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

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    ANNUAL REPORT 2011


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    Who we are Marel is the leading global provider of advanced equipment, systems and services to the poultry, fish, meat and further processing industries. Our state-of-the-art equipment and systems help food processors of all sizes, in all markets, to operate at peak productivity. A SINGLE SOURCE Our brands – Marel, Stork Poultry Processing and Townsend Further Processing – are among the most respected in the industry. United in one company, we offer our customers the convenience of a single source for products to meet their every need. INNOVATION: IT’S IN OUR DNA Our annual investment of 5-7% of revenues in research and development has led to breakthrough innovations that have transformed the way food is GLOBAL PRESENCE processed around the world. With more than 3,900 employees worldwide, offices and Our primary goal is to put our devotion to market- subsidiaries in some 30 countries, and a network of more than driven innovation at the service of our customers – 100 agents and distributors, Marel is in a unique position to from small family-owned businesses to leading global serve our customers wherever they may be located. producers – to help them to be profitable. ONE COMPANY... SERVING FOUR INDUSTRIES Our four Industry Centres gather together all the knowledge, expertise and decades of experience accumulated across our company in each of the four core industries we serve. Poultry processing: Fish processing: Meat processing: Further processing: Our Stork Poultry Marel provides advanced Our Meat Industry Centre Marel offers an extensive range Processing product range equipment and systems specialises in the key of products for portioning, offers integrated systems for salmon and whitefish processes of deboning coating, heat treatment and for processing broilers, processing, both farmed and trimming, case ready, sausage-making under the turkeys and ducks. and wild, onboard and food service and bacon brand name of Townsend ashore. processing. Further Processing. FURTHER POULTRY FISH MEAT PROCESSING


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    Marel in figures .......................................................... 2 Chairman’s address ....................................................... 4 TABLE OF CONTENTS CEO’s address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 I. Strategy and finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 II. Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Introduction: “Expanding into new markets” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Poultry processing: “Growth continues unabated” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Velskaya, Russia:“Working together towards a great future” . . . . . . . . . . . . . . . . . . . . . . . 25 Fish processing: “Focus on China bears fruit” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Bremnes Seashore, Norway: “Innova software – from planning to dispatch” . . . . . . . . . . . 29 Meat processing: “Automation and process monitoring are key” . . . . . . . . . . . . . . . . . . . 30 Las Piedras, Uruguay: “Marel flowline forms backbone at Las Piedras” . . . . . . . . . . . . . . . . 33 Further processing: “Processors focus on smart investments” . . . . . . . . . . . . . . . . . . . . . 34 Mar-Ne-Váll , Hungary: “Reduced water consumption and improved profitability” . . . . . 37 III. Business operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Introduction: “Providing sustainable value” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Market penetration: “A strong foundation for the future” . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Innovation: “Sustainability by design” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Operational excellence: “Continuous learning and improvement” . . . . . . . . . . . . . . . . . . 47 Our People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 IV. To our shareholders . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Shares and shareholders . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 CEO and Board of Directors .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Investor relations . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Risk management . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Corporate governance . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 V. Consolidated financial statements for 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 1


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    Amounts in EUR thousands Results 2011 2010 2009 2008 2007 Revenue 668,357 600,421 531,680 540,149 289,817 MAREL IN FIGURES Gross profit 247,289 227,074 191,674 178,931 97,236 Result before depreciation (EBITDA) 87,006 82,177 58,752 42,108 20,980 Result from operations (EBIT) 62,166 57,334 8,047 20,434 10,029 Net result for the period 34,463 13,626 (11,811) (8,405) 6,066 Cash flow statement Cash generated from operating activities, before interest & tax 63,716 114,881 75,395 45,852 7,925 Glossary of terms Net cash from (to) operating activities 43,183 78,988 25,526 9,602 2,778 Investing activities (28,690) (16,757) 10,758 (404,986) (70,249) Net interest bearing debt Interest bearing borrowings (current & non- Financing activities (47,120) (67,453) 10,168 386,481 34,118 current) - Cash & cash equivalents - Restricted Financial position cash Total assets 877,818 877,623 882,882 920,259 427,304 Net cash Working capital 52,487 78,114 109,111 (25,940) 109,887 Cash and cash equivalents + Restricted cash - Equity 373,471 343,269 323,797 288,279 181,835 Bankoverdrafts Net debt 250,489 256,741 295,012 379,405 129,919 Full time equivalents Number of personnel, where part time Various figures in proportion to sales employees are counted for the percentage of Gross profit 37.0% 37.8% 36.1% 33.1% 33.6% a full time job Selling and marketing expenses 11.9% 11.8% 13.8% 13.3% 15.5% EBITDA Research and development expenses 6.0% 6.1% 5.9% 5.1% 5.0% Earnings before interest, tax, depreciation and Administrative expenses 8.0% 9.1% 13.1% 11.1% 10.0% amortisation Wages and benefits 31.4% 31.7% 36.1% 33.7% 41.2% Current ratio Result before depreciation (EBITDA) 13.0% 13.7% 11.1% 7.8% 7.2% Current assets / Current liabilities Depreciation/amortisation 3.7% 4.1% 9.5% 4.0% 3.8% Quick ratio Result from operations (EBIT) 9.3% 9.5% 1.5% 3.8% 3.5% (Current assets - Inventories) / Current Net result for the period 5.2% 2.3% (2.2%) (1.6%) 2.1% liabilities Other key ratios Equity ratio Current ratio 1.2 1.4 1.6 0.9 1.9 Total equity / (Total equity + Total liabilities) Quick ratio 0.8 1.0 1.2 0.6 1.4 Return on owners’ equity Equity ratio 42.5% 39.1% 36.7% 31.3% 42.5% Result for the period / Average of total equity Return on owners’ equity 9.6% 4.1% (3.9%) (3.6%) 3.7% (beginning balance + ending balance for the period / 2) Return on total assets 3.9% 1.5% (1.3%) (1.2%) 1.5% Return on total assets Key figures from Marel’s core operations, normalised 2011 2010 2009 Result for the period / Average of total assets (beginning balance + ending balance fo the Revenue 668,357 582,130 434,796 period / 2) Result from operations (EBIT) 73,152 64,144 24,760 EBIT as a % of sales 10.9% 11.0% 5.7% Leverage Net interest bearing debt / Normalised last Result before depreciation and amortisation (EBITDA) 97,992 88,060 47,432 twelve months EBITDA EBITDA as a % of sales 14.7% 15.1% 10,9% Leverage 2.56 2.92 N/A 2


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    Revenues and profit from operations (EBIT) Revenues as percentage of revenues 700 700 10% Note: The figures to the left are from the 600 600 consolidated accounts of Marel. For key 8% 500 500 figures from Marel’s normalised core EUR mln EUR mln 400 400 5% operations, see relevant section on page 300 300 2. For further information, see chapter on 3% 200 200 Financial performance on pages 14-17. 2% 100 100 0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Revenues EBIT as ratio of revenues Sales in 2011, by business segments EBITDA Others Equity ratio Further 1% Fish Processing 16% 100 15% 40% 80 30% EUR mln 60 Meat 13% 40 20% Poultry 20 10% 55% 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Sales in 2011, by geographical location Number of employees (FTEs), average per year Research and development expenses 4.000 40 8% Iceland 0.4% The Netherlands 4% 35 7% EUR mln 3.000 30 6% 25 5% Other countries 2.000 20 4% 32% Europe other 15 3% 42% 1.000 10 2% 5 1% 0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 North America R&D expenses R&D expenses as % of revenues 22% 3


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    Aligning strategy and execution CHAIRMAN’S ADDRESS In the 2006 Chairman’s address, I announced that Marel was taking the lead in the consolidation that was looming for the food systems industry. I stated our view that companies needed a certain size and critical mass in order to be able to take advantage of opportunities developing in newer markets, such as in Eastern Europe, Asia and South America. Marel’s Marel’s best days are ahead! excellent performance in 2011 is a direct result of the successful execution In 2011, we had strong and profitable organic growth. The revenues of this strategy. expanded by 15% compared to the previous year and profitability was well Today, Marel is the undisputed global leader in its field. I would like to within stated targets. The quality of earnings is high in our company with express my sincere appreciation to the Marel team for their admirable a good distribution of earnings among the poultry, fish, meat and further performance in recent years. processing segments. Moreover, one-third of revenues are service-related and two-thirds from new equipment sales. We are a truly global company with a good balance in new orders between emerging markets and more Consolidation is picking up steam in the industry established markets in North America and Western Europe. As we predicted, consolidation is picking up steam in the industry. Marel Our industry is directly benefitting from the trends that are driving global has already taken pole position with its carefully planned acquisitions economic development. Urbanisation continues at a pace in emerging since 2006 and having benefited from having had first pick of future markets, resulting in a rise in average family incomes, which is in turn partners. Following a brief period of refocusing of the business once driving increased protein consumption. In the developed world, there is the period of high external growth was completed, we have entered a continuous need for modernisation. Marel is the partner of choice in the second phase of our growth strategy – a sustained period of high the production of high-quality food that is affordable, convenient and organic growth. Our goal is to continue to grow faster than the market nutritious. With a proven business model based on market penetration, and to achieve sales of EUR 1 billion EUR by 2015. The performance in innovation and operational excellence, Marel is well aligned with these recent years shows that Marel is already on the fast track to achieving this prevailing trends. ambitious goal. 4


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    There are many reasons to invest in Marel Strong financials and shareholder return • A global leader in an attractive industry, growing at a steady and Marel’s financing costs decreased significantly between years due to sustainable rate a reduction in debts and a favourable long-term financing agreement • A healthy balance between standard products, large projects and executed in November 2010. We introduced our target financial ratios and service revenues a dividend policy at the 2011 Annual General Meeting. In line with these • A truly global company with a good geographical distribution of targets, the Board of Directors will propose to pay a dividend equal to 20% revenues of profits for the operational year 2011. • Execution that is fully aligned with a clear and focused growth strategy • Long standing management team with proven track record Ready for the future • Strong product pipeline fuelled by innovation • Successful acquisitions and integration, with a full focus on organic In order to be able to capitalise on the opportunities that a fast-growing growth moving forward market presents, Marel has undergone major changes in the past two years. We now have a new market-driven organisational structure and • Gross margin improvement and sustainable cost reduction resulting in healthy EBITDA growth all key processes have been strengthened. We know that we also have to remain focused. Our people have shown their abilities in the past and we • Long-term financing at favourable terms are all set on delivering what is required to ensure that Marel continues to • Healthy cash flow generation and clear capital allocation strategy, be the customers’ choice. including distribution of profits Marel is shaping its own destiny by continuing to invest well above the industry average in innovation and further market penetration, laying the A focus on sustainability foundation for high organic sales growth, good quality of earnings and profitability for many years to come. Marel’s best days are ahead! Fish, meat and poultry consumption continues to steadily increase. At the same time, the focus on higher quality, improved yield and reduced waste continues to grow. Increasingly, the company is harnessing its drive to innovate in the development of products that promote sustainability. The Marel RevoPortioner is an example of how the company is using the latest Arni Oddur Thordarson technology to reduce energy use and waste. The RevoPortioner produces Chairman of the Board perfectly portioned products, such as chicken nuggets and hamburgers, at low pressure, while retaining the texture and structure of the raw material. It is encouraging to see that our efforts are having an impact. 5


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    CEO ’S ADDRESS Ready for the future Market situation Marel has come a long way since 2006, when an ambitious two-phase Market conditions were favourable for our customers in 2011. Global growth strategy was announced. Today, thanks to the success of that protein consumption continues to increase by 3-5% annually, mainly strategy, Marel is the market leader in advanced equipment for the driven by urbanisation in the emerging economies. In developed processing of proteins. After completing the first phase, defined by a series countries, the rising popularity of convenience food is a key factor. of strategic acquisitions, we are now in the second phase, where the focus Consumer habits are constantly changing and we spend less and less time is on strong organic growth. Our target is to reach EUR 1 billion in turnover in the kitchen. Marel is responding by helping processors to meet growing by 2015. consumer demand for food that is easy to prepare. We made significant strides toward this goal in 2011. We achieved pure Globally, poultry processors had a very good year, although it was a organic growth of close to 15%, primarily thanks to two factors: the further difficult time for our customers in the U.S. They were not in a position to expansion of our global market network, and our ability to consistently pass rising feed prices on to consumers, which limited capital investment. bring innovative new products to the market. Once again, our strong Meat processors had a decent year and their financial situation improved. innovation drive was a key factor in our success. Fish processors did well and we have seen rapid developments especially in China, with new farmed species such as tilapia and pangasius gaining market share. Looking ahead to 2012, we are optimistic and we expect market conditions to remain favourable for our customers. In the U.S., we anticipate a recovery in the poultry market. 6


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    Innovation We are driven by our commitment to bring new technologies to the especially in procurement and manufacturing. All in all, we took a big step market that provide added value for our customers. In 2011, our forward in becoming ‘one Marel’ and in establishing the foundation that innovation strategy produced a number of big success stories. will enable us to realise our growth ambitions. We saw excellent sales of unique products like the SensorX bone detection system and RevoPortioner low-pressure forming and portioning machine. Future outlook Innovations for the meat industry, especially our StreamLine intelligent deboning and trimming systems, made good headway in key markets. The We expect market conditions to remain favourable, reflecting the success of our INNOVA production management software systems shows underlying growth of 5-6% projected for the protein segment of the food how crucial it is for processors to have oversight and control in order to be processing industry in the years to come. Marel has established a strong able to optimise their production processes. And the reception that our market position and is ideally placed to take advantage of the many bacon slicers enjoyed in the U.S. market in 2011 was a major milestone. exciting opportunities that lie ahead. Throughout this report, we take the opportunity to highlight a number The milestones we have achieved in the past few years in creating the new of innovations that we have recently introduced to the market. Our Marel would not have been possible if we did not have people who are customers can expect to see more exciting new products in 2012 that will passionate about what they do. I feel privileged to work with them and I help them to improve profitability. am confident that together we will create a fantastic future for Marel and for all our stakeholders. One Marel In the first phase of our growth strategy, Marel grew aggressively through acquisitions, tripling turnover in less than three years. One significant Theo Hoen outcome is that in a short period of time, we have integrated roughly 10 Chief Executive Officer companies into one. Only five years ago, most of them were independent but now they have come together to make Marel what it is today. In 2010, we launched our “Marel on the move” campaign, which laid out a roadmap for the ‘new Marel’. In 2011, we set off on the new path and made tremendous progress. We have now defined a clear branding strategy vis-à-vis the market. We have established a new market-oriented organisational structure and expanded the reach of our strong sales and See Theo’s video introduction in the online report: service network. And we have taken advantage of our economies of scale, www.marel.com/ar2011 7


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    INNOVATION IN POULTRY PROCESSING The AeroScalder: Conserving scarce resources The innovative AeroScalder is an example of how Marel promotes sustainability in its product design. The AeroScalder uses conditioned air for scalding, thereby reducing the reliance on water – an increasingly scarce resource globally – by as much as 75%. In addition, it uses 50% less energy than traditional scalders. To go with its environmentally friendly design, the AeroScalder helps customers reduce costs and improve the quality of their products. 8


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    STRATEGY AND FINANCE 9


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    VISION Marel’s vision is to be the customers’ choice in supplying integrated systems, products and services to the poultry, fish and meat industries. Helle Klitlund, Quality Control Manager at Chrisfish, Denmark 10


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    The rising tide of consolidation and integration is transforming the global economy. STRATEGY The food industry is no exception. The processors who are Marel’s customers have grown in size and reach. They need to be able to count on equipment providers who can supply them with superior technology and who have the critical mass needed to follow them into new markets. Marel has risen to the challenge and positioned itself to become the customers’ choice in an increasingly global industry. 1 2 In 2006, we introduced a two-phased growth We expanded and transformed our strategy designed to establish Marel as the product offering through strategic market leader. acquisitions. - In phase 1, turnover was to be more than tripled over a period Today, we are the only company to offer complete of 3-5 years through strategic acquisitions. By 2010, Marel’s integrated systems in all four industries that revenues had grown from EUR 130 to EUR 582 million and we serve, i.e. poultry, fish, meat and further market share from 4% to 15%. processing. - The company is now in phase 2, where the goal is to reach a turnover of EUR 1 billion by 2015 through strong organic growth and smaller bolt-on acquisitions. Processing Primary Secondary Further Estimated 1,000 segment processing processing processing market size 668 Global Poultry leader Global Fish leader 129 Major global Meat provider 2005 2006 2007 2008 2009 2010 2011 2015* Estimated Global €4 billion External growth Integration Organic growth market size leader * Target 11


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    Marel share price at end of day 130 120 ST R AT E G Y 110 Share price in ISK 100 90 80 70 60 50 40 2006 2007 2008 2009 2010 2011 2012 3 4 We integrated all our business units into one We adopted a business model that delivers united Marel and transformed the company long-term and sustainable value for all our into a market-oriented organisation serving stakeholders. four industries. Market penetration: We are capitalising on our extensive global sales and service network and knowledge of customers’ production processes to continuously expand market share. Sales process Innovation: Our devotion to market-driven innovation creates value for all our stakeholders – customers, Product centers shareholders, employees and society at large. Operational excellence: We strive for continuous learning, Meat harvesting INNOVA Portioning End of line improvement and development across the whole range of Software Software Manufacturing centers our activities. MARKETS 5 We decided to focus on the profitability Sales & Service units MEAT and growth of our core business. Industry centers POULTRY By February 2010, Marel had divested of all major non- core activities. M k t Markets FISH Date Divestment FURTHER PROCESSING Q3 2008 Scanvaegt Norfo sawing system division Q2 2009 Scanvaegt Nordic Q1 2010 Operations of Carnitech in Stovring Q1 2010 Stork Food and Dairy Systems 12


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    Research and development expenses 40 8% 35 7% EUR mln 30 6% 25 5% 20 4% 15 3% 10 2% 5 1% 0 0 2007 2008 2009 2010 2011 R&D expenses R&D expenses as % of revenues 6 8 We continued to invest handsomely in Today, Marel is the global leader in R&D following the global financial crisis. its field and has begun to harvest the Today, we are reaping the benefits with a steady stream returns of the growth strategy. of innovative products. We achieved a record order intake in 2011, with EUR 702.4 mln in orders received compared to EUR 638.5 mln the year before. The order book now stands at EUR 196.2 mln, 7 We secured new long-term financing a year-end record. in November 2010 at favourable terms, leading to a reduction in financing costs in 2011 and in the years to come. Order book at end of year Equally important, it provides the stability needed for further growth and makes the full integration of the company’s operations possible. 2011 €196m 2010 Net debt at end of year €162m 400 2009 300 €105m EUR mln 200 100 0 2008 2009 2010 2011 13


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    F INANCIAL PERFORMANCE Marel had a very good year in 2011. Revenues amounted Development of order book in 2011 to EUR 668.4 mln compared to EUR 582.1 mln in 2010, In EUR mln Total Q1 Q2 Q3 Q4 Total 2010 2011 2011 2011 2011 2011 an increase of 14.8%. The EBIT margin was 10.9%, which Orders received* 638.5 160.7 168.8 197.0 175.9 702.4 is in line with the company’s target of 10-12% return on Order book 162.2 169.3 176.3 204.2 196.2 196.2 * Includes service revenues revenues for the year.1 “The results this year reflect our strong market position and pipeline of Order book at record level innovative new products,” says Erik Kaman, CFO of Marel. “The effort we’ve invested in expanding our geographical reach has paid off with sizeable Following a very good performance in 2010 and a record fourth quarter, orders and increased activity in new and expanding markets, including 2011 got off to a good start with substantial growth in revenues compared Asia, Eastern Europe and South America. We’re also benefiting from having to the same period the year before. Revenue reached a record level in Q4 maintained our level of investment in product development during the 2011, totalling 183.9 mln. The order book grew from EUR 162.2 mln at the economic downturn. There has been no reduction in the steady stream of end of 2010 to a year-end record of 196.2 mln at the end of 2011. new Marel products in the past 2-3 years.” 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. After having recovered in 2010, greenfield and other large projects continued to come in at a steady pace in 2011 and the sale of standard solutions remained healthy, with the poultry industry continuing to lead the way. 1 The figures for 2011 are normalised for one-off costs of 11.0 mln for pension-related issues. Furthermore, the 2010 figures 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. 14


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    Normalised core operations in 2011 and 2010 In EUR mln 2011 2010 Change in % Revenues 668.4 582.1 15% Cost of sales (421.1) (360.7) 17% Gross profit 247.3 221.4 12% Gross profit margin 37% 38% (3%) Other operating income (0.3) (0.7) (133%) Selling and marketing expenses (79.8) (68.2) 17% Research and development expenses (40.3) (35.9) 12% Administrative expenses (53.7) (52.4) 2% Result from operations (EBIT) 73.2 64.1 14% EBITDA 98.0 88.0 11% Response to growth With the growth in business and the order book, the company is able to make better use of its facilities and take advantage of operating leverage with regard to sales, general and administrative costs. “We’re working hard to build a stable foundation to support the growth “The results this year reflect in our business by improving processes and promoting operational our strong market position excellence in all areas,” says Erik. “We continue to keep working capital and pipeline of innovative new under control through active credit management related to order intake products.” Erik Kaman, CFO. and by running programmes to improve Days Sales Outstanding and Inventory Turn parameters.” In the area of corporate procurement, projects are in process aimed at taking better advantage of economies of scale and the company’s global presence. 15


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    F I NA N C IA L P E R F OR M ANCE EBIT and gross profit margins In 2011, the normalised operating profit (EBIT) was EUR 73.2 mln, or 10.9% of revenues, compared to EUR 64.1 mln in 2010. “This is a good result and within our target range of 10-12% of revenues,” says Erik. Revenues of core operations and normalised EBIT as % of revenues “The gross profit margin can be further improved, however. Even though 200 12% it has grown in both absolute and relative terms compared to the 180 previous year, we fell short of our target of 40%. We’ve been expanding 10% 160 geographically and increasing our manufacturing capacity in response to 140 8% the increased market activity, and this has put temporary pressure on our 120 EUR mln margins.” 100 6% 80 60 4% 40 2% Financing 20 0 0% With new long-term financing having been secured in November 2010, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2010 2010 2010 2011 2011 2011 2011 Marel has been working throughout the year to rationalise its financing resources worldwide to optimally benefit from the new structure. For Revenues EBIT as % of revenues this reason, cash which was previously restricted has been used to lower finance costs as much as possible. Having reduced leverage, Marel has been able to reduce the average interest terms on the financing Normalised EBITDA core operations package to EURIBOR/LIBOR + 250 bps. Total interest cost on borrowings 30 is approximately EUR 11 million lower in 2011 than it was 2010, reflecting 25 the lower financing cost associated with the new financing structure. In February 2012 the only outstanding ISK denominated financing (EUR 7.6 20 EUR mln million bond issue MARL 06 1) matures, further reducing interest cost and 15 currency risk. 10 “The efficiency and effectiveness of our financing is greatly improved 5 by centrally financing all entities from the holding, by automated daily 0 worldwide liquidity information and by establishing a worldwide cash Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2010 2010 2010 2011 2011 2011 2011 pool,” says Erik. 16


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    Key events during the year Development of net interest bearing debt On 1 January 2012, management of the pensions previously under the purview of the Stork Pension Fund was officially taken over by the 250 industry-wide pension fund Metal-Electro (PME) in the Netherlands. EUR mln The transfer of the pension arrangements was the result of a principle agreement announced on 19 April 2011. In addition to the Stork 225 Pension Fund, the parties to the agreement included Stork BV and a number of companies that were formerly part of the Stork group. Marel 200 was party to the agreement through Stork Food Systems. At end of quarter Q4 Q1 Q2 Q3 Q4 Change The total cost to Marel of pension related issues is EUR 11.0 mln, in EUR mln 2010 2011 2011 2011 2011 in 2011 accounted as a one-off cost in 2011. EUR 1.6 mln of that amount was Non-current borrowings 310.7 274.3 262.8 249.6 254.3 (56.4) paid in 2011, with the majority of the remainder to be paid in monthly Current borrowings 9.9 16.7 16.7 27.0 27.1 17.2 instalments in 2012. Total borrowings 320.6 291.0 279.5 276.6 281.4 (39.2) Cash and equivalents 63.9 43.4 30.7 33.2 30.9 (33.0) Net interest bearing debt 256.7 247.6 248.8 243.3 250.5 (6.2) 17


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    INNOVATION IN FISH PROCESSING The MS 2730: Next-generation salmon filleting The MS 2730 takes salmon filleting to a new level in terms of automation, yield and throughput. The machine has a capacity of 25 fish per minute and ensures optimal yield in two ways: • Settings are automatically adjusted to accommodate a variety of fish sizes, between 2-8 kg. • A set of new circular knives cuts the fish from gut to tail, ensuring that the meat close to the centre bone is included in the fillets. With the addition of the MS 2730 to its arsenal, Marel can now offer customers a complete salmon processing line that is fully optimised – from filleting all the way through to production of value-added products. See a video of the MS 2730 in the online report: www.marel.com/ar2011 18


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    MARKET OVERVIEW 19


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    Following a very good year in 2010 and a record fourth quarter, 2011 EXPANDING INTO NEW MARKETS got off to a good start with substantial growth in sales compared to the same period the year before. After having recovered in 2010, greenfield and other large projects continued to come in at a steady pace and the sale of standard solutions remained healthy, with the poultry industry continuing to lead the way. The order book, which had already reached record levels by the end of 2010, continued to grow reflecting strong underlying demand in the food industry. The order book for 2011 established a new year- end record for the company. Marel continued to benefit from its strong market position and product pipeline. With the company investing in further geographical expansion, there was good growth in newer geographical markets, compensating for reduced growth in the U.S. Sizeable orders and increased activity were seen in Asia, particularly China and South Korea; Eastern Europe, especially Ukraine and Russia; and in South America, most notably in Brazil. “There was good growth in newer geographical markets, such as Asia, Eastern Europe, and South America.” 20


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    Changing consumer habits: Time spent cooking at home Growth drivers 2.5 hours 1 hour 30 min. 15 min. 8 min. The protein market has been growing steadily at an average annual rate of 5-6% for the past two decades and is expected to continue to do so in the coming decades. This growth is driven by two key trends: MIn. 1934 1954 1974 1990 2010 180 • Changes in consumer habits are a key driver in Western countries Traditional cooking 150 where the time spent in the kitchen cooking each day has dramatically 120 decreased over the past few decades, from hours to minutes in some 90 countries. The popularity of convenience food has grown tremendously. Modern appliances 60 Source: Marel Prepared food Fresh and Home • Urbanisation drives increased protein consumption in emerging 30 frozen food delivery economies. Globally, some 1 billion people are expected to move from 0 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 the country to the city in the next decade, resulting in a rise in the average family income. As soon as people have more money to spend, their consumption of proteins increases at the expense of grain. The company’s view of the long-term prospects of the market remains unchanged. There is strong underlying growth in the protein segment of Global consumption of fish and meat per capita since 1960 the food processing industry and consumers see proteins as a necessary 60 component of their regular diets. It is expected that established markets, Kg (live weight and carcass weight) such as North America and Western Europe, will continue to grow by 50 an average rate of 4% annually. Growth of 6-8% annually is predicted in 40 emerging economies, including Asia, the Middle East, Latin America, and Central and Eastern Europe. 30 20 Source: FAO 10 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Other meat Beef/veal Pork Mutton & goat Poultry Fish 21


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    P O U LT RY P RO C ESSI N G GROWTH CONTINUES UNABATED “An all time high.” That is what 2011 was for Marel Stork Poultry Processing, according to Ton de Weerd, Managing Director of Marel’s Poultry Industry Centre. “Growth has continued unabated within the poultry processing industry and the order book was full throughout the year. Overall, it was our most successful year ever.” “The growth in Asia reflected the increasing popularity of poultry as a healthy and cheap alternative to other sources of protein.” 22


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    Sun rises in the east The growth in Asia reflected the increasing popularity of poultry as a healthy and cheap alternative to other sources of protein. “In addition to China, the main activity was in South Korea where we were able to secure a number of very good projects. Among them, a completely new installation that included a 6,000 bird per hour (bph) duck line,” says Ton. The projects in the region are prime examples of the integrated approach that has been growing in popularity in the industry, where the solutions cover multiple processing steps. Including, for example, further processing. “The growing success of large international food service companies offers many opportunities for poultry processors. And also for Marel, because when it comes to issues like traceability and food safety, our integrated approach provides the most complete solutions available on the market.” Europe invests in high-speed automation In Western Europe and Russia, processors have mainly been focusing on improving efficiency and lowering costs further through increased automation. Integrated solutions launched in 2011 under the Stork Poultry Processing brand have responded to this need. “Systems with a maximum processing speed of 13,500 bph – a new high in the industry – have been successfully adopted at a number of locations,” explains Ton. “In Germany, we’ve established a bench-mark for the most complete system operating at this speed. It includes our new TrayTrack system, a logistical concept for handling of product trays, which we expect a lot from in the future.” 23


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    PO ULTRY PR O C E S S IN G A boost in South America Contrary to most other regions, investment was below expectations in the U.S. poultry market in 2011, partly due to high feed costs and low prices on poultry products. “Nevertheless, we did score a success in the U.S. with a complete greenfield plant for a very large turkey processor. The turkey market in the U.S. offers good possibilities for us,” says Ton. The South American market has received a boost in 2011. “Investments are clearly on the rise in Argentina and the Brazilian market is investing in further automation.” Sustainable innovation Confidence levels are A number of innovative new products are in the pipeline for 2012, with high going into 2012, an ever-growing focus on sustainability. “Each step that contributes to says Ton. “We are a responsible and sustainable future is a good one. That’s why we build assuming that machines of the highest quality that last and are reliable. And that’s why we are very focused on issues such as water and energy consumption. investment levels will remain high.” “We’re very proud of our new development, the AeroScalder, to be introduced to the market in 2012,” adds Ton. “It sets a new standard; it uses up to 75% less water and 50% less energy than traditional scalders. “It’s an example of the path that Marel is choosing ever more often, supporting the customer with innovative solutions, while at the same time keeping a close eye on the benefits to the environment and society as a whole.” Confidence levels are high going into 2012, says Ton. “We are assuming that investment levels will remain high, although not all markets will develop equally well. We are expecting to see more projects in the U.S. in particular.” See video of an integrated poultry processing system www.marel.com/ar2011 Processing speeds of up to 13,500 bph are now on offer. 24


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    CUSTOMER STORY Global broiler production 2002-2012f 90 Velskaya, Russia 80 70 60 Working together towards a great future Million tonnes 50 When the Velskaya poultry factory, 750 km to the North- 40 East of Moscow, chose Stork Poultry Processing as a partner 30 in 2010, it was the beginning of a period of growth for 20 the company. Both the quantity and quality of Velskaya’s Source: USDA 10 production have increased enormously. 0 2003 2005 2007 2009 2011e 2012f “To reach our growth and quality targets, we work closely with Marel Stork Poultry Processing,” explains Velskaya United States EU-27 China Mexico Director Oxana Lukinyuk. The company is increasingly Brazil Others positioning itself as a producer of top-class fresh products Oxana Lukinyuk, and a higher degree of automation and optimal product Director of Velskaya flow is essential to guaranteeing product quality and improving efficiency. Global turkey production 2002-2012f 6 “To me the most important word is trust. 5 We trust Marel Stork Poultry Processing and are convinced of the quality of 4 Million tonnes their equipment. Besides that, their 3 employees respond quickly and are very 2 knowledgeable. They always find the right solution. We’re working together Source: USDA 1 towards a great future.” 0 2003 2005 2007 2009 2011e 2012f United States Canada EU-27 Russia Brazil Others 25


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    F IS H P RO C E S S I N G FOCUS ON CHINA BEARS FRUIT “Performance in our key markets – Norway, North America and the U.K. – was in line with expectations in 2011 and, in some cases, exceeded them,” says Jon Birgir Gunnarsson, General Manager of Marel’s Fish Industry Centre. “In addition, new and emerging markets have come in strong. We’ve focused in particular on the Chinese market and been successful there. China has traditionally relied heavily on manual The supply of fresh fish is on the rise globally, labour but pressure to reduce labour costs is growing, with a growing creating tremendous opportunities for us.” emphasis on value- added and further processed products. 26


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    Value-added fresh fish in demand Overall, the supply of fresh fish is on the rise globally, says Jon Birgir, with a growing emphasis on value-added and further processed products. “People would rather buy fillets today than whole fish. And they prefer it to be skinned and boneless. And taking it one step further, they would rather buy portions than whole fillets. So you can say that the fish industry is developing along the same path as the meat and poultry industries have, toward fresh tray ready,” says Jon Birgir. At the same time, processors are increasingly focusing on improving yield, especially in processing of wild whitefish. “There, the future opportunities for processors lie in extracting more value from the fish that is caught, not in a larger quantity of fish. Both these trends create opportunities for us.” With tropical fish gaining market acceptance in the EU, farmed fresh water whitefish is likely to gain a higher share in the fillet market. “It’s no secret that farmed fish is where the increase in supply is predominantly going to come from in the future. It’s a segment that we’re interested in helping to shape.” A breakthrough in salmon The most significant market development in salmon is the gradual re- emergence of the Chilean salmon industry following a disastrous collapse due to viral outbreak. The increased supply is likely to mean a drop in prices, which fluctuated widely in 2011. For Marel, the introduction of the new MS 2730 next-generation salmon filleting machine in 2011 was a major milestone. “As good as this machine is on its own, even more important is what it brings to our integrated processing line. We can now offer our customers a complete Marel line where the performance of the line as a whole is optimised – from filleting all the way through to production of value-added products – rather than just the performance of individual components,” says Jon Birgir. After generating a lot of pre-sale buzz, expectations are high that the MS 2730 will be well received by the market in 2012. 27


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    Meanwhile, the standout projects in 2011 for Marel centred on large-scale FI SH PRO C E S S IN G and complex logistics systems for handling of whole salmon. “I’m proud of what we’ve been able to achieve in solving very complex challenges for our customers,” says Jon Birgir. “These projects spanned the entire production process, from reception of the raw material through to the dispatch of the final product. The 30 years behind the development of our Innova production management system is what’s made it possible.” ShowHow strikes a chord “I’m equally proud of the fact that our in-house event, the annual Salmon ShowHow, is now recognised as one of the major events in the salmon industry, alongside the big international trade shows and conferences,” says Jon Birgir in conclusion. “We look forward to welcoming our customers once again next year for a review of the major industry trends, “I’m proud of what along with demonstrations of the latest technology we have to offer.” we’ve been able to achieve in solving very See videos in the online report: complex challenges for www.marel.com/ar2011 • MS 2730 salmon filleting machine our customers.” • Advanced whitefish flowline Global production of farmed tilapia and pangasius 5 Source: FAO and Groundfish Forum 4 Million tonnes 3 2 1 0 2008 2009 2010 2011e 2012f Pangasius Tilapia (incl. channel catfish) 28


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    CUSTOMER STORY Bremnes Seashore, Norway Innova software – from planning to dispatch “The upgrade of our Brømlo plant and the introduction of the Marel whole salmon packing grader and Innova production management software are key elements in our goal of continuing Global production of cod to produce high-quality fish, while increasing our mix of value- 1.5 added products such as fillets,” explains Bjørn Willy Sæverud, COO of Norwegian salmon processor Bremnes Seashore. Source: FAO and Groundfish Forum Million tonnes 1.0 Founded in 1937 on the island Bømlo, just off Norway’s southwest coast, Bremnes has been producing farmed salmon since 1958. A 0.5 pioneer in Norwegian aquaculture, the company operates salmon farms at 22 locations in the Stavanger-Hardanger region and Bjørn Willy Sæverud, COO of 0 processes some 200 tonnes of live salmon – 35,000 fish – each day, Norwegian salmon processor 2008 2009 2010 2011e 2012f a total of about 40,000 tonnes in 2011. Bremnes Seashore. Pacific cod Atlantic cod “The grader gives us the option of processing several different types of products at the same time, resulting in a continual flow of product on-line, while Innova provides us with logistics in terms of production planning, packing, labelling and registration for a variety of purposes, among them traceability.” Global production of farmed salmon 2.0 See video from Bremnes in the online report: www.marel.com/ar2011 Source: FAO and Groundfish Forum Million tonnes 1.5 1.0 0.5 0 2008 2009 2010 2011e 2012f Pacific salmon Atlantic salmon 29


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    AUTOMATION AND PROCESS M EAT PRO CESSI NG MONITORING ARE KEY “Marel is making a strong name for itself in the meat industry globally,” says Sigsteinn P. Gretarsson, Chief Operating Officer of Marel. “We see it in the increased activity in all our key markets, including North and South America, Europe and Australasia.” “Despite high corn prices, the U.S. market has over- performed for us. We’ve had a lot of success in the bacon industry.” 30


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    Growing brand awareness In the past two years, the company has focused on increasing awareness of the Marel brand and product range for meat processing and it’s paying off, says Sigsteinn. “Despite high corn prices, the U.S. market has over- performed for us, for example,” says Sigsteinn. “We’ve had a lot of success in the bacon industry and the new IBS4600 multi-blade slicer, launched early in the year, has sold particularly well. It’s brought the production of pre-cooked bacon – a major ingredient for burgers, sandwiches, ready meals and the food service industry – to a whole new level.” Recent developments in Eastern Europe have also been very encouraging, with significant new opportunities emerging in Russia in the second half of the year. “And in Australasia, we received substantial orders from many of our existing customers who have been upgrading to the latest Marel technology, including large turnkey beef deboning and trimming systems.” StreamLine, Marel’s successful intelligent deboning and trimming line, is an integral part of these systems. X-ray system making waves There are new innovations pushing through the pipeline that are likely to begin making waves next year, including a new Trim Management System. “We’re excited about this system,” says Sigsteinn. “It uses the X-ray technology from the SensorX bone detection system, which has been so successful in the poultry industry, to identify and accurately classify the chemical lean content of meat trim. This is especially vital for producers of sausages and burgers, for example, who have contractual and legal obligations regarding lean content.” Among the highlights of the year was an innovation of a different type, namely the first ever in-house exhibition that Marel’s Meat Industry Centre The IBS4600 bacon has ever held. “At the Meat ShowHow, held at our facility in Denmark in slicer was a hit in September, we had an opportunity to demonstrate our latest equipment the U.S. and systems to more than 200 visitors from as far away as New Zealand. 31


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    The show was very well received and the consensus seemed to be that we ME AT PR O C E S S IN G should make this an annual event so I’m already looking forward to next year.” Process monitoring is key High raw material costs and a shortage of labour continue to be the main drivers in the sale of meat processing equipment. “These factors are fuelling the demand for increased automation and process monitoring, which are without a doubt essential to improving yield and profitability in the meat industry,” says Sigsteinn. “Processors are ready to invest in technologies that allow them to monitor and control their production processes and our Innova production “Automation and management software does just that.” process monitoring Food safety also remains a major priority for processors and retailers alike. are without a doubt The new Trim Management System is a prime example of the emphasis essential to improving Marel places on meeting their needs in this regard. yield and profitability Marel’s meat industry specialists stand ready to serve, says Sigsteinn in in the meat industry.” conclusion. “We’ve put a lot of effort into strengthening the Industry Centre this year to better equip it to handle future growth. We look forward to forging new partnerships with processors in the coming year and to putting our expertise, experience and extensive product portfolio at their service.” See video of IBS4600 in the online report: www.marel.com/ar2011 32


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    CUSTOMER STORY Global beef and veal production 2002-2012f Las Piedras, Uruguay: 60 Marel flowline forms backbone at Las Piedras 50 40 “After seeing what the Marel flowline did for processors in Million tonnes Europe and Australia, we could easily see the opportunity 30 that we had for improving quality, logistics and traceability,” 20 says Martin Bazterrica, General Manager of Uruguayan Source: USDA 10 company Las Piedras. “We consulted Marel and, together with their meat processing experts, we designed a full 0 2003 2005 2007 2009 2011e 2012f production hall catering for the future.” United States China A pioneer in the Uruguayan beef processing industry, Las Brazil Argentina EU-27 Others Piedras accounts for 10% of the country’s total beef exports. The company is committed to innovation in processing. And now, five intelligent Marel flowlines form an impressive backbone of the deboning room of its state-of-the-art Martin Bazterrica, General Manager of Global pork production 2002-2012f processing plant just 20 minutes away from the capital of Uruguayan company Las Piedras. Montevideo. The system features full monitoring of the 100 performance, yield and quality of each individual operator, 80 as well as of the whole line. Million tonnes 60 “We are getting better results every day,” says Bazterrica, “and improvements in both yield and throughput.” 40 Source: USDA 20 See video of meat deboning and trimming flowline in the 0 online report: 2003 2005 2007 2009 2011e 2012f www.marel.com/ar2011 China Brazil EU-27 Russia United States Others 33


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    FURTHER PROCESSING PROCESSORS FOCUS ON SMART INVESTMENTS “The main players in our established markets were focused on making smart investments in 2011, particularly in the newest innovations,” says Bert Jan Hardenbol, Managing Director of Marel’s Industry Center for Further Processing. ”Further processors are a very creative group, constantly searching for new ways in which to produce on a large scale and with the “Sales in Asia and utmost flexibility.” Eastern Europe increased substantially, in particular for complete, new production lines.“ 34


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    Making a splash Established markets in Europe and the United States developed well during 2011 and in line with expectations. In addition, there were good results in some other parts of the world. “Sales in Asia and Eastern Europe increased substantially, in particular for complete, new production lines, including ovens like the SpiralOven and the ModularOven,” says Bert Jan. “The ModularOven is the largest oven system in the Townsend Further Processing product range, capable of preparing products in extremely large quantities at an excellent price per kilo,“ Bert Jan explains. The oven features highly advanced heating technology, including two separate towers with distinct environments in which the heating and cooking of products takes place. The technology provides exceptional versatility and the ability to process new products that would not have been possible before. Other products making a splash in 2011 included the company’s sausage- making systems. “Co-extrusion technology made a breakthrough in the U.S. and Europe and proved to be a good investment,” says Bert Jan. “And the market for the breakthrough RevoPortioner low-pressure forming range also continued to grow as expected.” Healthier foods in demand The growing demand for healthier food products over the past few years is a key trend in further processing that is reflected in Marel’s product development. “The use of ingredients like salt has decreased and calories and fat content have been reduced,” explains Bert Jan. “The use of local produce is also gaining in popularity and the size of portions is becoming smaller. These are all gradual developments that Sausage-making reflect the fact that consumers are becoming increasingly aware of health with the iLinker and social issues. We incorporate these factors in our latest innovations, and iConveyor; the RevoPortioner. with a focus on developing technology with the consumer’s needs of tomorrow in mind.” 35


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    FURTHER PROCESSING Further growth ahead Looking ahead to the coming year, Bert Jan expects developments to continue unabated. “The success of co-extrusion, certainly for hotdog production, will be further expanded, as well as the success of the ModularOven. I also expect to see further growth in the number of complete production lines in Asia and Eastern Europe.” Bert Jan is excited about the benefits to be derived from further integration of Marel’s wider product portfolio with the Townsend Further Processing production lines. “This will unquestionably create more added value for the customers as more functionality is added to existing concepts. It’s a key benefit of being a full-line supplier.” “We will have more capacity to specialise With the success of the expanding Townsend Further Processing product portfolio, the Industry Center has finally outgrown its current location in and to react in a more the Netherlands. “Yes, we’re moving!” Bert Jan exclaims and explains that a flexible manner to our move to larger premises is on the plan for next year. “Our new building is customers’ wishes.” within walking distance of the Boxmeer manufacturing site and the main benefit is that we will now have all of our functions under one roof. We will have more capacity to specialise and to react in a more flexible manner to our customers’ wishes.” See videos in the the online report: www.marel.com/ar2011 • ModularOven • Sausage-making: iLinker and iConveyor 36


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    CUSTOMER STORY Growth in global food retail 2006-2010 (retail value) Mar-Ne-Váll, Hungary Asia Reduced water consumption Pacific Latin and improved profitability America After installing a complete new Townsend Further Western Processing line in 2011, Hungarian company Mar- Europe Ne-Váll saw a dramatic rise in throughput, product North quality and efficiency. At the same time, water America consumption decreased substantially. The bottom Eastern line: greatly improved profitability. Europe “In a single year, production went up by some 500%,” Middle East says Mr. Markovits, owner of Mar-Ne-Váll. “At the and Africa Source: Euromonitor same time, energy costs and water consumption per Australasia kilogramme of product decreased by an average of 33%. To date, profitability has increased by 7% with Mr. Markovits, owner of Mar-Ne-Váll 0 5 10 15 20 25 30 35 the new line.” EUR millions Mar-Ne-Váll produces a wide variety of pre-cooked, ready-to-eat products, coated and uncoated, filled and unfilled. The booming growth since installing the new line has taken the company to the top of the industry in Hungary as far as quantity, quality and product range is concerned. “The whole line is a real success for us and our people like working with it,” concludes Mr. Markovits See video of complete processing line in the online report: www.marel.com/ar2011 37


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    INNOVATION IN MEAT PROCESSING Trim management system: Hits the target every time For processors, knowing the accurate fat percentage of incoming raw material is valuable. But controlling what actually comes out of their production process provides them with even more added value. Marel’s new trim management system analyses the fat/ lean ratio of meat using the X-ray technology of the SensorX, previously used so successfully to detect bones in poultry. The SensorX scans for density variations in the product and can detect hazardous contaminants, as well as accurately classify the lean content of the meat trim. Accurate trim management is especially important for producers of sausages and burgers, who have to fulfill contractual and legal obligations regarding lean content. 38


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    BUSINESS OPERATIONS 39


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    PROVIDING SUSTAINABLE VALUE As a provider of advanced equipment and systems for food processing, Marel is proud of the fact that our commitment to providing Marel has an obligation to bring new technologies to the market that sustainable value has led to continuous advancement in how food add value for our customers and our shareholders. But as a global is processed, benefiting consumers all over the world. leader, the company’s responsibility extends well beyond that, to embracing sustainable and ethical business practices, and ensuring that its operations benefit society at large. By rapidly responding we make sure that to ever-changing mealtime is quality time In pursuit of this goal, Marel relies on a simple and proven business consumer demand for families everywhere. model founded on three pillars – market penetration, innovation and operational excellence. They are at the core of Marel’s commitment to provide long-term and sustainable value for all our stakeholders – we promote By reducing our customers, shareholders, employees and communities alike. sustainability and customers’ reliance on conservation of scarce energy and water resources. By helping food processors reduce costs we make food more and increase efficiency affordable. By improving the handling of raw material we ensure that the food and embracing hygienic we eat is safe. design principles By reducing waste by-products and we help protect the increasing efficiency in environment. food processing 40


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    MARKET PENETRATION A STRONG FOUNDATION FOR THE FUTURE Strengthening Marel‘s geographical footprint has been a major priority in the past two years. The company has integrated offices in a number of countries and expanded its presence in up and coming markets. Petur Gudjonsson, Managing Director of Marel‘s International Sales and Service Network, surveils the key focus areas in 2011 and looks at the opportunities that lie ahead. “Countries we’ve been focusing on this year include France where we‘ve “Brazil is the put together a very strong team and are creating new opportunities. We‘ve breadbasket of the also put a lot of energy into Brazil and Russia, where we‘ve integrated the future and it‘s crucial former Marel and Stork offices, brought the people together and created a good framework for them to thrive in. Brazil is the breadbasket of the to establish a strong future and it‘s crucial to establish a strong foundation there for what is to foundation there for come,” says Petur. what is to come.” 41


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    M ARK ET P E N E T R AT IO N China automates Laying the groundwork for the future is also behind Marel’s decision In the area of service, the “One Number” campaign in the U.S. and Canada to bolster its presence in other fast-growing new markets. “We started represented an important step on the road towards completely integrated systematically building up our presence in China 2-3 years ago. We’ve service for all customers in the region. moved fast there and made great strides in both the fish and poultry Another thing that Marel is doing to strengthen the sales and service industries. We can say without hesitation that the future is bright. network is to devote more resources to systematic training. With the Increased automation is really a necessity for Chinese processors. They’re integration of the company, sales and service representatives are now competing for labour with the electronics industry and having difficulty responsible for an expanded portfolio of products and are expected to attracting workers. The employee turnover is tremendously high.” devote several weeks each year to training. The same goes for Southeast Asia where Marel has been developing more of a regional structure. “That way we can make better use of our specialists, Network of agents delivers by having them serve multiple countries.” In addition its own sales and service offices, Marel’s network of more than 100 agents around the world has delivered excellent results this year. India rising “We‘re devoting more attention to our agents, many of whom specialise India is another exciting prospect where the food industry is progressing in particular product groups or industries. We’re providing them with even rapidly. “India is likely to take a giant leap in the next 5-10 years, similar more support than we have in the past, and it‘s resulted in big sales in to what we saw with China maybe five years ago,” says Petur. “We intend places like South Korea, Ukraine and Argentina.” to be present there from the beginning and to take part in shaping the Summing up, Petur says that the results this year show what an attractive development of the industry.” Marel will be building on the track record industry the food industry is. “Processors can only delay their investments that it already has in India, having focused primarily on freezers for the for so long. We’ve seen virtually all our markets bounce back, and even shrimp and fish industries with good results. faster than we expected.” North American operation expanded Marel is also solidifying its presence in key established markets. “As far Taking the worry out of service as North America is concerned, we now have a tremendously strong Marel’s approach to service can best be described in terms of two operation in the U.S. with specialised teams focusing on each of the four concepts: “think global, act local” and “big enough to cope, small industries we serve,” explains Petur. “Until now, they’ve been serving enough to care”. This means that we constantly seek to ensure that the U.S. and Canada but now we‘re expanding to include Mexico. We our systems perform at an optimal level and meet our customers’ established an office there that is an integral part of our North American needs, each and every day. operation.” 42


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    Global presence Marel’s global distribution network includes offices and subsidiaries in some 30 countries, and approximately 100 agents and distributors around the world. Building on their knowledge of the market and customer needs, our local teams sell, market, distribute, install and service Marel’s standard products. Large-scale projects, on the other hand, are generally managed by the Industry Centres for fish, meat, poultry and further processing. In May, Marel’s innovations for fish processing were on display in Brussels at Seafood Processing Europe, one of the industry’s largest trade shows. 43


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    INNOVATION SUSTAINABILITY BY DESIGN “Besides fulfilling a basic need, food has become an emotional issue,” says Chief Technological Officer Jos van de Nieuwelaar, who takes a broad view of the role that food plays in our day-to-day lives. “What consumers in Western Europe and the United States, for example, are satisfying with food is often an emotional need. It can be related to health, pleasure, ease or convenience, price, responsible behaviour or any number of things. “For many end products, the relationship to the raw material that they originate from has become so distant. So our customers have to operate in the context of these emotions, which are changing faster than they used to. It is our job to develop machines and systems that help them to satisfy these changing needs. Or, better still, to anticipate tomorrow’s requirements.” Creativity and speed Jos is convinced that Marel is better placed than ever to rise to that challenge. It’s a challenge that demands creativity and close collaboration with the customer, who sets the final aim of a project, although how the contours will be fleshed out often remains to be defined. “You have 44


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    to have a true partnership with the customer in order to arrive at the best possible solution,” explains Jos. “And you have to be able to act very quickly and take risks. Having a flexible organisation allows us to arrive at the perfect customer-specific solution.” Sustainability and social responsibility The pace of change is increasing in all facets of life and the food industry is no exception. Ever changing consumer habits pose a steady stream of challenges to processors, which Marel helps meet through constant innovation. But there is a growing awareness that technological advances also have to be approached responsibly and in keeping with today’s pursuit of sustainability. “Issues such as water and energy consumption and the responsible use of raw materials are becoming ever more important. Our AeroScalder, to be launched in 2012, is the clearest example of how we are promoting sustainability in the design of our equipment. But the development of our in-line systems – for poultry processing, pinboning of fish and deboning of pork, to name some examples – is also substantially lowering the C02 footprint of our food by lowering energy and water usage, while at the same time increasing yield and quality,” says Jos. “Issues such as water and energy consumption Avoid waste, add value and the responsible use of raw materials are Reducing waste is also a priority. The more use that is made of every fish or bird, the better. In the past, in a poultry market primarily focused on becoming ever more harvesting chicken breasts, a substantial percentage of the rest of the bird important.” was quite simply thrown away. “Now we offer smart solutions that help our customers to market new end products, which fit in well with the pursuit of sustainability and which are commercially interesting. Every day we are working to add still more value to raw materials and by-products.” 45


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    I NN OVAT ION Vision and teamwork Innovation does not always happen along a straight line. It’s a process that requires vision, leadership, focus and the ability to learn as you go along. And it requires close collaboration. Whereas products were previously assembled from inputs from various disciplines within Marel, today a single solution is developed on the basis of a common vision. Jos puts it like this: “With the people we now have on board and the type of people we will be looking for in the years to come, we are building up the strengths we need for the future. We are working in a highly dynamic organisation in a highly dynamic marketplace. Teamwork and co-operation is what generates the right products for our customers. It can’t be done any other way.” At the core of Marel’s strong culture of innovation is a team of over 400 engineers and food scientists, supported by an annual investment of 5-7% of revenues in research and product development. Patents and trademarks Patent protection is vital to Marel. In 2011, the company applied for 10 new patents. The current patent portfolio consists of 281 granted patent families. Sustainability is increasingly a key criteria in the design and production of Marel’s products. Marel’s equipment is built to the highest quality standards and is built to last. It is designed to be energy efficient and to help customers reduce their reliance on scarce resources like water. In its latest sustainability report, the OSI Group, a leading global food processing company, cites its use of the RevoPortioner from Marel as an example of how the company is taking advantage of innovative new technologies to reduce energy use and waste, “ Through incremental improvements thereby minimising the environmental impact of its operations. and lean initiatives, we are removing View OSI’s sustainability report: http://www.osigroup.com/sustainability.html waste in order to increase speed and agility.” Fred Vijverstra, Global Manufacturing Director 46


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    Manufacturing OPERATIONAL EXCELLENCE “The Marel manufacturing organization has adopted a strong vision for the future, of a dynamic manufacturing process defined by three key factors – speed, flexibility and innovation,” says Fred Vijverstra, Global Manufacturing Director. “All 16 of our manufacturing sites around the CONTINUOUS LEARNING world have been aligned under this common vision.” AND IMPROVEMENT Continuous improvement is the driver for success in fulfilling this vision. “Through incremental improvements and lean initiatives, we are removing waste in order to increase speed and agility in the manufacturing process Effective management requires a holistic view of the company’s – from parts production and assembly to quality control, logistics and operations. Value flows horizontally through multiple divisions and procurement. This will lead to the lowest total cost for the company,” disciplines within a company before it reaches the customer. Therefore, explains Fred. when seeking to improve processes, the key to success is to look at the To promote a holistic approach, best practices are now combined in one company’s total value stream. Only by taking a step back and surveying common Marel Manufacturing System. In addition, a key focus is now the complete picture can we make real improvements that benefit our placed on strengthening the core competences that are strategically customers. important to supporting Marel´s value proposition. That is why Marel strives for continuous learning, improvement and “Now that we have one common vision and approach in place, the focus in development across the whole range of our activities. We firmly believe the coming year will be on harvesting the synergies to the fullest, as well that only by doing so can we truly create value for all our stakeholders – as on growing the manufacturing operation to match the needs of the customers, shareholders and employees alike. market.” In the past year, we have continued to maintain a strict focus on rationalization, cost control and reducing waste, while at the same time Procurement and working capital seeking to shorten lead times, improve quality and decrease the total cost In the procurement area, projects are in process aimed at taking better of our products and services for our customers. Great effort continues advantage of economies of scale. The main focus in 2011 was on 1) to be invested in ensuring that the company’s reduced cost base is standardising the parts used across the company, 2) selecting suppliers sustainable despite the growth in activity. who are a good fit with Marel’s strategy and 3) on leveraging spend. Moreover, emphasis continues to be placed on improving working capital parameters, such as Inventory Turn and Days Sales Outstanding. 47


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    OUR PEOPLE “The major milestone for me was the completion of the integration of all our business units into one company at the end of 2010,” says Hrund Rudolfsdottir, Corporate Director of Human Resources. “In 2011, we focused heavily on following that process through, on shaping a unified global team that marches together along the same path.” In 2010, the company launched a campaign under the banner of ‘Marel on the move’ that included a series of integration meetings at the company’s key locations around the world where the future vision, values and structure of the ‘new’ Marel were defined. In 2011, promotion of the set of values adopted during this process was a key priority for HR. Success grounded in values “We all recognise that in order to be successful, we need to be grounded in a set of strong and recognisable values that can guide our decisions in the future. Each of our locations put a tremendous amount of effort this year into analysing what these values mean, why we consider them to be important and how we apply them in a practical sense to our daily work,” “In a company like ours Hrund explains. that thrives on Diversity, one of the eight Marel values, was a particular focus area for HR innovation, we need a in 2011. “We’ve been working with three dimensions of diversity – culture, diversity of talents and team composition and gender. We are not all alike and that’s a good thing. points of view.” In a company like ours that thrives on innovation, we need a diversity of talents and points of view in order to constantly generate new ideas.” 48

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