Strategy and Finance

Financial Performance

The year 2013 can be characterized as steady but slow

"In line with the end of 2012, the year started out slow. Contrary to our expectations, the trend did not pick up as the year progressed. Revenues amounting to EUR 661.5 million in 2013 compared to EUR 714.0 million in 2012, a decrease of 7.3%. The EBIT margin was 6.5%. However, the orders received, order book and net debt improved compared to 2012."

Erik Kaman, Chief Financial Officer

Development of Order Book in 2013

In EUR millionTotal
Orders received* 650.4 183.7 159.1 163.3 162.4 668.6
Order book 125.4 151.1 131.8 138.3 132.4 132.4

* Includes service revenues

Natural Variations
in the Business Environment

"The order book grew by 5.6% in 2013 while revenue decreased by 7.3%. There are fluctuations in both orders received and revenue from quarter to quarter, but they are considered natural variations in the business and depend on the timing of orders received and manufacturing lead times. Food processors delayed their investment decisions due to factors such as higher feed prices, uncertain economic conditions, and more difficult financing possibilities.

“Recovery has been slow in our most important markets,” says Erik. "On the positive side, we see that the customer lead pipeline is mounting, which confirms a growing demand for investment. We see some early signs of recovery in certain markets like the U.S., but those trends were not strong enough to compensate for the decrease in other markets worldwide.

The economic environment is still challenging and sometimes it is difficult for our customers to finance projects and more standard equipment. Marel has now teamed up with a financial partner to offer leasing solutions for standard equipment, to adapt to the needs of the customers", says Erik.

Focus on
Strengthening Our Global Network

“We have maintained our focus on strengthening our global sales and service network, and streamlining our sales and service teams in order to enhance our customer partnerships. We have also continued to invest considerably in research and development. We aim to strengthen our position as a market leader by bringing food processors worldwide a steady flow of innovative products that cater to the ever-changing consumer needs,” says Erik. 

The company's revenue base remains strong and can generally be divided into three approximately equal components: 1) the sale of large systems, often for greenfield projects, 2) the sale of stand-alone equipment and smaller standardized systems, and 3) service and spare parts. In the past, large projects have generated about 1/3 of Marel's revenue, but last year they generated about 25% of revenue, whereas standard solutions accounted for about 35%.

Marel's poultry industry sector still accounts for slightly over 50% of the company's revenue; but there are signs that other segments may grow faster in the coming years.

Response to Economic Environment

In the present economic situation, Marel will focus on keeping a tight control of the cost level without lowering the resources allocated to research and development, and without impacting the sales and service network. According to the strategy laid out in 2006, Marel is now in its organic growth phase. The company can expand its production capacity without heavy investments in facilities and equipment.

"We have taken many important steps in recent years to align the company's resources, and to become more efficient in processes throughout the company's operations. This will be the foundation which supports our long-term business goals. We are guided by operational excellence in every aspect of our business.  We continue to limit our investments in working capital by accelerating our cash conversion cycle. During 2013, we were able to maintain our levels of days of sales outstanding and inventory turnover rate, despite lower revenues.

The changes in management are intended to accelerate the reduction of costs that are not contributing to future growth. This also means that some units in the organization which have a subscale nature will be combined with bigger units, leading to a simpler management structure, leaner processes and reduced costs. The first such steps have been taken in the company’s freezing and meat activities," says Erik.

EBIT and Cost Efficiency

In 2013, the operational profit (EBIT) was 42.9 million, or 6.5%, compared to an EBIT of 61.1 million or 8.6% in 2012.

"This is a reasonable result in a difficult environment. The gross profit margin must improve. We will continue to maintain a strict focus on manufacturing efficiency, overhead costs, improvement and simplification of processes, and using economies-of-scale wherever possible. There are many ongoing projects which aim at streamlining the business, further reducing Marel's cost base in a sustainable manner, and preparing the company for continued growth in line with strategic goals," says Erik.



In December 2012, Marel signed agreements with its lenders to amend and extend the term of the present loan facilities from November 2010 by one year, to the end of 2016, while reducing interest costs. In December 2013 and January 2014 Marel repaid the Danish mortgage loans to further streamline the capital structure. The company is now financed by one bank consortium, and in a proportion of EUR and USD that gives a good natural hedge to exposures.

Since 2009 net debt has decreased substantially or by 157 million, at the same time Marel has issued 46 million through private placements, paid dividend in the amount of 14 million and pension payments settlements in the amount of 22 million. During 2013 the company's net debt has decreased from 243.2 million to 217.1 million due to the cash flow from operational results, strict working capital management, and limited investments. This gives a good starting point to support future growth in 2014 and beyond.

Key Events During the Year

In 2013 Marel paid 3.7 million in pension payments in the U.S. The pension fund has now been closed and there are not further obligations. P&L impacts of  this were already taken in 2012.

Development of Net Interest Bearing Debt in 2013

End of quarter in EUR millionQ4 2012Q1 2013Q2 2013Q3 2013Q4 2013Change since Q4 2012
Non-current borrowings 239.7 234.6 230.7 234.0 214.8 (24.9)
Current borrowings 19.4 19.4 19.4 19.5 22.1 2.6
Total borrowings 259.2 254.0 250.1 253.5 236.9 (22.3)
Cash and equivalents 15.9 14.7 21.3 14.5 19.8 3.9
Net interest bearing debt 243.2 239.3 228.8 239.0 217.1 (26.2)

2013 Results in Comparison to 2012

In EUR million20132012Change in %
Revenues 661.5 714.0 (7)
Cost of sales (427.9) (464.7) (8)
Gross profit 233.6 249.3 (6)
Gross profit margin 35% 35% 0
Other operating income 0.0 0.5 -
Selling and marketing expenses (95.1) (90.1) 6
Research and development expenses (44.4) (41.6) 7
Administrative expenses (51.3) (56.9) (10)
Result from operations (EBIT) 42.9 61.1 (30)
EBITDA 69.4 86.0 (19)