avatar Marel Poultry B.V. Manufacturing
  • Location: NOORD-BRABANT 
  • Founded: 1948-07-27
  • Website:

Pages

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    ANNUAL REPORT 2010


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    I N N O VAT I O N – past, present and future For decades, Marel has worked side-by-side with some of the world’s most forward thinking food processors to constantly find new ways to optimize the production process. Our annual investment of 5-7% of income in research and development has led to breakthrough innovations that have transformed the way that food is processed around the world. Many of our products have become the industry’s benchmark. We employ more than 400 highly qualified scientists and technicians in the field of engineering and food technology, and our portfolio of some 200 granted patents continues to grow each year. Our primary goal is to put our devotion to market-driven innovation at the service of our customers – from small family-owned businesses to leading global producers – to help them to be profitable.


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    I N N O VAT I O N The Townsend skinner In the coming year, Marel will be charting and showcasing the company’s heritage of breakthrough innovations across our four core industry segments – poultry, fish, meat and further processing. These innovations span a wide range of applications. To name just a few, they include bone detection, cut up, deboning, evisceration, flow lines, forming, gizzard harvesting, grading, injection, meat harvesting, portioning, sausage making, sawing, skinning, slicing, weighing and weigh price labelling. As a first glimpse, we feature here a snapshot of the story of our Townsend skinner, which removes skin and membranes from meat. 1953 Model 52A Semi-automatic Model 800S belly skinning 1969 Model 814S 1975 Model 814 1972 Model 900 Conveyorized Model 914 skinning 1945 Model 52 1950 Model 800 1970 Model 27 1947 Model 66 1969 Model 600 Membrane skinning with stripper roll 1955 Model 26M 1969 Membrane skinning Model 66A 1960 Model 29M Model 35A 1950 Model 39 1960 Model 29 Open-top skinning Model 35 1951 Model 26 1962


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    It’s 1945 and the place is Iowa in the The Second World War may have been winding down but United States. The country is at war. that was just the beginning of the story of the skinner and Ray Townsend, then working at his of our ongoing commitment to continuously refining and family’s Star Machine Shop, visits further developing this irreplaceable piece of equipment. The a customer and is appalled to see most recent descendents of the Model 27 – the SK 15-300 a group of women wielding 6-inch Series skinners – have more than 60 years of knowledge and razor-sharp knives to laboriously experience behind them. And we think it shows, in the quality loosen skin from hams. The idea for the of design and build. first skinning machine, the Townsend Model 27 Open-Top Skinner, is born. I N N O V A T I O N : it ’s in ou r D NA. Model 7900 1993 Model 7950 1995 Model 9000A 1997 Model 6000ABF 2002 9000 EURO-EL 2004 6000DHT 2010 1991 Model 7914 1994 Model 9000 1996 Model 9000H 2001 9000 EURO 2003 6000ALT 2005 SK 15-340 1973 Model 500X 1980 Model 720 1993 SK II-320 Model 600S 1979 Model 700 1984 Model 7620 2008 1989 Model 7650 2008 Model 7500 1993 SK II-350 Series 1969 Model 400S 1975 Model 400 1973 Model 500


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    Contents Financial ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Marel in figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chairman’s address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 CEO’s address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Strategy and finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Opportunities and outlook . . . . . . . . . . . . . . . . . . . . . . . 19 Market outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Poultry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Fish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Meat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Further processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Business operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 To our shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Shares and shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Investor relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 CEO and Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 48 Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Consolidated financial statements for 2010 . . . . . . . 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 1


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    Financial ratios Amounts in EUR thousands Results 2010 2009 2008 2007 2006 Revenues 600,421 531,680 540,149 289,817 208,700 Gross profit 227,074 191,674 178,931 97,236 68,803 Result before depreciation and amortisation (EBITDA) 82,177 58,752 42,108 20,980 15,679 Result from operations (EBIT) 57,334 8,047 20,434 10,029 7,527 Net result for the period 13,626 (11,811) (8,405) 6,066 159 Cash flow statement Cash generated from operating activities, before interest & tax 114,881 75,395 45,852 7,925 6,010 Net cash from (to) operating activities 78,986 25,526 9,602 2,778 (2,992) Investing activities (16,757) 10,758 (404,986) (70,249) (69,754) Financing activities (67,453) 10,168 386,481 34,118 132,318 Financial position Total assets 877,623 882,882 920,259 427,304 364,793 Working capital 78,114 109,111 (25,940) 109,887 87,989 Equity 343,269 323,797 288,279 181,835 144,423 Net Debt 256,741 295,012 379,405 129,919 95,468 Various figures in proportion to sales Gross profit 37.8% 36.1% 33.1% 33.6% 33.0% Selling and marketing expenses 11.8% 13.8% 13.3% 15.5% 13.9% Research and development expenses 6.1% 5.9% 5.1% 5.0% 5.6% Administrative expenses 9.1% 13.1% 11.1% 10.0% 10.6% Wages and benefits 31.7% 36.1% 33.7% 41.2% 42.7% Result before depreciation and amortisation (EBITDA) 13.7% 11.1% 7.8% 7.2% 7.5% Depreciation/amortisation 4.1% 9.5% 4.0% 3.8% 3.9% Result from operations (EBIT) 9.5% 1.5% 3.8% 3.5% 3.6% Net result for the period 2.3% (2.2%) (1.6%) 2.1% 0.1% Other key ratios Current ratio 1.4 1.6 0.9 1.9 1.9 Quick ratio 1.0 1.2 0.6 1.4 1.4 Equity ratio 39.1% 36.7% 31.3% 42.5% 39.6% Return on owners’ equity 4.1% (3.9%) (3.6%) 3.7% 0.2% Return on total assets 1.5% (1.3%) (1.2%) 1.5% 0.1% Key figures from Marel’s core operations, normalised Q4 2010 Q4 2009 2010 2009 Revenue 167,677 112,492 582,130 434,796 Result from operations (EBIT) 20,063 6,920 64,144 24,760 EBIT as a % of sales 12.0% 6.2% 11.0% 5.7% Result before depreciation and amortisation (EBITDA) 26,104 12,763 88,060 47,432 EBITDA as a % of sales 15.6% 11.3% 15.1% 10.9% Glossary of terms Net Debt . . . . . . . . . . . . . . . . . . Interest bearing borrowings (current & non-current) -/- cash & cash equivalents -/- restricted cash Net Cash . . . . . . . . . . . . . . . . . . Cash and cash equivalents + restricted cash -/- bank overdrafts Full Time Equivalents . . . . . . Number of personnel, where part time employees are counted for the percentage of a full time job. EBITDA . . . . . . . . . . . . . . . . . . . . Earnings before interest, tax, depreciation and amortisation Current ratio . . . . . . . . . . . . . . . Current assets / current liabilities Quick ratio . . . . . . . . . . . . . . . . (Current assets -/- inventories) / current liabilities Equity ratio . . . . . . . . . . . . . . . . Total equity / (total equity + total liabilites) Return on owners’ equity . . . Result for the period / average of total equity (beginning balance + ending balance for the period/2) Return on total assets . . . . . . 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: The figures below are from the consolidated accounts of Marel. For key figures from Marel’s normalised core operations, see relevant section on page 2. For further information, see chapter on Financial performance on pages 12-16. Revenues and profit from operations (EBIT) Revenues as percentage of revenues 600 600 12% 500 500 10% EUR mln EUR mln 400 400 8% 300 300 6% 200 200 4% 100 100 2% 0 0 0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Revenues EBIT as ratio of revenues EBITDA Equity ratio 90 40% 80 70 30% 60 EUR mln 50 40 20% 30 20 10% 10 0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Numer of employees (FTEs), average per year Research and development expenses 4,000 40 7% 35 6% 3,000 30 5% EUR mln 25 4% 2,000 20 3% 15 1,000 10 2% 5 1% 0 0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 R&D expenses R&D expenses as % of revenues Revenues in 2010, by business segment Revenues in 2010, by geographical location Others Iceland 4% Fish 0.5% The Netherlands 2.5% Further 15% Other countries Processing 17% 13% Meat 15% Poultry North America Europe other 53% 29% 51% 3


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    Chairman’s address In 2010, the global economy staged a solid recovery and, looking ahead, seems to be firmly on the path to renewed economic growth. Industrial production, in particular, has recovered well from the economic downturn and demand is increasing, especially in emerging markets, where the most pressing concerns are an increased risk of inflation and overheating. However, economic conditions in developed markets may remain fragile in the near term. The global economy can therefore be described as increasing demand for fish, meat and poultry products undergoing a two-track recovery, reflecting the rise of all come together to create the conditions for a sustained emerging markets and the vast potential and challenges period of high growth for our customers and end-markets. this creates for the global economy as a whole. Making quality food affordable For Marel, these economic developments provide an As emerging markets grow, the demand for high quality exciting opportunity. For the past few years, we have food products inevitably increases. As consumers begin to focused on executing our strategy of becoming a leading attach greater value to nutrition, producers increasingly player within our industry. Today, Marel is the undisputed focus on improving yield and cost efficiency in their leading global provider of equipment and solutions to production processes. In developed markets, these the poultry, meat and fish processing industries, with an priorities are already squarely in focus and will continue to increased focus on the convenience food segment. be so for years to come. Moreover, our industry is directly benefiting from the Marel continues to work tirelessly, side by side with trends that are driving global economic development. our customers, to help them to capitalise on these key Urbanisation, rapid economic growth and continuously trends. Our strong commitment to innovation has led to continuous advancement in how food is processed, Marel‘s growth strategy creating higher quality products at lower cost, benefiting producers and consumers alike. We can proudly say External growth Integration Organic growth that our products positively and directly enhance the overall value of food, contributing to making quality food 1,000 affordable for people all over the world. Innovation and globalisation With our annual investment of 5-7% of revenues in 582 research and development – far above the industry average – we will continue to push the envelope of what is possible to fulfil our vision of being the customers’ choice. Despite the slowdown in revenues in 2009 and our 129 relentless focus on cost control, Marel chose not cut down on investments in research and development. Instead, we 2005 2006 2007 2008 2009 2010 2015* * Target 4


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    have continued to strengthen our product pipeline, which recent years. Looking ahead, Marel is in a unique position we see as a key stepping stone in continuing to provide to create value for customers and shareholders alike after the best value for our customers. Combined with first-rate having transformed the competitive landscape in a highly service and a strong market presence, this will provide a fragmented industry. As we predicted, consolidation is solid foundation for capturing increased market share in picking up steam in the industry. We expect that two or new and fast growing markets. three companies, each with a market share of 15-20%, will eventually dominate, and be joined by a number of smaller Aligning strategy and execution but powerful niche players. Marel has already taken pole In 2005, Marel’s revenues amounted to EUR 130 million position with its carefully planned acquisitions since 2006, serving mainly the fish industry. At our Annual General having benefited from having had first pick of our future Meeting in 2006, we stated that we would follow a two- partners. stage growth strategy in the next 10 years. The first phase would consist of two to four strategic acquisitions that Great team performance would transform Marel into the global leader in its field. I want to thank the Marel team for its dedication and During this phase, which would last 3-5 years, revenues hard work in recent years. Overall, 2010 was a good would grow to EUR 400-500 million, with an EBIT target of year for Marel, grounded in the great teamwork of our 10-12% of sales. It was expected that this period of high people during exceptional times. It is no easy task to external growth would be followed by a brief period of successfully combine so many companies into ONE in refocusing of the business, during which time preparations such a relatively short period of time. Our people also would be made for the second phase of the strategy, a achieved outstanding results in securing new financing sustained period of high organic growth. Our stated aim for the company at favourable terms with a club of six was to reach total revenues of approximately EUR 1 billion international banks and have successfully maintained by the year 2015. a sharp focus on cost control while, at the same time, continuing to strengthen our leading market position So far, the strategy has been successfully executed through innovation and product development. according to plan and the goal remains unchanged. In 2010, the company’s revenues reached EUR 582 million The long-term outlook in the industry is favourable. in a fast growing 4 billion euro market, implying a market Protein consumption continues to steadily increase, driven share of roughly 15%. And the return on sales was 11% in by changing consumer habits in established markets and 2010, in line with the stated target. rapid urbanisation in emerging markets. At the same time, the focus on higher quality, improved yield and reduced The second phase of the strategy has gotten off to a waste continues to grow. good start with the order book at record levels at the beginning of 2011. We will continue to invest handsomely Marel is fortunate to be operating in an attractive industry. in innovation and market penetration to support the But Marel is also shaping its own destiny by continuing autonomous growth. Looking ahead, we see good to invest well above the industry average in innovation potential for further increasing profitability through and further market penetration, laying the foundation for operational excellence and economies of scale, leading to high organic sales growth and good quality of earnings for higher gross margins and relatively lower overheads. We many years to come. may also undertake small bolt-on acquisitions financed from cash flow to support our market penetration strategy or to enhance and strengthen our product portfolio. Well positioned to harvest Marel’s acquisitions in recent years were neither opportunistic nor coincidental. The importance of Arni Oddur Thordarson diversification and a strong global market penetration Chairman of the Board has become clearly evident in the economic climate of 5


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    CEO’s address For Marel, 2010 was a very exciting year. After the last remaining non-core activities were divested in the beginning of the year, we were able to focus fully on our core businesses. We made substantial progress in integrating our different units into “one company” and our customers are beginning to see us as such. The motivation behind everything we do is the desire to be perceived as the BEST company in the business. This is clearly reflected in the vision we have adopted: One company “To be the customers’ choice in supplying integrated In the past five years, Marel has acquired a number of systems, products and services to the fish, meat and strong companies and renowned brands such as AEW poultry industries.” Delford, Scanvaegt, Stork Food Systems and Townsend. A great deal of effort has been put into integrating them Market situation all into one company, while also taking care to honour Overall, our customers are doing well, especially in key and benefit from the strong values of our heritage. Some, markets like the U.S. and Russia. The consumption of like Scanvaegt and Townsend, had been successful in proteins is still growing worldwide and convenience food this business for well over half a century. The integration continues to gain in popularity. These trends are still the process has therefore been geared towards bringing driving forces behind market growth in our industry. together the strengths that each has to offer. This The poultry market is especially healthy and our further emphasis is reflected in our new branding strategy where processing activities have done well in capitalising on the we take advantage of the strengths of particular brands in opportunities. Access to bank financing has improved certain industry segments. greatly and our customers have taken advantage with An important cornerstone of the future Marel is the new major investments to upgrade their facilities and improve market-oriented organisational structure. We will serve our profitability. core markets – poultry, fish, meat and further processing As a result, the market conditions for Marel have improved – from Industry Centers that have been established in during the course of 2010. We have strengthened our each of the four segments. In addition, we now have 12 market position and have seen a steady growth in order Product Centers that develop unique products, such as the intake quarter after quarter. With larger projects having SensorX, that can be used by customers in more than one rebounded, Marel’s order intake is back to the level it was protein segment. at before the financial crisis and our order book has never In 2010, the integration process focused in particular been stronger. on three key areas: the global distribution network, the It is our belief that the outlook for 2011 for our customers innovation process and the manufacturing organisation. continues to be favourable, although increasing feed prices Our distribution channels have been streamlined and are likely to exert some pressure. we have merged the sales and service networks of our companies. This has already had a positive effect on our sales, especially in the U.S., which led the way in this effort. 6


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    In the innovation area, we are excited about the many Investing in innovation new integrated products that are emerging that combine We feel an obligation to our customers to bring new the advanced technologies of our old companies. For technologies to the market that provide them with added customers, this is the most visible advantage that we can value. That is why we decided to maintain our level of offer as one integrated company – even better systems investment in product development during the past two and solutions that create additional value for them. years, despite the challenging operating environment. We launched a new integrated product at every major That decision is now really paying off. Our most recent industry exhibition in 2010 and there are many more in the innovations – including the SensorX, RevoPortioner, pipeline. INNOVA and StreamLine – have been very successful and We have also begun to harvest from the economies of have helped us to recover quickly from the economic scale of our company. Marel is now making much more downturn. We will continue to invest heavily in innovation effective use of its manufacturing capabilities with the and we have chosen it as the main theme of this report in implementation of one common manufacturing model. order to offer a glimpse of some of our many breakthrough We are also taking better advantage of our manufacturing innovations past and present. center in Slovakia, which has significant cost benefits. In addition, we made significant progress during the year Future outlook in areas like procurement, ICT and human resources Marel achieved a major milestone when the new long- management. term financing was secured in 2010. The new financing structure, made possible by the substantial recovery in Marel on the move financial performance in 2010, is the foundation we need The integration process was formally concluded in the to continue to grow and build our business in the future. second half of 2010 with our “Marel on the move” initiative, Having taken this important step, we look ahead with which featured a series of local integration meetings with anticipation and optimism to 2011. employees at our largest operating centers in Europe and Marel is privileged to be operating in a market with the United States where we discussed the road forward for strong underlying growth of 5-6%. We have been able Marel. We focused in particular on our vision for the future, to strengthen our position in this market through a our values and the new organisational structure. combination of targeted market penetration, a dedication I am convinced that in order to succeed in realising to research and development, and a focus on operational our vision, our company needs to be grounded in a excellence. Not to mention the commitment and loyalty set of strong and recognised values that will guide our of our employees. I have been inspired by the passion future actions and decisions. In 2010, employees had of our people during my visits to many of our locations a direct hand in defining the values that the company around the world this year. As I look ahead to 2011, I am will embrace. The outcome was a set of eight values: more convinced than ever that we are well on our way to commitment, partnerships with customers, diversity, building a great company that will play a major role in our teamwork, learning and excellence, open communication, industry for many years to come. No question, Marel is “on humour and fun, and success. Many initiatives have the move”. already been launched throughout the company to promote and embed these values in daily operations. Theo Hoen Chief Executive Officer 7


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    PROCESSING I N N O VAT I O N I N P O U LT R Y P R O C E S S I N G “Peace of mind” • It is widely accepted that the SensorX sets the POULTRY standard in bone detection in the poultry industry. Thanks to its advanced X-ray technology and software components, the system possesses unprecedented bone detection capabilities. • The SensorX enables poultry processors to significantly lower bone content in their products. Many of the largest poultry facilities in America and Europe feature the SensorX in their arsenal, ensuring food safety for the world’s best known fast food and retail brands. • “Now I can go to sleep with peace of mind because I know we will deliver product without bone contamination,” says Brian Coan, Purchasing Manager - supply chain, Chick-fil-A Inc., about the SensorX. 8


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    Strategy and finance 9


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    Strategy Marel has established itself as the leading global provider of advanced equipment and systems for poultry, meat, fish and further processing following the execution of an ambitious growth strategy announced in 2006. Since then Marel’s market share has grown from 4% to 15% following strategic acquisitions of three outstanding companies – AEW Delford, Scanvaegt and Stork Food Systems. The focus now in phase two is on organic growth and further development of the company’s operations. But being the biggest was never the company’s main goal. The strategy carried out in the last five years has been driven by the ambition of being the best company in the industry, as reflected in the company’s new vision statement adopted in 2010: income each year in research and development – far “To be the customers’ choice in supplying integrated above the industry average. Marel employs more than 400 systems, products and services to the fish, meat and highly qualified scientists and technicians in the field of poultry industries.” engineering and food technology, and its portfolio of more than 200 granted patents continues to grow each year. In pursuit of this goal, Marel relies on a simple and The primary goal is to put that know-how at the service proven business model founded on three pillars – market of customers – from small family-owned businesses to penetration, innovation and operational excellence. leading global producers – to help them to operate at Market penetration peak efficiency. Marel seeks to capitalise on its extensive global sales and Operational excellence service network and knowledge of customers’ production Marel strives for continuous learning, improvement and processes to continuously expand market share, development across the whole range of its activities. This penetrating further into existing market segments, as well commitment is epitomised by the pursuit of operational as new geographical areas. With offices and subsidiaries excellence that defines the company’s manufacturing in some 30 countries and a global network of more than organisation, from parts production and assembly to 100 agents and distributors, Marel is in a unique position quality control, logistics and procurement. It is also to serve customers all over the world, wherever they may reflected in the substantially more efficient use of working be located. capital achieved in the past two years. Innovation With its global presence and unwavering dedication to A culture of innovation is a cornerstone of Marel’s global innovation and operational excellence, Marel strives to leadership. The company invests an average of 5-7% of earn its customers’ trust each and every day. 10


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    S T R A T E G Y A N D F I N A N C E Focus on core business Market-oriented organisation A key part of Marel’s strategy following the acquisition Marel’s new organisational structure is designed to of Stork Food Systems was the decision to focus on the support the company’s value creation process. The profitability and organic growth of the company’s core structure is built on the four core market segments that business, centring on the four core industry segments of Marel serves – poultry, meat, fish and further processing. fish, meat, poultry and further processing. Accordingly, the Industry Centers have been established in each of the sale of major non-core operating units was completed in four segments, responsible for product development February 2010 with the sale of Food & Dairy Systems and specifically geared toward their respective segments. The Carnitech A/S. Industry Centers are complemented by Product Centers, which develop products and solutions applicable to more The Food & Dairy Systems division of Stork Food Systems, than one market segment. excluding its operations in Spain, was sold to the Dutch investor Nimbus. The operations of Carnitech A/S in Distribution channels Stovring, Denmark, were sold to the American Industrial The third key component of the new organisational Acquisition Corporation (AIAC), a privately held industrial structure, in addition to the Industry Centers and Product group. Excluded from the agreement were Carnitech’s Centers, is the company’s sales and service organisation. former salmon and freezing divisions, and its operations The Sales and Service Units (SSUs), as the field offices are in the United States, which are integral parts of the core called, provide the global distribution network for all four business and are now operated under the Marel name and industry segments and the local interface with customers. management. The integration of the network initiated in 2010 has strengthened Marel’s market presence across the globe One company and has already begun to contribute to the company’s The integration of the Marel and Stork Food Systems financial performance, especially in the United States, companies into “one company”, begun in 2009, was which led the way with the integration of its poultry and formally completed at the end of 2010. After having further processing teams. implemented a new organisational structure and defined Rebranding the values and vision of the united company, Marel has The introduction of the new organisational structure was now entered a new phase in its development focusing on followed by the launch of the rebranding of the company organic growth. The time has come to reap the benefits in Q1 2010. The Annual General Meeting on 3 March 2010 of the integration of the technologies developed by the formally approved the change of the company name different business units with a steady stream of innovative from Marel Food Systems to Marel. In addition, the brand new products that create more value for customers. names to be used in the marketing of products targeting Innovation the different industry segments were identified, with the Already in 2010, Marel introduced new integrated intention of capitalising on the strengths of particular products to the market at all the major exhibitions in each brands in certain industry segments. Consequently, of the four market segments that the company serves, the product range targeting the poultry industry is including at the International Poultry Exhibition in Atlanta now marketed under the brand name of Stork Poultry and VIV Utrecht (poultry), Seafood Processing Europe Processing, while the further processing product range in Brussels (fish) and IFFA in Frankfurt (meat and further is marketed under the name of Townsend Further processing). Processing. Products aimed at the fish and meat segments are marketed under the Marel name. 11


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    Financial performance In 2010, Marel completed the operational transformation begun in 2009. Two major non-core operating units were divested in the first quarter of 2010: Food & Dairy Systems in the Netherlands to the Dutch investor Nimbus and Carnitech A/S in Denmark to the American Industrial Acquisition Corporation (AIAC) in the United States. Though these activities were already represented in the 2009 balance sheet as assets held for sale, their revenues and results until closing are still part of Marel’s 2010 consolidated statements. In order to provide a useful overview of the company’s financial performance, the figures for core and non-core activities are presented separately. Furthermore, the 2010 numbers are normalised for the pension recovery premium costs of EUR 7.6 mln, which Marel was obliged to pay to the Stork Pension Fund because of under coverage of the Fund. In addition, the 2009 figures are normalised for the restructuring charges incurred that year in order to provide a better comparison of the operational results from the core activities between years. Operational results – core activities Marel’s revenues in 2010 amounted to EUR 582 mln compared to EUR 435 mln in 2009, an increase of 34%, which can be attributed to the recovery of the markets, Marel’s strong market position and the extension of the product portfolio with innovative new products. EBIT and revenues of core business and non-core operations in 2010 2010 operations in EUR mln EBIT Revenues Share Core operations, normalised* 64.1* 582.1 97% Non-core operations and normalisations (6.8) 18.3 3% Consolidated operations 57.3 600.4 100% * Includes normalisation of EUR 7.6 mln in Q2 for pension premium recovery 12


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    S T R A T E G Y A N D F I N A N C E The year got off to a much better start than 2009. The order book had gradually increased during the course of 2009 and was at a satisfactory level at the beginning of 2010. Orders received grew at a consistently faster rate than revenues throughout the year and the order book reached an excellent level of EUR 167 mln by the end of the year. The growth in the order book enables Marel to make a good start in 2011. The level of market activity increased gradually during the course of the year and virtually all of the geographical markets have now rebounded to the levels they were at before the financial crisis in 2008. The company’s revenue base is strong and divided into three roughly equal components: 1) the sale of large systems, often for new factories, 2) the sale of stand-alone equipment and smaller standardised systems, and 3) service and spare parts. Large orders, including greenfield projects, are now coming in at the same rate as before the crisis and the financing of such projects is no longer an issue for Marel’s customers. Development of order book in 2010 In EUR mln Total Q1 Q2 Q3 Q4 Total 2009 2010 2010 2010 2010 2010 Orders received * 474.1 135.0 149.4 165.4 188.6 638.5 Order book 105.8 113.5 125.3 141.2 162.2 162.2 * Includes service revenues Marel responded very early to the crisis and reduced its workforce by approximately 600 in 2008 and 2009, from 4,100 to 3,500. When the business began to grow again, the company recruited temporary personnel in the Netherlands and increased the size of the workforce in Iceland to respond to the increased level of production. The workforce in Nitra was also strengthened in order to take advantage of the lower production costs there. Through such measures, Marel became more resilient and better equipped to cope with downturns and was able to keep costs under control by benefiting from economies of scale and lower labour costs. Many other cost categories have been subject to close scrutiny and control, although it was unavoidable that the absolute level of costs would rise in 2010 to cope with the growth in revenues. However, overhead ratios were reduced during the course of the year, indicating improved operational leverage. This will remain a focus area in the years to come. The gross profit margin can be further improved. The long-term aim is to achieve a level of 40%, but the company fell short of that target in 2010 due to specific circumstances, including an atypical product mix, extra costs resulting from integration activities and start-up costs related to the rapid growth in production. Taking all these factors into account, it is clear that Marel nonetheless continued to benefit from the cost efficiency measures undertaken in 2009. 13


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    Normalised core operations in 2010 and 2009 In EUR mln 2010 2009 Change in % Revenues 582.1 434.8 34% Cost of sales (360.7) (268.6) 34% Gross profit 221.4 166.2 33% Gross profit margin 38% 38% Other operating income (0.7) (0.6) 12% Selling and marketing expenses (68.2) (59.3) 15% Research and development expenses (35.9) (28.4) 26% Administrative expenses (52.4) (53.1) -1% Result from operations (EBIT) 64.1 24.8 159% EBITDA 88.0 47.4 86% In 2010, the normalised operational profit (EBIT) was EUR 64.1 mln compared to EUR 24.8 mln in 2009, a steep increase resulting from an increase in sales combined with the ongoing focus on cost control. Marel’s management considers an 11% return on sales to be a good result as it is in the company’s target range of 10-12%. In the fourth quarter, Marel demonstrated that a return at the high end of this range is achievable. Revenues of core operations and normalised EBIT as % of revenues Normalised EBITDA core operations 180 14% 30 160 12% 25 140 10% 120 8% 20 EUR mln EUR mln 100 6% 15 80 4% 60 2% 10 40 0% 5 20 -2% 0 -4% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 2009 2009 2009 2009 2010 2010 2010 2010 Revenues EBIT as % of revenues 14


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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 300 275 EUR mln 250 225 200 At end of quarter Q4 Q1 Q2 Q3 Q4 Change in EUR mln 2009 2010 2010 2010 2010 from Q4 2009 Non-current borrowings 351.5 351.6 347.8 342.4 310.7 (40.8) Current borrowings 15.4 17.9 17.6 15.4 9.9 (5.5) Total borrowings 366.9 369.5 365.4 357.8 320.6 (46.3) Cash and equivalents 71.9 83.2 81.3 86.7 63.9 (8.0) Net interest bearing debt 295.0 286.3 284.1 271.1 256.7 (38.3) Financing activities Marel has made good progress in reducing net debt in 2009 and 2010 by reducing working capital, disposing of non-core assets, issuing new shares (in 2009) and maintaining the level of investment in tangible fixed assets below the depreciation level. In 2010, the combined effects of these actions, along with a significant growth in EBITDA, led to a reduction in net debt from EUR 295 mln to EUR 257 mln and a substantial deleveraging of the company. The progress made enabled Marel to secure a new long-term financing package in 2010, well in advance of the maturity of the existing loans. The agreement was concluded on 25 November 2010, in the amount of EUR 350 mln, enabling the company to refinance all of its existing debts at favourable terms and conditions, leading to a reduction in financing cost in the coming years. Equally important, the agreement supports the company’s long-term strategy by providing the stability and flexibility needed to continue to grow the business, as well as making the full integration of the company’s operations possible. The financing was provided by a group of six international banks, led by ING Bank (which acted as the Coordinating Bookrunner), Rabobank and ABN AMRO (which acted as joint Bookrunners). 15


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    The key elements of the financing package, to be drawn The new financing structure is a major milestone for Marel in currencies reflecting the company’s revenues and and provides the company with a strong foundation for assets, are: the future. With stable and cost-efficient new financing, Marel can move forward and focus on growing the • A five-year senior club loan and revolver, consisting business and capitalising on its operational leverage. Marel of a EUR 135 million and a USD 115 million term loan considers the refinancing to mark the official closure of the and EUR 100 million multicurrency revolver, with final integration process between of the “old” Marel and Stork maturity in November 2015. Initial interest terms are companies. Marel is now one company with one team and EURIBOR/LIBOR + 300 bps, which are expected to one financing. decrease during the maturity of the loan. • A junior club loan in the amount of EUR 30 million, with a six year maturity that can be converted into senior Many factors helped Marel to secure ranking subject to the company’s financial performance. the new financing: Initial terms are EURIBOR/LIBOR + 500 bps. • Number 1 globally in poultry, fish and further • Terms and conditions are in line with Loan Market processing; a major player in meat Association (LMA) corporate standards. • Operates in a fast growing market where there are As part of the refinancing strategy, Marel announced on extensive opportunities 1 November 2010 a conditional offer to bondholders • Innovation is the cornerstone of Marel’s global to repurchase bonds issued by the company and listed market leadership on NASDAQ OMX Iceland under the name MARL 06 1. • Large acquisitions finalised; focus now is on organic These bonds represented the only debt which could not growth be unconditionally repaid at Marel’s discretion. With the • Revenue growth is back on track repurchase of the bonds, Marel sought to further reduce • EBITDA growth due to gross margin improvement the currency risk on its balance sheet. Investors holding as a result of sustainable cost reduction approximately 66% of outstanding MARL 06 1 bonds • Long standing, proven management team accepted Marel’s offer to repurchase the bonds at par. In • Proven ability to manage through challenging addition to the repurchase of the MARL 06 1 bonds, Marel times repaid bond class MARL 09 1 in full. As a result, the total • Proven ability to deleverage despite difficult market value of the outstanding debt denominated in ISK was circumstances reduced to EUR 7.5 mln, which represents an acceptable • Proven ability to generate cash through cost currency risk, in Marel’s view. savings and improvement in working capital Marel currently relies on natural hedging as much as possible and has no currency hedging contracts at the moment. In connection to the refinancing, Marel extended its interest rates hedging, which matures in 2013, from 2013 to 2015 to mirror the maturity of the new financing structure. 16


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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: of financial institutions around the world. There are policies market risk, including foreign exchange risk and price in place that limit the amount of credit exposure to any one risk, credit risk, liquidity risk, cash flow risk and fair value financial institution. interest-rate risk. The company’s overall risk management programme focuses on the unpredictability of financial Liquidity risk markets and seeks to minimise potential adverse effects Due to the dynamic nature of the underlying businesses, on the company’s financial performance. The company the company has prudent liquidity risk management to uses derivative financial instruments to hedge certain ensure sufficient flexibility in funding under the revolving risk exposures when needed to manage its exposure part of the facilities agreement and current financial assets to interest rate and foreign exchange rate risk. Risk available. management is carried out within the company, where applicable, under policies approved by the Board of Cash flow and fair-value interest rate risk Directors. The company has increased the focus on risk The company’s income and operating cash flows are management with the centralisation of the company’s substantially independent of changes in market interest financial risk management function in group 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 EUR/USD, EUR/ variable rates expose the company to cash-flow interest GBP and EUR/ISK on the cost side. The general policy is to rate risk, while borrowings issued at fixed rates expose it to apply natural currency hedging to the extent possible and fair-value interest rate risk. prohibit any speculative trading of financial instruments. The company has now drawn approximately 30% of the The company manages its cash-flow interest rate risk by outstanding loans in USD to create natural hedging in using floating-to-fixed interest rate swaps. Such interest the balance sheet. Where needed, financial exposure is rate swaps have the economic effect of converting hedged in accordance with company’s general policy on borrowings from floating rates to fixed rates. The company permitted instruments and exposure limits. raises long-term borrowings at floating rates, and swaps a portion of them into fixed rates. The risk, measured as Credit risk the potential increase in interest paid during the coming The company minimises credit risk by monitoring credits year based on a defined movement in interest rates, is granted to customers and assigns collateral to cover monitored and evaluated regularly. potential claims. The company has policies in place to ensure that sales of products and services are made Insurance policies to customers with an appropriate credit history, and The company maintains global and local insurance products are not delivered until payments are secured. The programs. The coverage comprises property damage, proportion of sales to Icelandic customers is approximately business interruption, general and product liability, marine 0.5% of the total. Marel has not incurred any losses of cargo/mounting, directors and officers liability, employers outstanding receivables due to the economic crisis in practice liability, business travel and accident. The company Iceland. Marel has banking relations with a diversified set believes that its current insurance coverage is adequate. 17


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    PROCESSING I N N O VAT I O N IN FISH PROCESSING A new vision in slicing • The trailblazing GEBA SC 125V fixed-weight slicer is the first D-cut salmon slicer on the market to feature an advanced vision system for the slicing of whole salmon fillets. • “The new GEBA SC 125V has performed extremely well,” says Yves Jansen, Plant Director of Marine Harvest Pieters in Oostende, Belgium. “Not only is it accurate and labour saving, but it also greatly improves the FISH working environment of our operators, which is very important to us.” • Laser vision technology is used to measure the volume, size and weight of the fillet. The computer then calculates the cutting profile required to deliver slices of the chosen weight, at high speed and with great accuracy. 18


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    Opportunities and outlook 19


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    Market outlook The year 2010 got off to a much better start than the Growth drivers previous year. The recovery that began in the second The market for equipment and systems for processing of quarter of 2009 continued and market activity had proteins has been growing steadily at an average annual reached good levels by the beginning of the year, with the rate of 5-6% (see graph on “Global consumption of fish and poultry segment leading the way. Marel’s order book was meat”) for the past two decades, driven by two key trends: improving with large orders beginning to come in, a clear • Changes in consumer habits are a key driver in Western sign of growing confidence in the markets. countries. The average time spent in the kitchen Notably, large projects were not limited to the company’s cooking each day has dramatically decreased over established markets in Western Europe and North America. the past few decades, from hours to minutes in some Major greenfield projects were also secured early in the countries, with the U.S. and U.K. leading the way. The year in emerging markets, including in Eastern Europe market for convenience food has been growing steadily and Latin America, in addition to a milestone sale in at a rate of 6-8%. China, evidence that mechanisation and automation are • Urbanisation drives increased protein consumption in increasing at a robust rate in developing regions. emerging markets. Globally, some 1 billion people are expected to move from the country to the city in the The underlying demand in the food industry continued to next decade, resulting in a rise in the average family rise during the course of the year and Marel’s order book income. As soon as people have more money to spend, continued to grow, with orders received exceeding orders their consumption of proteins increases at the expense booked off each successive quarter. By the second half of of grain. the year, market conditions were back to the level they were at before the global financial crisis. In addition to these fundamental drivers, another key trend in consumer behaviour that emerged during the financial crisis – increased consumption of less expensive proteins, primarily poultry – continued to manifest itself during the course of the year. Consumers are dining out Time spent cooking at home less frequently, especially at high-end restaurants, and food service companies and retailers active in the low-cost 2.5 hours 1 hour 30 min. 15 min. 8 min. convenience food and fast food segments are profiting. So are Marel’s customers, the food processors who supply these outlets with products. MIn. 1934 1954 1974 1990 2010 180 The company’s view of the long-term prospects of the Traditional cooking 150 market remains unchanged. There is strong underlying 120 growth in the protein segment of the food processing 90 industry and consumers see proteins as a necessary Modern appliances 60 component of their regular diets. It is expected that Prepared food Fresh and Home 30 frozen food delivery established markets, such as North America and Western 0 and Southern Europe, will continue to grow by an average 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 rate of 4% annually. Even faster growth of 6-8% annually Source: Marel is predicted in emerging economies, including Asia, the Middle East, Latin America, and Central and Eastern Europe. 20


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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: Poultry continues to increase in popularity among consumers looking for affordable sources of protein. Accordingly, the poultry segment once again led the way in terms of the growth in order intake in 2010, including in the number of large orders in both established and emerging economies. The outlook for 2011 is positive. Fish: High raw material prices and consolidation in the industry have led fish processors to continue to invest in increased automation to improve yields, product quality and overall efficiency. Maximising the value extracted from the raw material remains a priority. The strong growth of the aquaculture industry continues. Meat: Processors are increasingly becoming convinced of the gains to be derived from effective process line monitoring and control. The need for increased efficiency, primarily due to high raw material prices and a shortage of labour, is driving the automation of production processes. The demand for higher value cuts of red meat is expected to increase in 2011. Further processing: The market for value added products continues to grow. Consumers, who spend less and less time on food preparation, are looking for greater variety in complete ready-made meals. Fast food restaurants also continue to thrive. Processors are investing in innovations that allow them to meet ever changing consumer demands. Global consumption of fish and meat per capita since 1960 60 50 Kg (live weight and carcass weight) Other meat Mutton & goat 40 Beef/veal Poultry 30 Pork Fish 20 Source: FAO 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 21


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    Poultry Developments in 2010 The rebound in investment among poultry processors equipment and systems that a high speed processing first evident in the second half 2009 continued in 2010. As plant may require. Marel’s fillet handling system is a central consumption shifted from more expensive proteins, such feature in such a setup and an excellent example of the as beef and pork, to less expensive alternatives, primarily synergies derived from the integration of the technologies poultry, the level of investment gradually returned to pre- of the “old” Marel and Stork. The system combines, on the crisis levels. While the United States remains Marel’s largest one hand, inline deboning developed by Stork and, on market, strategic greenfield projects were also secured in the other, Marel’s SensorX automatic bone detection with China, Europe, Russia and Latin America in 2010. Overall, trimming and Robobatcher for packing of fixed-weight orders received were above budget throughout the year. trays. The integration of these technologies creates added value for customers by raising product quality, food safety The strong market position that Marel has established in and high-speed automation to new levels. In 2010, a major many parts of the world was a key factor in the company’s poultry processor in Germany set a new standard for speed success in the poultry segment in 2010. This was with such an installation with a capacity of 13,500 broilers particularly true in the U.S. market, where the integration per hour. of the poultry teams of the former Marel and Stork companies at the end of 2009 began paying off. In 2010, Innovation is also continuously being applied to increasing the company’s sales and service organisations in the key the efficiency of existing processes and products in order European markets, as well as Russia and Oceania, were also to raise productivity and yield, and reduce the customers’ aligned and integrated, further bolstering Marel’s global costs even further. A new generation of the AMF-BX presence. deboning system and the new VO-20 RS opening machine, from the evisceration product range, are prime examples The greenfield projects that Marel secured in 2010 were of how Marel’s commitment to continuous product a reflection of the company’s strengths and, especially, development is constantly setting new standards for its unique ability to provide the complete range of efficiency, yield, hygiene, safety, ergonomics and reliability, to better meet the needs of poultry processors. Global broiler production 2000-2011f Global turkey production 2000-2011f 80 6 70 5 60 Million tonnes Million tonnes 4 50 40 3 30 2 Source: USDA Source: USDA 20 1 10 0 0 2000 2002 2004 2006 2008 2010e 2011f 2000 2002 2004 2006 2008 2010e 2011f United States EU-27 United States Canada China Mexico EU-27 Russia Brazil Others Brazil Others 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 Trends and opportunities Focus in 2011 • Growth: 2010 was a year of growth in the poultry The order intake in 2010 was well above budget, filling industry. In a number of markets, investments that the production schedule for the first half of 2011, a very had been postponed in the wake of the financial crisis positive sign for the year to come. The projected growth were revived. Added to that were new expansion will help to further solidify Marel’s position as the leading investments, including several greenfield projects innovator, manufacturer and supplier of products and and up-scaling of existing processing lines. The trend complete systems for the poultry processing industry. is expected to continue into 2011. Growth is also With the growing emphasis on automation throughout expected to continue in the turkey processing market. the industry, production planning and performance • Increasing demand for less expensive proteins: Poultry monitoring are likely to become increasingly important. products continue to increase in popularity among consumers looking for affordable sources of protein. Following the establishment of a new Poultry Industry Center in 2010, bringing together the entire range of the company’s products for poultry processing under one umbrella, Marel now offers a truly unique product portfolio to help processors meet this increasing demand. • Efficiency: Processors are increasingly automating their production processes with a view to increasing efficiency and improving yield. Marel, with its Stork Poultry Processing brand, has a strong tradition of bringing innovative products to the market, enabling processors to further optimise their processes, raise product quality and stay ahead of their competition. In 2010, several innovative inline solutions were presented and among the innovative technologies on the schedule for 2011 is a completely new The new generation of the AMF-BX breast filleting system offers improved performance, higher yields and scalding concept. greater control over the end product, helping processors meet ever changing customer demands. The VO-20 Reference Series opening machine sets a new standard for hygiene, safety, ergonomics and ease of use in evisceration. 23


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    Fish Developments in 2010 Salmon processors, meanwhile, were introduced to the Activity in the global fisheries trade in general was high new GEBA Slicer SC 125V, the first D-cut slicer on the in 2010, with demand growing in most markets and no market with a vision system for whole salmon fillets. large changes in supply expected. High raw material The slicer provides high quality slices or portions with a prices and consolidation in the industry put pressure on fixed weight at an extremely high accuracy, improving fish processors to continue to improve yields and product utilisation of the raw material by an impressive 10-20%. quality, requiring further investment in automation. Prices for many farmed species rose significantly in 2010 Trends and opportunities as a result of increasing demand. The picture for capture fisheries was more mixed, with some prices affected by • Eco-labelling and sustainability: Cod and haddock good harvests while others eased upward due to restricted stocks around Europe are considered to be healthy or quotas. Prices reached record levels in the salmon industry, recovering. Groundfish catches are expected to increase where demand is outstripping supply by a wide margin worldwide as a result of good resource recoveries in after the collapse of the Chilean salmon industry due to many fishing areas. The drive toward more eco-labelled viral outbreak. There were major sales in 2010 to customers fisheries, certifying that the product can be traced in Norway, the world’s leading producer and exporter back to a sustainable fishery, should help to bolster of salmon, who sought to capitalise on the undersupply demand, which looks to be increasing. However, faced despite being hampered by a harsh winter. with strong competition from less expensive farmed whitefish, the opportunities for groundfish processors Under pressure from the high prices, processors focused lie in increasing the value added of their products. With on maximising the value extracted from the raw material. its wide range of solutions that harness the power of Responding to these needs, Marel has worked hand-in- the revolutionary Innova production management hand with processors to introduce new ways to improve software, Marel can help processors take advantage efficiency and product quality and to shorten processing of such opportunities. Marel also has the expertise in time. In whitefish processing, Marel has introduced the traceability and labelling to meet the growing demand revolutionary method of “superchilling”, which allows for credible eco-labelling of products. for the core of the fish to be cooled to a sub-zero state without freezing the surface. The fillets become firmer and • Demand for less expensive proteins: The demand for more resilient during subsequent processing stages. The affordable farmed fish products continues to grow. The outcome is a much more attractive product with greatly increase in global fish consumption is expected to be increased primary product ratio. An added advantage is satisfied mostly with farmed species. Marel will continue that the fillets are still cold when packed, substantially to seek to transfer the knowledge and experience extending shelf life. Superchilling is now a method gained in serving wild fish processors to the processing recommended by third party scientists. of farmed species. 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 Global production of farmed tilapia and pangasius • Undersupply of salmon: Salmon consumption in the 5 European Union, the largest salmon market in the 4 Million tonnes Pangasius world, continues to increase. However, with Chile’s (incl. channel catfish) 3 production reaching rock bottom in 2010 following a Tilapia 2 virus epidemic, the Atlantic salmon market continued Source: FAO to be undersupplied. The Chilean salmon industry 1 now seems to be on the road to recovery and global 0 2007 2008 2009 2010e 2011f salmon supply is expected to increase substantially in the next two years. Nevertheless, there are major opportunities for Marel, as the leading global provider of equipment for modern salmon processing, in Global production of cod equipping producers seeking to fill the supply gap. 1.5 Million tonnes 1.0 Focus 2011 Pacific cod Atlantic cod The generally positive outlook in 2010 is expected to 0.5 persist into early 2011. In established markets, Marel will Source: FAO continue to build on its position as the leading provider 0 of equipment and systems for fish processing. Moreover, 2007 2008 2009 2010e 2011f as one integrated company, Marel now has the strength and critical mass needed to enter new and fast growing markets where opportunities lie. Marel is well placed to Global production of farmed salmon take advantage of its deep knowledge of the fish industry 2.0 and strong market presence to respond to shifts in the Million tonnes 1.5 markets. Pacific salmon 1.0 Atlantic salmon Source: FAO 0.5 The Superchiller cools the core of the fish to a sub-zero state 0 2007 2008 2009 2010e 2011f without freezing the surface, making it more resilient during processing and extending its shelf life. Innova production control software provides full traceability through every processing stage, from reception of raw material to dispatch of the final product. 25


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    Meat Developments in 2010 which has proven to be a key factor in improving overall The newly formed Meat Industry Center brings together yield and efficiency. the decades of experience and expertise accumulated Among the other innovations introduced at IFFA were in five different countries – Denmark, Iceland, the a new I-Cut portioning machine for bone-in products Netherlands, the U.K. and U.S. – for the purpose of and the PolySlicer 1000, featuring an involute blade and supplying top-of-the-line integrated systems and services advanced features that combine to deliver high output, to the medium and high end segments of the red meat product variety and versatility. Both are illustrative of industry, with a focus on beef and pork. Marel’s devotion to continuously seeking new ways to In 2010, the Center conducted a campaign to promote help customers reduce cost and increase flexibility and awareness of the Marel brand and product range among profitability. meat processors, which has already led to increased Marel’s latest innovation for the meat segment is a new activity in key markets. In particular, the level of proposals version of the SensorX, which brings the technology used received in North America, Australasia and Europe in 2010 so successfully in bone detection in poultry to the analysis is well above plan. New opportunities emerged from of fat content in red meat. Combined in an integrated successful equipment trials conducted with key customers solution with StreamLine, it forms a highly effective trim in Brazil, the world’s leading beef processing nation, as management system. well as Australasia and the United States. New orders are expected to follow from key customers in the U.S. and South America. Repeat orders have also been secured in Trends and Opportunities Australasia and Europe and the project pipeline remains • Increasing demand for higher value products: Less strong. expensive proteins, primarily poultry, have dominated the protein segment of the industry as consumers have In May, Marel participated in IFFA, the world’s largest reigned in expenditures following the global economic meat industry exhibition, held in Frankfurt every three downturn. However, the 2011 forecasts for red meat years. The company exhibited a wide range of new meat are good, with increasing demand projected for higher processing equipment and systems, including the very value cuts. This is likely to result in increased investment successful StreamLine intelligent deboning and trimming in the kind of advanced equipment and systems that system for beef products, featuring online monitoring Marel can provide, such as the range of highly accurate from carcass intake to product dispatch and robotic bag I-Cut portioning machines that provide processors loading. In today’s globalised market, beef processors with optimal utilisation of the raw material, minimal have to contend with low profit margins, increased costs giveaway and maximal yield and profit. and labour shortages, making it ever more vital for them to efficiently control, monitor and measure virtually • Increased automation: The need for increased every aspect of their production processes. StreamLine efficiency in the meat industry, primarily due to the is designed to meet their need for a flexible and easily current high cost of raw materials and shortage configured system that provides real-time information of labour, is driving the automation of production on all key performance indicators (KPIs) such as yield and processes. Marel’s product range is ideally placed to throughput down to each individual operator on the line, satisfy this need. 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 • Process monitoring: Processors are increasingly Global pork production 2000-2011f becoming convinced of the gains to be derived from 120 effective process line monitoring and control. Improved monitoring, both of the production process in general 100 and individual operators working on a processing Million tonnes 80 line, typically generates substantial improvements in 60 yield and profitability. The level of proposals in this area, capitalising on the integration of Marel’s range of 40 equipment with its Innova production management Source: USDA 20 software, is at an all time high. The success of StreamLine is indicative of this trend. 0 2000 2002 2004 2006 2008 2010e 2011f • Food safety: Food safety and hygiene remain a China Brazil major priority for processors and retailers alike. Marel EU-27 Russia United States Others made significant advances in 2010 in embracing and incorporating the best industry practices with regard to hygienic design of products. All product contact Global beef and veal production 2000-2011f parts of the new PolySlicer 1000, for example, are easily removed for fast and thorough cleaning, earning the 60 slicer a high score on the sanitary design checklist of the 50 American Meat Institute (AMI). Million tonnes 40 Focus in 2011 30 In 2011, the Marel Meat Industry Center is expected to 20 continue to strengthen its presence in selected markets Source: USDA 10 in Europe, South America, North America and Australasia. The campaign to raise market awareness of both the Marel 0 2000 2002 2004 2006 2008 2010e 2011f brand and Marel’s capabilities will continue. United States China Brazil Argentina EU-27 Others The I-Cut Bone provides accurate fixed weight portioning of bone-in products. 3-D scanning is used to calculate where to cut for optimal accuracy. The PolySlicer 1000 features an involute blade and can handle three logs of product simultaneously to produce stacks or shingles – fast. 27


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    Further processing Developments in 2010 Trends and opportunities The investment climate grew stronger with every quarter • Food service: The market share for fast food and in 2010. Further processors were increasingly willing to convenience food continued to grow in 2010. invest, although the final acquisition of products and Consumers are spending less and less time on food systems still took longer than it did before the global preparation and fast food restaurants are thriving as a financial crisis. It gradually became apparent that result. The worldwide success of the RevoPortioner, a processors were choosing to postpone replacement revolutionary low-pressure forming machine, reflected investments and instead to focus on bona fide innovations, this trend. A new high-capacity red meat configuration with the goal of further reducing costs, increasing of the machine is strengthening its position in the efficiency and acquiring the capacity to produce new United States and the new RevoPortioner Small is and exciting products to meet ever changing consumer expected to do very well in markets where there is a demands. need for a stable, reliable and trouble-free production using lines with a 400 mm bandwidth. Both systems Marel’s strategy to invest handsomely in innovative were launched at the very successful IFFA tradeshow in products and solutions proved to be in step with customer May, held every three years in Frankfurt. expectations. Sales increased substantially in 2010, driven by innovative systems such as the RevoPortioner, the • Value added products: The market for value added ModularOven and sausage making systems like the QX products is also growing. Consumers are looking for co-extrusion system. greater variety in complete ready-made meals that offer the ultimate in convenience. Demand for well-known In 2010, Marel introduced Townsend Further Processing classic dishes is increasing and, in some markets, the as the new brand name for its further processing product popularity of new and exciting high-quality products, range. Townsend is one of the most reputable brands based on local conventions or reflecting a homemade in the industry, renowned for innovation and quality. look and feel, is on the rise. Healthy convenience All of Marel’s products for this industry segment – for products that are lower in fat and calories are also portioning, marinating, coating, heat treatment or very popular. The demand for fully cooked products, sausage making – now bear the Townsend Further sold separately or as part of a ready meal, has created Processing name with pride. opportunities for Marel’s ModularOven high-capacity heating system. The ModularOven is a very flexible, heating system that provides optimum control of the heating parameters and is thus able to produce an extensive range of high quality products. The high-capacity ModularOven is equipped with one or more heating towers, each of which can have its own distinct cooking environment for maximum yield and capacity. 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 Focus in 2011 Looking ahead, Marel sees portioning, heat treatment and sausage making as the main pillars on which the future growth of the Townsend Further Processing range will be based. Strong growth is expected for the RevoPortioner family of products, which will be further Today, further processing accounts expanded in 2011. Poultry processing value in United States for 60% of the value For sausage making, Marel will focus on the further 100% 2% 4% 10% positioning of the QX system as the new standard for 90% 15% 26% the production of coextruded fresh, cooked/smoked 80% 45% 26% 70% 60% and dry sausage. A number of large U.S. and European 40% 60% processors will begin QX sausage production in 2011. 50% The iLinker and iConveyor system first introduced 83% 56% 40% 70% at IFFA in 2010 will also be a priority in 2011, along 30% 46% 50% 35% with the development of a complete system for the 20% 10% 18% production and packaging of fresh sausage. 9% 5% 0% 1960 1970 1980 1990 2000 2010e Further processing 50 years ago, whole birds accounted for Portions/Fillets 83% of the value Whole bird Superior product quality and food safety, combined with low production costs, are among the key benefits of the QX co-extrusion sausage-making system. 29


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    PROCESSING I N N O VAT I O N I N M E AT P R O C E S S I N G Monitor, measure and maximise • Beef processing companies looking for greater efficiency are increasingly focusing on key performance indicators (KPIs), such as yield and throughput, which show how effectively their plants are running. MEAT • Marel’s StreamLine intelligent deboning and trimming system helps take the guessing out of processing. Integrated with Marel’s state-of-the-art Innova production management software, StreamLine provides real-time performance information on every stage of the production process, from carcass intake to product dispatch. • “We have seen major improvements and increases in both yield and throughput,” says Norbert Marcher, owner of Norbert Marcher GmbH, of the StreamLine system the company acquired in 2008. 30


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    Business operations 31


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    Sales and marketing Marel’s global distribution network includes subsidiaries the year. Following a very challenging year in 2009, sales and Sales and Service Units (SSUs) in 24 countries, and increased by 33.9% in 2010. Orders received exceeded approximately 100 agents and distributors around revenues for each consecutive quarter, leading to a the world. Building on their knowledge of the market continuing increase in the order book, which stood at and customer needs, the local SSU teams sell, market, EUR 162.2 mln at the end of the year, compared to distribute, install and service Marel’s standard products. EUR 105.8 mln at the same time the year before. Large-scale projects, on the other hand, are generally Among the highlights of the year was the success of two managed by the Industry Centers for fish, meat, poultry stand-alone products, where Marel has a clear competitive and further processing. technical advantage – the SensorX bone detection system for poultry and the RevoPortioner, a unique machine for Global footprint forming products. What stood out in the sale of integrated With the aim of further strengthening Marel’s geographical systems in 2010 were the successful projects managed by footprint, the integration of the company’s sales and Marel’s new Poultry Industry Center. The Center brought service organisations, begun in 2009, remained a key together in one place the expertise and experience priority in 2010. The integration had an immediate positive previously housed separately by Marel and Stork Poultry, effect on sales worldwide, especially in the U.S. poultry with the members pulling together as one team to design market where Marel had a record year. Marel’s poultry integrated systems for new plants. and further processing customers in the U.S. now have one single point of contact for products from all of the company’s brands, an arrangement that has since been International exhibitions introduced in other countries in 2010. This new integrated In 2010, Marel participated in close to 40 exhibitions, trade structure has been rolled-out in Australia/New Zealand, shows and in-house seminars worldwide, including all the the Benelux countries, Brazil, Denmark/Sweden, France, major international exhibitions in the industry, such as the Italy, Norway, Poland, Portugal, Russia, South Africa, Spain International Poultry Exhibition in Atlanta and VIV Utrecht and U.K./Ireland. In several locations, offices have been (poultry), Seafood Processing Europe in Brussels (fish) and merged and moved into single premises to lower the IFFA in Frankfurt (meat and further processing). fixed cost base and take advantage of potential synergies. The focus at all these events was on presenting Marel as an Integration of the SSUs is scheduled to be completed by innovative single-source supplier with product offerings the end of 2011. to meet every need of processors in the fish, meat, poultry and further processing segments of the industry. Sales in 2010 Integrated systems – featuring products from the Marel, Already in the first quarter of the year, there were strong Stork Poultry Processing and Townsend Further Processing signs that investment in the food industry was bouncing product ranges – continued to be showcased at these back. Sales were approaching the level they had been at exhibitions, drawing widespread customer interest and before the financial crisis and remained strong throughout attention. 32


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    B U S I N E S S O P E R A T I O N S In addition to participation in the international trade The marketing activities range from micro and macro shows, Marel is increasingly taking advantage of the analysis of the company’s markets to the production of existing facilities housed by many of the company’s SSUs marketing material – including, for example, newsletters, around the world to organise its own customer events brochures, videos, the website and advertisements featuring live demonstration and testing of equipment – organising the company’s participation in global using the customers‘ own raw materials and products. marketing events, including trade shows and exhibitions, and media and public relations. Virtually all of the Sales Global marketing and Service Units around the world are staffed with Marel operates a global and multinational marketing marketing personnel who are responsible for local department spanning 17 locations. The team is responsible marketing activities such as local product campaigns, for global marketing – both internal and external – of the trade shows and branch events. This network of marketing company in general, as well as the four industry segments personnel provides an important gateway to the local and the products that the company produces. markets. In May, Marel’s innovations for meat and further processing were on display at IFFA, the world’s largest meat industry exhibition, held every three years in Frankfurt. 33


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    Rebranding On-line marketing The year 2010 marked the end of the rebranding of Marel seeks to actively promote its global offering the company, which began in 2009. A new logo was through the company website at www.marel.com. Some introduced for the company’s Stork Poultry Processing of the older URLs used prior to integration – including product range, following the adoption of a new logo for aewdelford.com, scanvaegt.com, storkpoultry.com, and its Townsend Further Processing products the year before. townsendeng.com – are still active but visitors to the The design of the two logos mirrors the design of the former two sites are now redirected to marel.com. Local Marel company logo and all three logos are tied together websites, which cater to the needs of the local markets in with a gradient banner. The objective with the new design the local languages, have also been introduced in 2010. is to continue to transfer value from the Stork Poultry Processing and Townsend Further Processing brand names Newsletters to Marel, and vice versa. The year 2010 marked a new beginning for the newsletters published by Marel, with the introduction of individual Marel will continue to use other brand names where newsletters for each of the four industry segments that feasible but without a separate visual identity. Brands Marel specialises in. The newsletters all share the same such as Delford, Geba, Scanvaegt, CP, AEW and others will blueprint, name (Insight) and overall look. The aim is to be used as product names in particular industries and provide the reader with up-to-date case stories, product production applications. information and interviews with key players in the food processing industry. Readers can subscribe to both the electronic and hard copy versions at marel.com. 34


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    B U S I N E S S O P E R A T I O N S Service The Marel Service Organisation spans 30 countries and As a result of consolidation in the food industry, small and comprises some 625 employees, who perform an average medium size production facilities are being replaced by of 1,000 customer visits daily. large production plants. Accordingly, economies of scale and greater efficiency in production have become major Marel’s approach to service can best be described with priorities. Marel’s goal, therefore, is to provide added value two concepts: “think global, act local” and “big enough to to customers worldwide in the form of fast and competent cope, small enough to care”. For Marel’s customers, this service, no matter where they are located, to ensure means that the company seeks to find the best balance peak performance and maximum uptime of their Marel for each customer within “the golden service triangle”. The equipment and systems. three dimensions of the triangle are: maximum uptime (throughput), minimal cost of ownership and highest yield Preventive maintenance, through scheduled visits (performance). of certified Marel specialists, is the key, along with a wide range of flexible service packages tailored to the One voice requirements of individual customers. Marel process The company’s service operation is being integrated consultants provide expert advice and analysis to help into one strong and global service organisation, with a customers optimise production, increase yield and consistent level of service across the different operating reduce costs, thereby increasing profitability. And timely units. The service teams in several Sales and Service emergency support is provided to counter unplanned Units around the world – including Brazil, France, Russia, equipment stoppages through remote diagnosis and on Spain and the U.S. – have been fully integrated and are site action. now communicating with “one voice” to customers at the local level. Focus in 2011 Implementation of the new service model will be priority in 2011. Cross training will be carried out to equip the company’s Field Service Engineers to provide first line support for the wide range of product for all four industry Uptime (throughput) segments that the company serves. The service organisation of the future requires a much closer relationship between supplier and customer. The goal of the Marel service organisation is to ensure that the systems that the company provides are always performing at an optimal level and meeting the needs of customers, each and every day. Cost of ownership Yield (performance) 35


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    Innovation Marel’s global leadership is founded on innovation. At the Integrated products core of the company’s strong innovation culture is a team The integration process is indeed paying off in the of over 400 engineers and food scientists, supported by innovation area where new products that combine the an annual investment of 5-7% of revenues in research and technologies of the different business units in the group product development. are creating more value added for customers. Major Marel maintains close ties with leading universities and milestones were reached in this regard in 2010. Marel research institutes, and its close partnerships with some of introduced new integrated products to the market at the most forward thinking processors in the industry have all the major exhibitions during the year, in each of the been a key factor in the many breakthrough successes in protein segments that the company serves. Examples product development over the years. include the integration of the Marel SensorX bone detection system and the poultry Front Half Filleting Innovation structure system from Stork, the integration of Townsend skinners Marel’s innovation process is driven by the needs of into the Marel Streamline processing solution, and the market. In 2010, in the context of the integration the integration of the software platforms developed of the group into one company, Marel adopted a new individually by Marel and Stork, i.e. the Marel INNOVA organisational structure that is geared toward supporting production control system and the Stork Poultry this process and the management of the company’s Processing Product Distribution System (PDS). growing portfolio of products. Four new Industry Marel‘s new generation ”key technology“ platform – Centers, one for each of the core market segments that consisting of new Human Machine Interface (HMI) displays, the company serves (poultry, meat, fish and further control computers and specialised electronic modules for processing), and 12 Product Centers operate their own weighing, vision and networking – also made its debut in innovation programmes that are coordinated and aligned 2010 in several new products. The new HMIs feature the to fully support the company’s vision. This ensures that the new graphical user interface that will become the standard products developed are compatible and can be combined in all new equipment from Marel. The new platform allows to serve the needs of customers requiring complete for more optimal control architecture, common user integrated lines, as well as those looking for specialised interfaces and common styling for all products. products for single application needs. The emphasis going forward is on reaping the full benefits The focus of the Product Centers is on individual of the integration with a steady stream of innovative new processing steps that are common across multiple products that provide increased value to customers. The industries – such as portioning, grading or freezing. new organisational structure is designed to support this The brief of the Industry Centers, on the other hand, value creation process. encompasses the delivery of fully integrated processing lines for a specific industry segment, spanning the entire Patents and trademarks production process from reception of the raw material all Patent protection is vital to Marel. In 2010, the company the way through to packaging of the final product. applied for patents on 29 new inventions and the current patent portfolio consists of 192 granted patent families. 36


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    B U S I N E S S O P E R A T I O N S New products Marel introduced more than 40 new products in the year 2010, including several new INNOVA modules. Examples include: POULTRY: • Evisceration equipment: New generation of opening and venting machines that set the standard in hygiene and fat retention, and formed the basis of the successful implementation of a new evisceration standard in the U.S. • X-ray systems: Integrated bone detection and bone SensorX X-ray systems management solutions for AMF/FHF deboning lines. Based on a new generation of the SensorX X-ray machine, which is helping to ensure the highest standards of food safety for many of the world’s best known fast food and retail brands. • M-150 Gizzard Harvester: Truly the “global” standard, featuring best in class technology and manufacturing. Lowers the total cost of ownership for customers by drastically reducing maintenance costs. • ACM cutup and AMF/FHF deboning systems: Excellent cutting accuracy combined with versatile breast or front half deboning. Updated with unique new features and modules, including keel bone harvesting for pharmaceutical purposes. FISH: • SpeedBatcher Marine: A marine version of the well ValueDrum known Marel SpeedBatcher for batching a continuous flow of product. This version allows for accurate packing of fixed weight packs at sea, ensuring reduced giveaway. 37


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    MEAT: • Integrated Streamline and skinning solution: For increased efficiency and convenience, the renowned Townsend skinners can now be offered as an integrated part of a Streamline deboning and cut-up meat processing system. • ValueDrum: New and improved ValueDrum for marinating meat portions, ensures uniform distribution of additives, shorter processing times and improved product shelf life. • Fat analyser: Fat analysis system for trim management, integrated with the Streamline meat processing system. FURTHER PROCESSING: • RevoPortioner 400: Low pressure former/portioner TurboVar for medium capacity, with built-in meat pump. Forms perfectly portioned products, while retaining the texture and structure of the raw material. • Qx Loader: High-speed loader for loading smoked sausages into thermoforming packaging machines without the need for manual intervention. • TurboVar: Flexible linker for sausages. Provides perfect sausage presentation with no open ends and significantly reduces the cost price of the sausage. APPLICATIONS FOR MORE THAN ONE INDUSTRY SEGMENT: • Multihead weighers: New range of weighers, including a large hopper version and an optional screw feeder. • PolySlicer 1000: New and greatly improved PolySlicer for low to mid-range applications. Now includes both orbital and involute blade options and advanced features that combine to deliver high output, product variety and versatility. • WPL9040 Weigh Price Labeller: Part of a new generation of reliable, accurate, easy to use, time saving WPL9040 weigh price labellers that can operate for long periods without interruption. Fully compatible with INNOVA. • INNOVA Weigh Price Labelling module: Provides real- time control and monitoring of all Marel Delford weigh price labellers, including labelling, order processing, boxing and palletising. 38


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    B U S I N E S S O P E R A T I O N S Manufacturing The pursuit of operational excellence defines Marel’s Manufacturing centers manufacturing organisation. The company strives for The majority of the company’s manufacturing resources leadership and continuous improvement across the are concentrated within the new fish, meat, poultry and whole range of manufacturing capabilities, from parts further processing Industry Centers. This organisational production and assembly to quality control, logistics and arrangement ensures close cooperation with sales, service procurement. and – most critically – product development. Marel’s global manufacturing operation, which spans Marel is also taking advantage of the low-cost 17 sites around the world, is mainly concentrated in the manufacturing center established in Slovakia in 2008 in Netherlands, the United States, Iceland and Denmark. the manufacturing of mature products. Approximately 75% of the company’s 1,250 manufacturing employees are based there. Procurement The close cooperation with product development is key Marel Manufacturing Model to successfully incorporating knowledge from selected The integration of Marel into “one company” has provided suppliers in the design and manufacture of Marel an opportunity to combine the best practices of the products. Focus is being placed on developing global different business units, which has served to further supply bases for the different product groups. strengthen the Marel manufacturing process. A key outcome of this effort is a new Marel Manufacturing Model, rolled out in 2010 across all of the company’s manufacturing sites for the purpose of harmonising strategy and methodology globally. The new model formalises the strong cooperative relationship between product development and manufacturing. It also defines the high-value “knowledge parts” that are manufactured in-house and specifies that final assembly and testing are also preferably done in-house. The roll-out has improved central spend and contract management and provided better leverage vis- à-vis the supplier base, resulting in greater economies of scale. The model also provides for continuous performance improvement processes. 39


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    Human resources The number of Marel employees has increased steadily Becoming one company and one team during the course of 2010 (Q1–3,202; Q2–3,315; Q3–3,372; The implementation phase of the integration process Q4–3,435)*, in line with increasing level of production initiated in 2009 was the main priority in human resources and general activity. The largest number of employees is (HR) management in 2010. The global team of HR officers, located in the Netherlands, followed by the U.S., Iceland, along with the corporate HR department, was assigned Denmark and the U.K. Close to 75% of employees are main responsibility for setting the priorities and defining located in Europe. the plan of action in this regard. An outcome of this Marel strives to engage competent employees and to process was the definition of the corporate HR mission and provide a supportive work environment that motivates vision: and encourages them to make the company vision their • Corporate HR mission: own. To that end, recruitment processes are carefully ”HR is a strategic partner for talent and organisational planned and emphasis is placed on providing excellent development within Marel.” training and opportunities for further education and job development, as well as fostering a spirit of teamwork • Corporate HR vision: and co-operation throughout the company. Marel “To be an attractive and successful global employer who recognises the importance of respecting cultural diversity, operates on the basis of shared values, strategy and while at the same time promoting the values that are aligned work culture. Where every employee feels inspired shared throughout the company. Open and honest and proud to be a part of the Marel family.“ communications and a healthy balance between work The mission and vision statement were the guiding and personal life also help to maintain a creative and lights in the development of the corporate HR strategy stimulating work environment that fosters innovation. and two-year action plan. The main focus was on establishing the fundamental systems needed to align * During the year, Marel sold two operating units, Carnitech and and integrate the different operating units under one flag. Stork Food & Dairy Systems, with a total number of 410 FTEs. The projects initiated in this regard include adoption of a system in benchmarking compensation and benefits for management, developing a company-wide appraisal 40


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    B U S I N E S S O P E R A T I O N S system based on the company values as a primary A major priority in 2010, to be continued in 2011, was a evaluation criteria, and establishing one job site for project to promote and embed the eight Marel values both internal and external recruitment. Management identified during the year into the company’s work development reviews for all operating units were processes and decision-making. Particular attention established. As a part of the management development has been devoted to “diversity“, identified as one of the programme, management training for high potential values that needed to be strengthened in the company’s employees will take place in 2011, a four module session, day-to-day operations. A project plan has been initiated developed in cooperation with selected universities and focusing on three dimensions: 1) group diversity, 2) professionals within each field of knowledge. cultural diversity and 3) gender diversity. The first visible step toward increasing diversity was taken in November Marel’s culture values local knowledge. At the same time 2010 when Marel became the one of the first companies that the foundation for joint strategies and policies is to sign the Women’s Empowerment Principles, a joint established, local work laws and cultural differences are global initiative of the UN Development Fund for Women always taken into account. (UNIFEM) and the UN Global Compact. The Principles HR played an active role in the integration process and in are designed to offer practical guidance to business on shaping the new organisation, especially in the integration how to empower women in the workplace, marketplace of the Sales and Service Units. and community. Improving market conditions during the year resulted People are our business in new recruitments and an increase in the size of the As the integration process wound down in the second half company’s work force. The development in the number of 2010, a series of local integration meetings was held in of employees, measured in the number of FTEs (full Europe and the United States under the banner of “Marel time equivalent), can be seen below. The number of on the move”. The purpose was to introduce the company’s employees is expected to increase during new vision, value and organisational structure, as well as the course of 2011. to provide a forum for honest and constructive discussions on the local implications of the integration process. One of the outcomes of the meetings was the decision to develop tailor-made HR agendas for each operating unit to address specific issues and concerns, which vary from one location to another. Number of employees (FTEs), average per year Number of employees (FTEs) by geographical location at year end 2010 4,000 3,000 Netherlands 20% US 33% Iceland 2,000 Denmark 8% UK & Ireland 1,000 8% Other countries 12% 19% 0 2006 2007 2008 2009 2010 Year-end 2010 41


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    PROCESSING I N N O VAT I O N IN FURTHER PROCESSING A revolution in forming FURTHER • The RevoPortioner is a revolutionary low-pressure forming and portioning machine for the production of a wide variety of products – from hamburgers, nuggets and schnitzels to whole muscle and three-dimensional products like tenderloins, steaks and fillets. • “We get excellent results with the RevoPortioner and our current products, and it gives us a lot of possibilities for future development,” says Peter Schulze, Operations Director Europe, OSI Food Solutions Germany GmbH. “A new generation in forming/portioning has emerged.” • Traditional high-pressure forming machines produce non-conformities in the shape of the products. With the RevoPortioner, the structure and texture of the raw material is perfectly retained and the final products always have the same shape and size. Combine that with high process capacity and low maintenance costs, and you have a recipe for success. 42


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    To our shareholders 43


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    Shares and shareholders Share performance Marel is listed on NASDAQ OMX Iceland (symbol: MARL) the Board of Directors to increase the company’s share and has been listed since 1992. Marel‘s share price stood at capital by 45 million shares to fulfil unexercised stock ISK 100.00 (EUR 0.65) at the end of 2010, compared to ISK option agreements. At year-end, Marel‘s shares totalled 62.30 (EUR 0.35) at the end of 2009, an increase of 60.5% 730,291,247. (in EUR 88.2%). During the same period, the OMXI6 PI ISK index rose by 14.6%. During the year 2010, the highest Shareholders end-of-day price was ISK 102.50 (EUR 0.67) and the lowest The number of shareholders in Marel was recorded in end-of-day price was ISK 57.90 (EUR 0.33). the shareholders register to be 1,772 at year-end 2010, compared to 1,751 shareholders at year-end 2009. As of Share capital 31 December 2010, Marel holds 37,500 treasury shares. Marel issued 3.2 million new shares in 2010. This Eyrir Invest ehf. is Marel’s largest shareholder, with 31.89% issuance was to serve stock option agreements of shares, followed by the Horn fjárfestingafélag ehf. exercisable in November 2010. In total, this share issue (13.87%) and Grundtvig Invest A/S (8.45%). The ten largest raised EUR 1.5 million. shareholders hold 77.8%. In total, Icelandic pension The issue in 2010 was conducted in accordance with a funds hold 23.0% of Marel’s share capital. International resolution of the Company‘s Annual General Meeting, shareholding increased from 16.0% at year-end 2009 to held on 3 March 2010, where the shareholders authorised 18.3% at year-end 2010. TOP 10 S H A R EH O L DER S A S O F 3 1 DEC EM B E R 2010 Shareholder No of shares % 1 Eyrir Invest ehf Investment company 232.924.713 31,89 2 Horn Fjárfestingarfélag ehf Investment company 101.291.743 13,87 3 Grundtvig Invest A/S Investment company 61.673.494 8,45 4 Lífeyrissjóður verslunarmanna Pension fund 42.481.031 5,82 5 Columbia Acorn International Asset management 35.369.999 4,84 6 Lífeyrissjóðir Bankastræti 7 Pension fund 30.500.000 4,18 7 Gildi - lífeyrissjóður Pension fund 18.310.521 2,51 8 Stafir lífeyrissjóður Pension fund 17.543.664 2,40 9 Sameinaði lífeyrissjóðurinn Pension fund 17.043.754 2,33 10 Festa - lífeyrissjóður Pension fund 11.060.000 1,51 Total 568.198.919 78 Others 162.092.328 22 Total issued shares 730.291.247 100 44


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    T O O U R S H A R E H O L D E R S Liquidity of shares value of the Company at year-end 2010 was ISK 73.0 billion Marel has made agreements with Landsbankinn, Saga (EUR 476.9 million) compared to ISK 45.3 billion (EUR 252.4 Investment Bank hf. and MP bank hf. regarding market million) at year-end 2009, an increase of ISK 27.7 billion making for the issued shares of Marel. The purpose of (EUR 224.5 million). As the Company‘s shares are traded in the agreements is to improve liquidity and to enhance ISK, the fluctuations of the Icelandic krona during the year transparent price formation in the Company’s shares on 2010 affected the market value, when converted into EUR. NASDAQ OMX Iceland. The duration of these agreements is unspecified but they can be terminated with one Dividend month‘s notice. The Board of Directors will propose that no dividends be paid in 2011. No dividends were paid in 2010. Shares in Marel were traded 1,182 times in 2010 for a total market value of ISK 11.9 billion (down from ISK 14.2 billion Share options to key employees in 2009), which corresponds to a turnover rate of 18%. The At end of year 2010, six share-option programs were in average end-of-day spread of Marel was 1.00%. The market place for employees at Marel. D I S TRI BUTI O N O F SH A R ES A S O F 3 1 , DE CE M B E R 2010 Number of Shares Shareholders % Shares % 1 - 9,999 1,130 63.77% 4,280,305 0.59% 10,000 - 99,999 489 27.60% 14,308,593 1.96% 100,000 - 199,999 54 3.05% 6,884,159 0.94% 200,000 - 799,999 54 3.05% 19,909,071 2.73% 800,000 - 1,399,999 7 0.40% 7,831,343 1.07% 1,400,000 - 2,999,999 12 0.68% 23,151,892 3.17% 3,000,000 - 9,999,999 15 0.85% 75,726,965 10.37% 10,000,000 - 99,999,999 9 0.51% 243,982,463 33.41% 100,000,000 - >100,000,000 2 0.11% 334,216,456 45.76% 1,772 100.00% 730.291.247 100.00% Program Number of shares Exercise price initiated in thousands per share Exercisable in February 2006 4,013 ISK 70.00 2009–2011 September 2006 2,000 ISK 74.00 2007–2011 January 2007 75 ISK 74.00 2009–2011 December 2007 850 ISK 92.00 2010–2012 June 2008 8,025 ISK 89.00 2011–2013 May 2010 17,902 EUR 0.546–0.591 2012–2015 Total 32,865 45


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    MAREL’S STOCK PRICE COMPARED TO THE OMXI6 PI ISK INDEX 200 180 Marel shares in ISK 160 Marel shares in EUR 140 OMXI6 PI ISK 120 100 Note: Indexed numbers, set at 100 at beginning of year 2010. 80 60 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/10 1/11 1/12 31/12 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 Marel‘s Board of Management From left: Sigsteinn Gretarsson, Managing Director of Marel ehf. Theo Hoen, CEO Erik Kaman, CFO “The passion and commitment of our employees was a key factor in the success we had in 2010. And our decision to maintain our level of investment in product development during the past two years, despite the challenging operating environment, is now really paying off. We have introduced a steady stream of innovative new products to the market during the year, with many more in the pipeline.” Theo Hoen, CEO of Marel 46

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