avatar Marel Poultry B.V. Manufacturing

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    ANNUAL REPORT 2009


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    We are proud of our multi-national heritage. We trace our roots as far back as the 1930s and across five countries. Denmark: Carnitech, Norfo and Scanvaegt Iceland: Marel and Pols The Netherlands: Stork PMT and Stork Titan United Kingdom: AEW, Delford, Sortaweigh and Thurne United States: Gamco and Townsend


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    GLOBAL LEADER Marel is the leading global provider of advanced equipment, systems and services to the fish, meat, poultry and further processing industries. Proteins constitute an ever greater part of the human diet and this segment of the food processing industry has been growing at an average annual rate of 5-6% for the past two decades. Number 1 Number 1 Number 1 Major global globally globally globally provider in advanced in advanced in advanced of advanced equipment and equipment and equipment and equipment and systems for poultry systems for fish systems for systems for meat processing processing segments of processing further processing


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    Global presence Marel is a multinational company, with more than 3,500 employees worldwide. We have offices and subsidiaries in some 30 countries and operate a network of more than 100 agents and distributors One company, one stop who market, sell and service the company’s products Our brands – Marel, Stork Poultry Processing around the world. and Townsend Further Processing – are among the most respected in the industry. Pushing the envelope United in ONE COMPANY, we offer our Marel thrives on innovation. With our annual customers the convenience of a single source investment of 5-7% of revenues in research and for products to meet their every need – from development – far above the industry average harvesting raw materials to packaging the – we are constantly extending our reach and final product. Marel is the only company in pushing the envelope of what is possible. the industry to offer complete integrated systems in all four industry segments that we serve, in addition to a wide range of standardized standalone units.


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    Contents Financial ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Marel in figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chairman’s address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 CEO’s address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Strategy and finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Subsequent events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Integration and strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Opportunities and outlook . . . . . . . . . . . . . . . . . . . . . . . . 21 Market outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Poultry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Fish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Meat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Further processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Business operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 To our shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Shares and shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Investor relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 CEO and Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 50 Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Consolidated financial statements for 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 The Board of Directors and CEO’s report . . . . . . . . . . . 56 Independent auditor’s report . . . . . . . . . . . . . . . . . . . . . 58 Consolidated income statement . . . . . . . . . . . . . . . . . . . 59 Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . 60 Consolidated statement of changes in shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Consolidated cash flow statement . . . . . . . . . . . . . . . . . 62 Notes to the consolidated financial statements . . . . 63 11


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    Financial ratios Operating results 2009 2008 2007 2006 2005 Revenue 531,680 540,149 289,817 208,700 129,039 Gross profit 191,674 178,931 97,236 68,803 43,625 Result before depreciation (EBITDA) 58,752 42,108 20,980 15,679 14,814 Result from operations (EBIT) 8,047 20,434 10,029 7,527 9,721 Result for the period (11,811) (8,405) 6,066 159 5,715 Cash flow statement Cash generated from operating activities, before interest & tax 75,395 45,852 7,925 6,010 4,706 Net cash from (to) operating activities 25,526 9,602 2,778 (2,992) 2,987 Investing activities 10,758 (404,986) (70,249) (69,754) (10,180) Financing activities 10,168 386,481 34,118 132,318 7,210 Financial position Total assets 882,882 920,259 427,304 364,793 114,890 Working capital 109,111 (25,940) 109,887 87,989 16,557 Equity 323,797 288,279 181,835 144,423 41,032 Net Debt 295,012 379,405 129,919 95,468 40,263 Various figures in proportion to sales Gross profit 36.1% 33.1% 33.6% 33.0% 33.8% Selling and marketing expenses 13.8% 13.3% 15.5% 13.9% 12.4% Research and development expenses 5.9% 5.1% 5.0% 5.6% 6.1% Administrative expenses 13.1% 11.1% 10.0% 10.6% 8.7% Wages and benefits 36.1% 33.7% 41.2% 42.7% 42.5% Result before depreciation (EBITDA) 11.1% 7.8% 7.2% 7.5% 11.5% Depreciation/amortization 9.5% 4.0% 3.8% 3.9% 3.9% Result from operations (EBIT) 1.5% 3.8% 3.5% 3.6% 7.5% Result for the period (2.2%) (1.6%) 2.1% 0.1% 4.4% Other key ratios Current ratio 1.6 0.9 1.9 1.9 1.4 Quick ratio 1.4 0.5 1.3 1.2 0.6 Equity ratio 36.7% 31.3% 42.5% 39.6% 35.7% Return on owners’ equity (3.9%) (3.6%) 3.7% 0.2% 18.1% Return on total assets (1.3%) (1.2%) 1.5% 0.1% 5.4% Key figures from Marel’s core operations, normalised Q4 2009 Q4 2008 2009 2008 Revenue 112,492 121,405 434,796 548,077 Result from operations (EBIT) 6,920 (5,724) 24,760 38,233 EBIT as a % of sales 6.2% (4.7%) 5.7% 7.0% Net result 1,236 (23,350) 5,145 6,639 Net result as a % of sales 1.1% (19.2%) 1.2% 1.2% Result before depreciation and amortisation (EBITDA) 12,763 745 47,432 60,016 EBITDA as a % of sales 11.3% 0.6% 10.9% 11.0% Glossary of terms Net Debt . . . . . . . . . . . . . . . . . . Borrowings (Current & Non-current) -/- Cash & Cash equivalents -/- Restricted cash Net Cash . . . . . . . . . . . . . . . . . . Cash and cash equivalents + restricted cash -/- Bankoverdrafts Full Time Equivalents . . . . . . Number of personnel, where part time employees are counted for the percentage of a full time job Explanation of other key ratios Current ratio . . . . . . . . . . . . . . . Current assets / Current liabilities Quick ratio . . . . . . . . . . . . . . . . (Current assets -/- Inventories -/- Production contracts) / (Current liabilities -/- Production contracts) Equity ratio . . . . . . . . . . . . . . . . Total equity / (Total equity + Total liabilities) Return on owners’ equity . . . Annualized result for the period / Average of 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) 2


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    Marel in figures Note: These figures are from the consolidated accounts of Marel. Please see the financial ratios on the left for key figures from Marel‘s core operations and pages 10-14 for the pro forma financial results. Sales in million EUR Profit from operations (EBIT) in million EUR €m €m 600 25 500 20 400 15 300 10 200 100 5 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 EBITDA in million EUR and as percentage of sales Equity ratio €m Ratio 600 14 % 40% 500 12 % 30% 10 % 400 8% 300 20% 6% 200 4% 10% 100 2% 0 0% 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Sales EBITDA as ratio of sales Number of employees, average per year Research and development expenses €m 4,000 35 7% 30 6% 3,000 25 5% 20 4% 2,000 15 3% 1,000 10 2% 5 1% 0 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 R&D expenses R&D expenses as % of sales Sales in 2009, by business segment Sales in 2009, by geographical location Iceland Other Fish 1% The Netherlands 4% 16% 16% Other countries 20% Further Processing 13% Europe other Poultry 48% North America Meat 41% 27% 14% 3


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    Chairman’s address The financial crisis that began in 2008 led to a world-wide economic downturn of a higher magnitude than we have seen in decades. However, it seems that the bottom is now behind us with global industrial production in general showing clear signs of recovery, underpinned by a rapid global recovery of equities and re-opening of banking markets. This is a sharp divergence from the experience of the Great Depression, when a decline in industrial production continued for years and asset prices tumbled for a decade. The economic turbulence is felt in different ways. Retail, construction and automobile industries in North America and Western Europe are expected to continue to face problems in the near term, while truly global businesses Marel’s acquisitions in recent years were neither that rely on geographical expansion and changes in opportunistic nor coincidental. The importance of consumer habits, and which focus especially on emerging diversification and a strong global market penetration, markets such as Asia and South America, are expected to with sales and service network spanning more than 40 enjoy good growth in the coming years. countries, has become clearly evident in the current economic climate. Looking ahead, Marel is in a unique position to create value for customers and shareholders after having A strong foundation transformed the competitive landscape in a highly The roots of our business in serving the food processing fragmented industry. Today, Marel is an undisputed industry can be traced back to 1932 when Scanvaegt world-wide industry leader in developing and providing was incorporated in Denmark. In 1946, Townsend was equipment and solutions to the poultry, meat and fish founded in the United States to serve the pork and meat industries, with an increased focus on the convenience industry. A little later, Stork Food Systems was established food segment. The cornerstone of Marel´s strategy was in the Netherlands to serve the poultry industry and Marel presented at our Annual General Meeting in 2006; an initial was incorporated in 1983 with the goal of increasing period of high external growth was to be followed by a productivity in the fish industry in Iceland. Today, Marel is brief period of refocusing and preparation for a long and a truly global multi-product and service business, sharing fruitful period of high organic growth. a common heritage of innovation and a drive to constantly serve customers better. The message from Marel’s Board of Directors to our people at the beginning of the recent External growth Integration Organic growth economic turbulence was clear; ensure that our businesses emerge stronger after the storm while maintaining the strategy of merging all the excellent businesses into ONE COMPANY to ensure value creation in the long term for both customers and shareholders. Structural changes were made at Marel in 2009, including at the level of senior management. I would like to take this opportunity to thank Hordur Arnarson, who served as Marel’s CEO for a period of 10 years, for his ambition and leadership in increasing the standardisation of products 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014* * Expected development 4


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    and for his courage in constantly investing in new product There is limited need for capital expenditures in the next development. At the same time, the Board of Directors 2-3 years and there are ongoing working capital programs would like to welcome Theo Hoen as CEO of the new in place that have the objective of using working capital Marel group. Theo has been at the forefront of the industry more efficiently. This should further improve our cash flow for 25 years. Initially, he dedicated himself to research in the coming years. After having made several structural before becoming head of production and then, in recent improvements and made significant progress in the years, serving as CEO of Stork Food Systems. Under Theo’s integration of the companies in the group, our ambition leadership, Stork Food Systems secured its position as is clear; Marel’s goal is to reach operational profits fully global leader in serving the poultry industry with high comparable with those of best in class global industrial growth and good profitability at an EBIT level of 10-12%. companies. A record cash flow in a tough environment Outlook In 2009, Marel made the strategic decision to become a The long-term outlook is favourable as the growth drivers more market-oriented company, focusing on four pillars – of steadily increasing protein consumption – including poultry, meat, fish and further processing. Consequently, urbanization in emerging markets and a move towards the organization was streamlined and the number of mass production processes in the food processing industry employees reduced from 4,100 to 3,500 people. Today, – remain intact. The industry´s growth has exceeded the organization is leaner, more focused and better economic growth rates by a considerable margin in the equipped to serve our growing global customer base. All past 20 years and is now expected to grow annually at a this was accomplished without reducing our investment in rate of 4-7% in the coming years. research and development, which is the foundation of our We are grateful for the trust that investors and creditors competitive advantage and the source of our long-term have shown Marel in recent years. It is a clear goal to sales growth. increase liquidity of shares and “unlock” shareholder value One unfortunate effect of the refocusing efforts in 2009 is by dual listing Marel shares in the Amsterdam Exchange the fact that our annual accounts are difficult to analyse. To or another European stock exchange, in addition to the the readers of our annual accounts I would therefore like listing in the Nasdaq OMX in Iceland where Marel has been to highlight a few of our team’s achievements in 2009: listed since 1992. • Non-core operating businesses, which are overall The Marel team is fully dedicated to being “back on track” operating at a much lower gross margin than our core already in 2010 with a full focus on strong organic growth businesses, were disposed of; consequently the focus and increased profitability to ensure that customers and on our high-growth and profitable core businesses was shareholders harvest well in the coming years. increased. • Administration costs are extremely high in 2009, which was a turbulent year with a heavy emphasis on disposals and the refinancing of the company’s operations following a period of rapid external growth. • A record operating cash flow was achieved in 2009, without sacrificing R&D efforts. Árni Oddur Þórðarson • The financials of the company significantly strengthened Chairman of the Board in 2009 as a result of increased operational cash flow, disposal of non-core businesses and an equity issue that significantly reduced risk and financing costs for the future. 5


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    CEO’s address Marel has established itself as the global leader in its field with a 15% market share. The success of the growth strategy announced by the Board of Directors in 2006, which culminated in the acquisition of Stork Food Systems in May 2008, is quite an achievement and we are proud of it. But being the biggest is not our main goal. We want our position of leadership to be based on our customers’ perception of Marel as the BEST company in the industry. That is what we have been working toward during the past The prevailing trends have been reflected in Marel’s order year, establishing the foundation that will enable us to be intake. In 2009, for four quarters in a row, we saw order the best. intake exceed orders booked off. As a result, our order book is at a much better level than it was at the beginning Being the best means excelling in three main areas: market of 2009. At the moment, order intake is approximately presence, innovation and operational excellence. The award 10% below the level it was at in early 2008. However, order that Marel received from Cargill Meats Europe in April 2009 intake in Q4 of 2009 is 15% higher than it was in Q4 of for operational excellence was one of the highlights of the 2008 and Q1 of 2009. year for us and shows that we are on the right path. All in all, it was a good recovery of the markets in 2009 Market situation after having taken a serious hit at the end of 2008. The protein market in which Marel operates was hit hard at the end of 2008 when the financial crisis struck and Toward “one company” customers began to have difficulty in financing larger After having been temporarily postponed due to the investments. Nevertheless, on the whole, our customers global financial crisis, the integration of the Marel and did well during this period. The consumption of proteins Stork companies was relaunched in May 2009 and was a remained stable because consumers see them as a key priority during the year. necessary component of their regular diets. Consumers did, We are convinced that by bringing the members of our however, shift their consumption from the more expensive group together in “one company”, we can better serve proteins to the cheaper ones, especially poultry. And they our customers, who have been the focal point of the began dining at home more. integration process from the beginning. By combining This trend was evident in the retail market where the high- the sales and service channels of Stork and Marel, we are end food stores saw a decrease in turnover at the same strengthening our market presence across the globe and time that discount stores like Aldi and Lidl experienced getting even closer to the customer. In the United States double-digit growth.1 A similar trend was observed in the we are already providing one point of contact for sales and foodservice market. High-end restaurants saw a drop in service for all of our brands. Gradually, we will do the same income while fast-food companies such as McDonald’s and in other countries. Burger King led the industry in terms of growth in 2009.2 We are also driven by our desire to meet our customers’ For Marel, this is a very favourable trend. The growth of expectations of a steady pipeline of innovative new discount stores and fast food companies means that the solutions. Combining the advanced technologies of Marel processors who are our customers have to increase their and Stork brings added value to our customers and allows capacity in order to keep up with demand, for which they us to offer products that help them to improve their need Marel’s equipment. It also means that our customers profitability. We launched our first “integrated innovation” have been relatively well placed during the global financial at the International Poultry Exhibition (IPE) in Atlanta in crisis. They operate in an industry that will find support January 2010, a total solution that combines a Stork breast once financing becomes more readily available in the filleting line with a Marel X-ray bone detection machine. market. The solution reduces the labour needed to man the filleting line and ensures that the fillets produced are free 1. Deloitte (2010). Global Powers of Retailing 2010. of bones. 2. The QSR 50 2009. QSR magazine (2010). 6


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    In 2009, the integration programme also addressed the Financial performance issues of branding, vision and manufacturing. In November Marel’s financial results were hit hard by the sudden drop 2009, we announced that the company name would be in revenues at the end of 2008. The impact was recognized changed to Marel and that all our business units would be very early on and we responded immediately with the integrated under this common identity. The re-branding necessary actions to reduce costs. During the year, we of the company was kicked off at the IPE show in Atlanta lowered our cost base by EUR 25 million and introduced and will be an ongoing process throughout 2010. We a programme to reduce gross working capital, which has also defined a new mission statement that encapsulates generated at least EUR 30 million in cash. our vision and ambition for the “new” Marel: “To be the customer’s choice in supplying integrated systems, As a consequence of the changed market conditions, products and services to the fish, meat and poultry it was unavoidable that we reduce the number of industries.” employees. We reduced our temporary staff, applied for a Dutch government programme of part-time We are extremely encouraged by the benefits we are unemployment and in-sourced. But we also had to reduce beginning to see emerge from the integration process and the number fixed staff by 14% compared to the end of Q2 we will continue full force with the programme in 2010. 2008, which we strongly regret. A market oriented organization Although we made hefty cost reductions in 2009, we avoided making cuts in sales, service and innovation, An important outcome of the integration process was which we consider to be our key success factors. As a the development of a new organizational structure for result, the investment in innovation as a percentage of the company. We made the strategic decision to take the revenues rose above the long-term target of 6% due to the next steps toward becoming a more market-oriented reduction in revenues in 2009. organization. The result is a new structure focused on serving the four industry segments that Marel has a strong Overall, we feel that by preserving our key success and unique position in – fish, meat, poultry and further factors while lowering our cost base overall, we have processing. We have established Industry Centres in each succeeded in strengthening our position in the market. of these segments, which are now the key drivers in our Moreover, the measures undertaken have contributed operations. to good operational results in 2009 given the market circumstances. Divestment of non-core activities Ever since the merger with Stork Food Systems was Future outlook completed, it has been our strategy to increase the Marel operates in a very attractive market, which is focus on the profitability and organic growth of our core expected to grow by 6-8% in the coming years. We are in a business, centred on the four industry segments already unique position in this market, thanks to our strong global mentioned. The decision was therefore made early on to presence and proximity to the customer, as well as our divest of those activities that were defined as non-core. In technological leadership and devotion to innovation. the first weeks of 2010, we concluded the divestment of We feel strongly that we have strengthened our position in the remaining non-core operating units of Carnitech A/S the past year by making our sales network more effective, Stovring and Stork Food & Dairy Systems. continuing to place a high a priority on innovation, and Carnitech A/S Stovring was sold to an American improving our operational excellence. We feel that the investment fund established by AIAC. Carnitech had a very “new” Marel is ready for the future. We begin 2010 with difficult year in 2009 but we feel confident that with this a much better order book than last year and a company new ownership, Carnitech can build a new future. that is working together as one team, with a clear strategic focus. And in 2009 we showed that we were capable of Food & Dairy Systems was sold to the Dutch private equity adapting to the changing market conditions, which was firm Nimbus. We are very proud of the successful strategy possible because of the fantastic, loyal and passionate change and refocusing of its product portfolio that Food & employees we have in our company. That is why I have Dairy Systems has gone through. The company performed great confidence in the future of Marel. well in 2009 and we are convinced that it has a bright future under Nimbus’ ownership. For Marel, the sales are a very positive step forward and pave the way for us to focus exclusively on our core Theo Hoen activities and build on our position as market leader. Chief Executive Officer 7


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    The Netherlands • The Dutch are the biggest exporters of butter and cheese in the world. • About 26% of the Netherlands is below sea level. This area is home to 60% of the country’s population. 8


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    Strategy and finance 9


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    Financial performance The year 2009 was a year of transformation for Marel’s business, as well as the financing of its operations. In order to provide a more useful overview of the company’s financial performance in 2009, the figures for core and non-core activities are presented separately. At the end of 2009, the company’s major non-core activities had either been sold or were in the process of being sold. In the case of the latter, they are presented under the heading of “assets/liabilities held for sale” in the balance sheet. Furthermore, the 2009 figures are normalized for restructuring charges incurred early in the year. For the year 2008, Stork Food Systems has been been included in the figures for the first four months of the year as well, in order to provide a better comparison of the operational results from core activities between years. Operational results – core activities Marel’s revenues in 2009 amounted to EUR 435 mln, compared to EUR 548 mln in 2008, a decrease of 21%, which was a consequence of the prevailing global financial and economic conditions. Pro forma income statement of core business in 2009 and 2008 In EUR thousands 2009 2008 Sales 434,796 548,077 Cost of sales (268,636) (348,182) Gross profit 166,160 199,895 Other operating income (602) 384 Selling and marketing expenses (59,289) (71,062) Research and development expenses (28,402) (30,234) Administrative expenses (56,608) (60,750) Profit from operations (EBIT) 21,259 38,233 EBIT, excluding one-off restructuring costs 24,760 52,033 Gross profit margin 38% 36% EBITDA 43,932 60,016 EBITDA, excluding one-off restructuring costs 47,432 73,816 10


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    S T R A T E G Y A N D F I N A N C E Number of employees per quarter from Q4 2007 to Q4 2009 4,200 4,000 3,800 3,600 3,400 3,200 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2008 2008 2008 2009 2009 2009 2009 Employees excluding Scanvaegt Nordic A/S The year began slowly with a low order book due to the sharp reduction in orders received in the fourth quarter of 2008. However, the order book gradually increased during the course of 2009 and, hence, so did revenues. Because orders received grew faster than revenues, the order book was at a solid level at the end of the year and very much better than at the beginning. The level of activity in the market had gradually increased and the prospect pipeline had grown, now also for the larger systems which had been the hardest hit by the unavailability of financing. Marel responded very early on to the reduction in orders received following the onset of the international financial crisis. Already in the fourth quarter of 2008, measures were taken to reduce the workforce by approximately 300 people. A further reduction of some 150 employees was made at the beginning of 2009 due to the still unfavourable market conditions. A provision of approximately EUR 3.5 mln was made for redundancy charges in the 2009 accounts in connection with these measures. With further small follow-on reductions during the year, partly related to integration efforts, the number of employees was reduced by a total of about 600 in 2009, substantially lowering the company’s cost base. Many other cost categories were also closely scrutinized, leading to further reductions in operational costs. The absolute cost of sales and marketing, as well as general and administrative costs, decreased by a combined EUR 15.9 mln, though as percentages of sales they increased slightly due to the lower revenue base. Gross profit grew throughout the year to about 40% of revenues in the second half, which is comparable to historical levels. The total cost savings achieved amount to EUR 25 mln on an annualised basis, at least 50% of which are expected to be sustainable once revenues begin to grow again. In 2009, the normalized operational profit (EBIT) was EUR 24.8 mln in 2009 compared to EUR 38.2 mln in 2008, a sharp decrease resulting from the reduction in sales, which could only partly be countered by lowering the cost base. Nevertheless, management considers an EBIT of 5.7% from core activities to be a satisfactory result given the challenging market conditions. Marel’s objective of achieving an operating profit (EBIT) of at least 10-12% remains unchanged. 11


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    Sales and EBIT of core business as % of sales in 2008 and 2009 €m Ratio 160 14% 140 12% 120 10% EBIT target 8% 100 6% 80 4% 60 2% 40 0% 20 -2% 0 -4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 Sales EBIT as ratio of sales Financing activities In 2009, Marel made good progress in improving the balance sheet by reducing net debt and, hence, decreasing leverage. The balance sheet was strengthened in four ways: • At the end of 2008, a programme was launched with the aim of reducing working capital by EUR 30–35 mln. Thanks to a concerted effort in 2009, the objectives were achieved. • Marel sold the non-core assets of Scanvaegt Nordic A/S, a Danish company operating outside the food industry, and real estate in Amsterdam formerly belonging to the Food & Dairy Systems division of Stork Food Systems. The proceeds from the sale amounted to EUR 37.5 mln, thereof EUR 35 mln paid in cash. • Marel issued new equity three times in 2009 for a total cash consideration of EUR 17 mln, in addition to which EUR 32 million in bonds from classes MARL 06 1 and MARL 09 1 was converted into equity. • Marel’s investment in tangible fixed assets was negligible during the year. Overall, the business remains well invested and the need for investment is expected to remain limited in the coming years. With the above measures, Marel was able to reduce net debt from EUR 379 mln to Euro 295 million and, at the same time, close hedge contracts for a total of EUR 34 mln. 12


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    S T R A T E G Y A N D F I N A N C E Development of net interest bearing debt from Q4 2008 to Q4 2009 400 350 €m 300 250 200 At end of quarter Q4 Q1 Q2 Q3 Q4 Change in € mln 2008 2009 2009 2009 2009 from Q4 2008 Non-current borrowings 265.8 272.9 373.9 366.8 351.5 85.7 Current borrowings 134.6 133.6 41.3 36.3 15.4 (119.2) 400.4 406.5 415.2 403.2 366.9 (33.5) Cash and equivalents 21.0 33.0 65.7 55.1 71.9 50.9 Net interest bearing debt 379.4 373.5 349.5 348.5 295.0 (84.4) The maturity of the loan portfolio was also improved considerably with the refinancing of current debt into longer term debt, supported by a club loan structure from the three Icelandic banks – Arion Bank, Islandsbanki and NBI. Further, a loan facility originally provided in relation to the acquisition of Food & Dairy Sytems was extended by two years. After the refinancing, there are no major loan maturities until the end of 2011. In the years prior to 2009, Marel entered into forward exchange rate contracts to hedge costs related to the operation in Iceland and ISK denominated bonds. Due to the collapse of the ISK and the Icelandic banks, Marel took a write-off on these contracts in 2008, estimating the closing rate of ISK/EUR at 169.44. In the settlement of these hedge contracts with the banks in May 2009, Marel benefited from a more favourable ISK/EUR rate of 149.74, which lead to exceptional positive results on derivatives of EUR 11.6 mln under finance costs. Currently, Marel relies on natural hedging as much as possible and its remaining currency hedge contracts are very limited. Furthermore, the need for hedging has decreased with the reduction of ISK debt from EUR 135 mln to EUR 100 mln following the conversion of MARL 06 1 and MARL 09 1 ISK bonds into equity, as mentioned above. In February 2010, a further EUR 66 mln of ISK bank borrowings were converted to EUR, reducing the unhedged position to EUR 34 mln. 13


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    Strategic focus It is the aim of Marel’s management to sharpen the strategic focus of the company and to turn its undivided attention to the growth and profitability of its core business. At the same time, emphasis is being placed on streamlining the company’s operations, integrating the companies acquired in recent years into “one company” and making the business as transparent as possible to investors. In line with these objectives, the activities of Food & Dairy Systems and Carnitech were in 2008 defined as non-core, falling outside of Marel’s strategic focus. Food & Dairy Systems’ business is primarily in the field of dairy and juice processing while Carnitech’s operations focus on large custom-made projects for meat processing, equipment for non-protein food processing, and production work and projects for third parties. Due to the expected sale of these operating units, the related assets and liabilities were presented as “assets/liabilities held for sale” in Marel’s 2009 balance sheet. The assets were recorded as impaired, incurring a total loss of EUR 24 mln. The total revenues generated by the two units in 2009 amounted to EUR 80 mln. Combined, they have appoximately 400 employees. The subsequent divestment of Food & Dairy Systems and the non-core operations of Carnitech in early 2010 is discussed in the chapter of the report on “Subsequent events”. EBIT and revenues of core business and non-core operations in 2009 2009 operations in € mln EBIT Revenues Share Pro forma core business 24.8* 434.8 82% Non-core operations (13.2) 96.9 18% Consolidated operations 8.0 531.7 100% * Includes normalization of €3.5 mln in Q1 14


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    S T R A T E G Y A N D F I N A N C E Subsequent events On 4 February 2010, Marel reached an agreement with the Dutch investor Nimbus on the sale of Food & Dairy Systems, excluding its operations in Spain, which remain with Marel but are still defined as non-core. The revenues generated by the operation in Spain amount to EUR 8 mln annually and the number of employees is around 50. It is expected that the closing of the transaction will take place in March 2010, depending on the formal approval process. On 4 February 2010, Marel signed an agreement with Arion Bank, Islandsbanki and NBI to change the currency composition of a club loan facility that the banks provided the company with in May 2009. According to the agreement, the entire ISK denominated portion of the syndicated loan is changed to EUR, the company’s main revenue currency. The amount concerned is equivalent to EUR 66 mln. With the agreement, Marel’s interest cost and currency risk have been greatly reduced. On 12 February 2010, Marel reached an agreement with the American Industrial Acquisition Corporation (AIAC) on the sale of the operations of Carnitech A/S in Stovring, Denmark. Excluded from the agreement are Carnitech’s former salmon and freezing divisions, and its operations in the United States, which are now operated under the Marel name and management. The buyer acquires the operational assets and liabilities of the Carnitech operations in Stovring, except for the real estate assets and a few other tangible assets, mainly furnishings. The parties have entered into a long-term rental agreement with an option for the buyer to acquire the premises. 15


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    Integration and strategy The acquisition of Stork Food Systems in 2008 completed • The company’s business units are located in six countries: the first phase of an ambitious growth strategy announced - Marel UK Ltd. in the United Kingdom, by Marel in 2006. In just two years, the company had - Carnitech A/S2 and Marel A/S in Denmark, increased its market share from 4% to 15% and become - Marel Food Systems s.r.o. in Slovakia, the leading global provider of advanced equipment and - Marel ehf. in Iceland, systems for the food processing industry. - Stork PMT BV, Stork Titan BV and Stork Townsend BV in the Netherlands, and The company is now in the second year of the second - Stork Townsend Inc., Stork Gamco Inc. and Stork Titan phase of the strategy, where the focus has shifted to Inc. in the United States. internal growth and increased profitability of the core • The company has manufacturing facilities in 17 locations. business, driven by economies of scale and the synergies • The corporate offices, which provide general to be derived from the integration of the companies management and coordination of all the company’s acquired in preceding years.1 In 2009, the main emphasis operations, are located in Iceland and the Netherlands. has been on the integration of the Marel and Stork Food Systems companies. Following the market In 2009, Marel made the strategic decision to follow the From the beginning, the integration process has been market and to base the new structure on the four industry motivated by the desire to meet the customer’s needs as segments that the company specializes in – fish, meat, efficiently as possible. Marel determined that the most poultry and further processing. Centres of excellence – effective way of achieving this was through the creation or Industry Centres – have been established in each of of “ONE COMPANY”, capable of 1) meeting customers’ these segments, which are now the key drivers in the expectations for innovative integrated solutions that company’s operations. The structure also includes Product combine the advanced technologies developed by the Centres that are responsible for innovation and product members of the group, and 2) providing one point of development, in partnership with the Industry Centers. contact for sales and service for all of the company’s Together, the Centers ensure that industry-specific brands. knowledge and technological capabilities come together to create integrated solutions tailored to the needs of New organizational structure customers in each market. The third pillar in the structure A key priority in the integration process has been the are the Sales and Service Units (SSUs), which provide the development of a new organizational structure for the global distribution network for all four industry segments “new” company. The complexity of the task has been and the local interface with the customer. considerable given the makeup of the company: • Marel has 3,500 employees around the world. 1. Carnitech in 1997, AEW Delford and Scanvaegt in 2006, and Stork • The company has offices and subsidiaries in 30 countries, Food Systems in 2008. in addition to a global network of more than 100 agents 2. Marel has reached an agreement on the sale of the operations of and distributors. Carnitech A/S. See page 15. 16


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    S T R A T E G Y A N D F I N A N C E that combine the advanced technologies developed Key projects individually by the members of the group. Consequently, In 2009, the integration process has focused on four a priority is being placed on the development of new priority areas: integrated products and systems, the first of which – a system that combines a Stork deboning line with a Marel 1. Vision bone detection system – was introduced at the International Work has been ongoing during the year to map the values Poultry Exhibition in Atlanta in January 2010. In 2009, of the company and its employees, and to begin creating particular attention was given to resolving interface issues, a shared vision that they can proudly adopt as their own. the adoption of a common technology platform and the The work has yielded, among other things, a new mission standardization of parts. statement: “To be the customers’ choice in supplying integrated systems, products and services to the fish, meat 4. Distribution channels and poultry industries.” Marel’s success is undoubtedly founded on innovation and high quality products but they alone do not suffice. 2. Branding How customers view the company is also defined by the In November 2009, it was officially announced that the performance of its distribution network and the local sales company name would be changed from Marel Food and service personnel they interact with. That’s why the Systems to Marel. The change is a key part of the strategy integration of the distribution networks of Marel and Stork to fully integrate the companies acquired under one and the realignment of the company’s sales process is one common identity and company name. The company’s of the most important projects in the integration process. other brand names may continue to be used in connection The ultimate goal is to be able to present the customer with with particular product lines and market segments. a simple and unified interface – one point of contact that 3. Integrated products gives him the security of knowing that he can have all his Ultimately, the main benefit of “one company” for the needs met from a single source. Good progress was made customer is the prospect of better systems and solutions during the course of 2009 and work will continue in 2010. Sales process Product centers Software Skinning Etc. Slicing Freezing ... Customers Meat Industry centers Poultry M k t Markets SSU SSUs Fish FP The new organisational chart reflects best practices that have been taken from both Marel and Stork Food Systems. In 2010, the elaboration and implemention of the structure will be completed, along with the related adjustments to IT, HR and financial reporting. 17


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    Integration within the “old” Marel Integration within Stork Food Systems While the focus of the integration process has been on The Stork companies, which were in the final stages the implementation of the new industry-driven structure, of establishing industry clusters, are now expanding the “old” Marel side of the company (i.e. Marel prior to the that vision to match the industry center approach that acquisition of Stork Food Systems) is completing its own has been selected as the basis of the company’s new “internal” process centred on the integration of Marel, structure. Scanvaegt, Carnitech and AEW Delford. Continued focus in 2010 Following the merger of Marel and Scanvaegt under The expected synergies from the integration of the the Marel name in 2008, AEW Delford and the salmon innovation capacities, distribution networks and overall and freezing divisions of Carnitech, as well as its U.S. operations of the Marel and Stork companies began to operations, were also brought under the Marel name emerge in 2009. It is apparent that the positive effects and management in 2009. The remaining operations of on growth, competitive capability and profitability of the Carnitech were defined as non-core business. company will be significant. The integration process will therefore remain a priority for the year 2010. 18


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    S T R A T E G Y A N D F I N A N C E Risk management Marel’s activities expose it to a variety of financial risks: Liquidity risk market risk, including foreign exchange risk and price Prudent liquidity risk management implies maintaining risk, credit risk, liquidity risk, cash flow risk and fair value sufficient cash and marketable securities, the availability of interest-rate risk. The company’s overall risk management funding through an adequate amount of committed credit program focuses on the unpredictability of financial facilities, and the ability to close out market positions. markets and seeks to minimize potential adverse effects Due to the dynamic nature of the underlying businesses, on the company’s financial performance. The company the company aims to maintain flexibility in funding by uses derivative financial instruments to hedge certain keeping committed credit lines and current financial assets risk exposures. Risk management is carried out within the available. company, where applicable, under policies approved by the Board of Directors. The company has increased the Cash flow and fair-value interest rate risk focus on risk management with the centralization of the The company’s income and operating cash flows are company’s financial risk management function in group substantially independent of changes in market interest treasury. rates. The interest rates of finance leases to which the company is lessor or lessee are fixed at inception of the Foreign exchange risk lease. These leases expose the company to fair-value The company operates internationally and is exposed interest rate risk. The company’s cash-flow interest rate risk to foreign exchange risk arising from various currency arises from long-term borrowings. Borrowings issued at exposures, primarily with respect to the Euro. Financial variable rates expose the company to cash-flow interest exposure is hedged in accordance with company’s general rate risk, while borrowings issued at fixed rates expose it to policy on permitted instruments and exposure limits. fair-value interest rate risk. Entities within the company use forward contracts and/ or natural hedging to manage their foreign exchange risk The company manages its cash-flow interest rate risk by arising from future commercial transactions, recognized using floating-to-fixed interest rate swaps. Such interest assets and liabilities. rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The company Credit risk raises long-term borrowings at floating rates, and swaps a The company minimizes credit risk by monitoring credits portion of them into fixed rates that are lower than those granted to customers and assigns collateral to cover available if the company borrowed at fixed rates directly. potential claims. The company has policies in place to The risk, measured as the potential increase in interest ensure that sales of products and services are made paid during the coming year based on a defined move in to customers with an appropriate credit history, and interest rates, is monitored and evaluated regularly. products are not delivered until payments are secured. The proportion of sales to Icelandic customers is approximately Insurance policies 0.5% of the total. Marel has not incurred any losses of The company maintains global and local insurance outstanding receivables due to the economic crisis in programs. The coverage comprises property damage, Iceland. Marel has banking relations with a diversified set business interruption, general and product liability, marine of financial institutions around the world, including three cargo/mounting, directors and officers liability, and Icelandic banks. There are policies in place that limit the company reimbursement liability. The company believes amount of credit exposure to any one financial institution. that its current insurance coverage is reasonable. 19


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    United States • The United States is both the leading importer and exporter of fresh, chilled and frozen beef in the world. • The United States has the longest highway system in the world, spanning more than 6 million km, and the largest number of motor vehicles per capita. 20


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    Opportunities and outlook 21


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    Market outlook The effects of the international financial crisis and the Changes in consumer habits are a key driver in the sale of global economic recession continued to be felt in 2009, food processing equipment and the favourable trends in particularly at the beginning of the year. Customers had consumer behaviour developed as expected during the difficulty in financing investments in large systems, which course of the year, creating opportunities for the industry. normally account for about one-third of the company’s The consumption of less expensive proteins, primarily revenues. The effects of the recession on the sale of spare poultry, has increased. In addition, consumers have parts and standard machines, on the other hand, were chosen to eat out less at restaurants and instead to go to limited. fast food outlets or purchase low-cost ready-made meals at discount supermarkets. Food service companies and As early as the beginning of the second quarter, there were retailers active in these segments are profiting and so are indications that a recovery was underway in Marel’s key Marel’s customers, the food processors who supply these markets, particularly in the Europe and North America, outlets with products. although the speed of recovery varied from country to country. As the year went on, there was a noticeable The company’s view of the long-term prospects of the increase in market activity in all industry segments and market remains unchanged. Proteins play an increasingly the sale of medium-sized projects, in particular, picked up large role in the global diet and the protein segment of substantially. Large orders began to come in toward the the industry, in which Marel operates, has been growing end of the year. at an average annual rate of 5-6% for the past 15 years. There is strong underlying growth in the industry and market activity is expected to continue to improve throughout 2010. Global consumption of fish and meat per capita 60 Other meat 50 Mutton & goat Kg (live weight and carcass weight) Beef/veal 40 Poultry Pork Fish 30 20 Source: FAO 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 22


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    O P P O R T U N I T I E S A N D O U T L O O K INDUSTRY OUTLOOK Poultry: The poultry segment led the way in terms of growth in order intake in 2009, culminating in a number of large orders, including greenfield projects, in the fourth quarter. There are no signs that the upward trend in the poultry market will change. Fish: Processors are more focused than before on maximizing the value extracted from the raw material. They are investing in equipment to improve yield and efficiency in all stages of the production process, and ensuring a better quality product and longer shelf life. Meat: Meat processors are becoming increasingly aware of the competitive edge that can be gained from effective monitoring and control of their processes. They are also investing in automation to reduce labour costs, and improve yields and efficiency, as well as hygiene. Further processing: The convenience food market continues to grow, with processors developing an increasing variety of convenience products to respond to the growing ‘eat at home’ trend. The fast food segment of the food service industry is doing well, while mid- and high-priced restaurants are suffering. 23


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    Poultry Developments in 2009 the year. For Marel, the segment led the way in terms of Poultry processors were reluctant to invest after the onset growth in order intake, culminating in a number of large of the global financial crisis and order intake fell sharply orders, including greenfield projects, in the fourth quarter. at the end of 2008 and beginning of 2009. However, it soon became apparent that the recession was causing The company took a big step forward at the tail end of the consumers to shift from more expensive proteins like beef year when the poultry teams of Marel and Stork in the U.S. and pork to less expensive alternatives, primarily poultry. were integrated. The move greatly benefits customers, As a result, broiler production in the U.S., the world’s who can now turn to a single point of contact for the largest producer and second largest exporter of poultry, entire range of equipment and systems that the company increased by 1% over 2008 – the first year-over-year has to offer to the poultry industry, including further increase in production after a decline for four consecutive processing equipment. quarters. Elsewhere, Marel strengthened its position as market The shift in consumption, combined with a substantial leader in Europe and Turkey in 2009, and improved decrease in the price of corn – a major ingredient of its market share in Thailand and China. However, poultry feed – meant that poultry processing companies investment was down in Brazil, the world‘s biggest generally performed well despite the challenging market poultry exporter, which has been severely affected by environment. Consequently, processors began to invest the recession. Demand in two of its main export markets, again in the second quarter of 2009 and the poultry Europe and Japan, has declined, in addition to which segment rebounded well throughout the remainder of the strengthening of the Brazilian Real against other currencies has lead to less favourable trading conditions for Brazilian producers, who are expecting a better year in 2010. Global chicken production 2005-2010f Global turkey production 2005-2010f 80 6 70 5 60 Million tonnes Million tonnes 4 50 40 3 30 2 20 Source: USDA Source: USDA 1 10 0 0 2005 2006 2007 2008 2009e 2010f 2005 2006 2007 2008 2009e 2010f United States EU-27 United States Canada China Mexico EU-27 Russia Brazil Others Brazil Others 24


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    O P P O R T U N I T I E S A N D O U T L O O K Trends and opportunities Focus in 2010 • Growth: Poultry profitability forecasts are optimistic Thanks to the growing order intake toward the end of for 2010 and global production is expected to increase 2009, a significant forward load has built up, filling the by 3%. With corn prices expected to remain at 2009 production schedule for the first two quarters of 2010. levels, leading producers like Tyson in the U.S. have set There are no signs that the upward trend in the poultry aggressive growth targets for 2010. However, there is a market will change. danger that if production increases exceed predictions, Innovative new products developed by Marel for the market will once again be flooded with excess poultry processing have recently become available products, putting further pressure on prices. commercially, further bolstering the company‘s already • Efficiency: Many customers are looking to improve strong competitive position as the global leader in a yield, providing opportunities for automatic harvesting growing market. In 2010, Marel will build on the success of giblets using the Stork Nu-Tech Nuova system, as of its eviscerating lines, which combine high processing well as the semi- and fully automated breast and leg yield with low labour requirements. Priority will also be deboning systems that the company offers. placed on the further development of an innovative new • Hygiene and safety: Marel is looking to capitalize on integrated system introduced at the International Poultry the ever growing focus on food safety and build on Exhibition in Atlanta in January 2010, which combines the success of its SensorX bone detection systems, a Stork automatic deboning line with a Marel bone particularly in the U.S. It is also anticipated that detection system and logistics. opportunities will arise with the introduction of new poultry slaughter inspection systems that are expected Marel is continuing to strengthen its sales and service to establish new performance standards for the network around the world. In 2010, the company will reduction of pathogens. look to realize the full potential of the integration of the Marel and Stork poultry teams in the U.S. and duplicate the process in other markets. No other company in the industry is able to offer such an extensive portfolio of products and integrated solutions. 25


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    Fish Developments in 2009 1 January 2010, validated catch certificates are now In recent years, the fish processing industry has benefitted required for all fish imports into the EU in order to prevent from new and innovative processing equipment that has illegal, unreported and unregulated fishing. Companies contributed to raising production and slaughter volumes, will have to implement traceability mechanisms in order to as well as reducing production costs. At the same time, keep track of catch origin and various other related data. consolidation in the industry has led to an increased Wild whitefish: Following a difficult period, with focus on efficiency, with processors looking to invest in overfishing having led to reduced catch quotas and higher equipment to improve yields and product quality. prices, demand for wild-caught whitefish is rising again. Despite a challenging business environment in 2009, Cod and haddock stocks around Europe are considered including high raw material prices and strong pressure to be healthy or recovering, and the Barents Sea cod from retailers on price, processors continued to invest in quota has been increased by 16% for 2010. Management increased automation. After a slow start to the year, the measures and the drive toward more eco-labeled fisheries markets picked up in the second quarter and key markets should see these increases continue. Marel has the like Norway – Marel’s largest market in the fish industry – innovative solutions to help processors to quickly respond and the United States performed well throughout the year. to changing market conditions. In Norway, major contracts were concluded in both the Farmed whitefish: Aquaculture has continued to grow salmon and whitefish industries. in the face of declining catch quotas. And with cod prices high, the increasing demand for seafood has largely been Trends and opportunities met with less expensive farmed species like pangasius The recession has increased awareness among fish and tilapia. Marel will continue to take advantage of the processors of the need to streamline and improve the extensive experience and expertise gained in serving wild efficiency of their operations. They are more focused than fish processor and transferring that knowledge to the before on maximizing the value extracted from the raw processing of farmed species. material, improving the yield and efficiency of all stages of the production process, and ensuring a better quality Salmon: Salmon prices remain high with demand product and longer shelf life. As the leading global supplier outstripping supply, particularly in the U.S. market, due to of advanced equipment to the fish processing industry, the collapse of the Chilean salmon industry. Norway, now Marel is well placed to capitalize on the opportunities that by far the biggest salmon producer in the world, is taking these trends present. advantage and establishing supply chains and investing in further processing capacity in the U.S. As the leading New regulations in the European Union 2010 regarding provider of equipment for modern salmon processing, fish imports are also expected to create opportunities for Marel is working hand-in-hand with processors to respond Marel’s Innova production management software. As of to the rising demand. 26


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    O P P O R T U N I T I E S A N D O U T L O O K Global production of pangasius and tilapia 5,000 Thousand tonnes 4,000 3,000 Pangasius Tilapia 2,000 Source: FAO 1,000 Focus in 2010 The latest concepts from Marel are designed to meet 0 2007 2008 2009e 2010f the needs of processors for ways to increase yields and produce higher quality products. In 2010, Marel will be focusing in particular on: processes to optimise Global production of cod utilisation of raw material, thereby increasing yield; new 1,250 cooling technology designed to increase product quality; Thousand tonnes methods to shorten processing time in order to increase 1,000 product quality and shelf-life; and increased automation 750 Pacific cod throughout the production process. 500 Atlantic cod Source: FAO As a single source supplier, and with its unflagging 250 devotion to innovation and long established 0 relationships with leading processors around the world, 2007 2008 2009e 2010f Marel is ideally placed to maintain and build on its position as industry leader. Global production of salmon 1,750 1,500 Thousand tonnes 1,250 1,000 Pacific salmon 750 Atlantic salmon 500 Source: FAO 250 0 2007 2008 2009e 2010f 27


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    Meat Developments in 2009 Trends and opportunities Meat producers saw margins improve and demand grow Trends that first emerged in 2008 became even more over the course of the year. Despite improving economic apparent in 2009: conditions, large producers in the United States and Added-value products: Fuelled by growing opportunities Europe have generally remained reluctant to invest in and the need to increase margins, food manufacturers are big projects for skinning, injecting and meat harvesting. pursuing the development of new added-value products However, breakthrough sales have been achieved in large in order to capitalize on the growing demand associated integrated deboning and trimming systems in the Central with contemporary lifestyles, including ‘ready-made meals’. European and Australasian markets. This provides opportunities for equipment suppliers Marel’s share of the U.S. bacon slicing market continues to and Marel is well placed to capitalize on the basis of its grow with over 90% of new equipment orders in the non- strong customer relationships, backed by a reputation for cooked sector being placed with Marel. The IBS4600 slicer, innovative and reliable equipment. Marel’s latest product for the pre-cooked bacon sector, Increased automation: Meat processors invest in which represents a similar size market as the non-cooked, automation for a number of reasons – to reduce labour has achieved its first sales and looks set to dominate the costs and reliance on an increasingly scarce labour sector. resource, to improve yields and increase efficiency, and Sales of new machines to emerging markets remained to improve hygiene. Equipment manufacturers who can positive. Added investment in automation is generally show that their systems significantly improve processes more urgently needed in these markets in order to meet and provide a good return on investment will benefit. the need for increased production, yield improvements Process monitoring: Meat processors, especially mid- and better margins. The move toward more centralized size companies, are becoming increasingly aware of processing continues with an increase in consumption in the competitive edge that can be gained from effective China, Brazil and Russia. monitoring and control of their processes. Marel’s Innova Sales of spare parts and service remained strong to meet production control software sets the company apart from the needs of customers opting to extend the operational its competitors in this area. life of existing equipment and systems. Food safety: Meat processors throughout the industry assign high priority to hygiene and food safety, and the hygienic design standards demanded by customers have become ever more stringent. Marel takes advantage of the opportunities this trend presents by ensuring that its equipment not only complies with the latest standards but is also quick and easy to clean. 28


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    O P P O R T U N I T I E S A N D O U T L O O K Global pork production 2005-2010f 125 Focus in 2010 100 In 2010, the Marel Meat Industry Center will focus Million tonnes 75 on strengthening its presence in the meat industry worldwide with the aim of becoming the industry’s 50 partner of choice in the supply of integrated systems. Source: USDA 25 Marel will continue to build on its successes in Europe, North America and Australasia, and take advantage 0 of the current momentum to add to its reference list 2005 2006 2007 2008 2009e 2010f of installations. A strong focus will also be placed China Brazil EU-27 Russia on capitalizing on the opportunities present in the United States Others South American markets. South America is a major beef-producing region, and Brazil as the world leader. Furthermore, in order to take advantage of Beef and veal production 2005-2010f the vast potential of rapidly growing markets in the 60 Far East, including India and China, Marel will focus on developing its infrastructure and building brand 50 awareness in the region. Million tonnes 40 30 20 Source: USDA 10 0 2005 2006 2007 2008 2009e 2010f United States China Brazil Argentina EU-27 Others 29


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    Further processing Developments in 2009 Trends and opportunities Like other parts of the food processing industry, the Added value processors have benefitted more than further processing segment has felt the effects of the most from the favourable prevailing trends in consumer recession and there is a continuing reluctance among behaviour. As a result of the economic recession, customers to invest in large projects in particular. consumers are eating out less at mid- and high-priced Nevertheless, the further processing market continued restaurants and choosing instead to go to fast food outlets to perform better than most other industry segments or purchase low-cost ready-made meals at convenience in 2009. stores and discount supermarkets. The convenience food market continued to grow during Food service industry: After five consecutive quarters of the year, with processors developing an increasing variety decline through the third quarter of 2009, the commercial of convenience products to respond to the growing ‘eat at food service industry as a whole is expected to be weak at home’ trend. Already in spring 2008, a Gallup poll showed least through the first half of 2010, according to a forecast that 30% of American were eating at home more as a by The NPD Group. However, the fast food segment, result of rising food prices. This trend continued in 2009 which represents the largest share of the industry, is doing and processors responded by adapting and updating their relatively well. Visits to fast food outlets grew or held to last production processes and systems. Marel’s wide range of year’s level in six out of the eight countries NPD tracks. equipment for the further processing segment – including the RevoPortioner, bacon slicers and the QX system – ‘Eat at home’: Retailers also experienced a relatively continued to find favour among processors. healthy third quarter, a reflection of the growing ‘eat at home’ trend (figures for the fourth quarter were not yet available at the time of publication). Shoppers are trading down from red meat to less expensive proteins like poultry, turkey and pork, in both fresh and fully cooked product categories. Enhancements and add-ons to the dinner menu, such as marinades, sauces and seasonings, are posting double digit increases. The food service companies and retailers active in these segments – fast food and retail – are profiting from these trends and so are Marel’s customers, the food processors who supply these outlets with products. 30


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    D E V E L O P M E N T Focus in 2010 With the organizational changes implemented in 2009, the Marel will maintain a strong focus on technology wide range of systems and the expertise that Marel has leadership and new product innovations. The company to offer to the further processing market have now been will look to capitalize on the recent success of products like brought together in one Industry Center, under the brand the RevoPortioner, which has been approved by major fast name of Townsend Further Processing. Marel will present a food operators for use in the making of their beef burgers, strong and comprehensive product range to the market in and its new IBS4600 bacon slicer. 2010 under the new industry identity. Global same-store sales growth compared to year ago, based on latest financial data McDonald’s; 4 wks., 31/12 Fast food Yum! (KFC/Pizza Hut); Q3, 5/9 restaurants Burger King; Q1, 30/9 Darden (Red Lobster); Q2, 29/11 Fine casual Brinker (Chili’s Grill & Bar); Q2, 23/12 restaurants Cheesecake Factory; Q4, 29/12 McCormick & Schmick’s; Q3, 26/9 Upscale Ruth’s Chris; Q3, 27/9 restaurants Morton’s; Q3, 4/10 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% Source: Public financial statements 31


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    United Kingdom • The British consume more tea per capita than anybody else in the world. • Big Ben, the largest and most famous four-faced chiming clock in the world, stands at the north end of the Palace of Westminster, where the English Parliament has been meeting since the 13th century. 32


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    Business operations 33


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    Product development A culture of innovation is the cornerstone of Marel‘s New innovation structure global leadership as a provider of advanced equipment To build on the company’s culture of innovation, and to and processing systems to the fish, meat, poultry and maintain a strong focus on both products and industry further processing industries. The company invests an processes, it was decided in 2009 to base the company’s average of 5-7% of revenues annually in research and new organizational structure on Industry Centres on the development, far above the industry average. Despite a one hand and Product Centres on the other. The four new strict focus on rationalization and cost reduction in 2009 Industry Centers serve as centres of excellence for the four that yielded savings of EUR 25 million on an annual basis industry segments that the company specializes in – i.e. at the corporate level, Marel maintained the same level of fish, poultry, meat and further processing. Innovation investment in research and development throughout the in the Industry Centres focuses on specific technologies course of the year. and continuous process improvement in the respective Marel employs a team of over 400 highly qualified industry, whereas innovation in the Product Centres is scientists and technicians in the field of engineering and focused on products and product families that serve more food technology. Working side-by-side with some of the than one industry. most forward thinking processors in the industry, the company is continuously extending the boundaries of INNOVA and Key Technology food processing performance and searching for new ways The transformation to the new structure began in 2009 to optimize the production process. with the establishment of the first new Product Center – the INNOVA Product Centre. INNOVA has enjoyed great The integration of the Marel and Stork Food Systems success since its debut in early 2008, replacing the well companies was a major priority in 2009. It was a year known MPS production control system. It was announced of identifying oportunities, sharing knowledge and in 2009 that INNOVA will be the backbone for all products realigning the organizational structure to be able to take and process solutions from Marel. Furthermore, the Marel innovation to the next level. “key technology“ platform – consisting of internally developed embedded computers, HMIs and specialized Integrated products control modules – will be the first choice for all new Marel When Marel and Stork Food Systems joined forces in 2008, products. This allows for more optimal control architecture, one of the main drivers of the merger was the potential common user interfaces and common styling for all the synergies to be derived in the area of innovation. Now products. that the companies are one, the customers’ expectations are that the “new” company will offer more integrated products and systems, with a better price performance, Patents and trademarks than the companies would otherwise have been able to do Patent protection is vital to Marel. In 2009, the company on their own. applied for patents on 26 new inventions and the patent portfolio grew to over 200 granted patents. In 2009, first priority was given to identifying oportunities to integrate Marel and Stork products to create added New products value for the customer. The company set itself the Marel introduced over 60 new products in 2009, including ambitious goal of introducing a new “integrated product” three new INNOVA software modules. to the market at every major exhibition in 2010 and onwards. 34


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    B U S I N E S S O P E R A T I O N S The following are among the new products: Townsend Further Processing: RevoPortioner x-drum Townsend Further Processing: Stork Poultry Processing: Module for CoexSkin 3,000 bph turkey processing wingstick production Turbotwist Pro, iLinker and iConveyor Marel Meat: skinners Townsend Further Processing: ModularOven Townsend Further Processing: RevoPortioner Marel Meat: Skinners x-drum New series of conveyorized and open-top skinners. A segmented drum to aid new product development in Marel Meat: Coarse meat separator the further processing plant innovation process. Low pressure meat harvesting system for high value meat. Townsend Further Processing: CoexSkin Stork Poultry Processing: 3,000 bph turkey Coextrusion process to produce fresh sausages with processing alginate casings. Upgrade and development of a large number of machines – including automatic live bird handling and controlled Townsend Further Processing: ModularOven atmosphere stunning – to be able to run the turkey Next generation thermal processing creates adjustable processing lines at higher speeds. climates to meet product needs, versus requiring product adjustments to accommodate conventional equipment Stork Poultry Processing: ACM-NT cutup and FHF- limitations. XB deboning systems Five new modules were introduced to increase yields Townsend Further Processing: Turbotwist Pro, and/or produce new unique chicken end-products. These iLinker and iConveyor modules can also be retrofitted into the large existing New generation of linker and intelligent stick loading installed base. system for improved oven use. 35


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    The following are among the new products: Stork Poultry Processing: evisceration systems Marel Streamline for poultry Marel I-Cut 10 portioning machine GEBA SC 250 D-Cut Slicer AEW Delford 9100 series Weigh Price Labeller Carnitech CT2616.24 Salmon Pinbone Marel SensorX 300 Remover Stork Poultry Processing: evisceration systems AEW Delford 9100 series Weigh Price Labeller RS line of post-eviscerator equipment, new inspection The second machine in a new generation of the Delford systems and equipment for processing of edible organs. Weigh Price Labellers was introduced in 2009. The 9100 series weigh price labeller runs up to 100 packs per Marel I-Cut 10 portioning machine minute and adds more modularity and a touch screen user A new entry level portioning machine for fish, poultry and interface. meat products. Suitable for small to mid-range producers. Marel SensorX 300 Marel Streamline for poultry A new and more modular generation of the highly The Streamline flowline concept adopted to poultry successful X-ray machine for finding bones in poultry and products. Compact and very flexible, easy to clean and meat products. attractive to small and medium sized customers. GEBA SC 250 D-Cut Slicer AEW Delford IBS4600 bacon slicer A new slicer with automatic angle and slice thickness The new high throughput IBS4600 bacon slicer is set to adjustment for cutting fresh and smoked salmon fillets and revolutionise the pre-cooked bacon industry, both in similar kinds of fish. terms of its productivity and its ability to provide fixed Carnitech CT2616.24 Salmon Pinbone Remover weight cooked slices. A new pinbone remover for pulling out nerve bones from salmon fillets with high efficiency and better yield. 36


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    B U S I N E S S O P E R A T I O N S Manufacturing Marel strives for operational excellence. It is our goal Part production and assembly to provide “best in class“ manufacturing, capable of Another important feature of the model is the company’s competing with anyone on the basis of quality and strong preference for manufacturing knowledge parts flexibility, to create a competitive advantage for the in-house, also a key component of value creation. Due to company. product and technology life cycles, in-house processes must be re-assessed regularly to ensure competitiveness. Global Manufacturing Team Final assembly and testing of products in-house is also Following the rapid growth of the company in the strongly preferred. past four years and the integration of Marel and Stork Food Systems, a global manufacturing team has been Procurement established consisting of managers from throughout In the related field of procurement, work on the the company who are responsible for manufacturing. integration of the procedures and processes of Marel This team has created a new manufacturing model that and Stork Food Systems continued in 2009, with the aim will be the basis for future make-buy decisions, capital of reducing costs through new corporate contracts with investments and re-allocations of products. key suppliers and a better information flow with the implementation of new IT tools. In 2010, all of Marel’s manufacturing sites will move toward a common strategy and working methods based on the Two new IT tools, for spend and contract management, new manufacturing model. The first priority in creating a were implemented in 2009. Four corporate projects have common strategy is to adopt one cost price model and also been initiated to align the supply base for all Marel one transfer pricing policy for the company. companies in order to achieve better conditions and closer cooperation with selected suppliers. The projects begun Marel Manufacturing Model in 2009 focus on stainless steel, gear motors, electrical The integration of the companies in the group into “one components and transportation. Four more projects will company” provides an opportunity to combine best be launched in 2010 focusing among other things on practices from each to further strengthen the Marel pneumatics and outsourcing in emerging markets. manufacturing process. The new Marel manufacturing A global lead buyer platform was established during the model follows this approach. year and will be extended in 2010. The platform provides One of the key elements of the model is a strong strategic buyers with training on global procurement cooperative relationship between product development projects and general procurement techniques. and manufacturing, which is so essential for the creation of value in the company. The integration of people from Working Capital different manufacturing disciplines (part production, One of Marel’s key financial objectives for 2009 was assembly, quality, logistics and procurement) into the increasing operational cash flows. The company launched product development process is an important component a Working Capital Management Programme at the end of this value creation. of 2008 with the aim of substantially reducing working capital through reductions in inventories and the number of debtors. The manufacturing process has contributed substantially to the results achieved by reducing stock levels, re-defining logistical parameters and extending payment terms with creditors. Marel is committed to continuing the working capital programme through 2010. 37


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    Sales and marketing Marel’s global distribution network includes more than 130 Marel sales organization: Before the process was outlets, including subsidiaries and sales and service offices launched, the Marel side of the company had a large in 30 countries, and more than 100 agents and distributors global network of 27 subsidiary companies called Sales around the world. and Service Units (SSUs), as well as some 40 distributors and agents, who have sold standard products and serviced Sales in 2009 the company’s customers worldwide. Generally, only After a record year in 2008, sales from core operations large scale projects have been sold directly from the main declined by 21% in 2009. The year got off to a slow start business units. following a sharp drop in the fourth quarter of 2008 with Stork Food Systems sales organization: A higher the onset of the international financial crisis. However, percentage of Stork Food Systems’ sales have been large sales gradually increased during the course of 2009 as projects and most of them have been handled centrally, market conditions improved. with the assistance of a network of subsidiaries and branch Marel’s product sales can be divided into three roughly offices in 15 countries and some 60 agents and distributors equal categories: worldwide. • The sale of spare parts and service, which has not been In 2009, it was decided that the company’s new sales affected by the recession. process would be driven by four new Industry Centers • The sale of standard equipment and smaller solutions – for fish, poultry, meat and further processing. In to existing factories, which have not been affected to a cooperation with Product Centers, the Industry Centers significant degree. will be responsible for the development of new products • The sale of large systems, often for new factories, which targeting the respective industry segments. The sales and was the hardest hit in 2009. Customers had difficulty service offices around the world (which will continue to be in financing larger investments for much of the year. called Sales and Service Units) will provide the distribution However, with market conditions gradually improving network for all the Centers and will provide the customer with each passing month, large orders began to emerge with one point of contact for all of the company’s brands. in the fourth quarter. In 2009, the roll-out of the new structure and the Marel´s order book was at a solid level at the end of 2009 integration of the Marel and Stork field offices was initiated and very much better than at the beginning of the year. in a number of countries, including the Benelux countries, With the level of market activity increasing in all segments, France, Italy, Spain and Portugal, Australia and New the prospect pipeline was growing, now also for larger Zealand, Brazil and the United States. systems. International exhibitions Toward “one company” In 2009, Marel participated in close to 40 exhibitions, trade In 2009, one of the main priorities in the integration shows and in-house seminars worldwide, including all the process was a general realignment of the company’s major international exhibitions for the seafood, poultry distribution channels and the integration of the sales and meat industries. The focus at all these events has organizations of Marel and Stork Food Systems. been on presenting Marel as an innovative single-source supplier with product offerings to meet every need of processors in the fish, meat, poultry and further processing segments of the industry. 38


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    B U S I N E S S O P E R A T I O N S Toward the end of the year, the added value of the and Stork poultry teams, as well as the Marel and Townsend integration of Marel, Stork and Townsend into “One further processing teams, were integrated. As a result, Company” became a strong focus point at the exhibitions. Marel’s customers in the U.S. now have one single point of At the Worldwide Food Expo/AMI in Chicago in October contact for products from all of the company’s brands. This 2009, products from all three brands were showcased arrangement will be introduced at other Marel Sales and together for the first time ever at a 650 m2 booth, Service Units during the course of 2010. the largest in the exhibition. Furthermore, for 2010, management has taken the process one step further Marketing and has set itself the goal of introducing at each major Together, Marel Food Systems and Stork Food Systems exhibition at least one new integrated product that operate a global and multinational marketing department combines the best that the company’s brands have to offer. with members based in eight locations. The marketing The first such system was presented at the International activities range from micro and macro analysis of the Poultry Exhibition in Atlanta in January – an innovative new company’s markets to the production of marketing material solution that combines a Stork FHF-XB front-half deboning – including, for example, newsletters, brochures, videos, and trimming line with a Marel SensorX bone detection the company’s website and advertisements – organizing system. the company’s participation in global marketing events, In Atlanta, customers also got their first look at another including trade shows and exhibitions, and media relations. major benefit of the integration process, namely Marel’s In addition to the global marketing department, virtually new integrated poultry and further processing teams in all of the Sales and Service Units are staffed with marketing the United States. In the fourth quarter of 2009, the Marel personnel who are responsible for local marketing activities. We are in a unique position to serve customers all over the world 39


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    Service Service increasingly provides real “value added” to the The main priority in 2010 will be to further define and company’s operations. The traditional industry view of combine the best of both service operations into one service as a cost center no longer applies. strong and common global service organisation, with a consistent level of service across the different operating As the integration of Marel and Stork Food Systems units. The goal is to provide fast and competent service proceeds, the company is developing one common with support at the local level to our customers worldwide, service philosophy based on a view of the company as no matter where they are. In this respect, several a service-oriented company rather than a traditional integration activities have been initiated with the goal of product-oriented company. The mindset on which this presenting “one face” to the customer, providing him with new philosophy is based can best be described with two one point of contact. concepts: “Think global, act local” and “Big enough to cope, small enough to care”. Outlook 2010 For our customers, this will mean that we aim to find the The integration process, as it proceeds in 2010, will best balance for each customer within “the golden service positively affect the company’s service organization. Once triangle”. This triangle consists of maximum uptime the integration of the company’s distribution channels is (throughput), minimal cost of ownership and highest yield finalized, the Sales and Service Units (SSUs) around the (performance). world will provide first line service for the entire range of equipment and systems offered by Marel. In conjuction with this change, the aim is to build a Uptime (throughput) common base of knowledge of the equipment across the entire group of Field Service Engineers. And to provide the SSUs with a common base of skills and qualifications representing all four industry lines - poultry, fish, meat and further processing - where feasible. Several initiatives have already been taken toward the development of one point of contact for service. A major achievement was the harmonisation of service rates across Cost of Ownership Yield (performance) the entire company for 2010. A Service Integration Team has been established to guide the process in the future. The Marel service organisation spans 30 countries and consists of approximately 625 employees, who perform an average of 1,000 customer visits daily, providing the organisation with an impressive fountain of knowledge and understanding of customer demands and requirements. 40


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    B U S I N E S S O P E R A T I O N S The Marel service organisation of the future Service will be undoubtedly be one of the main drivers do that, the organisation has to be able to monitor the of Marel’s business in the future. With consolidation the systems on a continuous basis through, for example, name of the game in the food processing industry, small remote monitoring, on-line monitoring of yield and and medium size production facilities are being replaced output, preventive maintenance schemes and other value- by large production plants that belong to even larger based services. We need to provide the customer with international organizations. The focus is increasingly on more value than just the equipment itself. achieving economies of scale and greater effiency in This kind of operation requires a much closer relationship production. between supplier and customer. The service components The service organisation of the future needs, therefore, to that Marel has in place provides the company with an have the capacity to cope with Key Account Management enormous competative advantage in this regard, which (KAM) and to be able to ensure that systems that the will contribute to pushing the volume of sales even further company provides, and indeed the whole production in the future. process, are always performing at an optimal level. To 41


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    Human resources In 2009, Marel employed on average 3,590 people in 30 at the same time strengthening the values that are countries around the world. The largest number is located shared throughout the company. Open and honest in the Netherlands, followed by Denmark and then Iceland. communications and a healthy balance between work Close to 75% of the employees are located in Europe. and personal life also help to maintain a creative and stimulating work environment that fosters innovation. The company’s HR mission is to engage competent employees and to provide a supportive work environment that motivates and encourages them to make the Integration in 2009 company vision their own. To do that, we strive to As the integration of Marel and Stork Food Systems carefully plan our recruitment processes, provide excellent proceeded in 2009, the main emphasis was on comparing training and opportunities for further education and differences in “the way we do things” and choosing the job development, and to foster a spirit of teamwork and best practices as our common way of proceeding in the co-operation throughout the company. We recognise future. The company’s human resources managers worked the importance of respecting cultural diversity, while together closely, with “Best of Both” as the unifying slogan, 42


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    B U S I N E S S O P E R A T I O N S One company, one culture to identify and celebrate the strengths that each company One of the priorities of the integration process in 2009 was brings to a common HR mission. This work will establish to identify a shared set of values and to begin nurturing a the foundation for joint strategies and policies, which the common work culture that employees can appreciate and HR team will continue to implement in 2010, while taking find desirable. A survey of 138 employees representing into account local work laws and cultural differences as a cross-section of the entire company showed that required. employees want the values of the “new” integrated company to reflect: a global perspective, collaboration Exceptionally difficult market conditions during the year with customers, a shared vision, humour and fun, made it necessary to reduce the size of our work force empowerment, innovation, teamwork, being the best and and to streamline the company’s operations in order to customer satisfaction. lower our cost base. The development in the number of employees, measured in number of FTEs (full time A follow-up project entitled “To a value-based Marel” has equivalent), can be seen below. It is estimated that the been launched with the goal of creating a company with company has reached equilibrium in terms of its human one vision and one recognizable set of values, based on resources and is in line with current market conditions. the results of the survey. Ultimately, employees should be able to recognize their own values in the values of the Major projects in the HR field for 2010 will include company and feel like it is a place where they belong. implementation of common incentive schemes, assessment systems, management development The management team will use the results from the and recruitment processes, as well as supporting project as a guiding light in developing the work culture of the integration process and the streamlining of the the “new” Marel. organization in general. Marel will continue to strive to be the employer of choice. Number of employees, average per year Number of employees by continent at the end of year 2009 3% 1% 4,000 4% 3,000 17% Europe North America South America 2,000 Asia Oceania and Africa 1,000 74% 0 2005 2006 2007 2008 2009 Year-end 2009 43


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    Iceland • Iceland has the largest marine fish catch per capita in the world, almost 10 times as large as Norway’s, the second biggest. • Half of Iceland’s land area consists of a mountainous lava desert and other wasteland. Eight percent is covered by Vatnajökull, Europe’s largest glacier. 44


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    To our shareholders 45


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    Shares and shareholders Share performance shareholders waived their pre-emptive rights and Marel is listed on the NASDAQ OMX Nordic Exchange authorised the Board of Directors to increase the Iceland (symbol: MARL). Its shares are included in the company’s share capital. OMXI6 PI ISK index, which consists of the six most traded and liquid listed companies. It replaced the OMXI15 index At year-end, Marel‘s shares totalled 727,136,497. at the beginning of 2009. Marel‘s share price stood at ISK 62.30 (EUR 0.35) at the end of 2009, compared to ISK 77.80 Shareholders (EUR 0.46) at the end of 2008, a decrease of 19.9% (in EUR The number of shareholders in Marel was recorded in 23.9%). During the same period, the OMXI6 PI ISK index the shareholders register to be 1,751 at year-end 2009, fell by 18.5%. During the year, the highest end-of-day price compared to 1,836 shareholders at year-end 2008. was ISK 79.30 (EUR 0.48) and the lowest end-of-day price As of 31 December 2009, Marel holds no treasury shares. was ISK 41.00 (EUR 0.24). International shareholding increased from 11% to 16% in 2009, following the acquisition of a 5.2% share in Marel by Share capital funds managed by Columbia Wanger Asset Management, Marel issued 146.8 million new shares in 2009, in three a wholly owned subsidiary of Bank of America Corporation. private placements. The main purpose of the increase in The increase is fully in line with Marel’s stated goal of shares was to strengthen the company’s capital structure strengthening and internationalizing its shareholder base. and reduce currency risk and the overall cost of funding. In Eyrir Invest ehf. is Marel’s largest shareholder, with 32.03% total, the share issues raised EUR 49.3 million. of shares, followed by the Horn fjárfestingafélag efh. The private placements in 2009 were conducted in (20.77%) and Grundtvig Invest A/S (8.47%). Five Icelandic accordance with a resolution of the Company‘s Annual pension funds round out the list of Marel’s ten largest General Meeting, held on 10 March 2009, where the shareholders, with a combined 14.33% ownership share. TOP 10 S H A R EH O L DER S A S O F 3 1 DEC EM B E R 2009 Shareholder No of shares % 1 Eyrir Invest ehf Investment company 232,924,713 32.03 2 Horn Fjárfestingarfélag ehf Investment company 151,011,770 20.77 3 Grundtvig Invest A/S Investment company 61,560,494 8.47 4 Lífeyrissjóðir Bankastræti 7 Pension funds 32,727,789 4.50 5 Columbia Acorn International Asset management 29,868,604 4.11 6 Lífeyrissjóður verslunarmanna Pension fund 25,294,666 3.48 7 Sameinaði lífeyrissjóðurinn Pension fund 16,575,243 2.28 8 Stafir lífeyrissjóður Pension fund 16,581,164 2.28 9 Gildi lífeyrissjóður Pension fund 14,230,521 1.96 10 Wanger International Asset management 9,536,321 1.31 Total 590,311,285 81.19 Others 136,825,212 18.81 Total ordinary shares 727,136,497 100.00 46

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