Marel — Investor Presentation 2017

Mar 2, 2017

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2 | CEO's operational report

Arni Oddur Thordarson, CEO

ADVANCING FOOD PROCESSING

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2.1 | Year of strategic moves and solid performance

CEO's operational report

ADVANCING FOOD PROCESSING

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Strategic acquisitions and strong organic growth

• On the Icelandic Stock Exchange since 1992
• In 1992, Marel had revenue of €6 million and 45 employees
• Growth strategy set forward in AGM 2006
• In 2005, Marel had revenue of 129 million with 10 million in EBIT with main focus on the fish industry
• Marel has become a global leader in providing advanced equipment and services for the poultry, meat and fish industry with Pro forma revenue close to €1 billion and €143 million in EBIT
• Compounded average annual growth of 20%
• Average annual organic growth 6%
• Average annual acquisition growth 14%

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Strategic acquisitions
2006
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SCANVATGT

	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing

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Strategic acquisitions

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2008

STORK

	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing

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Strategic acquisitions

2015

mPS

meat processing systems

	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing
	Primary processing	Secondary processing	Further processing

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Leading global provider of systems and services

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MPS acquisition | Integration on track

Acquisition closed in January 2016; €382 million on a debt and cash-free basis

Senior long-term financing agreement of €670 million reached at favorable terms with eight strong international banks

Finalized without issuing new shares

• Starting leverage of x2.9 net debt/EBITDA
• Solid operational performance and strong cash flow driving net debt/EBITDA to x2.25

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Marel invests 6% of revenue in innovation to drive growth

ATLAS live bird handling system

Thigh Fillet System

AMF-i breast cap filleting system

I-Cut 130 PortionCutter

MS 2720 Salmon Deheader

Over 25 new products launched in 2016

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2.2 | Operational and financial highlights

CEO's operational report

ADVANCING FOOD PROCESSING

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11

Solid performance with €983m in revenue and 14.6% EBIT*

Pro forma revenue of €983 million

• Organic growth between years: 3%

• Acquisition growth between years: 16%

• Order intake of €1,013 million

• Order intake at all time high in Q4 after a soft beginning of the year

• Entering 2017 with a strong order book

• EBIT* €143 million or 14.6%

• Strong financials

• Earnings per share increase by 34%
• Net leverage of 2.25 at the end of the year

*Adjustments in 2016 consist of a €24.6 million amortization of acquisition-related intangible assets (PPA)

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On track towards best in class profitability

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

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Pro forma: Business overview for the full year of 2016

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POULTRY

Solid operational profit margins and strong volume with Good geographic and product mix

Record order intake in Q4 with landmark Greenfield project secured in S-Korea and various other projects around the globe

52% of revenue
16.6% EBIT margin

MEAT

Strong operational performance in 2016

Integration on track, front-end sales team unified and MPS now fully under the Marel brand

In Q4 large sales secured in Europe, U.S. and S-America

34% of revenue
15.6% EBIT* margin

FISH

Onboard business in Seattle streamlined and focus shifted to high-tech innovative solutions.

Record order intake in Q4 after soft start of the year. Landmark project in Norway and various other projects in S- America, N- America and Europe

13% of revenue
3.1% EBIT margin

Other segments account for 1% of revenue

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

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Entering 2017 with a strong order book

• Order book of €350 million at closing of 2016, compared to €320 million pro forma at the same time in 2015

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Consolidated: Full year financial results

EUR thousands	FY 2016	FY 2015	Change in %
Revenue	969,671	818,602	18.5
Gross profit	397,008	319,515	24.3
as a % of revenue	40.9	39.0
Before PPA
Result from operations (EBIT)	139,361	99,895**	39.5
as a % of revenue	14.4	12.2
EBITDA	175,440	135,751**	29.2
as a % of revenue	18.1	16.6
After PPA
Result from operations (EBIT)	114,776	81,613	40.6
as a % of revenue	11.8	10.0
EBITDA	175,440	120,813	45.2
as a % of revenue	18.1	14.8
Net result	75,844	56,696	33.8

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

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Consolidated: Balance sheet

ASSETS (EUR thousands)

	31/12 2016	31/12 2015
Non-current assets
Property, plant and equipment	118,991	89,005
Goodwill	635,180	389,407
Other intangible assets	277,458	107,018
Trade receivables	237	443
Derivative financial instruments	447	-
Deferred income tax assets	7,343	10,029
	1,039,656	595,902
Current assets
Inventories	122,250	99,382
Production contracts	36,962	17,261
Trade receivables	115,259	99,696
Assets held for sale	-	3,799
Other receivables and prepayments	32,723	29,139
Derivative financial instruments	55	-
Cash and cash equivalents	45,523	92,976
	352,772	342,253
Total assets	1,392,428	938,155

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Consolidated: Balance sheet

EQUITY AND LIABILITIES (EUR thousands)	31/12 2016	31/12 2015
Group equity	525,573	446,739
LIABILITIES
Non-current liabilities
Borrowings	425,014	217,287
Deferred income tax liabilities	63,458	15,943
Provisions	7,361	6,943
Derivative financial instruments	4,946	3,057
	500,779	243,230
Current liabilities
Production contracts	150,769	78,330
Trade and other payables	168,980	139,227
Current income tax liabilities	9,081	3,221
Borrowings	24,117	18,449
Provisions	13,129	8,959
	366,076	248,186
Total liabilities	866,855	491,416
Total equity and liabilities	1,392,428	938,155

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18

Cash flow composition

CASH FLOWS FROM OPERATING ACTIVITIES

	2016	2015
Free cashflow
Cash generated from operating activities	179,017	119,739
Taxes paid	(8,086)	(12,304)
Investing activities	(44,307)	(28,931)
	126,624	78,504
Other cash flow items
Net finance cost	(33,791)	(13,783)
Net sale of treasury shares	10,884	(33,648)
Proceeds from assets held for sale	4,579	4,417
Dividends paid	(11,304)	(3,484)
Net proceeds from borrowings	220,795	26,409
Business combinations	(368,408)	6,655
	(177,245)	(13,434)

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Marel

Marel generating a healthy cash flow

• Net debt / EBITDA leverage of 2.25 at end of 2016
• Acquisition of MPS completed within the targeted capital structure with senior loans and without issuing any new shares
• Strong cash flow
• Cash generated from operating activities 179 million
• Free cash flow 127 million
• Marel is stimulating further revenue and operational profit growth by:
• Streamlining the business
• Continuous innovation
• Investing in the business

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Earnings per share increased by 34% in 2016

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EPS, trailing twelve months

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2.3 | Business highlights

CEO's operational report

ADVANCING FOOD PROCESSING

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22

Strong business model supporting future growth

Modernization and standard equipment

• Good volume in standard equipment across all industries and geographies throughout the year

Maintenance

• Marel has the largest installed base in its industry
• Recurring service and spare parts revenues have increased steadily and were 36% of total revenues in 2016

Greenfields

• Landmark Greenfield projects secured in Europe, South-America, North-America and Asia in addition to smaller Greenfields in Africa and Middle-East

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Case study: Long term customer relationship

10 year revenue profile from a customer

• Initial investment
• Additional investment
• Service & spare parts

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Examples of large projects secured in 2016

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2.4 | Outlook and strategy

CEO's operational report

ADVANCING FOOD PROCESSING

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26

Compounded annual revenue growth of over 20% since 2005

• Total revenue grew from €129 million in 2005 to €983 million in 2016*
• Average annual organic growth 6%
• Average annual acquisition growth 14%
• Good support from shareholders
• Equity issued totaled 268 million in the period 2006-2009 to finance acquisitions of Scanvaegt and Stork Food Systems
• MPS acquisition financed with solid operational performance and strong cash flow

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Focus on sustainable long term value creation

Vision

• In partnership with our customers, we are transforming the way food is processed. Our vision is of a world where food is produced sustainably and affordably

Strategy

• Leading global provider of advanced equipment, systems, software and services to the fish, meat and poultry industries across primary, secondary and further processing

Revenue growth and profitability

• Marel is targeting 12% average annual revenue growth in the next 10 years
• Marel's management expects 4-6% average annual market growth in the long term
• Marel aims to grow organically faster than market driven by innovation and market penetration
• Maintaining solid operational performance and strong cash flow supports average 5-7% revenue growth by acquisition
• Growth in Earnings per Share (EPS) faster than revenue growth

Capital allocation

• Strategic innovation and acquisitions with attractive return on investment
• Invest in the platform to be best-in-class in operations
• Return capital to shareholders

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Thank you

ADVANCING

FOOD PROCESSING