Marel — Investor Presentation 2016

Oct 27, 2016

marel

Q3 2016 presentation

Arni Oddur Thordarson, CEO,
Linda Jonsdottir, CFO

October 27, 2016

ADVANCING
FOOD PROCESSING

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marel

Q3 2016: Solid performance with 14.2% EBIT

• Revenue of €235 million
• Q3 2015: 189m, pro forma 230m
• Order intake of €233 million
• Q3 2015: 211m, pro forma 261m
• Order book €305 million
• Q3 2015: 188m, pro forma 304m
• EBIT* €33.4 million or 14.2%
• Adj. EBIT** Q3 2015: 12.8%, pro forma 13.8%
• EPS 2.42 euro cents compared with 2.07 in Q3 2015

*Adjustments in Q3 2016 consist of a €6.7 million amortization of acquisition related intangible assets (PPA)

**Adjusted for refocusing cost related to the refocusing program Simpler, Smarter, Faster.

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Pro forma: Business overview for the first nine months of 2016

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POULTRY

Strong order intake across the board, solid revenue and profitability

Key projects secured in North-America and Europe in Q3

54% of revenue
17.3% EBIT margin

MEAT

Unified sales team secured full-line projects in China and Germany

Integration on track and solid project execution

33% of revenue
14.4% EBIT* margin

FISH

Order intake and revenue lower than last year

Results partly affected by discontinued operations

In October large greenfield project in the Salmon industry was secured in Norway

12% of revenue
3.6% EBIT margin

Other segments account for 1% of revenue

• Operating income adjusted for amortization of acquisition-related intangible assets

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On track towards best in class profitability

EBIT — EBIT as % of revenue

• Operating income adjusted for amortization of acquisition-related intangible assets (PPA)

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Consolidated accounts

ADVANCING

FOOD PROCESSING

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Consolidated: Third quarter financial results

EUR thousands	Q3 2016	Q3 2015	Change in %
Revenue	234,806	189,106	24.2
Gross profit	94,019	73,923	27.2
as a % of revenue	40.0	39.1
Before PPA
Result from operations (EBIT)	33,402	24,166**	38.2
as a % of revenue	14.2	12.8
EBITDA	41,527	31,636**	31.3
as a % of revenue	17.7	16.7
After PPA
Result from operations (EBIT)	26,656	22,206	20.0
as a % of revenue	11.4	11.7
EBITDA	41,527	29,686	39.9
as a % of revenue	17.7	15.7
Net result	17,328	14,698	17.9

** Results are adjusted for refocusing costs related to the refocusing program Simpler, Smarter, Faster.

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Development of quarterly EBIT in the last three years

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First quarter

* Operating income adjusted for amortization of acquisition-related intangible assets (PPA) in 2016
** 2014 and 2015 EBIT adjusted for refocusing cost.

Second quarter

* 2014

Third quarter

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cararel

Order book at a good level

• Order book of €305 million at closing of Q3 2016, compared to €304 million pro forma at the same time in 2015

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Consolidated: Balance sheet

ASSETS (EUR thousands)	30/9 2016	31/12 2015
Non-current assets
Property, plant and equipment	113,652	89,005
Goodwill	633,425	389,407
Other intangible assets	286,069	107,018
Trade receivables	235	443
Deferred income tax assets	8,942	10,029
	1,042,323	595,902
Current assets
Inventories	123,692	99,382
Production contracts	44,578	17,261
Trade receivables	101,815	99,696
Assets held for sale	-	3,799
Other receivables and prepayments	41,518	29,139
Cash and cash equivalents	22,546	92,976
	334,149	342,253
Total assets	1,376,472	938,155

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Consolidated: Balance sheet

LIABILITIES AND EQUITY (EUR thousands)	30/9 2016	31/12 2015
Equity	505,087	446,739
LIABILITIES
Non-current liabilities
Borrowings	441,513	217,287
Deferred income tax liabilities	63,914	15,943
Provisions	6,847	6,943
Derivative financial instruments	9,150	3,057
	541,424	243,230
Current liabilities
Production contracts	134,327	78,330
Trade and other payables	160,804	139,227
Derivative financial instruments	45	-
Current income tax liabilities	14,964	3,221
Borrowings	24,401	18,449
Provisions	15,420	8,959
	349,961	248,186
Total liabilities	871,385	491,416
Total equity and liabilities	1,376,472	938,155

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Q3 2016 cash flow composition and change in net debt

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| Operating activities (before interest & tax)
€33.2 million | Tax
€0.1 million | Investing activities
€8.6 million | Free cash flow
€24.5 million | Net finance cost
€4.8 million | Other items*
€0.5 million | Decrease in net debt
€19.2 million |
| --- | --- | --- | --- | --- | --- | --- |
| | * Currency effect and change in capitalized finance charges | | | | | |

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Marel generating a healthy cash flow

• Net debt / EBITDA leverage of 2.6x at end of the quarter
• Acquisition of MPS completed within the targeted capital structure with senior loans without issuing any new shares
• Marel is stimulating further revenue and operational profit growth by:
• Streamlining the business
• Continuous innovation
• Investing in the business

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Development of basic earnings per share (EPS)

• EPS in the third quarter of 2016 is 17% higher compared to Q3 2015
• Year to date, EPS has increased by 14% between years
• EPS is affected by Purchase Price Allocation (PPA) in accordance to IFRS
• After Q2 2017, the PPA effect will decrease significantly, boosting EPS further assuming no material adverse development

EPS, trailing twelve months

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Business & Outlook

ADVANCING

FOOD PROCESSING

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Strong business model supporting future growth

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Modernization and standard equipment

• Good volume in standard equipment across all industries and geographies

Greenfields

• Greenfield projects secured in the U.S., Europe, Brazil and China in the first 9 months of 2016

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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Examples of large projects in the first nine months of 2016

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17

Lerøy & Marel – the next generation of salmon processing

• Following the recent acquisition of Havfisk and Norway Seafood Group, Lerøy has become a major player in both salmon and whitefish processing
• Lerøy is building a state-of-the-art salmon factory in Norway
• Will have all the latest technology in the salmon industry available setting new benchmarks
• Marel and Leroy are showing true innovation through partnership in this groundbreaking project that will drive the industry forward

History: Operations trace back to 1899
Revenue: €1.5 billion in 2015
Did you know? Lerøy supplies 4 million meals of seafood every day
Market leader: In June 2016, Lerøy acquired controlling interest in Havfisk and Norway Seafood Group

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Pro forma FY2015
Pro forma 9M 2016
Business Outlook 2016

Revenue €977m
Adj. EBIT** €133m
Order book €320m

Revenue €733m
EBIT* €108.4m
Order book €305m

Marel expects modest organic revenue growth and increase in EBIT* between years

• Operating income adjusted for amortization of acquisition-related intangible assets (PPA).
  ** Adjusted for refocusing cost related to the refocusing program Simpler, Smarter, Faster.

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marel

Thank you

ADVANCING

FOOD PROCESSING