Marel Q2 2014 Results

Strong order intake - Refocusing on track

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| Source: Marel hf.
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(All amounts in EUR)

Strong order intake – Refocusing on track

  •  Revenue for Q2 2014 was 169.8m [Q2 2013: 178.4m].
     
  •  Adjusted EBITDA (EBITDA before refocusing cost) was 18.0m or 10.6% of revenue. EBITDA was 13.0m or 7.7% of   revenue [Q2 2013: 19.0m].
     
  •  Adjusted operating profit (EBIT) was 10.7m or 6.3% of revenue. EBIT was 3.6m or 2.1% of revenue [Q2 2013: 12.3m].
     
  •  Net result for Q2 2014 was 0.8m [Q2 2013: 5.2m]. Earnings per share was 0.10 euro cents [Q2 2013: 0.71 euro cents].
     
  •  Cash flow from operating activities before interest and tax was 20.4m [Q2 2013: 25.3m]. Net interest bearing debt was 204.5m at the end of Q2 2014 [Q2 2013: 228.8m].
     
  •  The order book was at 156.4m at the end of Q2 2014 compared with 138.4m at the end of Q1 2014 [Q2 2013: 131.8m]

Marel’s main markets are showing positive developments. With a focused market approach Marel secured well balanced orders in large systems, standard equipment and spares. Operational profit in Marel’s poultry segment is improving and salmon activities are performing well.  

The refocusing plan of becoming simpler, smarter, and faster is proceeding according to plan. The plan’s objective is to serve customers’ needs more effectively and to reduce the company’s annual cost base by 20-25 million. Recurring annual cost saving targets from actions taken in the first half of the year amount to 8 million compared with one-off cost of 10.7 million. 

In the beginning of the year Marel published guidance to reach organic revenue growth in 2014 with 55 million adjusted EBIT. Based on the current order book and market outlook organic revenue growth is realistic, however the guidance for adjusted EBIT is now updated to 40 - 50 million. Full focus is on strengthening the market approach and operational improvement with the aim to reach EBIT of over 100 million in 2017.

Arni Oddur Thordarson, CEO: 

“We are pleased with milestones reached in Q2.  Our operational performance improved, order intake is strong and we are moving forward with our refocusing plan.

Order intake, a good forward leading indicator of revenues, was 188 million in the quarter. The order intake was balanced between large systems, standard equipment and spares. The geographical spread in orders was as well diversified with orders coming in from India, China, the Middle-East and South America in addition to good order intake from our U.S. and European customers.

Operational results are not yet in line with potential. We are moving towards becoming a simpler, smarter, and faster company by taking decisive steps to focus our market approach and optimize our manufacturing footprint. The primary goal and principle is to increase customer and shareholder long-term value.”

Simpler, smarter, and faster
Marel’s refocusing plan to become simpler, smarter, and faster is on track. The plan’s objectives are to increase efficiency in order to serve customers better and reduce the annual cost base by 20-25 million over the course of 2014 and 2015. This will improve results in the future on a recurring basis and support long-term growth and value creation.

Recurring annual cost saving targets from actions taken in the first half of the year amount to around 8 million compared with one-off costs of approximately 10.7 million.  In Q1 the future benefits were estimated on a recurring annual basis of approximately 3.6 million with the same amount as non-recurring cost. In Q2 the future benefits are estimated to be 4-5 million with 7.2 million non-recurring cost. 

 In Q2 2014 several actions were taken: 

• Restructuring of Marel’s operations in Oss and transfer to Boxmeer in the Netherlands.  The transfer of activities to Boxmeer captures synergies in administration, manufacturing and innovation and strengthens these activities within the organization. The transfer will be completed before the end of the year.

• Successful finalizing of the transfer of salmon activities from Norresundby to Stovring in Denmark.   The aim of moving the activities to a larger and modernized facility in Stovring is to be better equipped to take on the foreseen growth in the salmon business. 

• Marel acquired the after sales services and business in Denmark and Sweden from an agent.  By controlling the full offering of large systems, standard equipment and after sale services in the Nordic region, Marel believes it can better serve its customers’ needs and create more value and to strengthen further the recurring revenue base.
    
Further steps will be taken where business units serving the same customers´ needs which rely on the same technical capabilities will be combined.  The current diverse manufacturing base will be consolidated into larger multi-industry sites where the company is better equipped to take on growth and fluctuations in utilization. In addition, the overall operational efficiency will be increased and the product portfolio sharpened.

Strong order intake in Q2
Markets are turning positive and with a focused market approach Marel secured well balanced orders received in large systems, standard equipment and spares. The order book now stands at 156.4 million, 18 million higher than in the previous quarter. Orders received amounted to 187.8 million compared with 160.8 million in Q1 2014 and 159.1 million in Q2 2013. During Q2, orders were secured from around the world confirming that Marel is strategically and commercially strong with a good portfolio of unique solutions.

Outlook
In the beginning of the year Marel published guidance to reach organic revenue growth in 2014 with 55 million adjusted EBIT. Based on the current order book and market outlook organic revenue growth is realistic, however the guidance for adjusted EBIT is now updated to 40 - 50 million. Full focus is on strengthening the market approach and operational improvement with the aim to reach EBIT of over 100 million in 2017.

In the mid- and long-term, the Company believes its innovative products and global presence in all industries will secure good growth and increased profitability. The long-term outlook in the industry remains favorable and the estimated market growth is 4-6% in upcoming years. Marel’s goal is to continue to grow faster than the market based on innovative customer solutions and its extensive sales and service network.

It should be kept in mind that results may vary from quarter to quarter due to general economic developments, fluctuations in orders received, and deliveries of larger systems.