OMXI News

Wednesday, 7 February 2018, 8:01 PM

Marel hf.

Marel Q4 2017 results Strong close of a great year

Marel Q4 2017 results (All amounts in EUR)

Strong close of a great year

Q4 2017 ¿ Good execution led to higher volumes and EBIT

  -- Orders received were EUR 282m (3Q17: 296m and 4Q16: 294m).
  -- Revenues were EUR 295m (3Q17: 247m and 4Q16: 250m).
  -- EBIT* was EUR 46m (3Q17: 38m and 4Q16: EUR 35m), translating to an EBIT*
     margin of 15.7% (3Q17: 15.2% and 4Q16: 14.0%).
  -- Cash flow from operating activities before interest and tax in the quarter
     was EUR 65m (4Q16: 74m).
  -- Earnings per share (EPS) were EUR 4.81 cents in the quarter (4Q16: 3.17
     cents).

Full year 2017 ¿  Above EUR 1bn in revenues and 15% EBIT

  -- Orders received were EUR 1,144m in 2017 (2016: 1,013m pro forma).
  -- Revenues were EUR 1,038m (2016: 983m pro forma).
  -- EBIT* was EUR 157m, translating to an EBIT margin of 15.2% (2016: 143m pro
     forma and 14.6% respectively).
  -- The order book was EUR 472m at year-end (2016: 350m).
  -- Cash flow from operating activities before interest and tax over the year
     was EUR 236m (2016: 179m).
  -- Net debt/EBITDA was x1.9 at year-end (YE16: x2.3) which is fully in line
     with the targeted capital structure of x2-3 net debt/EBITDA. In 2017, Marel
     purchased EUR 63.4m worth of treasury shares and finalized the acquisition
     of Sulmaq for an amount equal to the enterprise value of EUR 26m.
  -- Earnings per share (EPS), trailing twelve months, were EUR 13.70 cents
     (2016: 10.59 cents).

The Board of Directors has proposed a dividend of EUR 4.19 cents per share for
the operating year 2017, the equivalent of approximately 30% of 2017 net
results. In addition, the Board of Directors has authorized management to
purchase own shares for nominal value of 20 million. 

Since listing on Nasdaq Iceland in 1992, Marel has with good support from
shareholders delivered compounded average annual growth of over 20% and created
excellent value for its stakeholders. As part of Marel¿s ambitious growth
strategy, the Company has decided to evaluate potential listing alternatives to
further advance its global vision and drive continued shareholder returns.
Marel is currently in the process of engaging an independent international
advisor for this purpose. 

Arni Oddur Thordarson, CEO:

¿We had a strong close of a great year. In 2017, we had record orders received
of EUR 1,144 million, up 13% between years. Our business is about advancing
food processing. In recent years we have also been advancing Marel. We have
prioritized investments and strengthened processes to be able to deliver
complex solutions to customers at the right time and quality. We have also been
adding resources to cope with the increased load. Today, we are team of 5,400
dedicated members in over 30 countries. 

Our committed team delivered record revenues of EUR 295 million in the fourth
quarter, an 18% increase in revenues compared with the same period last year.
Volumes and revenues increased faster than costs, leading to robust operational
results. For the full year, revenues were over EUR 1 billion with 15% EBIT. In
light of the good results delivered in 2017 and robust order book, we expect
strong organic revenues growth in 2018. 

We drive organic growth and value creation with innovation and market
penetration, supported by strategic partnerships and acquisitions. In
partnership with our customers, we are transforming the way food is processed.¿ 



Performance of Marel

  -- Orders received at an all-time high
  -- Production load was well managed in 4Q17
  -- Strong earnings growth and healthy profit margin
  -- Strong cash flow enables substantial investments in innovation and the
     future platform

Orders received at an all-time high

Marel is reaping the benefits of a steady flow of innovative products with
standard building blocks and a full line offering. Orders received in 2017
reached EUR 1,144m over the course of the year, up 13% compared to EUR 1,013m
in 2016. Despite the EUR 282m of orders received in the fourth quarter, QoQ was
down 4% which reflects the strong development of orders received over the last
few quarters. 

The order book was EUR 472m at year-end, or close to 0.45 of trailing twelve
month revenues.  The order book includes the acquired order book of Sulmaq for
EUR 17m. Greenfields and projects with long lead times constitute the vast
majority of the order book. The strong order book provides a good foundation
for the operational year 2018. 

Production load was well managed in 4Q17

Ramp up of production was well managed in 4Q17 delivering high revenues of EUR
295m. 

In order to deliver the right quality at the right time, production was ramped
up in 4Q17 and more focus is being placed on Sales and Operational Planning
(S&OP) internally. The recently implemented co-location product strategy has
allowed for better production management of equipment load fluctuations.
Outsourcing was a key success factor in improved management of the production
load in 4Q17. Our recently extended Nitra facility (Slovakia) will also enable
for improvements to production load management going forward. 

Strong earnings growth and healthy profit margin

We continue to deliver strong earnings growth with a healthy profit margin of
approximately 15% EBIT* for eight quarters in a row. Revenues in 2017 were EUR
1,038m with an adjusted EBIT of EUR 157m or 15.2% EBIT* margin. In comparison,
pro forma revenues in 2016 were EUR 983m with an adjusted EBIT of EUR 143m or
14.6% EBIT* margin. 

The fourth quarter was one of the best ever for Marel, mainly due to the ramp
up of production capacity in poultry. At the same time, operational costs rose
at a slower pace, leading to higher EBIT*. This resulted in an increase in
EBIT* to EUR 46m in 4Q17 from EUR 35m in 4Q16. All industries delivered higher
revenues in 4Q17 compared with previous quarters. 

Strong cash flow enables substantial investments in innovation and the future
platform 

Cash flow was exceptionally good in 2017. Free cash flow amounted to EUR 153m
in 2017, and EUR 37m in 4Q17. Marel continues to invest in the business to
prepare for future growth and full potential. Investment activities are
expected to be, on average, above normalized levels for the coming period. 

Net interest bearing debt decreased by EUR 39m in 2017, despite the fact that
Marel acquired Sulmaq for an amount equal to the enterprise value of  EUR 26m
and purchased EUR 63.4m worth of treasury shares, thereof EUR 6.8m was in order
to fulfill obligations of stock option agreements and the remainder to
facilitate future acquisitions. Net debt/EBITDA was x1.9 at YE17, compared to
x2.3 at YE16, fully in line with the targeted capital structure of x2-3  net
debt/EBITDA. 

Net result in 4Q17 was EUR 34m, up 50% from EUR 23m in 4Q16, translating to
Earnings per share (EPS, trailing 12 months) of EUR 4.81 cents in 4Q17 (4Q16:
EUR 3.17 cents). 

Net result in 2017 was EUR 97m, up 28% compared to EUR 76m in 2016, rendering
EPS of EUR 13.70 cents (2016: EUR 10.59 cents). 

In Q2 2017, Marel secured an extension to and amendments of its long term
financing at favorable terms and conditions reflecting its financial strength
and current market conditions. The all senior loan facilities are approximately
640 million EUR with initial interest terms EURIBOR/LIBOR +185 bps that will
vary in line with Marel¿s leverage ratio (Net debt/EBITDA) at the end of each
quarter. The final maturity is in May 2022. This provides Marel with increased
strategic and operational flexibility to support the ambitious growth plan
introduced at Marel¿s Annual General Meeting in March 2017. 

Impact of changes in IFRS

As of 1 January 2018 Marel will adopt the following new IFRS standards:

  -- IFRS 9 Financial Instruments;
  -- IFRS 15 Revenues from contract with customers;
  -- IFRS 16 Lease. Marel decided to early adopt IFRS 16 as per 1 January 2018.

The impact of implementing the new standards will be reflected in the opening
balance sheet as per 1 January 2018. The impact is: 

  -- IFRS 9: increase in retained earnings of EUR 4.1m largely offset by a
     reduction in carrying amount of borrowings.
  -- IFRS 15: decrease in retained earnings of EUR 8.9m largely offset by a
     decrease in production contracts.
  -- IFRS 16: no impact on retained earnings. Assets and liabilities will
     increase by EUR 36m to capitalize the right to use assets and the
     corresponding liabilities.

For further details of the changes relating to these new IFRS standards, please
refer to the Consolidated Financial Statements and the presentation on the
financial results.. 

Dividend

The Board of Directors will propose at the 2018 Annual General Meeting that EUR
4.19 cents dividend per outstanding share will be paid for the operating year
2017, corresponding to approximately 30% of net result attributable to
Shareholders of the Company of EUR 97m for the year 2017, and refers to the
Consolidated Financial Statements regarding appropriation of the profit for the
year and changes in Shareholders¿ equity. This is proposed in accordance to
Marel¿s dividend policy, disclosed at Marel¿s Annual General Meeting in March
2011. The target is that the net debt/EBITDA ratio is x2-3 net debt/EBITDA,
with excess capital to be used to stimulate growth and value creation as well
as pay dividends. Dividends or share buy-backs are targeted at 20-40% of the
net result. 

Outlook

In light of the good results delivered in 2017 and robust order book, we expect
strong organic revenues growth in 2018. 

Marel is targeting 12% average annual revenue growth in the period 2017-2026,
by market penetration and innovation, complemented by strategic partnerships
and acquisitions. 

  -- Marel¿s management expects 4-6% average annual market growth in the long
     term. Marel aims to grow organically faster than the market, driven by
     innovation and market penetration.
  -- Maintaining solid operational performance and strong cash flow supports
     average 5-7% revenues growth annually by acquisition.
  -- Marel¿s management expects Earnings per Share (EPS) to grow faster than
     revenues.

Growth will not 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. 


Investor meeting and webcast

On Thursday February 8, 2018, at 8:30 am (GMT), market participants are invited
to an investor meeting where CEO Arni Oddur Thordarson and CFO Linda Jonsdottir
will give an overview of the financial results and operational highlights. The
meeting is conducted in English and will be held at the company's headquarters
in Iceland. 

Please note that the meeting will also be webcast on www.marel.com/webcast.

Financial calendar

Marel will host its Annual General Meeting and publish its interim and annual
Consolidated Financial Statements according to the below financial calendar: 

  -- Annual General Meeting        March 6, 2018
  -- Q1 2018 results                        April 23, 2018
  -- Q2 2018 results                         July 25, 2018
  -- Q3 2018 results                 October 31, 2018
  -- Q4 2018 results                  February 6, 2019

Financial results will be disclosed and published after market closing.

Investor relations:

Tinna Molphy, Manager in Investor Relations, investors@marel.com and tel:
(+354) 563 8603. 

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.

Marel_FY17_IR_PressRelease_ENG_FINAL.pdf

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