Annual report 2018
For the full year, revenues were EUR 1.2 billion with 14.6% adjusted EBIT margin.
“Revenues for the full year 2018 were up 15%, of which 12.5% was organic growth. With one of the largest installed base worldwide and our proactive service mindset, 35% of our total revenues are recurring maintenance revenues. Adjusted EBIT was solid at 14.6% for the full year.
The orders received for the full year 2018 were solid at EUR 1,184 million, and rose marginally when compared with the robust growth in 2017. Trade constraints and geopolitical issues make timing of orders harder to predict. In such circumstances however, Marel as a product pioneer with extensive global reach, is well positioned to capitalize on the markets’ requirement to match the supply and demand of food. We still expect the underlying annual growth of the total market to be 4-6% on average and our aim is to continue to grow faster.
Our cash flow generation continues to be best in class and we continuously reinvest in innovation, global reach and infrastructure. We also complement our product portfolio and global reach with acquisitions to accelerate our journey to transform the way food is processed. Last year we acquired MAJA for the enterprise value of 35 million, acquired treasury shares and paid out dividends for close to a 100 million. Our strong operational cash flow and improvements in operating performance lead us to a leverage of x2 Net debt/EBITDA, which is at a similar level to last year despite these high investments.
The dual listing of Marel shares on an international stock exchange in addition to its listing in Iceland is proceeding well and the primary focus is now on Nasdaq Copenhagen and Euronext Amsterdam. It is important for a global leader to have a global stage to support its ambitious growth plan, and drive fair day-to-day trading and continued shareholder returns.”
The review of alternative listing options for Marel remains firmly on track. Marel believes that a dual listing of shares on an international stock exchange, in addition to its current listing in Nasdaq Iceland, is the optimal way to align the interests of current and future shareholders. Initially, three locations were considered as listing locations. The selection has now been narrowed to two; Euronext Amsterdam and Nasdaq Copenhagen. Next step in the process is to finalize the listing location by the 2019 AGM.
In June 2018, Marel announced an organizational change where the Commercial function was split into two new functions, Service and Global Markets and new appointments were made to Marel’s Executive Team. This new structure will allow for closer proximity to customers and better scalability to support Marel’s ambitious growth strategy going forward.
The acquisition of MAJA, the German food processing equipment manufacturer, was announced on 25 July 2018. The MAJA transaction was closed on 14 August 2018 and the results of MAJA have been included in the Consolidated Financial Statements from that date. In accordance with IFRS requirements, Marel performs a Purchase Price Allocation (PPA). Based on information currently available, a provisional goodwill amount of EUR 0.7m is reported in the 2018 financial statements. This amount will be adjusted based on the final outcome of the PPA-process.
In October, Marel announced the completion of its first issue in the Schuldschein market. This new financing adds further diversification to our long term funding structure, providing additional operational flexibility to support our growth strategy and continued value creation. The issue was oversubscribed and was subsequently raised to EUR 140 million. The vast majority was placed in the 5-year tranche priced at 110 basis points over EURIBOR, and the 7-year tranche was priced at 130 basis points over EURIBOR.
Orders received were EUR 1,184 million in 2018, up 3.5% from EUR 1,144 million in 2017. Orders received from newly acquired MAJA was EUR 10 million since the acquisition date. The order book stood at EUR 476 million at year-end, or close to 40% of trailing twelve month revenues. Greenfields and projects with long lead times constitute the vast majority of these orders.
Overall, Marel’s commercial position continues to benefit from its full-line offering and steady launch of innovative high-tech products for smarter processing. Global reach and focus on full-line offering across the poultry, meat and fish industries counterbalances fluctuations in operations. Market conditions have been exceptionally favorable in recent quarters and are now adjusting towards more normalized levels. With one of the largest installed base worldwide, a significant proportion of Marel’s revenues derive from recurring maintenance revenues or around 35% for the full year of 2018.
The order book was EUR 476 million at year-end, compared to 472 million at year-end 2017. The book-to-bill ratio was 0.99 in 2018 compared to 1.10 in 2017, reflecting strong demand and underpins Marel’s ability to deliver the right quality at the right time. The strong order book continues to provide a good foundation for the full operational year 2019.
Marel continues to deliver double digit revenue growth year-on-year. Revenues for the full year were EUR 1,198 million, up 15.4% compared to 2017. EBIT was EUR 175 million, up 11.3% YoY from EUR 157 million. Adjusted EBIT margin in 2018 was 14.6%, compared to 15.2% in 2017.
Gross profit margin continues to be stable at around 39% and gross profit increased 14.9% in 2018 to EUR 468 million compared to EUR 407 million in 2017. Basic earnings per share (EPS) were EUR 17.95 cents in 2018, compared to 13.70 cents in 2017.
Marel Poultry's competitive position remains strong on the back of its established full-line product range. Marel Poultry continued to deliver solid operational performance in 2018, with good orders received. Projects were well distributed geographically, Europe and Poland in particular as well as smaller orders coming in from the US.
In 2018, revenues for Marel Poultry were EUR 638 million, up 13.9% from 2017, EBIT was up 7.0% to EUR 117 million and the EBIT margin was 18.4%. Primary processing in the US is experiencing a temporary slowdown but there are opportunities to move US customers up the value chain.
Orders received for Marel Meat have risen throughout the year and 2019 will start with a record high order book. Large projects include slaughter and logistics greenfield projects in Russia, Spain and Vietnam. The upselling of secondary and further processing equipment is also firming up, which is a key focus area in order to reach long-term targets.
In 2018, revenues for Marel Meat were EUR 387 million, up 15.7% over the year. Adjusted EBIT margin for the same period was 11.3%. Management is targeting medium and long-term adjusted EBIT margin expansion for Marel Meat, through increased efficiency with further standardization and improved upselling.
The order book for Marel Fish has slowed down after a good first half of the year in 2018. There was good geographical and product diversity in orders received in 2018, including greenfield projects and salmon sector orders in Chile, France and Norway.
The full year of 2018 delivered strong revenues for Marel Fish. EBIT for the full year was EUR 12.6 million, compared to 5.6 million in 2017 and the EBIT margin was 7.9%. Marel has shown operational improvements in the past few quarters but as previously stated, the short-term operational margin for Marel Fish was likely to adjust downwards, however management is targeting medium and long-term EBIT margin expansion for the industry segment.
Free cash flow was EUR 121 million in 2018, compared to 153 million in 2017. The difference year-on-year is due to fluctuations and timing of orders received and down payments for large projects. Marel continues to invest in the business to prepare for future growth and its full potential. Investment activities are expected to be above normalized levels for the coming quarters.
Net debt/EBITDA including lease liabilities was x2.0 at year-end 2018, compared to x1.9 at the end of 2017. Currently leverage is at the lower end of the targeted capital structure of x2-3 net debt/EBITDA, which underpins the financial capacity to support further growth and value creation.
|
2018
|
2017
|
Change
|
|
|---|---|---|---|
|
Revenues
|
1,197.9
|
1,038.2
|
15.4%
|
|
Gross profit
|
467.5
|
406.7
|
14.9%
|
|
Gross profit as a % of revenues
|
39.0%
|
39.2%
|
|
|
Adjusted result from operations (EBIT)*
|
175.2
|
157.4
|
11.3%
|
|
Adjusted EBIT as a % of revenues*
|
14.6%
|
15.2%
|
|
|
EBITDA
|
215.5
|
192.0
|
12.2%
|
|
EBITDA as a % of revenues
|
18.0%
|
18.5%
|
|
|
PPA related costs
|
(14.3)
|
(17.1)
|
|
|
Result from operations (EBIT)
|
160.9
|
140.3
|
14.7%
|
|
EBIT as a % of revenues
|
13.4%
|
13.5%
|
|
|
Orders received
|
1,184.1
|
1,143.7
|
3.5%
|
|
Order book
|
476.0
|
472.1
|
0.8%
|
*Operating income adjusted for PPA related costs, including depreciation and amortization.
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Revenues
|
1,197.9
|
1,038.2
|
969.7
|
|
Gross profit
|
467.5
|
406.7
|
397.0
|
|
Result before depreciation and amortization (EBITDA)
|
215.5
|
192.0
|
175.4
|
|
Result from operations (EBIT)*
|
160.9
|
140.3
|
114.8
|
|
Net result for the period
|
122.5
|
96.9
|
75.8
|
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Orders received
|
1,184.1
|
1,143.7
|
1,006.1
|
|
Order book
|
476.0
|
472.1
|
349.5
|
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Cash generated from operating activities, before interest & tax
|
205.8
|
236.2
|
179.0
|
|
Net cash from (to) operating activities
|
166.8
|
195.6
|
137.1
|
|
Net cash from (used in) investing activities
|
(84.5)
|
(77.7)
|
(408.1)
|
|
Net cash from (used in) financing activities
|
(60.2)
|
(122.2)
|
220.4
|
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Total assets
|
1,565.9
|
1,440.6
|
1,392.4
|
|
Working capital
|
(43.7)
|
(71.9)
|
(13.3)
|
|
Group equity
|
560.9
|
541.9
|
525.6
|
|
Net debt
|
431.6
|
365.1
|
403.6
|
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Gross profit
|
39.0%
|
39.2%
|
40.9%
|
|
Selling and marketing expenses
|
11.2%
|
11.6%
|
13.3%
|
|
Research and development expenses
|
6.2%
|
5.6%
|
6.5%
|
|
Administrative expenses
|
7.0%
|
6.8%
|
6.8%
|
|
Wages and benefits
|
34.3%
|
35.0%
|
35.0%
|
|
Result before depreciation (EBITDA)
|
18.0%
|
18.5%
|
18.1%
|
|
Depreciation/amortisation
|
4.6%
|
5.0%
|
5.7%
|
|
Result from operations (EBIT)*
|
13.4%
|
13.5%
|
11.8%
|
|
Net result for the period
|
10.2%
|
9.3%
|
7.8%
|
|
2018
|
2017
|
2016
|
|
|---|---|---|---|
|
Current ratio
|
0.9
|
0.8
|
1.0
|
|
Quick ratio
|
0.6
|
0.6
|
0.6
|
|
Equity ratio
|
35.8%
|
37.6%
|
37.7%
|
|
Return on total equity
|
22.2%
|
18.2%
|
15.6%
|
|
Return on total assets
|
8.1%
|
6.8%
|
5.4%
|
*Operating income adjusted for PPA related costs, including depreciation and amortization.
Book-to-bill ratio
The ratio of orders received to revenues booked off, an indication of how quickly a business fulfills the demand for its product
CAPEX
Capital expenditure; money spent to buy, maintain, or improve fixed assets
Current ratio
Current assets/Current liabilities
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and amortization
EPS
Earnings per share
Equity ratio
Total equity/[Total equity + Total Liabilities]
Leverage
Net interest bearing debt/ Last twelve months EBITDA
Net debt
Interest bearing borrowings (current & non-current) - Cash & cash equivalents
Net cash
Cash and cash equivalents
Order book
Accumulated net order intake, where revenue is booked off orders
Orders received
When full responsibility to maintain an order is assumed, the order is formally registered in the system
PPA
Purchase price allocation
Quick ratio
[Current assets - Inventories]/Current liabilities
Return on total equity
Result for the period/Average of total equity ([beginning balance + ending balance for the period]/2)
Return on total assets
Result for the period/Average of total assets ([beginning balance + ending balance for the period]/2)