4.4% sales growth and 8.5% profit from operations (EBIT excluding one-time
costs)
Proforma sales of Marel Food System and Stork Food Systems core business for
2008 totalled EUR 613.3 million, which is an increase of 4.4% compared with
2007.
Proforma profit from operations (EBIT) for the year excluding one-time costs
was EUR 51.9 million, which is 8.5% of sales, compared with 41.5 million (7.1%
of sales) the year before, representing an increase of 25%.
IFRS standards require that the company's inventory be revalued at the time
of the acquisition of Stork Food Systems, from the purchase price to the
expected sales price. This results in a one-time debit entry of EUR 9.8 million
in the fourth quarter, which has no effect on the company's cash flow.
One-time costs related to restructuring amounted to EUR 4 million.
The company has in recent years entered into forward contracts to hedge the
costs related to its operations in Iceland. In October 2008, the market for
transactions in Icelandic kronas failed and the contracts were rendered null
and void. For that reason, a precautionary debit entry of EUR 17.8 million was
made under cost of capital.
Net interest bearing debt amounts to EUR 378.2 million. The average maturity of
debt is about four years.
Equity totalled EUR 286.8 million and the equity ratio was 31.1% at the end of
2008.
Extensive rationalisation measures in fourth quarter in response to demanding
business environment
Proforma sales from core business were EUR 138 million compared with EUR 159
million the year before, representing a decrease of 13.4%.
Loss from operations (EBIT) in the fourth quarter amounted to EUR 7.4 million
compared with a profit from operations of EUR 1.6 million for the same period
the year before. Profit from operations of core business, excluding one-time
expenses related to the acquisition of Stork Food Systems, was EUR 8.4 million,
or 6.2% of sales.
The company initiated extensive restructuring during the quarter, including a
reduction of 300 in the number of employees outside Iceland. The resulting
costs are expensed in Q4. The annual reduction in cost resulting from these
measures is estimated to be EUR 12-15 million.
Consolidated financial statements
According to the consolidated financial statements, which include the
operations of Stork Food Systems for the period 8 May to 31 December, as well
as the operations of Food and Dairy Systems, sales for the year 2008 totalled
EUR 540.1 million.
Profit from operations (EBIT) for the year 2008 was EUR 20.4 million, which is
3.8% of sales.
Hordur Arnarson, CEO:
“The proforma profit from operations (EBIT) from the company‘s core business
for 2008 was 8.5% of sales, compared to the company‘s goal for the year which
was 9%. The deviation can be attributed entirely to developments during the
fourth quarter, and specifically to the effects of the international financial
crisis on the company‘s sales.
In response to the changing conditions in the international markets, the
company has undertaken extensive measures to reduce operational costs. Among
other things, the number of employees at our companies outside Iceland was
reduced by 300 at the end of the year and the associated expense was recorded
in the fourth quarter.
The difficult conditions in the financial markets have affected the ability of
our customers to invest, especially in new factories, and the result in many
cases has been a deferment of such investments. We have, on the other hand,
benefited from the increasingly large share of our turnover that is based on
the sale of spare parts and service, which has not suffered. The food
processing industry has always adapted quickly to changes in the environment.
Our valuation of the strong underlying growth in the industry remains
unchanged.“
Prospects
Global economic developments in the months ahead will heavily influence the
company‘s prospects. The number of received orders shrank significantly when
the international financial crisis struck in October last year. Some customers
also requested deferment of contracts already signed. In December and January
however, the development with regard to orders received was positive.
The company‘s product sales can be divided into three roughly equal categories:
The sale of spare parts and service, which is virtually immune to the effects
of the financial crisis.
The sale of standard equipment and smaller solutions to existing factories,
which has so far not felt the effects of the financial crisis to a significant
degree.
The sale of large systems, often for new factories, which has suffered a
significant reduction in the fourth quarter of 2008. In most cases, however,
the projects have merely been postponed. It is likely, therefore, that an
accumulated need will have built up by the time that conditions in the
financial markets improve.
The company has already introduced measures to reduce costs. The number of
employees at Marel Food Systems' companies outside Iceland was reduced by 300
and restraint has been exercised in all areas of the company‘s operations. It
is expected that the measures undertaken will result in reduced costs amounting
to EUR 12-15 million in 2009. Efforts to increase efficiency, reduce costs and
improve the allocation of financial resources will continue.
The drop in raw material prices in recent weeks will have a positive effect on
the company, both directly through reduced production costs related to the
decrease in the price of stainless steel, and indirectly through lower corn
prices, which will improve operational results of our customers.
In general, there is a good balance in the currency composition of earnings and
expenses. Nevertheless, less than 1% of the company's earnings are in Icelandic
krona compared with 5% of total cost. The elevated exchange rate of the krona
in recent years has had a negative effect on the company's earnings. The recent
devaluation of the krona rate has been beneficial to the company.
It is likely that the lowest point with regard to orders received was reached
in October and November of last year. However, the recovery is likely to be
slow in the coming months and vary from one market area to another. The
positive effects of the recovery on the company‘s operations are not likely to
be felt to a noticeable degree until the latter part of the year.
Compared to most other industries, the food processing industry is well placed
to weather the storm of the financial crisis. In fact, the downturn of the
international economy will create opportunities for companies in the industry
in the months ahead. Consumer habits have already begun to change and will
continue to do so. The consumption of less expensive proteins, primarily
poultry, is likely to increase substantially. Consumers will also eat out less
in restaurants and shop more for “ready-made meals“.
This development will benefit Marel Food Systems as it calls for the
development of ever more efficient processing equipment and systems, especially
for the processing of poultry and fish - two industry segments where Marel Food
Systems is the global leader. Moreover, the drop in corn prices and base
interest rates will make it easier for food processing companies to make the
investment required to be able to respond to changing consumer demands.
The company‘s expectations are that sales in 2009 will decrease by 4-6%. The
profit from operations (EBIT) for the year 2009 is expected to be 10-12% in the
second half of the year, in keeping with the company's goals. Our valuation of
the strong underlying growth in the industry remains unchanged. The long-term
prospects of the company are good.
Presentation of results 11 February 2009
Marel Food Systems will present performance results at a meeting on Wednesday,
11 February 2009, at 8:30 a.m., at the company‘s headquarters at Austurhraun 9,
Gardabaer.
Publication days of the Consolidated Financial Statements in 2009 and the
Annual General Meeting 2010
Publication dates of the Financial Statements for 2009:
Annual General Meeting of Marel Food Systems hf 10 March 2009
1st quarter 6 May 2009
2nd quarter 6 August 2009
3rd quarter 3 November 2009
4th quarter 4 February 2010
Annual General Meeting of Marel Food Systems hf. 3 March 2010
For further information, contact:
Hörður Arnarson, CEO
Tel: (+354) 563-8000
