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Marel Investor Presentation 2021
2191_rns_2021-11-11_8e340799-05a1-4f8b-91e9-114066421d1a.pdf
Investor Presentation
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Intellectual Property Rights
Capital Markets Day
marel | cmd
Disclaimer
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The purpose of this presentation (the "Presentation") is to provide an overview of Marel hf. (the "Company"). This Presentation has been prepared and issued by and is the sole responsibility of the Company and is being furnished to each recipient solely for its own information. For the purposes of this notice, "Presentation" means this document, its contents or any part of it, any oral presentation, any question or answer session and any written or oral material discussed or distributed during the Presentation meeting.
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No representation or warranty, express or implied, is given by or on behalf of the Company or its directors, officers, employees, agents, affiliates as to, and no reliance should be placed on, the fairness, accuracy, reasonableness or completeness of the information or opinions contained in this Presentation or otherwise made available and no responsibility or liability (including in respect of direct, indirect or consequential loss or damage) is assumed by any such persons for such information or opinions or for any errors or omissions.
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Except where otherwise indicated in the Presentation, the information provided therein is based on matters as they exist at the date of preparation of the Presentation and not as of any future date and will be subject to updating, revision, verification and amendment without notice and such information may change materially. The Company is under no obligation to update or keep current the information contained in this Presentation to which it relates or to provide the recipient of with access to any additional information that may arise in connection with it and any opinions expressed in this Presentation are subject to change without notice. Nothing contained in this Presentation is or should be relied on as a promise or representation as to the future. This document has not been approved by any regulatory or supervisory authority.
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This Presentation includes market share and industry data obtained by the Company from industry publications and surveys and internal surveys. The Company may not have access to the facts and assumptions underlying the numerical data, market data and other information extracted from these sources. As a result, the Company is not able to verify such numerical data, market data and such other information, and assumes no responsibility for the correctness of any market share or industry data or such other information included in this Presentation or provided at the Presentation. Certain of the market, economic and industry data contained in this presentation comes from the Company's own internal research and estimates based on the knowledge and experience of the Company's management in the markets in which the Company operates. While the Company reasonably believes that such information is reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change. Accordingly, undue reliance should not be placed on the market, economic and industry data contained in this Presentation.
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Certain statements, beliefs and opinions in this Presentation are, or may be deemed to be, "forward looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology or by their context. These forward-looking statements include all matters that are not historical facts. They appear in a number of places and include, but are not limited to, statements regarding the Company's intentions, beliefs or current expectations concerning, amongst other things, results of operations, financial condition, liquidity, prospects, growth and strategies. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. A multitude of factors including, but not limited to, changes in demand, competition and technology or the regulatory environment, can cause actual events, performance or results to differ significantly from any anticipated development. Forward-looking statements are not guarantees of future performance and the actual results of operations, financial condition and liquidity, and the development of the industry in which the Company operates, may differ materially from those made in or suggested by the forward-looking statements set out in this Presentation. Past performance of the Company cannot be relied on as a guide to future performance. Forward-looking statements speak only as at the date of this Presentation and the Company expressly disclaims any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this Presentation. As a result, you are cautioned not to place any undue reliance on such forward-looking statements. In addition, even if the results of operations, financial condition and liquidity of the Company, and the development of the industry in which the Company operates, are consistent with the forward-looking statements set out in this Presentation, those results or developments may not be indicative of results or developments in subsequent periods.
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This Presentation does not constitute, and should not be construed as, part of any offer or invitation for the sale or purchase of securities and it is not intended to provide the basis of any investment decision in any jurisdiction, nor does it purport to give legal, tax or financial advice. Nothing herein shall be taken as constituting the giving of investment advice and this Presentation is not intended to provide, and must not be taken as, the basis of any decision and should not be considered as a recommendation to acquire any securities of the Company. The recipient must make its own independent assessment and such investigations as it deems necessary.
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Any sale of the Company's ordinary shares has not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and will not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of the ordinary shares in the United States (for these purposes, the "United States" means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia).
Capital Markets Day 2021
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Growth
Agenda
- Welcome and introduction
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Tinna Molphy, - Director IR
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Delivering growth globally, digitally and sustainably
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Arni Oddur Thordarson, - Chief Executive Officer
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Key pillars to support 12% revenue growth
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Arni Sigurdsson, - Chief Strategy Officer and EVP Strategic Business Units
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Financial strength to support the growth ahead
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Linda Jonsdottir, - Chief Financial Officer
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Q&A panel discussion
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|---|---|---|
TRANSFORMING FOOD PROCESSING
marel / cmd
Arni Oddur Thordarson
Delivering growth globally, digitally and sustainably
Capital Markets Day 2021
Arni Oddur
Thordarson
Chief Executive Officer
Arni Oddur Thordarson became Marel's CEO in November 2013, having served as Chairman of Marel's Board of Directors from 2005. Thordarson co-founded Eyrir Invest in the year of 2000 and was the company's CEO until 2013. He has extensive international global business experience and has served as non-executive director of various companies including Fokker Technologies and Stork Technical Services.
Education
MBA, IMD, Switzerland
Cand. Oecon., Business Administration, University of Iceland
17 years with Marel / 17 years in Industry
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Consumer preferences becoming more diversified, focused on convenience, freshness & health
Rising income drives more protein consumption
We envision a world where quality food is produced sustainably and affordably
Unity We are united in our success
Innovation Innovation drives the value we create
Excellence Excellence is what differentiates us
Global population expected to grow to ~10bn by 2050
Marel is at the center of these prevailing trends
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Best-in-class products and technology
Marel is a unique provider of solutions, software and services, supporting customers across the value chain
Line solutions provider...
- ☑ One-stop-shop for the customer
- Seamless integration & more efficiency
- Strong competitive advantage
...across poultry, meat and fish...
- ☑ More resilient business model
- Technology transfer across industries
- Better utilization of resources
...with standard and modular offering...
- ☑ Scalable: Less engineering and easier to manufacture
- Improved service
- Better customer experience
...and market leading proprietary software
- ☑ Traceability and sustainability
- Linking equipment to function as single entity
- Real-time actionable insights to improve operations
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EUR orders received annualized 9M21¹
1.5bn
Revenue split by geography
Asia and Oceania
10%
Americas
33%
EMEA
57%
Revenues invested in INNOVATION
~6%
39 years since foundation
Nasdaq
Listed since 1992
EURONEXT
Listed since 2019
Compliment to ESG / UN SDG
Poultry
51%
of revenues
Meat
34%
of revenues
Fish
12%
of revenues
Equipment
60%
of total revenues
Aftersales
40%
of total revenues
Componded average revenue growth of
~20%
Per annum since listing in 1992
~7,000
employees
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Notes: ¹Annualized orders received based on orders received as of 30 September 2021
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From startup to global leader
Marel had 7,000+ employees and EUR 1,238m in revenues in 2020, a stark increase from its 45 employees and revenues of EUR 6m at the time of listing on Nasdaq Iceland in 1992.
Orders received in the last twelve months of EUR 1,421m and annualized 9M21 orders received amount to EUR 1,468m.
10 year revenue profile from a customer
Strong revenue growth since 1992
| Aftersales as % of revenue | 10% |
|---|---|
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Notes: 1 Operating income adjusted for PPA related costs, including depreciation and amortization, and beginning in Q4 2020 adjusted for acquisition related costs.
2 Annualized orders received based on orders received YTD as of 30 September 2021
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End-market of EUR 1,200-1,300 billion
Growing 3% per year
- Commercial value of poultry, meat and fish processing industries expected to grow 3% annually in the long-term
- Ongoing shifts in consumer behavior and demand across market channels such as e-commerce, food service and traditional supermarkets
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Marel's strong brand and unique offering cater to its loyal blue-chip customer base
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Marel is at the center of prevailing trends
| Drivers of production volume | Drivers of Marel's addressable market | ||||
|---|---|---|---|---|---|
| Population growth | |||||
| More demand for food, especially from Asia and Africa | Rising income | ||||
| Increased protein consumption typically correlates to higher income | Consumer preferences | ||||
| Consumer preferences more diversified, focused on convenience, freshness & health | Automation | ||||
| Continued focus on automation to combat labor shortages and increased costs | Agility | ||||
| Flexibility to match changing consumer preferences with different products | Sustainability | ||||
| Food safety, traceability and the efficient use of resources are key priorities |
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Global structure in six key regions serving customers in 140 countries
- In 2019, we started a program to strengthen our local presence around the globe defined by six key regions
- This global reach proved to be instrumental to our resilience and ability to engage with, service, and support our customers during the pandemic
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Top 10 products record
Marel software offers powerful end-to-end solutions allowing food processors to maximize productivity
Inventory count by product breakdown
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Digital offering can be split into three layers
| Logistics | Food safety management | Performance management | Planning & optimization |
|---|---|---|---|
| Inventory | Traceability | OEE | Order fulfillment |
| Final goods | Quality assurance | IMPAQT | Illustrative |
| ... | ... | Green reporting | ... |
Line level (MES) offering
Process control: Multiple machines working as a single entity and process transparency
Machine level integrated offering
Maintenance
Production
Performance
...
Mantel
MantelEquipment with Digital Engine¹ (enabling connectivity)
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Notes: ¹ Digital Engine is an IoT box installed on machines to provide connectivity to the cloud and provide Marel and customers with basic information such as machine health and production insights
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Sustainability is our business and is embedded throughout all of our operations
Major commitments include:
NORDIC CEOs FOR A SUSTAINABLE FUTURE
SCIENCE BASED TARGETS
DROHN ANDYRAE CORPORATE CLIENTS ACTION
TCFD
SIGS FORCE IN
SUBJECTS TO PROTECTION
PROTECTION
Transforming food processing for sustainable outcomes and returns
| Customer health and safety | Animal wellbeing | Automation |
|---|---|---|
| Food waste reduction | Traceability | Yield |
| Food safety and security | Robustness and durability | Environmental impact |
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Customers and Marel share an ambition for sustainability and food quality
Customer case study
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Growth
TRANSFORMING FOOD PROCESSING
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Arni Sigurdsson
Key pillars to support 12% revenue growth
Capital Markets Day 2021
Arni Sigurdsson
Chief Strategy Officer & EVP Strategic Business Units
Arni Sigurdsson joined Marel in 2014. He leads the Strategy and M&A as well as the business units of Retail and Food Service Solutions and Innova Software. Sigurdsson serves on the board of Worximity Technology Inc. Before joining Marel, he was an associate at AGC Partners. Prior to that, he worked at Landsbanki Islands, where he supported Marel on the acquisition of Stork Food Systems.
Education
MBA, Harvard Business School
BS, Industrial Engineering, University of Iceland
8 years with Marel / 10 years in Industry
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Organic growth / Acquired growth
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Three key strategic pillars to drive customer engagement and growth
Customer focus
- Reliable (maintenance) partner - operate in same time zone, culture and language as our customers
- Focus on effortless customer journey and best in class infrastructure to drive customer engagement
- Improved sales & service coverage
Best-in-class products and technology
- Leader in best-in-class, high quality equipment, lines and digital solutions
- Close partnership with customers addressing opportunities with product development and strategic partnerships
- Standard and modular building blocks with overarching software and strong service model
People and Culture
- Identifying and developing future leaders for strategic roles across the business
- Great talent drives our success but is in high demand, so attraction and retention is key
- Developing high performing teams by focusing on diversity, inclusion and development opportunities
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Organic growth / Acquired growth
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Customer focus
Reliable and easy to do business with
Global reach, local presence
- Six strong regions building strong long-term customer partnerships
- Fully dedicated management on the ground, operating in same time zone, culture & language as our customers, with understanding of local dynamics & customer needs
- Over 30% growth in direct sales & service FTEs in the last 18 months in emerging markets
- “Seeing is believing” – new demo centers in Brazil & China, bringing Marel closer to our customers in key regions
Effortless customer journey
- Investing in new spare parts distribution model (processes & infrastructure) from customer to delivery
- Being a reliable maintenance partner with attractive delivery promises is of essence for both Marel and our customers
- Using virtual reality to enhance the customer experience by simulating & showing food processing plants before order
New retail & food service solutions business unit
- More agile approach to meet changing customer needs driven by backward integration and increased choice in retail channels
- Main focus is on the value chain from consumer up to cut-up & deboning (secondary and further processing)
- Dedicated business development to focus on adjacent markets in alternatives and pet food
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Best-in-class products and technology
Digitalization, automation and sustainability are core focus areas in our innovation
EUR ~75 million invested in innovation in 2020
Marel strives to provide solutions and line concepts that provide superior value to our customers
We have a strong commitment to innovation with ~6% of revenues invested annually
| Innovation is our value | Partnership with customers | Strategic partnerships | ESG at the center | Proven track record |
|---|---|---|---|---|
| Innovation is at the heart of Marel and one of our three core values | Long-standing tradition of co-operation between our customers and employees in innovation | Successful strategic partnerships with academia and best-in-class companies | Sustainable thinking is an integral part of the development process | Transformative solutions introduced in 2020 where focus was on sustainability, automation and smart processing |
| Over 1,000 employees dedicated to innovation | Record year with over 30 new solutions released |
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Organic growth Acquired growth
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Video
Successful partnership with best-in-class companies
Partnership / Marel Spectra
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Organic growth Acquired growth
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Digital vision
Be the digital partner of choice for the food processing industry, and enable customers to sustainably maximize value creation by providing the digital products and platform for interconnectivity and optimization.
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Organic growth / Acquired growth
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Marel has deployed EUR 620 million in high quality acquisitions
Key acquisition rationale
- Strengthened line offering in poultry, meat and fish
- Improved high quality product portfolio
- Better market reach and customer engagement
- Shared vision & strategy
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Notes: 1 Revenue at the time of acquisition, last reported FY revenues as per previous public disclosures. 2 50% ownership as of beginning of 2021. 3 40% ownership as of 29 Jan 2021, accounted for as investment in associate in 2020. 4 Closing of acquisition expected before year end 2021.
Organic growth / Acquired growth
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Acquisitions are to enhance our key strategic pillars and drive organic growth
Market opportunities
Reinforce market presence and build new and current customer relationships
Customer focus
Complementary solutions
Strengthen product portfolio and line offering
Best-in-class products and technology
Shared vision and strategy
Aligned vision and strategy with cultural fit
People and Culture
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Organic growth / Acquired growth
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Stimulating organic growth
Dutch duck and goose processing solutions provider
Added a third pillar within poultry processing
Ulybino
Siberia, Russia
A joint success project for combined PMJ and Marel Poultry where technical and sales expertise were the defining characteristics of this full-line project
Leading German food cutting technology provider
Strengthened Marel's full-line offering and increased standard equipment sales
Vion
Altenburg, Germany
First integrated project for TREIF and Marel Meat, with Marel being able to add more capabilities to a project that TREIF was already involved in
Icelandic whitefish processing solutions provider
Strengthened Marel's full-line offering for the fish industry
Brim Seafood
Reykjavik, Iceland
The most advanced whitefish processing facility in the world, with primary capabilities from Curio along with Marel processing solutions and software
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Sulmaq
Expanded geographic presence in Latin America with acquisition of Sulmaq in 2017
Frimesa in Assis Chateaubriand, Brazil
- Together, Marel Meat and Sulmaq were able to secure a sale of a greenfield project in Brazil, constituting Marel Meat's largest sale ever in Latin America
- The FRIMESA plant will be the largest and most advanced pork processing plant in Latin America and is on track to open in January 2023
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Organic growth / Acquired growth
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Marel’s integration objective is to strengthen our integrated line offerings, drive cross selling and enable continued profitable organic growth
Integration approach / Sulmaq
Organic growth / Acquired growth
Future M&A
Why Marel?
Global reach
Shared vision and strategy
Succession of family owned businesses
Digitalization
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Growth
TRANSFORMING FOOD PROCESSING
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Linda Jonsdottir
Proven track record of strong financial results and value creation
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Linda Jonsdottir
Chief Financial Officer
Linda Jonsdottir has been Marel's CFO since 2014. Before that, she was Marel's Corporate Director of Treasury and Investor Relations. Prior to joining Marel, Jonsdottir worked in treasury and financing for Eimskip, Burdaras and Straumur Investment Bank. She was a director of the Icelandic Enterprise Investment Fund from 2010 to 2015.
Education
MSc, Finance, Reykjavik University
Cand. Oecon., Business Administration, University of Iceland
12 years with Marel / 12 years in Industry
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Revenues have grown 10x since 2005 and EBIT 17x
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Gross profit
% of revenues
Sales, general and administrative expenses
% of revenues
Adjusted EBIT margin
% of revenues
Examples of initiatives
| Targeting more aftermarket potential | Higher standard equipment sales |
|---|---|
| Improving ratio of direct vs indirects | End-to-end spare parts journey |
| More focus on value-based pricing | Life-cycle management |
| Increased market coverage | Digital approach to sales and marketing |
| New ways of working, less fly-in, fly-out | Shared services center in Poland |
| Margin expansion for Marel Meat | Cross- and upselling Market penetration |
| Margin expansion for Marel Fish | Full-line offering Higher volume |
Mid-term targets YE23
- Gross profit of 40%
- SG&A of 18%
- Innovation promise of 6% of revenues
- Adjusted EBIT margin of 16%
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12% average annual growth target from 2017 - 2026¹
Business mix split
Service / Spares
Aftermarket
~40%
Service / Spares / Software
Aftermarket
~50%
2026E
Equipment
~50%
Long-term targets YE26
- 12% average annual revenue growth in 2017-2026¹
- 50% of revenues to come from service, spares and software
- Basic EPS to grow faster than revenues
- Innovation promise of 6% of revenues
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Notes: ¹ Growth is not expected to be linear but based on opportunities and economic fluctuations. Operational results may vary from quarter to quarter due to general economic developments, fluctuations in orders received and timing of deliveries of larger systems
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Key performance metrics
Earnings per share¹
EUR per share
EPS expected to grow faster than revenues
- In the period 2017-2026, Marel's management expects basic earnings per share to grow faster than revenues
- Focus on margin expansion in Marel Meat and Marel Fish and overall operational improvement and value creation
Free cash flow²
EUR m
Strong cash generation
- Marel's strong cash generation supports continued significant investments in infrastructure, innovation and strategic inventory buildup
- Strong cash flow enables both deleveraging and the undertaking of strategic acquisitions
Net debt / EBITDA
Leverage (x)
Capacity for further growth
- Leverage well below the targeted capital structure of 2-3x net debt / EBITDA
- Financial strength enables continued investment and will facilitate future strategic moves in line with the company's 2017-2026 growth strategy
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Notes: ¹ Basic earnings per share, trailing twelve months. ² Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets.
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New level of orders received to be turned into revenues in the coming periods
- Orders received in 9M21 up 20% year-on-year, three sequential quarters of strong orders in Q1-Q3
- Healthy mix of revenues deriving from greenfield projects, modernization, standard equipment and maintenance of existing customers' installed base world-wide
- Overall a significant proportion of Marel's revenues derives from the aftermarket, in total around 40% of full year 2020 revenues aiming for 50% of total revenues in 2026 with the addition of growing software revenues to service and spare part revenues
- Order book primarily constitutes greenfield projects, standard equipment and large projects with long lead times
- Strong orders received in Marel Poultry for the last two quarters, supporting stronger volume and improved industry mix in the coming quarters
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Well diversified revenues streams
Strong track record of a well diversified revenue structure across both industries and geographies, and 40% of total revenues deriving from recurring services and spare parts revenues
Revenue split by segment
- Lower orders received for Marel Poultry early in 1Q21 had an impact on revenues and industry mix. Strong orders in Q2-Q3 and pipeline will increase volume with foreseen more favorable industry mix, resulting in higher operating profits
- Other revenues constitute revenues from for example acquisition of TREIF within bread and dairy
Revenue split by geography
- Revenues from Asia and Oceania steadily accelerating as requirement for automation, digitalization and food safety is increasing in developing markets
- Underlying market strength in North America has driven consistent revenue contribution from the region over the last years
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Investing for growth
- Successful refocusing program in 2014-2015, optimizing product portfolio and reduction of manufacturing sites, subsequently contributed to significant margin uplift to around 15% for 20 consecutive quarters
- 4Q19 and through 2020 impacted by ASF, trade constraints, COVID-19, in addition to supply chain and mobility challenge complexities
- 2021 margins colored by step up in market coverage, innovation and infrastructure initiatives to increase speed and agility for the expected growth curve resulting in higher operating expenses, in addition to margin pressure from supply chain and logistical challenges
- Full focus on customer delivery, margin pressure continues due to supply chain and logistics costs, prices raised by 4-6% in Q3 on new orders that will partly offset increased costs
- Strong orders received in the poultry industry for the last two quarters supporting stronger volume and improved industry mix in coming quarters
- Management continues to target medium and long-term EBIT margin expansion for Marel Meat and Marel Fish
- Fluctuation in adjusted EBIT margins quarter on quarter can be expected as timing of big projects and product mix can have an effect
- Marel does not adjust results for non-recurring costs, except for PPA and acquisition related costs.
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Notes: 1 Adjusted for PPA costs related to acquisitions from 2016 onwards and refocusing costs in 2014 and 2015 relating to "Simpler, Smarter, Faster" program. PPA refers to amortization of acquisition related (in)tangible assets. Beginning in Q4 2020 also adjusted for acquisition related costs. 2 Adjusted EBIT in Q4 2015 is not adjusted for EUR 3.3m cost related to the MPS acquisition, which was described in the Company's Q4 2015 report and recorded in general and administrative expenses.
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Focus on cash, net working capital and CAPEX
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Strong cash flow supports continued investment in infrastructure, innovation and growth strategy
- Operating cash flow can fluctuate with the development of orders received and revenue levels, e.g. if orders received grow faster than revenues, working capital improves
- Significant inventory buildup of EUR 51.9m in 9M21, tying up capital and cash flow, to ensure timely delivery of equipment and spare parts to customers, operational cash flow before inventory buildup at healthy level
- Strong cash conversion supports continued investment in infrastructure, innovation and 2017-2026 growth strategy
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Notes: ¹ Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets.
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Stepping up investments to accelerate speed and improve scale
- CAPEX to increase ~200bp on average in the next four years to around 4.5% without R&D investments
- Objective is to best serve customer needs and capture growth opportunities from changing market dynamics
- Ahead of the growth curve, Marel stepped up market coverage and undertook important initiatives to create more agility and flexibility of operations
- Key focus going forward is on automating and digitizing the end-to-end spare parts handling to ensure shorter lead times and adapt to a changing mix in the order book
- Aftermarket now 40% of our revenues and target for YE26 that service, spares and software combined will contribute 50% of total revenues
- Improvement projects to streamline the back-end, as well as automating and digitizing the manufacturing platform, supply chain and aftermarket
- R&D capitalized investments are ~1.0-1.6% of revenues, total R&D effect on P&L is ~6%
- CAPEX investments is one of the drivers for growth and improved gross profit margins in line with our medium term targets
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Notes: 1 Capital expenditures net of proceeds from sale of non-current assets and excluding the investments in right of use assets.
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...to support organic growth
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Launch of new Demo Center in Campinas, Brazil
Video
Stepping up market coverage and frontline investments
- Investments in new facilities to support growth in key markets
- In July, Marel opened a new 4,700m² office and demo center facility in Campinas, Brazil, Marel's first in Latin America
- New facilities opening in Shanghai, China in November 2021
- Enhanced and accelerated digital approach, implementing online tools to display our solutions, engage with customers, and service them through remote augmented reality (AR)
- Marel live, innovative and interactive online format instead of traditional trade shows
- Virtual Progress Point, with full 3D models of our equipment
- Marel webshop, an easy way to do business with us online and around the clock
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New global distribution center
To transform end-to-end spare parts handling and shorten lead times to customers
- Marel is a trusted maintenance partner, 3Q21 was a record quarter in spare parts deliveries
- Objective to consolidate spare part operations from multiple warehouses/manufacturing sites to one Global Distribution Center and regional hubs for fast-moving parts
- Next to the main Global Distribution Center we will have regional distribution centers and Local Hubs to be close to our customers where needed
- Will improve the customer experience when ordering spare parts, a single point of contact rather than multiple
- Will enable e-business on spare parts via a special customer portal integration
- One central stocking point to improve transparency of stock and reduce excess stock
- Reducing back office complexity with fully digitalized ordering process and automatic fulfillment of orders
- Reduces transportation costs and overall carbon footprint
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Automating and digitizing the manufacturing platform to accelerate speed and improve scale
- Investments in our manufacturing platform with the aim to automate and digitize our processes
- Providing end-to-end traceability of goods flow and improving shop floor planning
- Automation in warehouse and goods movement through robotic processes
- Creating more agility to meet changes in customer demands
- Consolidation of warehouses for increased inventory oversight and optimization
- Increasing our footprint to be able to deliver on future organic growth
- Improving working conditions for our most important assets, our people
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...and returning value to shareholders
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Capital returns to shareholders
Marel has consistently returned capital to shareholders while expanding the business and maintaining leverage levels
- Excess capital used to stimulate growth and value creation
- Dividend or share buyback targeted at 20-40% of net profits
- Since 2016, Marel has acquired 7 companies, whereby MPS was the largest and added primary processing capabilities to the Marel full-line offering in the meat sector
- Acquisitions are made with a strategic aim of becoming a full-line provider to the poultry, meat and fish industries
- With a leverage ratio of 0.9x, Marel has the financial strength to support strategic actions in the ongoing consolidation wave, in line with the company's growth strategy
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Notes: ¹ Share buybacks include purchase of treasury shares and expenditures relating to formal share buyback programs.
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Fully committed to reach our ambitious growth targets
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12% average annual growth target from 2017 - 2026¹
Business mix split
Service / Spares
Aftermarket
~40%
Service / Spares / Software
Aftermarket
~50%
Long-term targets YE26
- 12% average annual revenue growth in 2017-2026¹
- 50% of revenues to come from service, spares and software
- Basic EPS to grow faster than revenues
- Innovation promise of 6% of revenues
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Notes: ¹ Growth is not expected to be linear but based on opportunities and economic fluctuations. Operational results may vary from quarter to quarter due to general economic developments, fluctuations in orders received and timing of deliveries of larger systems
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Arni Oddur Thordarson
Chief Executive Officer
Linda Jonsdottir
Chief Financial Officer
Arni Sigurdsson
Chief Strategy Officer
& EVP Strategic Business Units
Q&A panel
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Capital Markets Day 2021
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Director of Investor Relations
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Investor Relations
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Investor Relations
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TRANSFORMING FOOD PROCESSING
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Thank you
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TRANSFORMING FOOD PROCESSING
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Appendix
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Financial highlights 9M2021
Strong organic growth in orders received, and robust cash flow generation
- Orders received up 20% year-on-year, three sequential quarters of strong orders in Q1-Q3 2021
- Revenues of EUR 993m, up 11.1% YoY
- Aftermarket, comprising of services, spare parts and service level agreements, represented ~40% from solid recurring aftermarket revenues
- Order book was EUR 528m, up 21.5% YoY, and at similar levels as the record order book in 1Q18, translating to a book-to-bill ratio in 9M21 of 1.11
- Cash flow from operating activities before interest and tax in the first nine months was EUR 157.8m (9M20: 178.7m). Free cash flow 9M21 at EUR 100.2m (9M20: 122.8m)
- Leverage was 0.9x at the end of 3Q21 well below the targeted capital structure of 2-3x
Revenues
EUR m
EBIT¹ margin
%
Orders received
EUR m
Free cash flow²
EUR m
Order book³
EUR m
Leverage
Net debt/EBITDA
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Capital Markets Day 2021
Notes: ¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and beginning in Q4 2020 adjusted for acquisition related costs.
² Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets.
³ Including acquired order book of Curio and PMJ of EUR 4.2m in 1Q21.
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Strong order book
Order book remains healthy with very strong orders received at new record levels
- A strong order book of EUR 528m, representing 39% of 12-month trailing revenues
- Order book remains healthy with strong orders received
- Order book consists of orders that have been signed and financially secured with down payments/letters of credit
- SLA contracts including spare parts are included in the order book
- Low customer concentration with no customer accounting for more than 5% of the total revenues
- Strong orders received in the poultry industry for the last two quarters supporting stronger volume and improved industry mix
| Order book % trailing 12-month revenues | 40% | 32% | 34% | 36% | 39% | 39% |
|---|---|---|---|---|---|---|
| Book-to-bill ratio | 0.99x | 0.95x | 1.00x | 1.11x | 1.13x | 1.09x |
Capital Markets Day 2021
Notes:¹ The order book reflects Marel's estimates, as of the relevant order book date, of potential future revenues to be derived from contracts for equipment, software, service and spare parts which have been financially secured through down payments and/or letters of credit in line with the relevant contract terms. These estimates reflect the estimated total nominal values of amounts due under the relevant contracts less any amounts recognized as revenues in Marel's financial statements as of the relevant order book date.² Orders received represents the total nominal amount, during the relevant period, of customer orders for equipment, software, service and spare parts registered by Marel.³ Including acquired order book of MAJA of EUR 2m.⁴ Including acquired order book of TREIF of EUR 5m in 4Q20.⁵ Including acquired order book of Curio and PMJ of EUR 4.2m.
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Well diversified revenues streams
Strong track record of a well diversified revenue structure across both industries and geographies, and 40% of total revenues deriving from recurring services and spare parts revenues
Revenue split by segment
- Lower orders received for Marel Poultry early in 1Q21 had an impact on revenues and industry mix. Strong orders in Q2 - Q3 and pipeline will increase volume with foreseen more favorable industry mix, resulting in higher operating profits
- Other revenues constitute revenues from for example acquisition of TREIF within bread and dairy
Revenue split by geography
- Revenues from Asia and Oceania steadily accelerating as requirement for automation, digitalization and food safety is increasing in developing markets
- Underlying market strength in North America has driven consistent revenue contribution from the region over the last years
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Industry performance
Global reach and focus on full-line offering across the poultry, meat and fish industries counterbalance fluctuations in customer demand
Poultry
Revenues and EBIT¹ margin
EUR m, %
Poultry revenues (EUR m) Poultry EBIT (%)
- Full-line offering based on standardized and modularized building blocks. With the most complete product range and one of the largest installed base worldwide, delivering the highest portion of service revenues. Focus on roll-out of innovative products and market penetration through cross-selling of secondary and further processing solutions.
- Orders received for Marel Poultry were strong in 2Q21 and 3Q21, supporting stronger volume going forward with a good product mix. Pipeline remains strong.
- On the back of a stronger order book and pipeline, volume will continue to increase with foreseen more favorable mix, resulting in higher operating profits.
Meat
Revenues and EBIT¹ margin
EUR m, %
Meat revenues (EUR m) Meat EBIT (%)
- Full-line offering following strategic bolt-on acquisitions. Focus on strong product development, increased standardization and modularization, as well as market penetration and further cross- and upselling
- Orders received in 3Q21 for Marel Meat were softer than in 1Q21 and 2Q21. Pipeline shows good opportunities in all regions and expectation of higher conversion of pipeline into orders in coming quarters.
- Management continues to target medium and long-term EBIT¹ margin expansion for Marel Meat, and management has accelerated market coverage and operational improvement initiatives.
Fish
Revenues and EBIT¹ margin
EUR m, %
Fish revenues (EUR m) Fish EBIT (%)
- Full-line offering to the wild whitefish industry since 2020, and objective to reach full-line offering across farmed and wild whitefish and salmon through continued focus on innovation and M&A.
- Orders received in 3Q21 for Marel Fish were solid. Strong pipeline for both small and medium-sized projects. Q4 started on a strong note in the fish industry with key large projects secured.
- Management continues to target medium and long-term EBIT¹ margin expansion for Marel Fish, higher volume is needed to deliver sufficient margin improvement.
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Notes: ¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and beginning in Q4 2020 adjusted for acquisition related costs.
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Net working capital
- Operating cash flow can fluctuate with the development of orders received and revenue levels, e.g. if orders received grow faster than revenues, working capital improves
- Significant inventory buildup of EUR 51.9m in 9M21, tying up capital and cash flow, to ensure timely delivery of equipment and spare parts to customers, operational cash flow before inventory buildup at healthy level
Net working capital
EUR m
| 2018 | 2019 | 2020 | 9M | ||
|---|---|---|---|---|---|
| 2020 | 2021 | ||||
| (+) Inventories | 149.9 | 166.8 | 199.9 | 180.6 | 251.8 |
| (+) Trade receivables | 138.8 | 160.0 | 151.3 | 111.7 | 153.8 |
| (+) Other receivables | 45.0 | 46.8 | 53.1 | 53.0 | 51.1 |
| (-) Trade payables | -217.0 | -200.5 | -222.7 | -208.1 | -238.5 |
| (-) Contract liabilities | -168.1 | -179.2 | -190.5 | -171.3 | -229.0 |
| Net working capital | -51.4 | -6.1 | -8.9 | -34.1 | -10.8 |
| -6.1 | -8.9 | -10.8 | |||
| -0.5% | -0.7% | 2.8%¹ | -0.8%¹ | ||
| -4.3% | -34.1 | ||||
| -51.4 | |||||
| Net working capital | % of revenues |
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Notes: ¹ September net working capital as a % of trailing twelve months revenues
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Strong capital structure and sustainability linked financing
- Marel targets a leverage ratio of 2-3x net debt / EBITDA
- With a leverage ratio of 0.9x and committed liquidity of EUR 674.3m² at the end of Sept 2021, Marel has the financial strength to support strategic actions in the ongoing consolidation wave, in the line with the company's growth strategy
- The Group has a EUR 700m multi-currency syndicated credit facility agreement with seven international banks
- EUR 608.1m headroom to support strategic opportunities
- As of 30 Sep 2021, Marel is using EUR 91.9m of the facility as drawn debt and issued guarantees
- The facility has a sustainability incentive structure with KPI's in line with Marel sustainability objective
- Current Margin 80 bps + EURIBOR and can vary in line with leverage ratio
- Bank syndicate of ABN Amro-ODDO, BNP Paribas, Danske Bank, HSBC, ING, Rabobank, and Unicredit
Schuldschein promissory note
- 2019 Marel entered the Schuldschein market with a EUR 140m note with a mixture of floating and fixed tranches in maturities of 5 and 7 years
- Vast majority placed in the 5-year tranche priced at 110bp over EURIBOR and the remainder placed in the 7-year tranche priced at 130bp over EURIBOR
- Joint bookrunners were ABN AMRO, Bayerische Landesbank and UniCredit
Total borrowings and liabilities as of 30.09.2021¹
EUR m
Borrowing maturity schedule as of 30.09.2021¹
EUR m
Capital Markets Day 2021
Notes: ¹ Excluding EUR 1.7m capitalized finance charges. ² Committed liquidity includes cash on hand and available headroom on credit facility.
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