Marel Q2 2021: Record orders and cash flow, revenues and EBIT
stable between quarters
EXECUTIVE SUMMARY
Financial highlights
Q2
2021
- Record orders received and
strong order book, orders for poultry were at a strong level, meat
were in line with expectations and fish were at record
levels.
- Pipeline building up across
all industries and processing stages.
- Profitability at similar
levels as Q1 2021, hampered by supply chain and logistics costs, as
well as step up in sales and service coverage ahead of the growth
curve.
- Orders received
were EUR 371.3m (2Q20: 280.1m).
- The order book
was EUR 499.1m (1Q21: 455.3m, 2Q20: 439.0m).
- Revenues were
EUR 327.5m (2Q20: 305.7m).
- EBIT1 was EUR
38.6m (2Q20: 45.0m), translating to an EBIT1 margin of 11.8% (2Q20:
14.7%).
- Net result was
EUR 23.3m (2Q20: 30.7m).
- Basic earnings
per share (EPS) were EUR 3.14 cents (2Q20: 4.07 cents).
- Cash flow from
operating activities before interest and tax was EUR 77.9m (2Q20:
63.1m).
- Free cash flow
at EUR 54.6m (2Q20: 47.6m)
- Net debt/EBITDA
was 0.8x at the end of June (1Q21: 0.8x, 2Q20: 0.6x).
Financial highlights 1H
2021
- Orders received
were EUR 740.7m (1H20: 631.9m).
- Revenues were
EUR 661.5m (1H20: 607.3m).
- EBIT1 was EUR
76.6m (1H20: 70.4m), translating to an EBIT1 margin of 11.6% (1H20:
11.6%).
- Net result was
EUR 44.5m (1H20: 44.1m).
- Basic earnings
per share (EPS) were EUR 5.95 cents (1H20: 5.82 cents).
- Cash flow from
operating activities before interest and tax in the first six
months was EUR 138.1m (1H20: 124.6m).
- Free cash flow
at EUR 100.1m (1H20: 86.2m).
Árni Oddur
Thórdarson, CEO of Marel
commented:
“The second quarter was a dynamic one for Marel,
where the partnership between our passionate team, our customers
and suppliers was paramount to our success.
For two sequential quarters, we’ve secured
record orders received of around EUR 370 million each quarter. In
the second quarter, Marel Poultry was back on track with strong
orders received, orders in Marel Meat were in line with
expectations, and Marel Fish delivered record orders where salmon
was clearly on the menu. Revenues and gross margins are expected to
pick-up on the back of a healthy order book and good product mix.
The pipeline continues to build up in all industries.
Our operational results were soft in Q2 with EUR
328 million in revenues and EBIT close to 12%. In times of
ever-changing market environment and shifting consumer behavior,
agility is key. Ahead of the growth curve, we stepped up our local
sales and service coverage worldwide and continued to introduce
revolutionary solutions that will further transform the food
processing industry. We´ve also taken great strides in remodeling
our end-to-end spare parts delivery systems, focusing on automating
and digitizing the process, just as our customers are doing in
their business.
Continued investment in our platform and
acquired growth are enabled by the strong cash flow. There was
record operational cash flow in the quarter of EUR 78 million
despite ramping up inventories to secure timely delivery.
Recent acquisitions are driving organic growth
through cross- and upselling, transfer of technology, and
accelerating the innovation roadmap. In the quarter, we secured
landmark orders for a turkey greenfield in the US, and the first
full-line tilapia plant in Brazil, both focused on quality and
sustainability using highly automated and digitized solutions. We
continue on that journey and in July we announced the agreement to
acquire Valka to strengthen the full-line offering, increase scale
and accelerate the innovation roadmap for the fish segment.
In strategic partnership, Marel and TOMRA, are
developing a true game-changer in foreign material detection, the
Marel Spectra. This revolutionary solution will meet Marel’s
customers challenges head on to deliver contamination free, safe
and sustainable food.
Our financials are strong, and we will continue
to innovate, to form strategic partnerships with pioneers, and to
undertake acquisitions to become the leading pure-play provider of
full-line digitized processing solutions and services to the
poultry, meat and fish industries.”
Financial performance
Key figures (EUR m)
2Q21 |
|
2Q20 |
|
∆ YoY |
|
As per financial statements |
|
6M21 |
|
6M20 |
|
∆ YoY |
327.5 |
|
305.7 |
|
7.1% |
|
Revenues |
|
661.5 |
|
607.3 |
|
8.9% |
118.6 |
|
114.2 |
|
3.9% |
|
Gross profit |
|
243.0 |
|
221.5 |
|
9.7% |
36.2% |
|
37.4% |
|
|
|
Gross profit as a % of revenues |
|
36.7% |
|
36.5% |
|
|
38.6 |
|
45.0 |
|
-14.2% |
|
Adjusted result from operations (Adjusted EBIT) |
|
76.6 |
|
70.4 |
|
8.8% |
11.8% |
|
14.7% |
|
|
|
EBIT1 as a % of revenues |
|
11.6% |
|
11.6% |
|
|
49.8 |
|
56.9 |
|
-12.5% |
|
EBITDA |
|
97.1 |
|
94.5 |
|
2.8% |
15.2% |
|
18.6% |
|
|
|
EBITDA as a % of revenues |
|
14.7% |
|
15.6% |
|
|
(5.6) |
|
(2.6) |
|
115.4% |
|
Non-IFRS adjustments |
|
(13.5) |
|
(5.2) |
|
159.6% |
33.0 |
|
42.4 |
|
-22.2% |
|
Result from operations (EBIT) |
|
63.1 |
|
65.2 |
|
-3.2% |
10.1% |
|
13.9% |
|
|
|
EBIT as a % of revenues |
|
9.5% |
|
10.7% |
|
|
23.3 |
|
30.7 |
|
-24.1% |
|
Net result |
|
44.5 |
|
44.1 |
|
0.9% |
7.1% |
|
10.0% |
|
|
|
Net result as a % of revenues |
|
6.7% |
|
7.3% |
|
|
371.3 |
|
280.1 |
|
32.6% |
|
Orders Received |
|
740.7 |
|
631.9 |
|
17.2% |
499.1 |
|
439.0 |
|
|
|
Order Book2 |
|
499.1 |
|
439.0 |
|
13.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q21 |
|
2Q20 |
|
|
|
Cash flows |
|
6M21 |
|
6M20 |
|
|
77.9 |
|
63.1 |
|
|
|
Cash generated from operating activities, before interest &
tax |
|
138.1 |
|
124.6 |
|
|
67.3 |
|
53.4 |
|
|
|
Net cash from (to) operating activities |
|
122.2 |
|
97.4 |
|
|
(20.7) |
|
(10.3) |
|
|
|
Investing activities |
|
(52.4) |
|
(20.8) |
|
|
(63.6) |
|
(584.0) |
|
|
|
Financing activities |
|
(67.0) |
|
(222.2) |
|
|
(17.0) |
|
(540.9) |
|
|
|
Net cash flow |
|
2.8 |
|
(145.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30/06 |
|
31/12 |
|
|
|
|
|
|
|
|
Financial position |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
Net Debt (Including Lease liabilities) |
|
182.3 |
|
205.2 |
|
|
|
|
|
|
|
|
Operational working capital3 |
|
49.7 |
|
78.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key ratios |
|
6M21 |
|
6M20 |
|
|
|
|
|
|
|
|
Current ratio |
|
1.0 |
|
1.2 |
|
|
|
|
|
|
|
|
Quick ratio |
|
0.6 |
|
0.8 |
|
|
|
|
|
|
|
|
Return on equity4 |
|
9.3% |
|
9.5% |
|
|
|
|
|
|
|
|
Leverage5 |
|
0.8 |
|
0.6 |
|
|
|
|
|
|
|
|
Number of outstanding shares (millions) |
|
753.8 |
|
747.9 |
|
|
|
|
|
|
|
|
Market capitalization in EUR billion based on exchange rate at end
of period |
|
4.5 |
|
3.5 |
|
|
|
|
|
|
|
|
Basic earnings per share in EUR cents |
|
5.95 |
|
5.82 |
|
|
1 Operating income adjusted for PPA related costs,
including depreciation and amortization, and as of Q4 2020,
acquisition related costs. 2 Including acquired order book of Curio
and PMJ of EUR 4.2m in 1Q21. 3 Trade receivables, inventories, net
contract assets & contract liabilities, trade payables. 4
Net result (annualized) / average of total equity.
5 Net debt (Including lease liabilities) / LTM EBITDA.
Record orders received in the first half
of the year
Record orders received in 2Q21 of EUR 371.3m,
with strong orders across all industries and all processing
stages.
Strong first half of the year with combined
orders of EUR 740.7m in 1H21, up 17.2% from EUR 631.9m in 1H20.
M&A continues to fuel organic growth and
accelerate the innovation roadmap. In the quarter Marel secured
important orders where a broader product portfolio following recent
acquisitions of TREIF (meat and other), Curio (fish) and PMJ
(poultry) were key.
Marel Poultry secured a landmark order from
Prestage Farms for a highly innovative and fully automated turkey
processing plant, including multiple lines and the largest inline
air chilling tunnel for turkeys in the US, focused on
digitalization and sustainability to improve end-to-end
traceability, nutrition and product quality.
In the fish industry, the first full-line
solution for tilapia was sold to C.Vale in Brazil, increasing
flexibility to handle both fresh and frozen products, and
optimizing the use of raw material, less water usage, less CO2
emissions and data collection to measure progress.
Within prepared foods, orders for new avenues
such as the pet market were secured in the second quarter.
Pipeline is strong across all industries
and processing stages
The pipeline for large greenfields and
modernization projects is building up in all industries. Marel has
stepped up market coverage and recently launched revolutionary
solutions in consumer-ready products.
The need for automation and digital solutions in
the food value chain is driven by secular trends like population
growth and urbanization. COVID-19 improved the outlook for
automation in the animal protein industry and has been an
accelerator for the underlying secular trends in terms of social
distancing, access to labor and hygiene. In addition, shifting
market dynamics and change in consumer behavior are also driving
demand.
Revenues of EUR 328m with 40% solid
recurring aftermarket revenues
Revenues were EUR 327.5m in 2Q21, up by 7.1%
YoY, down 1.9% QoQ.
Aftermarket, comprising of services and spare
parts, represented 40% of total revenues in the quarter (1Q21: 39%,
2Q20: 38%).
A strong order book and a book-to-bill
ratio of 1.13 in the quarter
The order book at end of June was EUR 499.1m
(1Q21: 455.3m, 2Q20: 439.0m), representing 39% of 12-month trailing
revenues.
The book-to-bill ratio in the quarter was 1.13,
compared to an average of 0.98 in the past four quarters
(2Q20-1Q21).
Greenfields, such as large equipment orders, and
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 order book.
Profitability continues to
be hampered by rising logistics costs,
step up in sales and service coverage
Gross profit margin was 36.2% in the quarter
(2Q20: 37.4%) and gross profit was EUR 118.6m (2Q20: 114.2m).
Margins impacted by increased costs due to mobility and logistical
challenges, as well as faster rebound in the world economy than
expected.
COVID-19 continued to have an impact on 2Q21
results, both in terms of supply chain and efficiency of
operations. Ensuring timely delivery and installation for customers
during a period of significant challenges in mobility and
logistics, led to higher costs in manufacturing, aftermarket and
transportation.
Decisive steps in 2Q21 in journey to transform
spare parts handling with focus on investments in fulfillment
centers and digitizing and automating the end-to-end parts handling
to ensure shorter lead times.
Sales and marketing (S&M) costs were at a
level of 12.2% of revenues and reflect the step up in market
coverage in line with plans to leverage global reach and digital
solutions to drive organic growth.
General administrative (G&A) costs were 6.2%
of revenues and innovation cost was at the 6.1% strategic
level.
Marel is committed to the mid-term targets to
achieve gross profit of 40%, SG&A of 18% and maintain the
innovation investment at the 6% strategic level by year-end
2023.
Marel does not adjust results for non-recurring
costs, except for PPA and acquisition related costs.
Continued focus on EBIT margin
expansion
EBIT1 was EUR 38.6m (1Q21: 38.0m, 2Q20: 45.0m),
translating to an EBIT1 margin of 11.8% (1Q21: 11.4%, 2Q20:
14.7%).
Profitability for Marel Poultry was lower as a
result of soft orders for larger projects as stated in 1Q21 and
high logistics costs to ensure timely delivery of projects, or
12.2% (2Q20: 19.8%). Strong orders received in 2Q21 and a strong
pipeline in Marel Poultry supporting stronger volume and mix in
coming quarters.
Management continues to target medium and
long-term EBIT margin expansion for Marel Meat and Marel Fish.
Robust cash flow generation to support
continued investments
Record operational cash flow mainly driven by
down payments for new orders improving working capital.
Strategic buildup of inventory to ensure timely
delivery to customers of EUR 19.2m.
Cash generated from operating activities in the
quarter was EUR 77.9m (2Q20: 63.1m).
Free cash flow in 2Q21 was EUR 54.6m (2Q20:
47.6m).
Strong cash conversion supports continued
investments in innovation, infrastructure and strategic inventory
buildup.
Investments to support organic and
strategic growth
To best serve customer needs and capture growth
opportunities from changing market dynamics, Marel is focusing on
increasing digitalization and agility, leading to an increased
level of investments in the coming years.
Important initiatives identified, e.g. stepping
up market coverage, innovation investments in digital solutions,
and improvement projects to streamline the back end, as well as
automating and digitizing the manufacturing platform, supply chain
and aftermarket.
In July, Marel will open a new demo center and
sales and service office in Campinas, Brazil, with new facilities
opening in Shanghai, China later in the year.
Low leverage
ratio of 0.8x, strong financial position to support the
2017-2026 growth strategy
Low leverage, committed liquidity of
EUR 672.3m at the end of June, including fully committed
all-senior funding in place until 2025, enables continued
investment and will facilitate future strategic moves in the
ongoing industry consolidation wave, in line with the company’s
2017-2026 growth strategy.
Over the quarter, a dividend of EUR 41.0m paid
out in April, or 40% of net results (2020: 40%, 2019: 30%), in
addition to a EUR 6.0m partial working capital settlement for the
TREIF acquisition.
Leverage was 0.8x at the end of 2Q21 (1Q21:
0.8x), well below the targeted capital structure of 2-3x.
Subsequent events: Marel to acquire
Valka, an innovative provider of advanced processing solutions for
the global fish industry
Marel aims to acquire 100% of Valka's share
capital. An agreement has been reached to acquire over 90% of the
share capital of Valka, and the remaining shareholders will be
offered to sell their shares at the same terms.
Valka is an Icelandic provider of advanced
processing solutions for the global fish industry, and its product
range includes waterjet cutting, trimming, and grading solutions
for whitefish and salmon.
Valka is based in Iceland and Norway and has
around EUR 17 million in annual revenues and 105 employees.
This transaction will strengthen Marel's
full-line offering to the fish processing industry and increase
scale to serve customer needs better. The shared technical know-how
in the combined team will accelerate the innovation roadmap
allowing fish processors swiftly adapt to a rapidly changing
market.
The transaction is subject to customary closing
conditions, including anti-trust approval and is expected to be
completed later this year.
Industry performance
Q2 2021
Marel Poultry - 44% of
total revenues with 12.2% EBIT1
margin
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. Recent bolt-on acquisition of PMJ
fueling organic growth in terms of new sales into the duck
market.
Strategic partnership between Marel and TOMRA,
combining their respective expertise in food processing and
cutting-edge vision technology to develop the Spectra, a uniquely
valuable solution in foreign material detection that meets Marel
customers’ challenges head on.
Orders received for Marel Poultry in 2Q21 and
pipeline were strong across all processing steps, supporting
stronger volume and mix in coming quarters. A landmark deal for a
turkey greenfield with Prestage Farms in the US was secured in the
quarter. Opening in 2022, the highly automated and digitized plant
has end-to-end Marel state-of-the-art technology, including
air-chilling and track and trace functionality covering the entire
plant.
Revenues in 2Q21 for Marel Poultry were EUR
145.1m, down 10.2% YoY.
EBIT in 2Q21 was EUR 17.7m (2Q20: 32.0m) and the
EBIT margin was 12.2% (2Q20: 19.8%). Lower profitability for Marel
Poultry as a result of soft orders for larger projects as stated in
1Q21 and high logistics costs of projects to ensure timely delivery
to customers.
Marel Meat - 41% of total
revenues with 12.6% EBIT1
margin
Full-line offering with focus on strong product
development, increased standardization, modularization, market
penetration and further cross- and upselling.
M&A: Acquisitions fueling organic growth
through cross-and upselling, and accelerating the innovation
roadmap by cascading technology across industries.
Newly launched solutions, SensorX Magna and Accuro,
are gaining traction in line with higher focus on food safety and
sustainability in consumer-ready products.
Orders received in 2Q21 for Marel Meat were good
across all processing steps with continued focus on a broader
product portfolio following recent acquisitions. Pipeline remains
strong.
Revenues in 2Q21 for Marel Meat were EUR 134.8m, up
by 38.4% YoY (2Q20: 97.4m).
EBIT in 2Q21 was EUR 17.0m (2Q20: 8.6m) and EBIT
margin of 12.6% (2Q20: 8.8%). Improved profitability in the quarter
due to better project execution and product mix driven by increased
sales coverage, and solution replication in large orders.
Management continues to target medium and long-term
EBIT margin expansion for Marel Meat, and has accelerated market
coverage and operational improvement initiatives.
Marel Fish -
12% of total revenues with 6.3%
EBIT1 margin
Objective to reach full-line offering across farmed
and wild whitefish and salmon through continued focus on innovation
and M&A.
M&A: Agreement to acquire Valka as a subsequent
event, pending anti-trust and other customary closing conditions.
Curio acquisition consolidated as of 4 Jan 2021. Salmon primary
processing offering solidified through the strategic partnership
with Stranda and 40% acquisition of their shares.
Innovation roadmap accelerated to close certain
application gaps to reach full-line offering for both salmon, as
well as wild and farmed whitefish.
Orders received in 2Q21 were at record level for
Marel Fish. Pipeline for large projects is building up and
conversion into orders is expected to pick up. Landmark order for
tilapia processing with C.Vale in Brazil, focused on channel
flexibility, and the optimal use of raw material, less water usage,
less CO2 emissions and data collection to measure progress.
Revenues for Marel Fish in 2Q21 were EUR 37.9m
(2Q20: 41.0m).
EBIT in 2Q21 was EUR 2.4m (2Q20: 3.9m) and the EBIT
margin was 6.3% (2Q20: 9.5%), higher volume is needed to deliver
sufficient margin improvement.
Management continues to target medium and long-term
EBIT margin expansion for Marel Fish.
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 be on Marel in
2021.
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 average annual market growth of 4-6% 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
22 July 2021
On Thursday 22 July 2021, at 8:30 am GMT (10:30 am
CET), Marel will host a virtual investor meeting where CEO Arni
Oddur Thordarson and CFO Linda Jonsdottir will give an overview of
the financial results and operational highlights in the second
quarter.
The virtual meeting will be webcast live on
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:
- IS: +354 800 7437 (PIN:
79078208#)
- NL: +31 10 712 9163
- UK: +44 33 3300 9032
- US: +1 631 913 1422 (PIN:
79078208#)
Financial Calendar
Marel will publish its (Condensed) Consolidated
Financial Statements according to the below financial calendar:
- Q3 – 20 October 2021
- Q4 – 2 February 2022
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.
Media relations
For media inquiries, please contact Marel Media
Relations via email globalcommunications@marel.com or tel. (+354)
563 8200.
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.
Marel has around 6,800 employees in over 30 countries. In 2020,
Marel delivered EUR 1,238 million in revenues, and invests around
6% of revenues in innovation annually. By continuously transforming
food processing, Marel enables its customers to increase yield and
throughput, ensure food safety and improve sustainability in food
production. Marel was listed on NASDAQ Iceland in 1992 and
dual-listed on Euronext Amsterdam in 2019.
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 Q2 2021 Condensed Consolidated Interim Financial
Statements
- Marel Q2 2021 Condensed Consolidated Interim Financial
Statements
- Marel Q2 2021 Press Release