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Marel Investor Presentation 2022
2191_rns_2022-07-28_e376955e-e5ae-44ef-b4ee-28f329bd661e.pdf
Investor Presentation
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imarel
Q2 2022
Investor meeting
28 July 2022
cmarel
Q2 2022 results
Investor meeting
Arni Oddur Thordarson
Chief Executive Officer
Linda Jonsdottir
Chief Operating Officer
28 July 2022
marel
Orders received at a record level in the quarter
Orders received of EUR 472 million at new price/cost level, up 27.1% year-on-year
- Third sequential quarter of record orders received, order book and pipeline remain strong fueled by pioneering solutions and scale up in local market coverage globally
- Newly acquired Wenger and Sleegers contributed EUR 16.9 m to orders received in 2Q22
- Demand from the poultry and fish industries on a strong run rate, while the outlook is softer for meat, and continued momentum in aftermarket
- Proactively ramped up sales and service coverage ahead of the growth curve, S&M cost peaking in the quarter at 14% of sales with clear target to reach 12%
- Spare parts sales at a record level for four sequential quarters underpinning investments to transform spare parts handling
- Continued supply chain disruption and inflation at high levels resulting in inefficiencies in manufacturing and higher costs associated with missing parts, timely delivery and slower ramp up of revenues than planned
- Marel is targeting gradual step up in revenue growth in 2H22 and into 2023 on the back of a strong order book where the full benefit of pricing actions are incorporated to improve price/cost coverage
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Balanced revenue mix
Record orders received and clear path towards historical profitability. Focus on ramp up in coming quarters in line with high orders received and order book.
Orders received were at an all-time high in 2Q22, driven by the automation need within the industry in line with rising costs for energy and labor. Very good mix in orders received in the quarter with growth in both primary, secondary and consumer-ready solutions. Large greenfield orders from the Middle East and Balkan region. Marel presented its new cutting-edge technology for poultry processors at VIV Europe, e.g. Athena, breast deboning process, and Nuova-I, intelligent evisceration solution which enables optimal processing with deviant products sizes or shapes. Strong pipeline and outlook for 2H22, supporting stronger volume going forward with a favorable product mix.
EBIT¹ margin impacted by margin pressures due to inefficiencies related to supply chain bottlenecks and time lag in price/cost as price increases filter through.
Management targets short-term EBIT margin expansion for Marel Poultry. On the back of a healthy order book and good mix in pipeline, volume is expected to gradually improve throughout the year with foreseen better price and product mix, resulting in gradual improvements in operational performance.
Meat
Operational performance at unacceptable levels in the quarter, impacted by lockdowns in China, geopolitics and sanctions. Sales in consumer-ready solutions below targets. High focus on making necessary changes to achieve improved operational performance.
High inflationary environment and focus on sustainability are shifting consumer preferences towards poultry, fish, and plant-based at the cost of meat.
High focus and commercial efforts in selling pioneering solutions that are head on with current challenges in the meat industry. Marel presented 15 new products and unique solutions for the meat industry at IFFA trade show. Acquisition of Sleegers Technique, announced on 22 April, will benefit sales in the consumer-ready, and prepared foods segments.
Orders received in 2Q22 for Marel Meat were soft, in particular in primary projects, due to lockdowns in China, geopolitics and sanctions, as well as rising costs in an inflationary environment.
Revenues impacted by lower orders received, unbalanced load between factories and inefficiencies related to supply chain bottlenecks.
Fish
Orders received at record levels, high focus on ramping up revenues to deliver a step up in operational performance.
Orders received in 2Q22 for Marel Fish were strong, with significant organic growth. Customers are investing in larger solutions and continued automation investments in the salmon industry where prices are high and appetite for investment in automation is good. Continued strong pipeline for larger projects in salmon, while momentum in whitefish gradually picking up, and high conversion from pipeline into orders expected in coming quarters.
Revenues below target. Full focus on resolving part availability in partnership with suppliers and increasing supply chain efficiency.
Integration of newly acquired entities on fast track and coloring operational performance in the quarter and this year.
Management continues to target medium and long-term EBIT margin expansion for Marel Fish. Order book targeted to convert faster into revenues in addition to high focus on improved productivity and cost efficiency.
Notes: All financial numbers relate to the Q2 2022 Condensed Consolidated Interim Financial Statements. Other segment accounts for around 7% of the revenues in Q2 2022. Revenues from Wenger have been allocated to the Other segment as of closing 9 June 2022 and will become part of segment reporting alongside the poultry, meat and fish business segments as of Q3 2022. ¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and acquisition related costs.
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Operational performance below expectations
EBIT target for year-end 2023 revised to 14-16% run-rate, allowing for 2% contingency buffer due to volatility in market conditions
- Gross profit was 33.5% in the quarter (1Q22: 36.1%, 2Q21: 36.2%)
- Lower productivity due to part availability and supply chain challenges
- High costs and inflation, time-lag between increase in price and cost having an effect
-
Non-recurring costs related to improvement projects, e.g. transformational initiatives in the end-to-end spare parts journey
-
Operating expenses
- S&M 13.9% of revenues (1Q22: 13.8%, 2Q21: 12.2%), compared to 11.7% of orders received. Customer engagement high in the quarter, including trade show participation at Barcelona (fish), IFFA (meat) and VIV (poultry), showcasing pioneering solutions that underpin Marel's leadership in the industry
- G&A 7.5% of revenues in the quarter (1Q22: 7.7%, 2Q21: 6.2%), impacted by one-off consultancy costs and implementation of Shared Services
- R&D 5.8% in the quarter (1Q22: 6.1%, 2Q21: 6.1%), in line with mid-term YE23 target of 6.0%
- Results not adjusted for non-recurring costs, except for PPA and acquisition related costs
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.
marel
Clear set of actions and levers to reach 14-16% EBIT
- Financial targets for year-end 2023 will be achieved through a balanced mix of initiatives of efficiency gains and growth, supported by refinement of the operating model
- With actions already enacted, management expects EBIT margin to gradually improve by 1.5% from announced reduction in workforce (cost reduction fully visible by YE22) and 2% from executed pricing action (filtering through in next 3-4 quarters)
- Further initiatives are centered around price/cost discipline, OPEX efficiency, and ramp up of revenues, which are expected to add 1.5%, 2% and 3% respectively to margin expansion towards the YE23 target run-rate of 14-16% EBIT
- Marel has actively raised prices in recent quarters that will gradually filter in through in the next 3-4 quarters, service & spares takes on average 6-8 weeks to price through, standard equipment between 3-6 months and larger projects on average 9-12 months
- Cash CAPEX target unchanged and expected to increase to on average 4-5% of revenues in 2021-2026, thereafter, returning to more normalized levels
Cmarel
Financial performance
Linda Jonsdottir,
Chief Operating Officer
28 July 2022
marel
Financial highlights – Q2 2022
Record orders, margins below expectations, price and cost measures enacted to improve operational performance
- Revenues up by 21.3% YoY, where organic growth was 3.5% QoQ and 16.1% YoY, below targets when compared to average orders received in past 3-4 quarters
- Aftermarket represented 41% of total revenues (1Q22: 40%, 2Q21: 40%)
- Order book at quarter-end includes acquired order book of EUR 81m from Wenger and Sleegers
- Gross profit margin was 33.5% in the quarter (1Q22: 36.1%, 2Q21: 36.2%)
- Operating margins below expectations, hampered by cost pressures due to inflation, logistics and continued supply chain disruption, in addition to slower ramp up of revenues than planned
- Marel has actively raised prices, time lag varies by business mix (aftermarket ~6-8 weeks, standard equipment ~3-6 months, and larger projects ~9-12 months)
- Operating cash flow was EUR 18.4m, and free cash flow was negative due to lower operating performance, continued inventory buildup and investments, tying up capital and cash flow
- Leverage ratio at quarter-end was 3.8x, following the acquisition of Wenger, focus forward on deleveraging to reach targeted capital structure of 2-3x net debt to EBITDA
Revenues
EUR m
Orders received
EUR m
Order book
EUR m
EBIT¹ margin
%
Free cash flow²
EUR m
Leverage
Net debt/EBITDA
Notes: ¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and 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 Net debt (including lease liabilities) / Pro-forma LTM EBITDA.
marel
Diversified revenue base
Strong track record of a well diversified revenue structure across industries, geographies and business mix, with 41% of total revenues from recurring aftermarket services and spares
Revenues by industry %
Revenues by geography %
Revenues by business mix %
Notes: 1 Revenues from Wenger have been allocated to the Other segment as of closing 9 June 2022 and will become part of segment reporting alongside the poultry, meat and fish business segments as of Q3 2022. 2 Equipment revenues are comprised of revenues from greenfield and large projects, standard equipment and modernization equipment, and related installations. 3 Aftermarket revenues are comprised of revenues from maintenance, service, and spare parts.
marel
Strong order book
A record high order book of EUR 775 million, representing 52.8% of 12-month trailing revenues
- The acquisitions of Wenger and Sleegers positively impacting the order book by EUR 80.9m in the quarter
- The book-to-bill ratio in the quarter was 1.19, compared to an average of 1.13 in the past four quarters (3Q21-2Q22)
- Marel is targeting gradual step-up in revenue growth in 2H22 and into 2023 on the back of a high order book and strong pipeline
- Order book consists of orders that have been signed and financially secured with down payments/letters of credit
- Vast majority of the order book are greenfield projects while spare parts and standard equipment run faster through the system
- Low customer concentration with no customer accounting for more than 5% of total annual revenues
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. ⁵ Including acquired order book of Curio, PMJ and Valka of EUR 12m. ⁶ Including acquired order book of Wenger and Sleegers of EUR 81m.
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Earnings per share
Marel's management targets Earnings per Share to grow faster than revenues
- Cash flow reinvested in innovation, infrastructure, strategic actions and global reach to sustain growth and value creation
- Basic earnings per share were EUR 1.27 cents (1Q22: 2.87 cents, 2Q21: 3.14 cents) and earnings per share trailing twelve months was EUR 11.00 cents in 2Q22 (2Q21: 13.75)
- To meet Marel's obligations under share incentive programs with employees, a share buyback program was initiated for up to 4m shares on Nasdaq Iceland and up to 1m shares on Euronext Amsterdam
- As part of the buyback program, Marel has purchased 4.1m shares (EUR 17.6m) in the period 1 June 2022 to 30 June 2022
Earnings per share (EPS)
Trailing twelve months, euro cents
Notes: 1 An offering of 100 million shares issued and sold in connection with the dual listing in 2Q19, increasing the total share capital to 771 million shares.
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Income statement: Q2 2022
Revenues in Q2 2022 were 397 million, gross profit was EUR 133 million or 33.5% of revenues, and the adjusted EBIT was EUR 25 million or 6.3%
| In EUR million | Q2 2022 | Of Revenues | Q2 2021 | Of Revenues | Change |
|---|---|---|---|---|---|
| Revenues | 397.3 | 327.5 | +21.3% | ||
| Cost of sales | (264.2) | (208.9) | +26.5% | ||
| Gross profit | 133.1 | 33.5% | 118.6 | 36.2% | +12.2% |
| Selling and marketing expenses | (55.3) | 13.9% | (39.8) | 12.2% | +38.9% |
| General and administrative expenses | (29.7) | 7.5% | (20.2) | 6.2% | +47.0% |
| Research and development expenses | (23.1) | 5.8% | (20.0) | 6.1% | +15.5% |
| Adjusted result from operations¹ | 25.0 | 6.3% | 38.6 | 11.8% | -35.2% |
| Non-IFRS adjustments | (10.2) | (5.6) | +82.1% | ||
| Result from operations | 14.8 | 3.7% | 33.0 | 10.1% | -55.2% |
| Net finance costs | (1.9) | (1.9) | 0.0% | ||
| Share of result of associates | (0.8) | (0.4) | +100.0% | ||
| Result before income tax | 12.1 | 30.7 | -60.6% | ||
| Income tax | (2.5) | (7.4) | -66.2% | ||
| Net result | 9.6 | 2.4% | 23.3 | 7.1% | -58.8% |
Notes: The income statement as presented above provides an overview of the quarterly Adjusted result from operations, which management believes to be a relevant Non-IFRS measurement.¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and acquisition related costs.
marel
Income statement: H1 2022
Revenues in H1 2022 were 769 million, gross profit was EUR 267 million or 34.7% of revenues, and the adjusted EBIT was EUR 56 million or 7.3%
| In EUR million | H1 2022 | Of Revenues | H1 2021 | Of Revenues | Change |
|---|---|---|---|---|---|
| Revenues | 768.9 | 661.5 | +16.2% | ||
| Cost of sales | (501.8) | (418.5) | +19.9% | ||
| Gross profit | 267.1 | 34.7% | 243.0 | 36.7% | +9.9% |
| Selling and marketing expenses | (106.6) | 13.9% | (79.8) | 12.1% | +33.6% |
| General and administrative expenses | (58.3) | 7.6% | (45.9) | 6.9% | +27.0% |
| Research and development expenses | (45.9) | 6.0% | (40.7) | 6.2% | +12.8% |
| Adjusted result from operations¹ | 56.3 | 7.3% | 76.6 | 11.6% | -26.5% |
| Non-IFRS adjustments | (16.5) | (13.5) | +22.2% | ||
| Result from operations | 39.8 | 5.2% | 63.1 | 9.5% | -36.9% |
| Net finance costs | 1.5 | (6.3) | -123.8% | ||
| Share of result of associates | (1.6) | (0.5) | +220.0% | ||
| Result before income tax | 39.7 | 56.3 | -29.5% | ||
| Income tax | (8.4) | (11.8) | -28.8% | ||
| Net result | 31.3 | 4.1% | 44.5 | 6.7% | -29.7% |
Notes: The income statement as presented above provides an overview of the quarterly Adjusted result from operations, which management believes to be a relevant Non-IFRS measurement.¹ Operating income adjusted for PPA related costs, including depreciation and amortization, and acquisition related costs.
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Balance sheet: Assets
Q2 2022 Condensed Consolidated Interim Financial Statements
- Supply chain issues have escalated in recent months, whereby there are still delays in availability of parts which impact operations
- Balance sheet used to mitigate supply chain challenges
- Continued inventory buildup in the quarter, tying up capital and cash flow, to support timely delivery of equipment and spare parts to customers
- Inventories increased by EUR 91.6m in the quarter, thereof EUR 54.1m due to the acquisitions of Wenger and Sleegers
- The increase in goodwill relates to the acquisitions of Wenger and Sleegers
- Intangible assets increased due to the acquisition of Wenger (EUR 194m) and Sleegers (EUR 5m)
Assets
| In EUR million | 30/06 2022 | 31/12 2021 | Change |
|---|---|---|---|
| Property, plant and equipment | 316.2 | 228.7 | +38.3% |
| Right of use assets | 41.1 | 40.5 | +1.5% |
| Goodwill | 898.0 | 705.2 | +27.3% |
| Intangible assets | 556.0 | 357.2 | +55.7% |
| Investments in associates | 11.1 | 12.7 | -12.6% |
| Other non-current financial assets | 0.9 | - | +100.0% |
| Derivative financial instruments | 0.7 | - | +100.0% |
| Deferred income tax assets | 22.3 | 18.1 | +23.2% |
| Non-current assets | 1,846.3 | 1,362.4 | +35.5% |
| Inventories | 392.6 | 273.4 | +43.6% |
| Contract assets | 74.4 | 69.6 | +6.9% |
| Trade receivables | 215.7 | 154.7 | +39.4% |
| Derivative financial instruments | 2.5 | 1.1 | +127.3% |
| Other receivables and prepayments | 104.4 | 66.7 | +56.5% |
| Cash and cash equivalents | 100.2 | 77.1 | +30.0% |
| Current assets | 889.8 | 642.6 | +38.5% |
| Total Assets | 2,736.1 | 2,005.0 | +36.5% |
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Balance sheet: Equity and liabilities
Q2 2022 Condensed Consolidated Interim Financial Statements
- Contract liabilities increased by EUR 43.5m in the quarter, thereof 33.5m from the acquisition of Wenger
- Trade and other payables increased by EUR 56.2m in the quarter, mostly due to the timing of payments and acquisition of Wenger
- On 27 April 2022, Marel signed a new EUR 150.0m multi-currency bridge facility, which has a 12-month term and two six-month extension options at Marel's discretion
- In 2Q22, Marel drew USD 530.0m on its committed revolving facility in order to finance the Wenger acquisition and utilized the full EUR 150.0m to provide operational liquidity
- EUR 100.0m was repaid on the revolving facility in the quarter
- Committed liquidity of EUR 237.3m at the end of 2Q22, including fully committed all-senior funding in place until 2025
- Leverage ratio at 3.8x at quarter-end due to the acquisition of Wenger with vast majority in cash consideration, FX impact from stronger USD resulting in higher debts in EUR, in addition to overall lower EBITDA than expected
Assets
| In EUR million | 30/06 2022 | 31/12 2021 | Change |
|---|---|---|---|
| Group Equity | 1,014.4 | 1,023.1 | -0.9% |
| Borrowings | 828.2 | 234.9 | +252.6% |
| Lease liabilities | 31.4 | 30.9 | +1.6% |
| Deferred income tax liabilities | 91.7 | 92.1 | -0.4% |
| Provisions | 5.2 | 4.0 | +30.0% |
| Other payables | 6.6 | 22.7 | -70.9% |
| Derivative financial instruments | - | 0.4 | -100.0% |
| Non-current liabilities | 963.1 | 385.0 | +150.2% |
| Contract liabilities | 384.3 | 306.0 | +25.6% |
| Trade and other payables | 339.1 | 259.4 | +30.7% |
| Derivative financial instruments | - | 0.8 | -100.0% |
| Current income tax liabilities | 15.0 | 10.7 | +40.2% |
| Lease liabilities | 10.6 | 10.5 | +1.0% |
| Provisions | 9.6 | 9.5 | +1.1% |
| Current liabilities | 758.6 | 596.9 | +27.1% |
| Total liabilities | 1,721.7 | 981.9 | +75.3% |
| Total equity and liabilities | 2,736.1 | 2,005.0 | +36.5% |
marel
Cash flow bridge
Cash flow colored by continued inventory buildup, investments and mitigating supply chain challenges
- Cash flow from operating activities before interest and tax was EUR 18.4m in 2Q22 (1Q22: 32.7m, 2Q21: 77.9m)
- Free cash flow was EUR -7.9m in 2Q22 (1Q22: 14.6m, 2Q21: 54.6m)
- Cash flow in the quarter was impacted by negative development in working capital, continued investment and inventory buildup, tying up capital and cash flow, to support timely delivery of equipment and spare parts to customers
- Cash CAPEX excluding R&D investments in 2Q22 were EUR 14.2m (1Q22: 7.7m, 2Q21: 10.0m) or 3.6% of revenues
- Cash capital expenditures (Cash CAPEX) excluding R&D investments are expected to increase to on average 4-5% of revenues in 2021-2026, thereafter, returning to more normalized levels
Notes: 1 Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets. 2 Currency effect, change in capitalized finance charges, movement in lease liabilities, and options exercised.
marel
Key performance metrics
Proven track record of earnings results and value creation
Earnings per share (EPS)
Trailing twelve months, euro cents
Free cash flow¹ EUR m
Net debt / EBITDA
Leverage (x)
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 and overall operational improvement and value creation
Cash conversion
- Free cash flow in the quarter impacted by low operating performance, continued inventory buildup and investments
- Historically, Marel's strong cash generation has enabled both deleveraging and the undertaking of strategic acquisitions as well as supported continued investments in infrastructure, innovation and strategic inventory buildup
Focus on deleveraging towards target
- Leverage 3.8x at quarter-end due to the acquisition of Wenger with vast majority in cash consideration, FX impact from stronger USD resulting in higher debts in EUR, in addition to overall lower EBITDA than expected
- Focus forward on deleveraging to reach targeted capital structure of 2-3x net debt to EBITDA
Notes: ¹ Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets. ² Net debt (including lease liabilities) / Pro-forma LTM EBITDA.
Charel
Business and outlook
Arni Oddur Thordarson,
Chief Executive Officer
28 July 2022
marel
New pioneering solutions at recent trade shows
Finally connecting with customers and partners in person, in Q2 2022 we showcased our pioneering solutions that drive automation, digitalization and sustainability at Barcelona for seafood, IFFA for meat and VIV for poultry
IMPAQT and Nuova-I for optimal performance
- Software solutions driving optimal performance allowing for remote insights and improved services
- IMPAQT is an overarching software package that analyzes loss and standstills in all installed primary processing equipment and does root cause analysis - remotely
- Nuova-I enables optimal processing with deviant product sizes or shapes, while optimum machine performance can be achieved remotely
Spectra and Athena new cutting-edge technology
- At the VIV exhibition both software and hardware solutions made an entrance and demonstrate how they will shape the future of food processing, two examples are the Spectra and Athena
- Athena will transform the breast deboning processing and Spectra is a soft contaminant detector or next generation of inspection technology using hyperspectral camera technology, developed in partnership with Tomra
Notes: 1 Free cash flow defined as cash generated from operating activities less taxes paid and net investments in PP&E and intangible assets. 2 Net debt (including lease liabilities) / Pro-forma LTM EBITDA.
marel
Eindhoven, NL
Global Distribution Center
A state-of-the-art, scalable and sustainable distribution center built for the future, ensuring Marel can meeting changing customer demands
Trusted maintenance partner for our customers reflected in record orders for spares
- As part of Marel's effort to set up a dedicated supply chain for our entire spare parts business, we are investing in a state-of-the-art global distribution center in Eindhoven, Netherlands
- Fully automated and digitalized physical fulfillment center, strategically located close to our major distribution partners
- Will enable us to better serve our customers with spare parts, shorten lead times substantially and grow our maintenance business
Other transformational initiatives to improve the end-to-end spare parts journey
- In 2021, initiated the split between inventories for spare parts and equipment at key spare parts production facilities, allowing for better procurement strategies and planning of inventories to meet the specific needs for manufacturing and spare parts
- First step concluded in the quarter by separation of spare parts from parts used in manufacturing in the US
- Continued investments in our supply chain and manufacturing platform will be a key enabler for Marel's organic growth target and will add to non-recurring costs in the short term
Key objective in the 2026 growth strategy is for 50% of revenues to come from service and software
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Successful closing of Wenger
Platform investment into new and attractive growth markets, Wenger has a diversified and loyal customer base driving healthy profitability and EBIT margin of 14-15%, strong cash flow and solid return on invested capital
- Wenger to form a new business segment and fourth pillar of the business model in addition to poultry, meat, and fish, and part of segment reporting as of Q3 2022 financial results
- The acquisition is expected to be margin and earnings enhancing, Wenger's revenues in 2022 are expected to be USD 190 million and EBITDA to be USD 32-35 million; pro-forma the Wenger business is around 10% of Marel's total revenues and 12% of combined EBITDA
- Over 500 employees located in close vicinity to Marel in Kansas in the US, Valinhos in Brazil, and Kolding in Denmark
- Total investment for the acquisition is USD 540 million and the transaction multiple corresponds to 14x EV/EBITDA adjusted for expected tax benefits of USD 60-70 million
- Marel is committed to invest in the combined business to drive commercial synergies and accelerate growth. Planned initiatives include expanding manufacturing capacity to respond to high demand in Wenger's core markets, in particular pet food
- The two companies have complementary technology and product portfolios that will strengthen the value proposition with line solutions for processors of plant-based protein, where Marel will add capabilities, such as weighing, sorting, inspection, low-pressure forming and thermal treatment, all aimed at ensuring high-nutrition products processed in a safe and sustainable way
- Jesper Hjortshøj, VP Business Development, and former VP of Prepared Foods will lead the Wenger business
Attractive and growing end-markets
- Total size of core end markets EUR +150 billion, with expected growth of 5-7% p.a. until 2026
- Addressable solutions market of EUR 2 billion with 4-6% annual growth
High recurring revenue
- Growing installed base drives increased aftermarket levels, now around 45% of total revenue
- Marel's global reach and digital platform will support a more proactive aftermarket approach
Diversified customer base
- Strong foothold in the North American market
- Opportunities in expanding global reach even further leveraging Marel's wider sales and service network to improve customer coverage and engagement
As % of Wenger revenues 2019-21
Pet food
Food & other
Aqua feed
Aftermarket
Equipment
Europe, Middle East and Africa
Americas
Asia and Oceania
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Clear set of actions and levers to reach 14-16% EBIT
- Financial targets for year-end 2023 will be achieved through a balanced mix of initiatives of efficiency gains and growth, supported by refinement of the operating model
- With actions already enacted, management expects EBIT margin to gradually improve by 1.5% from announced reduction in workforce (cost reduction fully visible by YE22) and 2% from executed pricing action (filtering through in next 3-4 quarters)
- Further initiatives are centered around price/cost discipline, OPEX efficiency, and ramp up of revenues, which are expected to add 1.5%, 2% and 3% respectively to margin expansion towards the YE23 target run-rate of 14-16% EBIT
- Marel has actively raised prices in recent quarters that will gradually filter in through in the next 3-4 quarters, service & spares takes on average 6-8 weeks to price through, standard equipment between 3-6 months and larger projects on average 9-12 months
- Cash CAPEX target unchanged and expected to increase to on average 4-5% of revenues in 2021-2026, thereafter, returning to more normalized levels
marel
Financial targets and dividend policy
Marel is targeting 12% average annual revenue growth from 2017-2026 through market penetration and innovation, complemented by strategic partnerships and acquisitions
| Mid-term targets by YE23 | 2017-2026 targets | FY17 | FY18 | FY19 | FY20 | FY21 | 1H22 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross profit | 40% | Revenue growth¹ | 12% | Organic | 4.9% | 12.5% | 5.4% | -5.4% | 4.4% | 13.4% |
| Acquired | 2.2% | 2.9% | 1.8% | 1.8% | 5.5% | 2.9% | ||||
| Total | 7.1% | 15.4% | 7.2% | -3.6% | 9.9% | 16.2% | ||||
| CAGR 2017-1H22 | 7.8% | |||||||||
| Innovation investment | 6% | Innovation investment | ~6% of revenues | 5.6% | 6.2% | 6.4% | 5.6% | 5.9% | 6.0% | |
| Earnings per share (TTM) | 18% | Earnings per share (TTM) | EPS to grow faster than revenues | 13.7 | 18.0 | 15.3 | 13.6 | 12.9 | 11.0 | |
| SG&A | 18% | Leverage | Net debt / EBITDA 2-3x | 1.9x | 2.0x | 0.4x | 1.0x | 1.0x | 3.8x | |
| Adj.EBIT | 14-16% | Dividend policy | 20-40% of net result | 30% | 30% | 40% | 40% | 40% | - |
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.
marel
Financial targets and dividend policy
Marel is targeting 12% average annual revenue growth from 2017-2026 through market penetration and innovation, complemented by strategic partnerships and acquisitions
| Mid-term targets by YE23 | 2017-2026 targets | |||
|---|---|---|---|---|
| Gross profit | 40% | Revenue growth¹ | 12% | In the period 2017-2026, Marel is targeting 12% average annual revenue growth through market penetration and innovation, complemented by strategic partnerships and acquisitions. Maintaining solid operational performance and strong cash flow is expected to support 5-7% revenue growth on average by acquisition. |
| • Marel’s management expects average annual market growth of 4-6% in the long term. Marel aims to grow organically faster than the market, driven by innovation and growing market penetration. | ||||
| • Management believes that market growth will be at a level of 6-8% in the medium term (2021-2026), due to catch up effect from the past five years and a very strong tailwind in the market. | ||||
| • Recurring revenues to reach 50% of total revenues by YE26, including software and services. | ||||
| Innovation investment | 6% | Innovation investment | ~6% of revenues | To support new product development and ensure continued competitiveness of existing product offering. |
| Earnings per share (TTM) | EPS to grow faster than revenues | Marel’s management targets Earnings per Share to grow faster than revenues. | ||
| SG&A | 18% | Leverage | Net debt / EBITDA 2-3x | The leverage ratio is targeted to be in line with the targeted capital structure of the company. |
| Adj.EBIT | 14-16% | Dividend policy | 20-40% of net result | Dividend or share buyback targeted at 20-40% of net result. Excess capital used to stimulate growth and value creation, as well as payment of dividends / funding share buybacks. |
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.
28 July 2022
Arni Oddur Thordarson
Chief Executive Officer
Linda Jonsdottir
Chief Operating Officer
Q&A
28 July 2022
Tinna Molphy
Director of Investor Relations
Marino Thor Jakobsson
Investor Relations
Investor Relations
+354 563 8001
[email protected]
@Marel_IR / $MAREL
DISCLAIMER
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FORWARD-LOOKING STATEMENTS
Statements in this press release that are not based on historical facts are forward-looking statements. Although such statements are based on management's current estimates and expectations, forward-looking statements are inherently uncertain.
We therefore caution the reader that there are a variety of factors that could cause business conditions and results to differ materially from what is contained in our forward-looking statements, and that we do not undertake to update any forward-looking statements.
All forward-looking statements are qualified in their entirety by this cautionary statement.
MARKET SHARE DATA
Statements regarding market share, including those regarding Marel's competitive position, are based on outside sources such as research institutes, industry and dealer panels in combination with management estimates.
Where information is not yet available to Marel, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.
Emarel
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