EXECUTIVE SUMMARY
Financial highlights Q3 2020
- Orders received were
EUR 282.5m (3Q19: 285.0m). - The order book was
EUR 434.3m (2Q20: 439.0m, 3Q19: 431.9m). - Revenues were
EUR 287.2m (3Q19: 312.5m). - EBIT* was
EUR 44.1m (3Q19: 44.3m), translating to an EBIT* margin of 15.4% (3Q19: 14.2%). - Net result was
EUR 29.4m (3Q19: 33.4m). - Basic earnings per share (EPS) were
EUR 3.93 cents (3Q19:4.38 cents ). - Cash flow from operating activities before interest and tax in the quarter was
EUR 54.1m (3Q19: 47.7m). Free cash flow atEUR 36.6m (3Q19: 29.0m). - Net debt/EBITDA was 0.5x at quarter end (2Q20: 0.6x). Targeted capital structure is 2-3x net debt/EBITDA.
- Successful closing of TREIF acquisition on
8 October 2020 , leverage was at 1.1x post the acquisition.
Financial highlights 9M 2020
- Orders received were
EUR 914.4m (9M19: 919.5m). - Revenues were
EUR 894.5m (9M19: 963.6m). - EBIT* was
EUR 114.5m (9M19: 141.4m), translating to an EBIT* margin of 12.8% (9M19: 14.7%). - Net result was
EUR 73.5m (9M19: 99.9m). - Basic earnings per share (EPS) were
EUR 9.75 cents (9M19:14.19 cents ). - Marel took actions earlier in the year that will deliver
EUR 8m in annualized savings with aroundEUR 4m in non-recurring cost. - Cash flow from operating activities before interest and tax was
EUR 178.7m (9M19: 129.6m).
* Operating income adjusted for purchase price allocation (PPA) costs related to acquisitions
“We are pleased to publish our results in the third quarter and first nine months of 2020. We are humble and upbeat when we look at the results and the outlook. Orders received in Q3 and in the first nine months of 2020 were on par with the respective periods last year. Demand for automation and more customer channel flexibility in the poultry, meat and fish segments is building up similar to other food value chains. The speed of change is fast, driven by consumers around the world seeking ready-to-cook products as part of a balanced diet that is both safe and affordable. Marel’s digital platforms and global reach with local presence on every continent have proven to be key differentiating factors in these challenging times.
In Q3, we delivered revenues of
High margins and robust cash flow continues to support further growth and value creation. On 8 October, we successfully closed the acquisition of TREIF and remain financially strong with leverage post acquisition at x1.1 EBITDA. TREIF is a great strategic fit, their product portfolio is highly complementary and will strengthen our full-line offering in the meat segment. There is also great potential to cascade TREIF’s cutting edge technology into the poultry and fish segments. TREIF enjoys a blue-chip customer base and their installed base is substantial.
Marel is in a pole position to further transform the food industry in good partnership with our long-standing customers. We will continue to systemically invest in innovation and infrastructure, well above the industry standard and use acquisitions and strategic partnerships to accelerate our journey. There is no way back, the speed of digital transformation is immense, and a more demand-driven food value chain will significantly contribute to the availability and affordability of safe and healthy food, while at the same time reduce waste and better utilize available resources. In times of such transformation on top of economic uncertainties, there will be fluctuations quarter-by-quarter. At Marel, we remain fully committed to our ambitious mid-, and long-term targets with continued growth and value creation.”
Subsequent events: Acquisition of TREIF
On
Financial performance
Orders received during Q3 and 9M 2020 on par with last year
Orders received in the quarter were
Orders received continue to be well balanced between large projects, standard equipment and maintenance projects.
The need for automation and digital solutions in the food value chain is driven by secular trends like population growth and urbanization. Additionally, the pandemic is placing more focus on minimizing human intervention as a means to improve hygiene and disease, as well as traceability and trust in the food value chain. Marel is uniquely positioned to support the food industry with the use of robotics, increased tracking & tracing and process control.
Marel remains committed to its R&D investment of ~6.0% of revenues to maintain its technological leadership in the industry.
Solid order book
The order book in the third quarter was
Greenfields, such as large equipment orders, and large projects with longer lead times constitute the vast majority of the order book while services, spares and standard equipment have shorter lead times and run faster through the book.
Marel is a full-line provider to the poultry, meat and wild whitefish industry. With its strong product portfolio of solutions, software and services, Marel is well positioned to lead the transformation of the food processing industry and support food processors channel flexibility to chase consumer-ready products.
The acquisition of cutting technology provider TREIF will enhance standard equipment sales for the meat industry, as well as its other segments focused on improving automation, food safety and flexibility and time to market for consumer-ready product offerings.
Revenues reflect seasonality
Revenues totaled
Aftermarket was 41% of total revenues (2Q20: 38%, 3Q19: 37%), including recurring service and spare parts revenues. Although service revenues were lower due to travel restrictions, this was compensated by growth in spares and good delivery performance.
Marel’s global reach with a local presence, with sales and service engineers servicing customers in over 140 countries, has proven to be a key differentiating factor in operational resilience, delivering the right quality at the right time. The local teams with virtual and remote global support from industry experts, have shown great solution-driven leadership in installation and aftermarket services, reducing the carbon footprint of fly-in fly-out.
Strong gross margin, good mix and low OPEX delivering 15.4% EBIT
Gross profit margin improved to 39.2% in the quarter (2Q20: 37.4%, 3Q19: 38.2%). The product mix was favorable with good levels of spare parts sales and good delivery performance. Gross profit was
Operating expenses were similar to 2Q20, with more focus on online solutions and virtual events as travel restrictions remain and trade show activity is yet to pick up.
EBIT* margin was at 15.4% (2Q20: 14.7%, 3Q19: 14.2%).
Net result was
Basic EPS at
Solid cash flow generation
Cash flow was solid in the third quarter. Operational cash flow was
Inventories leveled off QoQ with
Tax payments for 3Q20 were
A total of around
Marel continues investing in the fundamentals. Cash flow related to investment activities in the quarter at
Strong financial position with leverage at 0.5x, moving to 1.1x post TREIF acquisition
Leverage was 0.5x at the end of 3Q20 (2Q20: 0.6x) and 1.1x post TREIF acquisition which is well below the targeted capital structure (2-3x). Low leverage position enables Marel to take a leading role in the ongoing industry consolidation wave.
Marel continues to have a strong financial position that will support continued investment and facilitate future strategic moves in line with the company´s 2017-2026 growth strategy.
Marel has secured liquidity of
During 1Q20, Marel drew
Successful closing of TREIF acquisition
On
With
TREIF has established a blue-chip customer base and its installed base is substantial. By leveraging Marel’s digital platform and global reach with local teams in all key regions, further growth is expected from cross- and upselling Marel products, exploring new customers retail channels and adjacent industries as well as aftermarket potential.
The purchase price on a cash and debt free basis was paid with
Resilient business model in challenging times
Significant investments in recent years in Marel´s global reach, digital platform and infrastructure, have been instrumental in positioning the company to successfully navigate a business environment colored by geopolitical uncertainty, trade constraints and change in consumer behavior already accelerated by the ongoing changes.
Marel has a global manufacturing presence and flexibility in production, reducing supply chain risk. During the pandemic Marel has systematically built up sufficient safety stock of spare parts across locations to serve customer demand and ensure timely delivery.
Sustainability focus is embedded throughout Marel´s organization. Not only is it ingrained in our substantial innovation investments and the full-line product portfolio enabling sustainable production and reducing waste, new ways of working are also having a postitive impact on Marel´s CO2 footprint, with online solutions and less fly-in fly-out.
Industry performance Q3 2020
Marel Poultry: 55% of total revenues and 21.1% EBIT margin in 3Q20.
Full-line offering with one of the largest installed bases world-wide, focusing on roll-out of innovative products and market penetration through cross-selling of secondary and further processing solutions.
After a very strong start of the year orders received for Marel Poultry were softer in 3Q20, while the pipeline is building up, particularly in solutions to enhance channel flexibility for consumer-ready products.
Revenues for Marel Poultry in 3Q20 were
Marel Poultry´s EBIT margin continued on a strong level, driven by favorable product mix and strong aftermarket. Solid performance of Marel Poultry while the environment is colored by the pandemic.
Poultry has proven the most resilient during the pandemic due to its convenience, affordability and ability to adapt to supply relatively quickly.
Full-line offering with focus on strong product development, increased standardization, modularization and market penetration and further cross- and upselling.
The TREIF acquisition will double standard equipment sales for
Orders received for
Revenues for
Management continues to target medium and long-term EBIT* margin expansion for
Full-line offering to the wild whitefish industry since 2020. Strong line offering with opportunities to improve breadth through innovation and / or M&A to reach full line offering across whitefish and salmon.
Orders received for
Revenues for
Management continues to target medium and long-term EBIT margin expansion for
Outlook
Market conditions have been challenging due to geopolitical uncertainty and the ongoing COVID-19 pandemic. Marel enjoys a balanced exposure to global economies and local markets through its global reach, innovative product portfolio and diversified business mix. At the moment it is not known what the full economic impact of COVID-19 will have on Marel.
Marel is committed to achieve its mid- and long term growth targets. Our strategic mid-term targets are to achieve gross profit around 40%, SG&A of around 18% and Innovation at the 6% strategic level by year-end 2023.
In the period 2017-2026, Marel is targeting 12% average annual revenue growth through 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 growing market penetration.
- Maintaining solid operational performance and strong cash flow is expected to support 5-7% revenues growth on average by acquisition.
- Marel’s management expects basic EPS to grow faster than revenues.
Growth is not expected to 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.
Virtual investor meeting and live webcast/conference call
On Wednesday
The virtual meeting will be webcast live on www.marel.com/webcast and a recording will be available after the meeting on marel.com/ir.
Members of the investment community can join the conference call at:
US: +1 833 823 0586
Upcoming virtual investor events
- Berenberg, Pennyhill Conference London, 2 December
For the latest roadshow calendar please visit www.marel.com/ir
Upcoming
- Whitefish Showhow – 21-22 October
- Whitefish Showhow,
South Europe – 17 November - Case Ready Steak, LatAm – 18 November
- Case Ready Hamburger, LatAm – 19 November
- Whitefish Showhow, LatAm – 25 November
- Salmon Showhow – 17 February
For the latest schedule please visit www.marel.com/events
Financial Calendar
Marel will publish its financial results according to the below financial calendar:
- Q4 2020 –
3 February 2021
- Q4 2020 –
Financial results will be disclosed and published after market closing of both Nasdaq Iceland and Euronext Amsterdam.
Investor Relations
For further information, please contact Marel Investor Relations via email IR@marel.com or tel. (+354) 563 8001.
About Marel
Marel (NASDAQ: MAREL; AEX: MAREL) is a leading global provider of advanced food processing equipment, systems, software and services to the poultry, meat and fish industries. Following the closing of the TREIF acquisition on
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.
Attachments
- Marel Q3 2020 Condensed Consolidated Financial Statements - Excel
- Marel Q3 2020 Condensed Consolidated Interim Financial Statements_vF
- Marel Q3 2020 Press Release_vF
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