oils and feed equivalent of meat.
Source: The Economist

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Marel is transforming poultry processing in Africa

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Africa – the world's next breadbasket

x2

Fastest growing population in the world

2.4 bn

Forecasted population in 2050

x20

Potential increase in agricultural output

Recent Marel Greenfield projects

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Record order intake and revenue in Q3 2014

Modernization and standard equipment

• Investment in expansion and modernization projects picking up in the US and Europe

Greenfields

• Several small and medium sized Greenfield projects in emerging growth markets such as Africa, Asia, and South America

Maintenance

• Marel has the largest installment base in its industry
• Recurring service and spare parts revenues increasing steadily and are currently around 40% of total revenues

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Q&A

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Disclaimer

• This Presentation is being furnished for the sole purpose of assisting the recipient in deciding whether to proceed with further analysis of this potential opportunity. This Presentation is for informational purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale, subscription or purchase of securities.

• The information set out in this Presentation may be subject to updating, completion, revision and amendment and such information may change materially. Even though Marel hf. has given due care and attention in the preparation of this Presentation, no representation or warranty, express or implied, is or will be made by Marel hf. as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and any reliance the recipient places on them will be at its own sole risk. Without prejudice to the foregoing, Marel hf. does not accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from use of this Presentation or its contents or otherwise arising in connection therewith. Any recipient of this Presentation is recommended to seek its own financial advice.

• There is no representation, warranty or other assurance that any of the projections in the Presentation will be realized. The recipient should conduct its own investigation and analysis of the business, data and property described herein. Any statement contained in this Presentation that refers to estimated or anticipated future results or future activities are forward-looking statements which reflect current analysis of existing trends, information and plans. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially and could adversely affect the outcome and financial effects of the plans and events described herein. As a result, the recipient is cautioned not to place undue reliance on such forward-looking statements.

• Transactions with financial instruments by their very nature involve high risk. Historical price changes are not necessarily an indication of future price trends. Any recipient of this Presentation are encouraged to acquire general information from expert advisors concerning securities trading, investment issues, taxation, etc. in connection with securities transactions.

• This Presentation and its contents are confidential and may not be further distributed, published or reproduced, in whole or in part, by any medium or in any form for any purpose, without the express written consent of Marel hf. By accepting this Presentation the recipient has agreed, upon request, to return promptly all material received from Marel hf. (including this Presentation) without retaining any copies. In furnishing this Presentation, Marel hf. undertakes no obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies therein which may become apparent.

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Thank you
Dank u wel
Takk fyrir
Mange tak

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