- Q2 2008 results - Good sales growth and operational results meet company´s goals

Marel Food Systems hf - Q2 Results

9.5% EBIT (proforma) in second quarter
 
•  Marel Food Systems‘ acquisition of Stork Food Systems took effect on 8 May
   2008 and Stork Food Systems is included in the company‘s accounts as of that
   date. 

•  Sales for the second quarter totalled EUR 145.0 million, compared with 72.6
   million for the same period the year before, representing an increase of
   99.8%. Proforma sales of Marel Food Systems and Stork Food Systems core
   business (excluding the Food and Dairy division of Stork) in the second
   quarter of 2008 totalled EUR 162.6 million, which is an increase of 8.2%
   compared with the same period in 2007, or about 11% on a fixed exchange
   rate. 

•  Profit from operations (EBIT) for the second quarter was EUR 11.1 million,
   which is 7.7% of sales, compared with EUR 3.4 million (4.7% of sales) for the
   same period the year before. Proforma profit from operations (EBIT) was EUR
   15.5 million, which is 9.5% of sales. 

•  Net finance costs for the period were positive.  Marel issued bonds in this
   quarter amounting to ISK 6 billion. Marel‘s operational currency is the Euro.
   The company‘s obligations related to the bond offering were changed to Euro
   commitments at a favorable point in time totalling EUR 47 million, creating a
   one-time exchange rate profit.
 
•  Net profit in the period from April to June 2008 amounted to EUR 10.1
   million, compared with EUR 7.4 million in 2007. 


Highlights of the first six months of 2008

•  Proforma sales of Marel Food Systems and Stork Food Systems core business for
   the first six months of the year totalled EUR 317.8 million, which is an
   increase of 8.5% compared with the same period in 2007, or 11.5% on a fixed
   exchange rate.
 
•  Profit from operations (EBIT) for the period was EUR 13.3 million, which is
   6.1% of sales, compared with EUR 6.7 million (4.6% of sales) for the same
   period last year. Proforma profit from operations (EBIT) was EUR 27.7
   million, which is 8.7% of sales.
 
•  Net interest bearing debt amounted to EUR 379.2 million at the end of June
   2008.
 
•  Equity totalled EUR 306.2 million and the equity ratio was 32.5% at the end
   of June 2008. 


Hörður Arnarson, CEO:

“We completed the formal merger of Marel and Stork Food Systems on the 8th of
May, marking a very important milestone in the company´s history. United, the
company has the critical mass and strength to follow the growth of its clients
into emerging markets in Eastern Europe, South America and Asia. 

Following three strategic acquisitions in the last two years, we have this year
focused on integration, organic growth and improving performance. In the second
quarter, Marel Food Systems' profit from operations (proforma) amounts to 9.5%
of sales from core businesses, and the company is showing strong internal
growth. For the first six months of the year, profit from operations (proforma)
as a percentage of sales is 8.7%, with an improvement between quarters, which
is in line with our goal of 9% for the year as a whole and over 10% for next
year.” 


Prospects 

Marel Food Systems‘ performance is in line with stated expectations at the end
of the first quarter when performance was expected to improve considerably
during the course of the year. As stated, synergies are beginning to emerge as
a result of the integration of the companies acquired in preceding years.
Proforma profit from operations (EBIT) for the second quarter is 9.5% of
turnover (8.7% for the first six months of the year), which is in line with the
company‘s stated goal of 9% for the year as a whole. The benefits of the
Scanvaegt and Marel merger under the Marel name, announced in the first
quarter, will begin to materialize in the third quarter and will not impact
fully until the fourth quarter. 

The integration of Marel Food Systems and Stork Food Systems is just beginning
and, as has been previously stated, is quite different in nature to the
integration of Marel and Scanvaegt. There is no overlap in the companies‘
product lines and one-time costs associated with the integration will therefore
be minimal. Initially, the focus will be on achieving synergies through the
merger of the companies‘ information systems, procurement, production and
marketing activities. These efforts have already begun. 

As in years past, seasonality will impact the company‘s performance in the
third quarter. 

The company‘s operating environment has been marked by significant increases in
raw material prices, as well as instability in global financial markets. So
far, the effects have been minimal. These developments present both threats and
opportunities. It is difficult to predict what effects these conditions will
have on the company‘s operations if they persist.