Annual report 2017
For the full year, revenues were over EUR 1 billion with 15% adjusted EBIT.
“We had a strong close to a great year. In 2017, we had record orders received of EUR 1,144 million, up 13% year-on-year. Our business is about advancing food processing, and in recent years we have also been moving Marel forward. We have prioritized investments and strengthened processes, enabling us to deliver complex solutions to customers at the right time and of the right quality. To cope with the increased load we have added resources: Today, we are team of 5,400 dedicated members in over 30 countries.
Our committed team delivered record revenues of EUR 1,038 million in 2017, a 6% increase in revenues compared to the previous year. We continue to deliver strong earnings growth with a healthy profit margin of around 15% EBIT in the past two years.
Marel’s target is 12% average annual revenue growth in the period 2017-2026. 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.”
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 were EUR 1,144 million this past year, up 13% compared to EUR 1,013 million in 2016. Projects were well distributed geographically and between different divisions.
The order book stood at EUR 472 million at year-end, or close to 45% of trailing twelve month revenues. This figure includes EUR 17 million from the acquired order book of Sulmaq. Greenfields and projects with long lead times constitute the vast majority of these orders.
The recently implemented co-location product strategy has enabled better production management of equipment load fluctuations. In order to deliver the right quality at the right time, production was ramped up and more focus placed on Sales and Operational Planning (S&OP) internally. Outsourcing was a key success factor in improved management of the production load. Our recently extended Nitra facility (Slovakia) will also contribute to further improvements in production load management going forward.
We continue to deliver strong earnings growth with a healthy profit margin of approximately 15% adjusted EBIT for eight quarters in a row. The fourth quarter of 2017 was one of the best ever for Marel, mainly due to the ramp up of production capacity in poultry. Revenues in 2017 were EUR 1,038 million with an adjusted EBIT of EUR 157 million or 15.2% adjusted EBIT margin. By comparison, pro forma revenues in 2016 were EUR 983 million with an adjusted EBIT of EUR 143 million or 14.6% adjusted EBIT margin. All industry segments delivered higher revenues in 2017 compared to the previous year.
Marel Poultry accounted for 54% of Marel’s total revenues in 2017. Marel Poultry generated EUR 560 million in revenues and EUR 110 million in EBIT (19.5% EBIT margin) for the full year 2017. This is a 9% increase in revenues and 28% increase from the EBIT of EUR 85 million in 2016 (16.6% EBIT margin). Facilitated by good flexibility in the supply chain organization, orders recognized as revenues were at the highest level ever in Poultry.
Marel is reaping the benefits of a steady flow of innovative products with standard blocks and full line offering.
Marel Meat accounted for 32% of Marel’s total revenues in 2017. Marel Meat generated EUR 334 million in revenues and EUR 39 million in EBIT (11.5% EBIT margin) for the full year 2017. Revenues were on par with pro forma 2016, with EBIT of EUR 52 million (15.6% EBIT margin). Marel strengthened its position in South America with the acquisition of Brazilian primary meat processor Sulmaq in 2017.
The focus going forward for Marel Meat will be on increased standardization and modularization.
Marel Fish accounted for 13% of Marel’s total revenues in 2017. Marel Fish generated EUR 132 million in revenues and EUR 6 million in EBIT (4.2% EBIT margin) for the full year 2017. This is a 4.1% increase in revenues and a 43.6% increase from the EBIT of EUR 4 million in 2016 (3.1% EBIT margin). Marel Fish has almost reached the same level of revenues it had before discontinuing its onboard customized solutions in Seattle that contributed approximately a third of total fish revenues in 2015.
The focus going forward for Marel Fish is on full line offering for wild whitefish, farmed salmon and farmed whitefish.
Cash flow was exceptionally good in 2017, where free cash flow amounted to EUR 153 million in 2017. Marel continues to invest in the business to prepare for future growth and reach its full potential. Investment activities are expected to be, on average, above normalized levels for the coming period.
Net interest-bearing debt decreased by EUR 39 million in 2017, despite the fact that Marel acquired Sulmaq for an amount equal to the enterprise value of EUR 26 million and purchased EUR 63.4 million worth of treasury shares. Of the treasury shares bought, EUR 6.8 million were intended to fulfill obligations of stock option agreements and the remainder to facilitate future acquisitions. Net debt/EBITDA was x1.9 at year-end 2017, compared to x2.2 at year-end 2016, fully in line with the targeted capital structure of x2-3 net debt/EBITDA.
The net result in 2017 was EUR 97 million, up 28% compared to EUR 76 million in 2016, rendering EPS of EUR 13.70 cents (2016: EUR 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 Q2 2017, Marel secured an extension of and amendments to its long-term financing on favorable terms and conditions, reflecting its financial strength and the current market conditions. The all-senior loan facilities total approximately EUR 640 million 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.
|
2017
|
2016
|
Change
|
|
|---|---|---|---|
|
Revenues
|
1,038.2
|
983.0
|
5.6%
|
|
Gross profit
|
406.7
|
404.6
|
0.5%
|
|
Gross profit as a % of revenues
|
39.2%
|
41.2%
|
|
|
Adjusted result from operations (EBIT)2
|
157.4
|
143.5
|
9.7%
|
|
Adjusted EBIT as a % of revenues2
|
15.2%
|
14.6%
|
|
|
EBITDA
|
192.0
|
179.7
|
6.8%
|
|
EBITDA as a % of revenues
|
18.5%
|
18.3%
|
|
|
Adjustment for amortization of acquisition-related (in)tangible assets
|
(17.1)
|
(24.6)
|
|
|
Result from operations (EBIT)
|
140.3
|
118.9
|
18.0%
|
|
EBIT as a % of revenues
|
13.5%
|
12.1%
|
|
|
Orders received (includes service revenues)
|
1,143.7
|
1,012.8
|
12.9%
|
|
Order book
|
472.1
|
349.5
|
35.1%
|
1Pro forma results include MPS numbers. Pro forma numbers are presented to provide better comparison.
2Operating income adjusted for amortization of acquisition-related (in)tangible assets (PPA).
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Revenues
|
1,038.2
|
969.7
|
818.6
|
|
Gross profit
|
406.7
|
397.0
|
312.2
|
|
Result before depreciation and amortization (EBITDA)
|
192.0
|
175.4
|
120.8
|
|
Result from operations (EBIT)
|
140.3
|
114.8
|
81.6
|
|
Net result for the period
|
96.9
|
75.8
|
56.7
|
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Orders received (includes service revenues)
|
1,143.7
|
1,006.1
|
824.6
|
|
Order book
|
472.1
|
349.5
|
180.9
|
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Cash generated from operating activities, before interest & tax
|
236.2
|
179.0
|
119.7
|
|
Net cash from (to) operating activities
|
195.6
|
137.1
|
93.7
|
|
Investing activities
|
(77.7)
|
(408.1)
|
(17.9)
|
|
Net cash from (used in) financing activities
|
(122.2)
|
220.4
|
(10.7)
|
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Total assets
|
1,440.6
|
1,392.4
|
938.2
|
|
Working capital
|
(71.9)
|
(13.3)
|
94.1
|
|
Group equity
|
541.9
|
525.6
|
446.7
|
|
Net debt
|
365.1
|
403.6
|
142.8
|
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Gross profit
|
39.2%
|
40.9%
|
38.1%
|
|
Selling and marketing expenses
|
11.6%
|
13.3%
|
13.6%
|
|
Research and development expenses
|
5.6%
|
6.5%
|
7.0%
|
|
Administrative expenses
|
6.8%
|
6.8%
|
7.3%
|
|
Wages and benefits
|
35.0%
|
35.0%
|
33.6%
|
|
Result before depreciation (EBITDA)
|
18.5%
|
18.1%
|
14.8%
|
|
Depreciation/amortisation
|
5.0%
|
5.7%
|
4.8%
|
|
Result from operations (EBIT)
|
13.5%
|
11.8%
|
10.0%
|
|
Net result for the period
|
9.3%
|
7.8%
|
6.9%
|
|
2017
|
2016
|
20153
|
|
|---|---|---|---|
|
Current ratio
|
0.8
|
1.0
|
1.4
|
|
Quick ratio
|
0.6
|
0.6
|
1.0
|
|
Equity ratio
|
37.6%
|
37.7%
|
47.6%
|
|
Return on total equity
|
18.2%
|
15.6%
|
13.0%
|
|
Return on total assets
|
6.8%
|
5.4%
|
6.0%
|
3 Adjusted for refocusing costs and acquisition related costs
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
Annualized result for the period ÷ Average of total equity ([beginning balance + ending balance for the period] ÷ 2)
Return on total assets
Annualized result for the period ÷ Average of total assets ([beginning balance + ending balance for the period] ÷ 2)