avatar Marel Poultry B.V. Manufacturing

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    1 Financial Statements for 2013


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    3 Marel’s Annual Report is a Web-Only Edition Marel’s annual report 2013 is for the first time a web-only edition. This is in line with the forward-thinking, innovative spirit of Marel and reflects the company’s emphasis on sustainability. On Marel.com/ar2013 you will find the complete report along with videos and other useful information. The report is accessible on all devices and can be downloaded in the Download Center found in the online report. GO TO Marel.com/ar2013 and explore our performance and outlook.


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    4 5 4.000 30 100 EMPLOYEES COUNTRIES PARTNERS Who We Are A SINGLE SOURCE INNOVATION: IT’S IN OUR DNA Marel is the leading global provider of advanced Poultry processing: Marel offers integrated Marel´s brands – Marel, Stork Poultry Processing and Townsend Marel´s annual investment of 5-7% of revenues in equipment, systems and services to the poultry, systems for processing broilers, turkeys, Further Processing – are among the most respected in the research and development has led to breakthrough fish, meat and further processing industries. and ducks under the brand name of Stork industry. United in one company, Marel offer its customers the innovations that have transformed the way food is Poultry Processing. convenience of a single source for products to meet their every processed around the world. Marel´s state-of-the-art equipment and systems need. help food processors of all sizes, in all markets, to Fish processing: Marel provides advanced Marel´s primary goal is to put its devotion to market- operate at peak productivity. equipment and systems for salmon and driven innovation at the service of its customers – whitefish processing, both farmed and wild, from small family-owned businesses to leading global onboard and ashore. producers – to help them to be profitable. GLOBAL PRESENCE Research and development expenses With around 4,000 employees worldwide, offices and subsidiaries Meat processing: Marel provides advanced 50 7.0% in some 30 countries, and a network of more than 100 agents equipment and systems to the meat and distributors, Marel is in a unique position to serve its industry, specializing in the key processes 40 6.5% customers wherever they may be located. of deboning and trimming, case ready, food service and bacon processing. 30 6.0% ONE COMPANY SERVING FOUR INDUSTRIES 20 5.5% Further processing: Marel offers an extensive Marel´s four Industry Centres gather together all the knowledge, range of products for portioning, coating, heat 10 5.0% EUR million expertise and decades of experience accumulated across the treatment, and sausage-making under the company in each of the four core industries it serves. brand name of Townsend Further Processing. 0 4.5% 2009 2010 2011 2012 2013 R&D expenses R&D expenses as % of revenues


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    6 7 “Population growth combined with urbanization and rising incomes puts increasing pressure on global natural resources. One of society’s greatest challenges is to fulfill rising consumption demands in an environmentally, economically, and socially sustainable way, providing safe and healthy food for all.” Asthildur Otharsdottir, Chairman of Marel’s Board of Directors Chairman’s Address POWERFUL GROWTH DRIVERS MANAGEMENT CHANGES The global population already exceeds seven billion people • By improving the handling of raw material and embracing Structural changes were made at Marel in 2013, including at the 3x and is expected to exceed nine billion by 2050. In addition to hygienic design principles, we elevate the quality and level of senior management. The Board of Directors would like more mouths to feed, increased economic development allows nutritional value of food. to thank Theo Hoen, who has been an integral part of the Marel people to consume more, leading to an expected increase in and Stork Food Systems story for 28 years, for his dedication • By developing highly advanced inspection and traceability food demand of well over 50% by mid-century. and contribution to the growth and success of Marel. systems, we ensure that the food we eat is safer. At the same time, it is estimated that each year, more than one World trade At the same time, we welcome Arni Oddur Thordarson as new • By reducing waste by-products and increasing efficiency third of all the food the world produces is lost or wasted. Not in food processing, we help protect the environment. of meat, poultry & seafood has CEO. Arni has been instrumental in shaping Marel’s strategy only does this mean an economic loss, it means that all of the during his eight year tenure as Chairman of the Board of natural resources used for growing, processing, packaging, tripled in value in the last 10 years Directors. We would also like to thank Theo Bruinsma, who has transporting, and marketing that same food were also wasted. POTENTIAL TO DO BETTER left the Board of Directors, for his valuable contribution. In a world with more people to feed and less natural resources, Marel’s operating results for 2013 did not reflect potential. We we cannot afford this. need to improve our earnings to enable us to better serve our DIVIDEND BRIGHT FUTURE customers and provide satisfactory returns to shareholders. These trends and challenges are powerful growth drivers for In 2011, the Board introduced a targeted capital structure for We look to the future with optimism. With our innovative Economic uncertainty has delayed investments in food Marel’s industry. The opportunities are abundant. With our Marel of net debt in the range of 2-3 times earnings before products and global presence in a market with powerful growth processing equipment and the turnaround has been slower innovative products and global presence, we are in a great interest, tax, depreciation, and amortization, where excess drivers, we are in a unique position to secure healthy growth, than we expected. This has affected our revenues. There is now position to participate in solving one of the world’s greatest capital is used to stimulate growth and pay dividends to improved profitability, and increased shareholder value. a clear need for expansion and modernization in our industry - problems: how to feed the growing population. shareholders targeted at 20-40% of net profits. external signs are pointing in the right direction. The Board would like to thank the entire Marel team for their In 2012 and 2013, dividends of €6.9 and €7.1 million, respectively, dedication in 2013. We can increase the efficiency of our internal operations. In the DOING MORE WITH LESS were paid to shareholders. In light of the current capital last few years, we have taken crucial steps towards becoming Our highly skilled and motivated people are the assurance that structure and upcoming refocusing program, the Board has Marel is committed to the continuous advancement of how food is a market-driven organization and standardizing our products. we will continue to create value in 2014 and beyond. We are proposed that no dividends will be paid for 2013. processed – doing more with less: Our newly launched Simpler – Smarter – Faster program marks also grateful to our customers who buy and use our products, as the beginning of a new phase with a focus on simplifying our well as help drive our innovations, and to our investors for their • By reducing our customers’ reliance on energy and water, structure and driving down fixed costs, while improving service continued support. we promote sustainability and conservation of scarce and customer value. Our cash-flow has remained strong and resources. our balance sheet is healthy. We have a solid foundation for • By helping our customers reduce cost and increase future growth and increasing profitability. efficiency, we make food more affordable.


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    8 9 “I enjoyed eight years as Chairman of the Board of Directors of Marel and it was with passion that I assumed the role of CEO in November 2013. Since becoming CEO, I have had the pleasure of meeting over 2,500 of Marel’s committed and talented employees, and I have experienced first-hand how truly innovative and market-driven company Marel is. We are all passionate about Marel’s future and looking forward to pursuing the opportunities ahead.” Arni Oddur Thordarson, CEO CEO’S Address A SIMPLER, SMARTER, AND FASTER MAREL CLEAR STRATEGY AND QUALITY OF EARNINGS HUGE POTENTIAL Our commitment to providing sustainable value has led to Marel’s strategy is clear. We will continue to focus on the We have already taken several steps to simplify Marel’s Marel is ready for the future. We will continue to expand the continuous advancement in food processing, benefitting industry segments of poultry, fish, meat, and further processing. structure and reduce fixed costs. First, we expanded and boundaries in food processing by constantly securing a strong consumers around the world. Marel’s market position is strong on all continents and our strengthened Marel’s executive team with several experienced and steady flow of new solutions to the market that are tailored global service network remains a clear competitive advantage. and highly qualified Marel managing directors. Secondly, we to our customers’ needs. We are firmly committed to the aim of Marel is already the partner of choice in the production of high- Securing after sales services with minimum downtime in our are streamlining our freezing activities in Singapore in order delivering increased value to customers and shareholders. We quality food that is convenient, nutritious, and environmentally customers’ factories is essential. to focus more on unique products that are supporting Marel’s have exceptional people and we operate in a market with huge friendly. Now we are working towards becoming simpler, full-line solutions. potential. Together we are about to accomplish great things. smarter and faster at keeping ahead of the industry’s needs Bringing value to our customers also means we increase the quality of earnings for Marel shareholders. Last year, recurring Finally, we have simplified Marel’s meat activities by merging Marel achieved 4% average annual growth over the last 5 years. revenues in the form of spare parts and service revenues three business units to better utilize existing innovation and Yet during the same period, the global economy has been accounted for 35% of total revenues, compared with around sales capabilities within the company. Those units include sluggish. This has been a difficult period for food processors 20% in 2005. Carnitech activities that were acquired last year. that have seen a spike in corn and energy prices. The situation is improving and food processors delivered healthy profits in As a part of our new strategy, Marel’s organizational structure 2013, which enabled them to strengthen their financials. ALIGNING EXECUTION AND STRATEGY will be further simplified in order to provide customers with better service. We will take considered steps to combine Over There is now a clear need for expansion and modernization in Recent operational results have not reflected our full potential several markets. Marel has both the solutions and capabilities to meet those needs. and competitive position. We now strive for operational excellence throughout the organization, with a greater focus on aligning execution with strategy. We have formally launched our refocusing plan with the objective of becoming business units that serve the same customer needs and rely on the same technical capabilities. Our current manufacturing footprint is extensive and widespread, causing both over and underutilization in the system. We will drive higher gross margins through the optimiziation of the manufacturing 50% Increase in food simpler, smarter, and faster. footprint. Our aim is to surpass EUR 100 million in operating demand to 2050 profits in 2017.


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    10 11 Marel’s Growth Drivers Population Growth Urbanization Diet & Lifestyle Sustainability Change & Environment Marel in Figures Revenues Revenues and profit Number of employees (FTEs) Sales in 2013, by geographical location from operations (EBIT) as percentage of revenuse by geographical location at year end 2013 700 700 14% 600 600 12% Netherlands 24% Iceland 500 500 10% 28% US The Netherlands 400 400 8% Iceland Europe other Denmark 300 300 6% 8% North America UK 200 200 4% 9% 17% Other countries EUR million EUR million Other countries 100 100 2% 13% 0 0 0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Equity ratio Research and development expenses EBITDA Sales in 2013, by business segments 50% 100 45 8,5% 40% 40 8,0% 80 35 7,5% 30% Fish 30 7,0% 60 Poultry 25 6,5% 20% 6,0% Meat 20 40 5,5% Further processins 15 10% Others EUR million EUR million 10 5,0% 20 5 4,5% 0% 0 4,0% 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013


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    12 13 Marel’s financial results were below full potential in 2013. Cash flow was strong. Order book and orders received were steady. Strategic progress was made. Marel in Figures Various figures in proportion to sales 2013 2012 2011 2010 2009 Gross profit 35.3% 34.9% 37.0% 37.8% 36.1% Results 2013 2012 2011 2010 2009 Selling and marketing expenses 14.4% 12.6% 11.9% 11.8% 13.8% Revenue 661,536 713,960 668,357 600,421 531,680 Research and development expenses 6.7% 5.8% 6.0% 6.1% 5.9% Gross profit 233,644 249,226 247,289 227,074 191,674 Administrative expenses 7.8% 8.0% 8.0% 9.1% 13.1% Result before depreciation (EBITDA) 69,444 85,963 87,006 82,177 58,752 Wages and benefits 37.9% 33.9% 31.4% 31.7% 36.1% Result from operations (EBIT) 42,909 61,081 62,166 57,334 8,047 Result before depreciation (EBITDA) 10.5% 12.0% 13.0% 13.7% 11.1% Net result for the period 20,620 35,609 34,463 13,626 (11,811) Depreciation/amortisation 4.0% 3.5% 3.7% 4.1% 9.5% Result from operations (EBIT) 6.5% 8.6% 9.3% 9.5% 1.5% Net result for the period 3.1% 5.0% 5.2% 2.3% (2.2%) Order Book 2013 2012 2011 2010 2009 Orders Received* 668,584 650,493 702,419 638,453 474,077 Order Book 132,438 125,390 196,218 162,155 105,832 Other key ratios 2013 2012 2011 2010 2009 * Includes service revenues. Current ratio 1.3 1.3 1.2 1.4 1.6 Quick ratio 0.8 0.8 0.8 1.0 1.2 Cash flow statement 2013 2012 2011 2010 2009 Equity ratio 49.9% 46.7% 42.5% 39.1% 36.7% Cash generated from operating activities, before interest & tax 80,320 65,569 63,716 114,881 75,395 Return on owners’ equity 5.0% 9.2% 9.6% 4.1% (3.9%) Net cash from (to) operating activities 64,097 49,095 43,183 78,988 25,526 Return on total assets 2.4% 4.1% 3.9% 1.5% (1.3%) Investing activities (31,963) (37,294) (28,690) (16,757) 10,758 Financing activities (26,461) (26,486) (47,120) (67,453) 10,168 Key figures from Marel’s core operations, normalised 2013 2012 2011 2010 2009 Revenue 661,536 713,960 668,357 582,130 434,796 Financial position 2013 2012 2011 2010 2009 Result from operations (EBIT) 42,909 61,081 73,152 64,144 24,760 Total assets 839,568 865,128 877,818 877,623 882,882 EBIT as a % of sales 6.5% 8.6% 10.9% 11.0% 5.7% Working capital 49,041 59,076 52,487 78,114 109,111 Result before depreciation and amortisation (EBITDA) 69,444 85,963 97,992 88,060 47,432 Equity 419,339 403,748 373,471 343,269 323,797 EBITDA as a % of sales 10.5% 12.0% 14.7% 15.1% 10.9% Net debt 217,130 243,242 250,489 256,741 295,012 Leverage 3.13 2.83 2.56 2.92 N/A


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    15 2.000 50.5% Close to shareholders of the world lives in urban areas 3x World trade 2x Consolidated Financial Statements Annual Report 2013 of meat, poultry & seafood has increase in market value tripled in value in the last 10 years since 2009 Poultry birds make over 80% 1.4 billion cattle of all livestock in the world Aquaculture Contents provides The Board of Directors’ and CEO’s Report 16 48% Independent auditors’ report on consolidated financial statements 20 China consumes Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position 21 22 of all seafood 50% of the world production of pork Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements 23 24 26


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    16 17 The Board of Directors' and CEO's Report Marel is a leading global provider of advanced equipment, systems and services for the poultry, fish, meat and further The management and the Board of Directors of the Group believe that they are taking all the necessary measures to processing industries. Marel has offices and subsidiaries in over 30 countries and a global network of more than 100 support the sustainability and growth of the Groupʼs business in the current circumstances. Accordingly they continue agents and distributors. to adopt the going concern basis in preparing the annual report and financial statements. The Consolidated Financial Statements for the year 2013 comprise the financial statements of Marel hf. (“the The management of the Group believes it is well placed to manage its business risks successfully based on the Company”) and its subsidiaries (together “the Group”). The Consolidated Financial Statements are prepared in present economic outlook. Further information is disclosed in note 3 to the Consolidated Financial Statements 2013. accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and additional Icelandic disclosure requirements. Share Capital and Articles of Association At year-end Marelʼs shares totalled 735.6 million, all in one class, and unchanged from the end of 2012. Thereof Operations in 2013 Marel holds 0.1 million treasury shares. The number of shareholders at year-end 2013 was 1,846 compared to 2,144 According to the Consolidated Statement of Comprehensive Income, the Group's operating revenue amounted to at the end of 2012. The ten biggest shareholders were: EUR 661.5 million in 2013, compared to EUR 714.0 million in 2012. Profit for the year amounted to EUR 20.6 million (2012: EUR 35.6 million). Total comprehensive income amounted to EUR 21.8 million (2012: EUR 36.6 million). In 2013 the Company expensed EUR 44.4 million (2012: EUR 41.6 million) for research and development. Year-end 2013 Year-end 2012 Number of Number of In July Marel acquired the assets related to the mixing and grinding activities from the estate of Carnitech A/S for shares, shares, EUR 1.5 million. million % million % According to the Consolidated Statement of Financial Position, the Company's assets amounted to EUR 839.6 million Eyrir Invest hf. Investment company 215.4 29.3% 243.4 33.1% at the end of 2013 (2012: EUR 865.1 million). Equity amounted to EUR 419.3 million at the end of 2013 (at year-end 2012: EUR 403.7 million) or 49.9% of total assets (at year-end 2012: 46.7%). Net interest bearing debt decreased Grundtvig Invest ApS Investment company 61.6 8.4% 61.6 8.4% from EUR 243.2 million at the end of 2012 to EUR 217.1 million at the end of 2013. The Group was in full compliance Lífeyrissjóður verzlunarmanna Pension fund 59.3 8.1% 54.8 7.4% with bank covenants in 2013. Gildi - lífeyrissjóður Pension fund 36.1 4.9% 29.0 3.9% The average number of full time employees was 4,084 in 2013 (2012: 4,049). Total salaries and wages were EUR 210.3 million (2012: 206.1 million). Columbia Acorn International Asset management 36.0 4.9% 36.0 4.9% According to the Company's 2013 Annual General Meeting decision, a dividend of EUR 7.1 million or 0.97 euro cents Lífeyrissj.starfsm.rik. A & B deild Pension fund 31.4 4.3% 32.0 4.4% per share was paid out to shareholders for the operational year 2012, corresponding to about 20% of the Companyʼs Stefnir - ÍS 15 Asset management 26.8 3.6% 19.8 2.7% profit for the year. Comparable figures for the year before were a total dividend of EUR 6.9 million or 0.95 euro cents per share. Stafir lífeyrissjóður Pension fund 18.8 2.5% 17.3 2.4% Sameinaði lífeyrissjóðurinn Pension fund 16.6 2.3% 16.6 2.3% The goodwill of the Group was tested for impairment at year-end by calculating its recoverable amount. The results of these impairment tests were that there was no impairment as the recoverable amount of the goodwill was well above Stapi lífeyrissjóður Pension fund 15.2 2.1% 5.2 0.7% book value. Top 10 total 517.0 70.3% 515.7 70.1% At the end of 2013 the Companyʼs order book amounted to EUR 132 million (2012: EUR 125 million). Others 218.6 29.7% 219.9 29.9% At the end of October the Companyʼs Board of Directors appointed Árni Oddur Þórðarson as the Chief Executive Total issued shares 735.6 100.0% 735.6 100.0% Officer of Marel hf., replacing Theo Hoen. At the same time Ásthildur Margrét Otharsdóttir assumed the role of the Chairman of the Board and Arnar Þór Másson became Vice Chairman. In beginning of November Árni Oddur In 2013, Marel purchased 4.7 million shares for EUR 4.2 million to fulfil future stock option obligations, and sold 8.7 Þórðarson and Theo Bruinsma resigned from the Companyʼs Board of Directors. million treasury shares for a total amount of EUR 4.7 million to fulfil the employeesʼ stock option programme. Marelʼs executive team was expanded and strengthened in December with several experienced and highly qualified Stock options are granted to management and selected employees. Total granted and unexercised stock options at Marel´s Managing Directors. These changes will further align execution with strategy and enable Marel to reach its end of the year 2013 were 18.1 million shares, of which 5.0 million are exercisable at the end of 2013 and the long term goals. By this change all of Marelʼs key industries are represented in the executive team, sharpening the remainder will become exercisable in the years 2014 to 2018. Further information is disclosed in note 17 to the market and innovative driven focus of the Company. Consolidated Financial Statements 2013. At the Company's 2010 Annual General Meeting, the shareholders authorised the Board of Directors to increase the Company's share capital by 45 million shares to fulfil stock option agreements. Thereof 8.4 million shares have been issued at end of year 2013. This authorisation applies for six years from its adoption.


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    18 19 The Board of Directors suggests that no dividends will be paid for the operational year 2013, but refers to the financial statements regarding appropriation of the profit for the period and changes in shareholders' equity. Corporate Governance The Companyʼs corporate governance policy is based on the Guidelines on Corporate Governance issued in March 2012 by the Icelandic Chamber of Commerce, NASDAQ OMX Iceland hf. and Confederation of Icelandic Employers, which is in accordance with Clause 2.26 in the Rules for issuers of financial instruments on NASDAQ OMX Iceland issued in December 2013. In compliance with the guidelines, the Board of Directors has prepared a Corporate Governance Statement which is distributed with the Consolidated Financial Statements 2013 and disclosed in the Annual Report 2013. Candidates for the Board of Directors of the Company have to notify the Board of Directors in writing at least five full days before the beginning of the Annual General Meeting. The Company's Articles of Association can only be amended with the approval of 2/3 of casted votes and approval of shareholders who control at least 2/3 of the shares represented in a legal shareholders' meeting, provided that the notification calling the meeting thoroughly informs on such amendment and what the amendment consists in. Statement by the Board of Directors and the CEO According to the Board of Directorsʼ and CEOʼs best knowledge these Consolidated Financial Statements comply with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Icelandic disclosure requirements for consolidated financial statements of listed companies. Further according to the Board of Directorsʼ best knowledge, the statements give a true and fair view of the Group´s financial position as at 31 December 2013, operating performance and the cash flows for the year ended 31 December 2013 as well as describe the principal risk and uncertainty factors faced by the Group. The report of the Board of Directors provides a clear overview of developments and achievements in the Company's operations and its situation. The Board of Directors and CEO of Marel hf. hereby ratify the Consolidated Financial Statements of Marel hf. for the year 2013 with their signatures. Garðabær, 5 February 2014 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    20 21 Consolidated Statement of Comprehensive Income 2013 2012 Notes Revenues ........................................................................................................................................... 5 661,536 713,960 Cost of sales ...................................................................................................................................... (427,892) (464,734) Gross profit 233,644 249,226 Selling and marketing expenses ........................................................................................................ (95,105) (90,119) Research and development expenses .............................................................................................. (44,388) (41,566) Administrative expenses ................................................................................................................... (51,313) (56,945) Other operating income / (expenses) ................................................................................................ 6 71 485 Result from operations 42,909 61,081 Finance costs .................................................................................................................................... 7 (19,427) (18,366) Finance income .................................................................................................................................. 7 363 336 Net finance costs ............................................................................................................................... 7 (19,064) (18,030) Result before incom e tax 23,845 43,051 Income tax ......................................................................................................................................... 9 (3,225) (7,442) Profit for the period 20,620 35,609 Other Comprehensive Income Item s that are or w ill be reclassified to profit or loss: Currency translation differences ....................................................................................................... (1,593) (229) Cash flow hedges ............................................................................................................................. 3,621 1,602 Income tax relating to cash flow hedges ........................................................................................... (828) (400) Other com prehensive incom e for the period, net of tax 1,200 973 Total com prehensive incom e for the period 21,820 36,582 Profit (loss) attributable to: Shareholders of the Company ........................................................................................................... 20,620 35,609 Com prehensive incom e attributable to: Shareholders of the Company ........................................................................................................... 21,820 36,582 Earnings per share for result attributable to equity holders of the Com pany during the period (expressed in EUR cent per share): - basic .............................................................................................................................................. 10 2.81 4.88 - diluted ............................................................................................................................................ 10 2.79 4.83 Earnings per share for total com prehensive incom e attributable to equity holders of the Com pany during the period (expressed in EUR cent per share): - basic .............................................................................................................................................. 2.97 5.01 - diluted ............................................................................................................................................ 2.95 4.96 The notes on pages 11 - 60 are an integral part of the Consolidated Financial Statements Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    22 23 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Notes 2013 2012 ASSETS Attributable to equity holders of the Com pany Share Share Hedge Translation Retained Non-current assets capital premium * reserve reserve earnings Total equity Property, plant and equipment ................................................................................................ 11 104,707 108,034 Goodw ill .................................................................................................................................. 12 378,708 379,984 Balance at 1 January 2012 6,667 317,100 (9,314) 702 58,316 373,471 Other intangible assets ........................................................................................................... 12 118,561 112,779 Trade receivables ................................................................................................................... 13 691 2,584 Profit for the year .............................................. 35,609 35,609 Deferred income tax assets ................................................................................................... 14 9,611 7,988 Total other comprehensive income ................... 1,202 (229) 973 612,278 611,369 Employee share option scheme: Current assets Inventories .............................................................................................................................. 15 91,796 99,178 Treasury shares purchased ............................. (38) (3,544) (3,582) Production contracts ............................................................................................................. 16 24,829 40,163 Treasury shares sold ........................................ 62 3,625 3,687 Trade receivables ................................................................................................................... 13 68,737 70,816 Treasury shares, transaction costs ................. (10) (10) Other receivables and prepayments ...................................................................................... 13 22,135 27,657 Dividend paid ..................................................... (6,900) (6,900) Cash and cash equivalents .................................................................................................... 19,793 15,945 Value of services provided ............................... 582 582 227,290 253,759 Value of services provided released ................ (575) 493 (82) 24 78 1,202 (229) 29,202 30,277 Total assets 839,568 865,128 Balance at 31 Decem ber 2012 6,691 317,178 (8,112) 473 87,518 403,748 EQUITY Capital and reserves attributable to equity holders of Marel hf. Profit for the year .............................................. 20,620 20,620 Share capital ........................................................................................................................... 17 6,727 6,691 Total other comprehensive income ................... 2,793 (1,593) 1,200 Share premium ........................................................................................................................ 17 317,294 317,178 Employee share option scheme: Hedge reserve ........................................................................................................................ 17 (5,319) (8,112) Treasury shares purchased ............................. (43) (4,107) (4,150) Translation reserve ................................................................................................................ 17 (1,120) 473 Treasury shares sold ........................................ 79 4,603 4,682 Retained earnings ................................................................................................................... 101,757 87,518 Treasury shares, transaction costs ................. (13) (13) Total equity 419,339 403,748 Dividend paid ..................................................... (7,105) (7,105) Value of services provided ............................... 398 398 LIABILITIES Value of services provided released ................ (765) 724 (41) Non-current liabilities 36 116 2,793 (1,593) 14,239 15,591 Borrow ings ............................................................................................................................. 18 214,846 239,747 Deferred income tax liabilities ................................................................................................. 14 13,885 11,194 Provisions ............................................................................................................................... 19 6,065 4,941 Balance at 31 Decem ber 2013 6,727 317,294 (5,319) (1,120) 101,757 419,339 Derivative financial instruments .............................................................................................. 21 7,184 10,815 Includes reserve for share based payments as per 31 December 2013 of EUR 1,250 (2012: EUR 1,617). *) 241,980 266,697 Current liabilities Production contracts .............................................................................................................. 16 44,881 43,847 Dividend per share In March 2013 a dividend of EUR 7,105 (EUR 0.97 cent per share) (2012: EUR 6,900, EUR 0.95 cent per share) was Trade and other payables ...................................................................................................... 22 105,662 125,417 declared. All has been paid. Current income tax liabilities ................................................................................................... 3,526 3,090 Borrow ings ............................................................................................................................. 18 22,077 19,440 Provisions ............................................................................................................................... 19 2,103 2,889 178,249 194,683 Total liabilities 420,229 461,380 The notes on pages 11 – 60 are an integral part of the Consolidated Financial Statements Total equity and liabilities 839,568 865,128 The notes on pages 11 - 60 are an integral part of the Consolidated Financial Statements Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    24 25 Cash flow s from Investing activities Notes 2013 2012 Consolidated Statement of Cash Flows Interest received ......................................................................................................................... 455 333 Acquistion of assets ................................................................................................................... (1,488) - Cash flow s from operating activities Notes 2013 2012 Purchase of property, plant and equipment ................................................................................ (7,355) (11,279) Investments in intangibles ........................................................................................................... (24,029) (28,153) Proceeds from sale of property, plant and equipment ................................................................ 454 1,807 Result from operations ................................................................................................................ 42,909 61,081 Other changes ............................................................................................................................ - (2) Adjustments to reconcile result from operations to net cash provided by operating Net cash used in investing activities (31,963) (37,294) activities: Depreciation and impairment of property, plant and equipment .................................................. 11 9,270 9,945 Cash flow s from financing activities Amortisation and impairment of intangible assets ....................................................................... 12 17,266 14,937 Purchase of treasury shares ..................................................................................................... (4,163) (3,592) Gain on sale of property, plant and equipment .......................................................................... (246) (190) Sale of treasury shares .............................................................................................................. 4,682 3,687 Changes in non current receivables ........................................................................................... 1,887 531 Exercise of share options ........................................................................................................... (41) - Working capital provided by / (used in) operating activities 71,086 86,304 Proceeds from borrow ings ......................................................................................................... 49,000 47,540 Repayments of borrow ings ........................................................................................................ (68,834) (67,221) Changes in working capital: Dividends paid ............................................................................................................................. (7,105) (6,900) Inventories and production contracts ......................................................................................... 22,655 (23,132) Net cash used in financing activities (26,461) (26,486) Trade and other receivables ....................................................................................................... 4,140 3,972 Trade and other payables ........................................................................................................... (17,879) 340 Net increase (decrease) in net cash 5,673 (14,685) Provisions ................................................................................................................................... 318 (1,915) Changes in operating assets and liabilities 9,234 (20,735) Exchange (loss) / gain on net cash ............................................................................................ (1,825) (304) Net cash at beginning of the period ............................................................................................ 15,945 30,934 Cash generated from operating activities 80,320 65,569 Net cash at end of the period 19,793 15,945 Taxes paid .................................................................................................................................. (2,699) (1,341) Cash and cash equivalents ........................................................................................................ 19,793 15,945 Interest and finance costs paid .................................................................................................. (13,524) (15,133) Net cash at end of the period 19,793 15,945 Net cash from operating activities 64,097 49,095 The notes on pages 11 - 60 are an integral part of the Consolidated Financial Statements The notes on pages 11 - 60 are an integral part of the Consolidated Financial Statements Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    26 27 Notes to the Consolidated Financial Statements 1 General information Marel hf. ("the Company") is a limited liability company incorporated and domiciled in Iceland. The address of its Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are registered office is Austurhraun 9, Gardabaer. recognised in the period in which the estimates are revised and in any future period affected. The Consolidated Financial Statements of the Company as at and for the year ended 31 December 2013 comprise E. Changes in accounting policies the Company and its subsidiaries (together "the Group"). The Group is primarily involved in the manufacture, Standards, amendments and interpretations to existing standards that are not yet effective have not been early development, distribution and sales of solutions for use in all major sectors of the food processing industry. All adopted by the Group. amounts are in EUR*1000 unless otherwise stated. The following standards and amendments to existing standards have been published and have an effective date on The Company has its listing on the Nasdaq OMX Nordic Exchange in Iceland. or after 1 January 2013. The Financial Statements as presented in this report are subject to the adoption by the Annual General Meeting of Shareholders, to be held on 5 March 2014. • Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities • IFRS 10 Consolidated Financial Statements • IFRS 11 Joint Arrangements 2 Summary of significant accounting policies • IFRS 12 Disclosure of Interests in Other Entities • IFRS 13 Fair Value Measurement The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. • IAS 1 Presentation of items of other comprehensive income (amendments) • IAS 19 (as revised in 2011) Employee Benefits 2.1 Basis of preparation These standards have been adopted as per 1 January 2013 and have a non-material effect on the Groupʼs A. Statement of Compliance Consolidated Financial Statements of 2013. The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and additional Icelandic disclosure requirements for consolidated financial information of listed companies in accordance with Icelandic Financial Statements Act No. 3/2006 and rules for issuers of financial instruments in Nasdaq OMX in Iceland. These Consolidated Financial Statements have been approved for issue by the Board of Directors on 5 February 2014. B. Basis of Measurement These Consolidated Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets (including derivative instruments) at fair value through profit or loss or other comprehensive income. C. Functional and presentation currency Items included in the Financial Statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (“the functional currency”). The Consolidated Financial Statements are presented in Euro (EUR), which is the Group's reporting currency. All financial information presented in Euro has been rounded to the nearest thousand. D. Use of estimates and judgements The preparation of the Consolidated Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 4. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    28 29 2.2 Consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, The Group's share of its associates' post-acquisition profits or losses is recognised in the Statement of variable returns from its involvement with the entity and has the ability to affect those returns through its power over Comprehensive Income, and its share of post-acquisition movements in reserves is recognised in reserves. The the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the on which control commences until the date on which control ceases. Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any behalf of the associate. related Non-Controlling Interest (NCI) and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an Business combinations impairment of the asset transferred. Accounting policies of associates have been changed where necessary to The Group accounts for business combinations using the acquisition method when control is transferred to the ensure consistency with the policies adopted by the Group. Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is Dilution gains and losses arising in investments in associates are recognised in the Statement of Comprehensive recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of Income. debt or equity securities. 2.3 Segment information The consideration transferred does not include amount related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration other components. All operating segments' operating results are reviewed regularly by the Group's CEO and strategic is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent decisions are based on these operating segments. The operating structure in the Group is developing further towards changes in the fair value of the contingent consideration are recognized in profit or loss. the operating segments. If share-based payment awards (replacement awards) are required to be exchanged for awards held by the 2.4 Foreign currency translation acquireeʼs employees (acquireeʼs award), then all or a portion of the amount of the acquirerʼs replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the Transactions and balances market-based measure of the replacement awards compared with the market-based measure of the replacement Foreign currency transactions are translated into the respective functional currencies of Group entities, and from awards compared with the market-based measure of the acquireeʼs awards and the extent to which the replacement there into the Group's reporting currency using the exchange rates prevailing at the dates of the transactions or awards relate to pre-combination service. valuation where items are revaluated. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset Statement of Comprehensive Income, except when deferred in equity as permanent loan, as qualifying cash flow transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the hedges and qualifying net investment hedges as explained in note 2.9. Foreign exchange gains and losses that relate policies adopted by the Group. to borrowings and cash and cash equivalents as well as all other foreign exchange gains and losses are recognised immediately in the Statement of Comprehensive Income within 'Finance income' or 'Finance costs'. Transactions and non-controlling interests Transactions that result in changes in ownership interests while retaining control are accounted for as transactions Group companies with equity holders in their capacity as equity holders. As a result, no gain or loss on such changes is recognised in The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary profit or loss but rather in equity. Also, no change in the carrying amounts of assets (including goodwill) or liabilities is economy) that have a functional currency different from the presentation currency are translated into the presentation recognised as a result of such transactions. This approach is consistent with NCI being a component of equity. currency as follows: (i) assets and liabilities presented are translated at the closing rate at the date of that Consolidated Statement of Associates Financial Position; Associates are all entities over which the Group has significant influence but not control, generally accompanying a (ii) income and expenses for each Statement of Comprehensive Income are translated at average exchange rates, shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the method of accounting and are initially recognised at cost. The Groupʼs investment in associates includes goodwill transaction dates, in which case income and expenses are translated at the dates of the transactions; and identified on acquisition, net of any accumulated impairment loss. See note 2.7 for the impairment of non-financial (iii) all resulting exchange differences are recognised as a separate component of equity (Translation reserve). assets including goodwill. On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are recognised in Translation reserve. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are recognised in the profit or loss for the period as part of the gain or loss on sale. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 16

    30 31 2.6 Intangible assets Goodwill Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of Goodwill represents the excess of the cost of an acquisition over the fair value of the Groupʼs share of the net the foreign entity and translated at the closing rate. identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying In case of a non-wholly-owned subsidiary, the relevant proportionate share of the translation difference is allocated to amount of goodwill relating to the entity sold. Goodwill on some acquisitions that occurred prior to 1 January 2004 the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint has been charged in full to retained earnings in shareholdersʼ equity, such goodwill has not been retroactively control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit capitalised. or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to cash-generating units or groups of cash-generating units that are expected to benefit from the business combination non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that in which the goodwill arose. includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects relating to 2.5 Property, plant and equipment the design and testing of new or improved products are recognised as intangible assets when it is probable that the project will generate future economic benefits, considering its commercial and technological feasibility, and costs can Land and buildings comprise mainly factories and offices. All property, plant and equipment (PPE) is recognised at be measured reliably. Other development expenditures are recognised as an expense as incurred. Development cost less subsequent depreciation and impairment, except for land, which is shown at cost less impairment. Cost costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development includes expenditure that is directly attributable to the acquisition of the items. costs that have a finite useful life and that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit, not exceeding Subsequent costs are included in the assetʼs carrying amount or recognised as a separate asset, as appropriate, only five years. when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and Patents & Trade name maintenance are charged to the profit or loss for the period during the financial period in which they are incurred. Expenditure to acquire patents, trademarks and licenses is capitalised and amortised using the straight-line method over their useful lives, but not exceeding 8 years, or 11 years in case of trademarks, with the exception of one Land is not depreciated. Depreciation on assets is calculated using the straight-line method to allocate the cost of particular case. These intangible assets are not revaluated. each asset to its residual value over its estimated useful life, as follows: Other intangible assets − Land and buildings...................................................................................................... 30-50 years Costs associated with maintaining computer software programmes are recognised as an expense as incurred. − Plant and machinery................................................................................................... 4-15 years Development costs that are directly attributable to the design and testing of identifiable and unique software products − Vehicles & equipment................................................................................................. 3-7 years controlled by the group are recognised as intangible assets when the following criteria are met: – it is technically feasible to complete the software product so that it will be available for use; Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major – management intends to complete the software product and use or sell it; renovation, whichever is sooner. – there is an ability to use or sell the software product; – it can be demonstrated how the software product will generate probable future economic benefits; The assetsʼ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. – adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and An assetʼs carrying amount is written down immediately to its recoverable amount if the assetʼs carrying amount is – the expenditure attributable to the software product during its development can be measured reliably. greater than its estimated recoverable amount (see note 2.7). Directly attributable costs capitalised as part of the software product include the software development employee Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are recognised costs and an appropriate portion of relevant overheads. within other operating income (expenses) in the Statement of Comprehensive Income. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Borrowing cost is expensed as incurred except when directly attributable to acquisition or construction of an asset Computer software development costs recognised as assets are amortised over their estimated useful lives, which that necessarily takes a substantial period of time to get ready for its intended use. Such borrowing cost is capitalised can vary from 3 to 5 years. as part of the cost of the asset when it is probable that it will result in future economic benefits to the entity and the cost can be measured reliably. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


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    32 33 2.7 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Held-to-maturity financial assets Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are indicate that the carrying amount may not be recoverable. Non-financial assets other than goodwill that suffer classified as held to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly impairment are reviewed for possible reversal of the impairment at each reporting date. attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the of all held-to-maturity investments as available for sale, and prevent the Group from classifying investment securities assetʼs recoverable amount is estimated. Goodwill is tested annually for impairment. as held to maturity for the current and the following two financial years. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows Loans and receivables from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the market. They are included in current assets, except for maturities greater than 12 months after the reporting date. combination. These are classified as non-current assets. The Groupʼs receivables comprise ʻtrade receivablesʼ and ʻcash and cash equivalentsʼ in the Consolidated Statement of Financial Position (notes 2.12 and 2.13) and are recognised initially at The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. fair value and subsequently measured at amortised cost using the effective interest method. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. any of the other categories. They are recognised initially at fair value and included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial basis. assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. extent that the assetʼs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Fair value measurement The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active 2.8 Financial assets (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent armʼs length transactions, reference to other instruments that are substantially the same and discounted cash Financial assets other than derivatives flow analysis refined to reflect the issuerʼs specific circumstances. The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, The fair value of investments traded in active markets (such as trading and available-for-sale securities) is based on held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. quoted market prices at the reporting date. The fair value of investments that are not traded in an active market is determined by using valuation techniques. The The classification depends on the purpose for which the investments were acquired. Management determines the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each classification of its investments at initial recognition. reporting date. Financial assets at fair value through profit or loss Impairment of financial assets A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged such investments and makes purchase and sale decisions based on their fair value in accordance with the Groupʼs decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If documented risk management or investment strategy. Upon initial recognition attributable transaction costs are any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously and changes therein are recognised in profit or loss. If the Group has the positive intent and ability to hold debt recognised in profit or loss – is removed from Equity and recognised in the Consolidated Statement of securities to maturity, then such financial assets are classified as held-to-maturity. Comprehensive Income for the period. Impairment losses recognised in the Consolidated Statement of Comprehensive Income for the period on equity instruments are not reversed through the Consolidated Statement of Comprehensive Income for the period. Impairment testing of receivables is described in note 2.12. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Non-derivative financial liabilities Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 18

    34 35 Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. (b) Net investment hedge Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income 2.9 Derivative financial instruments and hedging activities and presented in the hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income within Finance income or Finance costs. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently Gains and losses accumulated in equity are included in profit or loss when the foreign operation is partially disposed revaluated at their fair value. of or sold. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging (c) Derivatives at fair value through profit or loss are accounted for at fair value through profit or loss. instrument, and if so, the nature of the item being hedged. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these The Group designates certain derivatives as either: derivative instruments are recognised immediately in the Consolidated Statement of Comprehensive Income within (a) Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction Finance income or Finance costs. (cash flow hedge); or (b) Hedges of a net investment in a foreign operation (net investment hedge). 2.10 Inventories The Group documents at the inception of the transaction the relationship between hedging instruments and hedged Inventories are stated at the lower of historical cost or net realisable value. Cost is determined using the weighted items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The average method and an adjustment to net realisable value is considered for items, which have not moved during the Group also documents its assessment, both at hedge inception and on an on-going basis, of whether the derivatives last 12 months. The cost of finished goods and work in process comprise raw materials, direct labour, other direct that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged costs and related production overheads based on normal operating capacity but exclude borrowing costs. Net items. realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and any applicable variable selling expenses. Costs of inventories include the transfer from equity of gains or losses on Movements on the hedge reserve in equity are shown in the Statement of Changes in Equity. The full fair value of a qualifying cash flow hedges relating to production cost. hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. 2.11 Production contracts Trading derivatives are classified as current asset or liabilities. Production costs are recognised when incurred. (a) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is When the outcome of a production contract can be estimated reliably and it is probable that the contract will be recognised in other comprehensive income and presented in the hedge reserve in equity. The profit or loss relating to profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs the ineffective portion is recognised immediately in the Statement of Comprehensive Income within Finance income will exceed total contract revenue, the expected loss is recognised as an expense immediately. or Finance costs. When the outcome of a production contract cannot be estimated reliably, contract revenue is recognised only to the Amounts accumulated in equity are recycled in the Consolidated Statement of Comprehensive Income for the period extent of production costs incurred that are likely to be recoverable. in the periods when the hedged item affects profit or loss. The Group uses the ʻpercentage of completion methodʼ to determine the appropriate amount to recognise in a given However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, period. The stage of completion is measured by reference to the contract costs incurred up to the reporting date as a inventory or non-current assets) the gains and losses previously deferred in equity are transferred from equity and percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, goods sold in case of inventory or in depreciation in case of non-current assets. prepayments or other assets, depending on their nature. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast for which costs incurred plus recognised profits or less recognised losses exceeds progress billings. transaction is ultimately recognised in the Statement of Comprehensive Income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for Statement of Comprehensive Income within Finance income or Finance costs. which progress billings exceed costs incurred plus recognised profits or less recognised losses. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 19

    36 37 2.12 Receivables and prepayments 2.17 Current and deferred income tax Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of effective interest method, less provision for impairment. A provision for impairment of trade receivables is established Comprehensive Income, except to the extent that it relates to items recognised directly in shareholders' equity. In this when there is objective evidence that the Group will not be able to collect all amounts due according to the original case, the tax on this item is included in deferred taxes; the net amount is recognised in equity. terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the impaired. The amount of the provision is the difference between the assetʼs carrying amount and the present value of reporting date in the countries where the Companyʼs subsidiaries and associates operate and generate taxable estimated future cash flows, discounted at the effective interest rate. income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is amounts expected to be paid to the tax authorities. recognised in profit or loss. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in profit or loss. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 2.13 Cash and cash equivalents Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred Cash and cash equivalents can include cash on hand, deposits held at call with banks and other short-term highly income tax liability is settled. liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the Consolidated Statement of Financial Position. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 2.14 Share capital 2.18 Employee benefits Ordinary shares are classified as equity. Share-based compensation Incremental costs directly attributable to the issue of new shares or options are shown in shareholders' equity as a The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives deduction, net of tax, from the proceeds. services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount Where any group company purchases the Companyʼs equity share capital (treasury shares), the consideration paid, to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non- including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an Company's shareholders until the shares are cancelled or reissued. Where such shares are subsequently sold or employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions reissued, any consideration received, net of any directly attributable incremental transaction costs and the related about the number of options that are expected to vest. The total amount expensed is recognised over the vesting income tax effects, is included in equity attributable to the Company's shareholders. period, which is the period over which all of the specified vesting conditions are to be satisfied. At reporting date, the entity revises its estimates of the number of options that are expected to vest based on the non- Private placements need to be approved by the shareholders in the Companyʻs Annual General Meeting. Based on market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Statement of such resolution, where the shareholders waive their pre-emptive rights, the Board of Directors can approve for a Comprehensive Income, with a corresponding adjustment to equity. The proceeds received net of any directly private placement. attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The fair value of the employee share options granted is measured using the Black-Scholes formula. 2.15 Trade payables Measurement inputs include share price on measurement date, exercise price of the options, expected volatility based on weighted average historic volatility adjusted for changes expected due to publicly available information, Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective weighted average expected life of the instruments based on historical experience and general option holder interest method. behaviour, expected dividends, and the risk-free interest rate based on government bonds. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 2.16 Borrowings Profit sharing and bonus plans Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated Under some circumstances, a liability for key employee benefits in the form of profit sharing and bonus plans is at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in other provisions when there is no realistic alternative but to settle the liability and at least the condition recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest is met that there is a formal plan and the amounts to be paid are determined before the time of issuing the financial method. statements. Liabilities for profit sharing and bonus plans are expected to be settled within 12 months and are measured at the Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the amounts expected to be paid when they are settled. liability for at least 12 months after the reporting date. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 20

    38 39 2.21 Leases Pension plans Marel has several pension plans in accordance with local rules and conditions. Based on IAS 19R, only one Leases of property, plant and equipment where the Group has substantially obtained all the risks and rewards of arrangement with regards to early retirement rights can be classified as defined benefit until the moment of settlement ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of expected in 2020 (VPL in the Netherlands). One other defined benefit obligation refers to jubilee rights in the the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is Netherlands. Because of their non-material character, these arrangements are not disclosed separately. For the allocated between the liability and finance charges so as to achieve a constant rate on the finance balance majority of its employees, the Group has pension plans, classified as defined contribution plans, in which the liabilities outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term borrowings. to the employees are based on the number of years of service and the salary levels. A defined contribution plan is a The interest element of the lease payment is charged to the profit or loss over the lease period so as to produce a plan to provide benefits after retirement in which an entity makes fixed contributions to a separate entity, and legally constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and has no constructive obligation to make further contributions. Obligations relating to defined contribution pension plans equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease are charged to profit or loss as employee remuneration expenses when the contributions are payable. Contributions term. paid in advance are presented as assets to the extent that cash repayment or a reduction in future contributions is available. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor are charged 2.19 Provisions to the profit or loss on a straight-line basis over the period of the lease. Provisions for restructuring costs and legal claims are recognised when the Group has a present legal or constructive In those cases where the Group is the lessor of a finance lease, the finance lease is recorded in the Statement of obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, Financial Position as a receivable, at an amount equal to the net investment in the lease. The finance income is and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and recorded in the profit or loss based on a pattern reflecting a constant periodic rate of return on the lessorʼs net employee termination payments. Provisions are not recognised for future operating losses. The Group gives investment outstanding in respect of the finance lease. Assets held by the Group for operating leases are presented guarantee on certain products and undertakes to repair or replace items that fail to perform satisfactorily. If the Group in the Statement of Financial Position according to the nature of the asset. Operating lease income is recognized in expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as the profit or loss over the lease term on a straight line basis. a separate asset but only when the reimbursement is virtually certain. 2.22 Dividend distribution Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the Dividend distribution to the Companyʼs shareholders is recognised in the Groupʼs financial statements in the period in obligation. The increase in the provision due to passage of time is recognised as interest expense. which the dividends are approved by the Companyʼs shareholders. 2.20 Revenue recognition Dividends are recognised when the right to receive payment is established. Revenue comprises the fair value for the sale of goods and services net of value-added tax, rebates and discounts, and after eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue from fixed-price contracts for delivering design services and solutions is recognised under the percentage- of-completion (POC) method. Under the POC method, revenue is generally recognised based on the services performed and direct expenses incurred to date as a percentage of the total services to be performed and total expenses to be incurred. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 21

    40 41 3 Financial risk management Financial risk factors The Groupʼs activities expose to financial risk consisting of market risks (interest and currency risk), credit risk and The following table details the Group's sensitivity of transaction and translation risk to a 10% increase and decrease liquidity risk. in the EUR against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible This note presents information about the Group´s exposure to each of the above mentioned risks, the Groupʼs change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated objectives, policies and processes for measuring and managing the risk. Further quantitative disclosures are included monetary items and adjusts their translation at the period-end for a 10% change in foreign currency rates. The throughout these Consolidated Financial Statements. sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive Risk management framework number below indicates an increase in profit or equity where the EUR strengthens 10% against the relevant currency. Risk management is carried out by a central treasury department (Group Treasury) under policies and with For a 10% weakening of the EUR against the relevant currency, there would be a comparable impact on the profit or instruments approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in equity, and the balances below would be opposite. close co-operation with the Groupʼs operating units. The Group´s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group´s financial 2013 2012 performance. The Group uses derivative financial instruments to hedge certain risk exposures and does not enter USD GBP USD GBP into financial contracts for speculative purposes. Group Treasury and Corporate Control staff meet with CFO weekly to monitor the risk management process. im pact im pact im pact im pact Profit or (loss) ..................................................................................... (682) (856) (683) (1,033) (a) Market risk Equity .................................................................................................. - - - - In November 2010, the Group entered into a EUR 350m facilities agreement with six international banks, led by ING bank, Rabobank and ABN Amro. Marel amended and extended this facilities agreement with the consortium with effective date 31 December 2012, while the terms and conditions generally remained in line with Loan Market On the operational side, only a fraction of a percentage of revenues is denominated in ISK, while around 6.6% Association (LMA) corporate standards. The key amendments were: (2012: 5.8%) of costs is in ISK. Capitalised • The junior loan was converted into senior debt, making it an all senior facility; Finance lease finance Other • The facility was extended by one year with final maturity in November 2016 Liabilities in currency recorded in EUR in 2013 liabilities charges borrow ings Total • Initial interest terms EURIBOR/LIBOR +250 bps for the facility depending on leverage. The Group has a financing structure which can accommodate the Group´s financing requirements till 2016 with USD Liabilities in DKK ......................................................................... 90 - 3,221 3,311 and EUR borrowings matching the Group´s exposure in these currencies to a large extent. Liabilities in EUR ......................................................................... - (2,991) 139,500 136,509 Liabilities in USD ......................................................................... 107 (1,104) 98,053 97,056 (i) Foreign exchange risk Liabilities in other currencies ..................................................... 47 - - 47 The Group operates internationally and is exposed to currency risk arising from mainly the USD and GBP, primarily 244 (4,095) 240,774 236,923 with respect to the EUR, as the EUR is the Group´s reporting currency. Financial exposure is hedged in accordance Current matures ......................................................................... (220) 1,365 (23,222) (22,077) with the Group´s general policy and within set limits. The Group monitors foreign exchange risk arising from 24 (2,730) 217,552 214,846 commercial transactions, recognized assets and liabilities (transaction risk) that are determined in a currency other Capitalised than the entity´s functional currency. Derivative hedging is applied if the exposure is outside of the risk tolerance Finance lease finance Other band on a consolidated basis. Currency exposure arising from net assets of the Group´s major foreign operations (translation risk) is managed primarily through borrowings denominated in the relevant foreign currencies as the Liabilities in currency recorded in EUR in 2012 liabilities charges borrow ings Total policy is to apply natural exchange rate hedging where possible. Economic risk is defined as the extent to which currency fluctuations can alter a companyʼs future operating cash flows, that is future revenues and costs. Economic Liabilities in DKK ......................................................................... 69 - 8,929 8,998 risk is not hedged. Liabilities in EUR ......................................................................... - (4,006) 153,500 149,494 Liabilities in USD ......................................................................... 235 (1,556) 101,949 100,628 The year end and average rates used for the currencies mentioned above are: Liabilities in other currencies ..................................................... 67 - - 67 Year-end Average Year-end Average 371 (5,562) 264,378 259,187 rate 2013 rate 2013 rate 2012 rate 2012 Current matures ......................................................................... (196) 1,390 (20,634) (19,440) EUR/USD ............................................................................................. 1.3768 1.3283 1.3242 1.2855 175 (4,172) 243,744 239,747 EUR/GBP ............................................................................................. 0.8350 0.8493 0.8206 0.8111 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 22

    42 43 The Group's debt to adjusted capital ratio at the end of the reporting period was as follows: (ii) Cash flow and fair value interest rate risk 2013 2012 The Group is exposed to interest rate risk on borrowings. Borrowings issued at variable rates expose the Group to Total borrow ings ....................................................................................................................................... 236,923 259,187 cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The risk Cash and cash equivalents ....................................................................................................................... (19,793) (15,945) is managed by maintaining a mix between fixed and floating interest rate on borrowings. The Group adopts a policy Net Interest Bearing Debt ........................................................................................................................... 217,130 243,242 of ensuring that between 50 – 70% of its exposure to changes in interest rates on core debt is hedged for maximum 5 years. Based on various scenarios, the Group manages its cash flow interest rate risk by using floating to fixed Total Equity ................................................................................................................................................ 419,339 403,748 interest rate swaps. Generally the Group raises long term borrowings at floating rates and swaps them into fixed Hedge Reserve .......................................................................................................................................... 5,319 8,112 rates. Presently around 41% (2012: 45%) of the core debt has floating interest rates and the rest is fixed. Adjusted Capital ......................................................................................................................................... 424,658 411,860 As at reporting date a total of EUR 131.0 million (2012: EUR 135.5 million) floating rate liabilities were swapped into Debt to adjusted capital ratio ..................................................................................................................... 0.51 0.59 fixed interest rates. Under the interest rate swaps the Group agrees with banks to exchange at specified intervals From time to time the Group purchases its own shares on the market; the timing of these purchases depends on the (quarterly) the difference between fixed contracts rates and floating rate interest amounts calculated by reference to requirement to settle employeeʼs stock option exercises. Primarily the shares are intended to be used for issuing the agreed notional amounts. The interest rate swaps mature in 2016. The weighted fixed rate payable amounts to shares under the Group's share option plans. Buy and sell decisions are taken by the Board of Directors. Based on a 2.80% (2012: 3.29%). motion approved in the Annual General Meeting of shareholders, the Board of Directors can acquire up to 10% of its own shares at a price which is not higher than 10% over and not lower than 10% under the average price of shares in the Company for the two weeks immediately preceding the acquisition. In 2008 the company started applying Cash flow hedge accounting to hedge the variability of interest cash outflows, between settlement date and maturity date, due to the change in 3 months EURIBOR/LIBOR interest rates for the (iv) Insurance Senior Secured Floating Rate Notes. Throughout the year 2013 as well as per year end the cash flow hedge The Group maintains global and local insurance programs. The coverage comprises property damage, business accounting relationships were effective. The amounts deferred in equity at year-end are expected to affect interest interruption, general and product liability, marine cargo/mounting, directorsʼ and officersʼ liability, employers practice costs within the coming 3 years. liability, business travel and accident. The Group believes that its current insurance coverage is adequate. At year-end 2013, if EURIBOR interest rates had been 25 basis points higher/lower with all other variables held (b) Credit risk constant, post-tax profit for the year would have been EUR 149 (2012: EUR 139) lower/higher. Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual At year-end 2013, if US LIBOR interest rates had been 25 basis points higher/lower, with all other variables held obligations. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with constant, post-tax profit for the year would have been EUR 118 (2012:EUR 160) lower/higher. banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The credit quality of the customer is assessed, taking into account its financial position, past Among the actions taken to monitor the interest rate risk are stress tests to establish sensitivity to possible experience and other factors. Each customer has a set credit limit and the utilization of the credit limit is regularly movements in rates and how they might affect the Group's results. monitored. (iii) Capital Management Exposure to credit risk The Board of Directorsʼ policy is to maintain a strong capital base so as to maintain investor, creditor and market The carrying amount of financial assets represents the maximum credit risk exposure. The maximum exposure to confidence and to sustain future development of the business. The Board monitors on leverage defined as Net Debt credit risk at the reporting date was: divided by EBITDA as well as on the return on capital, which the Group defines as result from operations divided by total Equity. The Board also monitors the level of dividends to ordinary shareholders. Carrying am ount 2013 2012 The Board's target is to arrange for maximum 6% of total share capital for shares held by employees of the Group Note under the stock option plans. At present employees will hold 2.47% (2012: 3.95%) of the shares, assuming that all Trade receivables .......................................................................................................................... 13 69,428 73,400 outstanding share options vest and / or are executed. Other recievables and prepayments .............................................................................................. 13 22,135 27,657 The Board seeks to maintain a balance between the higher returns on equity that might be possible with higher levels Cash and cash equivalents ............................................................................................................ 19,793 15,945 of borrowings and the advantages and security of a sound capital position. The Group uses the leverage ratio in their 111,356 117,002 approach to capital management. No credit limits were exceeded during the reporting period, and management does not expect any losses from non- performance by these counterparties. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and products are not delivered until payments are secured. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. Marel has banking relations with a diversified set of financial Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 23

    44 45 institutions around the world, including one Icelandic bank. The Group has policies that limit the amount of credit Fair value estimation exposure to any one financial institution and has ISDA agreements in place with counterparties in derivative Fair value sensitivity analysis for fixed rate instruments transactions. The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge (c) Liquidity risk accounting model (references made to note 21). Therefore a change in interest rates at the reporting date would not Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial affect profit or loss. liabilities that are settled by delivering cash or another financial asset. Prudent liquidity risk management implies maintaining sufficient cash and committed credit facilities to give reasonable operating headroom. Due to the Fair value vs. carrying amount dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by maintaining The fair value of borrowings equals their carrying amount, as the impact of discounting is not significant. The fair availability under committed credit lines. The Group has EUR 100 million of committed ancillary facilities, which can values are based on cash flows discounted using a rate based on the borrowings rate of 4.68% (2012: 4.85%). be used both as a revolver and to issue guarantees for down payments. At year end the Group had drawn EUR 29.0 The weighted average interest rate on borrowings in 2013, including effect of floating to fixed interest rates swaps is million (2012: EUR 23.6 million) on the revolver and issued EUR 13.9 million (2012: EUR 13.6 million) of guarantees 4.68% (2012: 4.85%). under the facility, therefore the total usage is EUR 42.9 million (2012: EUR 37.2 million), leaving a headroom of EUR 57.1 million (2012: EUR 62.8 million). All facilities are subject to operational and Consolidated Statement of Financial The fair value of the finance lease liabilities equals their carrying amount, as the impact of discounting is not Position covenants (interest cover and leverage). At the end of 2013 there is sufficient headroom. significant. The fair values are based on cash flows discounted using a rate based on the average interest rate of 7.90% (2012: 7.49%). The credit spread over Libor is 7.40%. Cash flow forecasts are done at the local levels and monitored by Group Treasury. Group liquidity reports are viewed by management on a weekly basis. The Group has a notional cash pool with the aim of making better use of the The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Group cash position and to further decrease the amount of idle cash. Position, are as follows: The table below analyses cash outflows per maturity group based on the remaining period at reporting date to the Fair value- Other Total contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. hedging Loans & financial carrying 2013 Note instruments receivables liabilities amount Fair Value Less than 1 Betw een 1 Cash and cash equivalents ....................... - 19,793 - 19,793 19,793 At 31 Decem ber 2013 year and 5 years Over 5 years Receivables ............................................... 13 - 91,563 - 91,563 91,563 - 111,356 - 111,356 111,356 Borrow ings ..................................................................................................................... 21,857 214,822 - Interest on borrow ings ................................................................................................... 7,272 25,836 - Interest rate sw aps used for hedging ....... 21 (7,184) - - (7,184) (7,184) Finance lease liabilities ................................................................................................... 220 24 - Secured bank loans ................................... 18 - - (236,679) (236,679) (236,679) Trade and other payables .............................................................................................. 105,662 - - Finance lease liabilities .............................. 18 - - (244) (244) (244) Interest rate sw aps ........................................................................................................ 2,885 4,633 - Trade and other payables ......................... 22 - - (105,662) (105,662) (105,662) Total 137,896 245,315 - (7,184) - (342,585) (349,769) (349,769) At 31 Decem ber 2012 2012 Cash and cash equivalents ....................... - 15,945 - 15,945 15,945 Borrow ings ..................................................................................................................... 19,244 233,808 5,764 Receivables ............................................... 13 - 101,057 - 101,057 101,057 Interest on borrow ings ................................................................................................... 7,854 20,251 976 - 117,002 - 117,002 117,002 Finance lease liabilities ................................................................................................... 196 176 - Trade and other payables .............................................................................................. 125,417 - - Interest rate sw aps used for hedging ....... 21 (10,815) - - (10,815) (10,815) Interest rate sw aps ........................................................................................................ 4,625 5,577 - Secured bank loans ................................... 18 - - (258,816) (258,816) (258,816) Total 157,336 259,812 6,740 Finance lease liabilities .............................. 18 - - (371) (371) (371) Trade and other payables ......................... 22 - - (125,417) (125,417) (125,417) (10,815) - (384,604) (395,419) (395,419) Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 24

    46 47 4 Critical accounting estimates and assumptions The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs Estimates and judgements are continuously evaluated and are based on historical experience and other factors, used in making measurements: including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The actual results will, by definition, seldom be exactly Level 1: equal to the related accounting estimates used. The fair value of financial instruments traded in active market, such as trading and available-for-sale securities, is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts Group is the current bid price. of assets and liabilities within the next financial year are discussed below. Level 2: (a) Estimated impairment The fair value of financial instruments that are not traded in an active market is determined by using valuation The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions stated in note 2.7. The recoverable amounts of cash-generating units have been determined based on value-in-use existing at each reporting date. These valuation techniques are based on observable inputs, either directly (i.e. as calculations. These calculations require the use of estimates (note 12). prices) or indirectly (i.e. derived from prices). The Group tests annually whether financial assets have suffered any impairment, in accordance with the accounting Level 3: policy stated in note 2.8. The recoverable amounts of cash-generating units have been determined based on value in Valuation techniques using significant unobservable inputs. use calculation. These calculations require the use of estimates. The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level (b) Income taxes in the fair value hierarchy into which the fair value measurement is categorised: The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax At 31 Decem ber 2013 Level 1 Level 2 Level 3 Total determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax Derrivate liabilities held for risk management ......................................... - 7,184 - 7,184 audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax At 31 Decem ber 2012 provisions in the period in which such determination is made. Derrivate liabilities held for risk management ......................................... - 10,815 - 10,815 (c) Fair value of derivatives and other financial instruments No financial instruments were transferred from Level 1 to Level 2, or from Level 2 to Level 3 of the fair value The fair value of financial instruments that are not traded in an active market (for example, over-the-counter hierarchy. derivatives) is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each reporting date. The Group uses discounted cash flow analysis for available-for-sale financial assets that are not traded in active markets. (d) Capitalised development cost The recoverability of the capitalised development cost is tested regularly, to verify if expected future economic benefits justify the values captured in the intangible fixed assets. The Group uses discounted cash flow analysis for this purpose. (e) Revenue recognition The Group uses the percentage-of-completion method in accounting for its revenues for production contracts. Use of the percentage-of-completion method requires the Group to estimate the stage of completion to date as a proportion of the total work to be performed. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 25

    48 49 In the following table the book values of the assets and liabilities which include an element of estimation are The segment information for the year ended 31 December 2013 is as follows: disclosed. 2013 2012 Further Assets Liabilities Assets Liabilities Poultry Fish Meat Processing Others Total Goodw ill ....................................................................................... 378,708 - 379,984 - Other intangible assets ................................................................ 118,561 - 112,779 - Third Party Revenues ................................ 338,517 106,150 105,065 99,086 12,718 661,536 Current and deferred income taxes ............................................ 9,611 17,412 7,988 14,284 Financial instruments ................................................................... - 7,184 - 10,815 Result from operations ................................... 44,519 (1,041) (2,168) 2,069 (470) 42,909 Production contracts ................................................................... 24,829 44,881 40,163 43,847 Finance costs - net ......................................... (19,064) Result before incom e tax 23,845 5 Segment information Income tax ...................................................... (3,225) Profit (loss) for the period 20,620 Operating segments Assets ............................................................ 500,039 101,087 98,311 104,896 35,235 839,568 The segments comprise the core industries, which form the basis for managerial decision taking. The following Depreciation and amortisation ........................ (9,798) (3,771) (3,475) (6,133) (3,359) (26,536) summary describes the operations in each of the Groupʼs reportable segments. Poultry processing: Our Stork Poultry Processing product range offers integrated systems for processing broilers, turkeys and ducks. The segment information for the year ended 31 December 2012 is as follows: Fish processing: Marel provides advanced equipment and systems for salmon and whitefish processing, both farmed and wild, onboard and ashore. Further Meat processing: Our Meat Industry Centre specializes in the key processes of deboning and trimming, case ready, Poultry Fish Meat Processing Others Total food service and bacon processing. Further processing: Marel offers an extensive range of products for portioning, coating, heat treatment and sausage- Third Party Revenues ................................ 388,172 130,982 88,356 92,386 14,064 713,960 making under the brand name of Townsend Further Processing. The 'Others' segment includes the holding companies as well as any revenues, result from operations and assets Result from operations ................................... 52,516 12,024 (9,018) 4,930 629 61,081 which do not belong to the core industries. Finance costs - net ......................................... (18,030) The reporting entities are reporting their revenues per operating segment based on the industry for which the Result before incom e tax 43,051 customer is using Marelʼs product range. Therefore inter-segment sales do not exist, only intercompany sales within Income tax ...................................................... (7,442) the same segment. Profit (loss) for the period 35,609 Results are monitored and managed at the level of the identified operating segments, up to the result from operations. Decisions on Tax and Financing structures are taken on corporate level; therefore no financial income Assets 1)………………………………………………………………………………………518,520 115,212 91,697 104,185 35,514 865,128 and expenses nor tax are allocated to operating segments. The measure of profit or loss per operating segment is Depreciation and amortisation ........................ (9,235) (3,858) (3,524) (5,820) (2,445) (24,882) provided as result from operations and finance costs and taxes are reported in the column Total. Intercompany transactions are entered into under at armʼs length terms and conditions, comparable to those 1) The assets of 2012 have been restated to enable comparison to the 2013 numbers. available to unrelated parties. Information on liabilities per operating segment is not provided to the chief operating In 2013 the goodwill was allocated to the operating segments, which was formerly included in the ʻOthersʼ segment. decision maker and as such not included in this disclosure. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 26

    50 51 Geographical information 7 Net finance costs The Groupʼs four operating segments operate in four main geographical areas, even though they are managed on a Finance costs: 2013 2012 worldwide basis. The home country of the Group is Iceland. The two main operating companies are located in Iceland Interest on borrow ings ..................................................................................................................... (12,213) (14,718) and the Netherlands; however, these companies realize most of their revenues in other countries. Interest on finance leases ................................................................................................................ (20) (28) Other finance expenses .................................................................................................................. (2,354) (2,565) Revenues, allocated based on country w here the custom er is located. 2013 2012 Net foreign exchange transaction losses ........................................................................................ (4,840) (1,055) Iceland .................................................................................................................................................... 6,020 4,772 Subtotal Finance costs ..................................................................................................................... (19,427) (18,366) The Netherlands ..................................................................................................................................... 23,980 19,342 Europe other ........................................................................................................................................... 271,370 318,325 Finance income: North America ......................................................................................................................................... 174,873 181,255 Interest income ................................................................................................................................. 363 336 Subtotal Finance income .................................................................................................................. 363 336 Other countries ....................................................................................................................................... 185,293 190,266 Net Finance costs ............................................................................................................................ (19,064) (18,030) 661,536 713,960 Other finance expenses/income consists of: Total assets The amortisation of capitalised finance charges, amounting to EUR 1,379 (2012: EUR 1,408), Guarantee and Iceland .................................................................................................................................................... 146,902 149,074 commitment fees, amounting to EUR 775 (2012: EUR 939) in addition to other finance related costs. The Netherlands ..................................................................................................................................... 419,484 427,324 Other countries ....................................................................................................................................... 253,389 272,785 8 Staff costs 819,775 849,183 2013 2012* Total assets exclude the Groupʼs cash pool which manages the Groupʼs cash at central level. Salaries and Wages ..................................................................................................................... 210,254 206,098 Related expenses ........................................................................................................................ 24,023 24,636 Capital expenditure Expenses related to equity-settled share-based payments ........................................................ 398 582 Iceland .................................................................................................................................................... 6,467 7,239 Post retirement costs ................................................................................................................... 15,766 13,751 The Netherlands ..................................................................................................................................... 16,008 21,108 250,441 245,067 Other countries ....................................................................................................................................... 8,909 11,085 Staff costs analyses as follow s in the 31,384 39,432 Consolidated Statement of Comprehensive Income: Cost of sales ................................................................................................................................ 121,445 120,185 6 Other operating income (expenses) Selling and marketing expenses ................................................................................................... 55,705 54,374 Research and development expenses ........................................................................................ 36,632 34,935 Administrative expenses .............................................................................................................. 36,659 35,573 License income and expenses amounted in 2013 to EUR 71 (2012: EUR 485). 250,441 245,067 Average number of Full Time Equivalents .................................................................................... 4,084 4,049 * The numbers for 2012 are restated to enable comparison over the years. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 27

    52 53 9 Income Tax 10 Earnings per share 2013 2012 Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average Current tax ......................................................................................................................................... (3,350) (1,856) number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held Deferred tax ....................................................................................................................................... 125 (5,586) as treasury shares. (3,225) (7,442) Basic earnings per share (EUR cent per share) 2013 2012 The tax on the Groupʼs profit before tax differs from the theoretical amount that would arise using the weighted Net profit attributable to shareholders ............................................................................................. 20,620 35,609 average tax rate applicable to profits of the consolidated companies as follows: Weighted average number of outstanding shares in issue (thousands) ........................................ 733,741 729,545 Basic earnings per share (EUR cent per share) ............................................................................. 2.81 4.88 Reconciliation of effective incom e tax 2013 2012 % % The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares Result before income tax ................................................................. 23,845 43,051 outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share options. For the share options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Income tax using Iceland rate ........................................................... (4,769) 20.0 (8,610) 20.0 Companyʼs shares) based on the monetary value of the subscription rights attached to outstanding share options. Effect tax rates in other jurisdictions ............................................... (2,376) 10.0 (2,564) 6.0 The number of shares calculated as above is compared with the number of shares that would have been issued Weighted average applicable tax ..................................................... (7,145) 30.0 (11,174) 26.0 assuming the exercise of the share options. FX effect Iceland .............................................................................. 230 (1.0) (163) 0.4 Diluted earnings per share (EUR cent) 2013 2012 R&D tax incentives ........................................................................... 2,687 (11.3) 2,981 (6.9) Net profit used to determine diluted earnings per share .................................................................. 20,620 35,609 Permanent differences ..................................................................... 249 (1.0) 401 (0.9) Tax losses (un)recognised .............................................................. (24) 0.1 1,214 (2.8) Weighted average number of outstanding shares in issue (thousands) ........................................ 733,741 729,545 (Impairment)/reversal of tax losses ................................................. 484 (2.0) (655) 1.5 Adjustments for share options (thousands) .................................................................................... 5,119 7,613 Effect of tax rate changes ............................................................... 124 (1) (92) 0.2 Weighted average number of outstanding shares for diluted earnings per share (thousands) ..... 738,860 737,158 Others .............................................................................................. 170 (0.7) 46 (0.1) Diluted earnings per share (EUR cent) ............................................................................................ 2.79 4.83 Tax charge included in the profit for the period (3,225) 13.5 (7,442) 17.3 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 28

    54 55 11 Property, plant and equipment Land & Plant & Vehicles & Depreciation of property, plant and equipment analyses as follows in the Consolidated Statement of Comprehensive buildings machinery equipment Total Income: At 1 January 2012 2013 2012 Cost ...................................................................................... 112,621 63,895 44,800 221,316 Cost of sales ................................................................................................................................. 5,675 6,383 Accumulated depreciation ..................................................... (30,249) (46,143) (36,836) (113,228) Selling and marketing expenses .................................................................................................... 853 795 Net book amount .................................................................... 82,372 17,752 7,964 108,088 Research and development expenses ......................................................................................... 450 373 Administrative expenses ............................................................................................................... 2,292 2,394 Year ended 31 Decem ber 2012 9,270 9,945 Opening net book amount ..................................................... 82,372 17,752 7,964 108,088 Exchange differences ........................................................... (217) (215) (258) (690) As of 31 December 2013, mortgages included in interest bearing debt amounted to EUR 3,221 (2012: EUR 8,929), Additions ............................................................................... 3,249 3,367 4,663 11,279 which are secured against a pledge on the real estate for the amount of EUR 5,412 (2012: EUR 12,363). Disposals .............................................................................. (65) (113) (520) (698) Depreciation charge ............................................................. (2,982) (4,004) (2,959) (9,945) The carrying amount of the assets recognised under finance lease is EUR 460 (2012: EUR 714). Closing net book amount ........................................................ 82,357 16,787 8,890 108,034 At 1 January 2013 Cost ...................................................................................... 115,433 65,434 47,370 228,237 Accumulated depreciation ..................................................... (33,076) (48,647) (38,480) (120,203) Net book amount .................................................................... 82,357 16,787 8,890 108,034 Year ended 31 Decem ber 2013 Opening net book amount ..................................................... 82,357 16,787 8,890 108,034 Exchange differences ........................................................... (602) (118) (203) (923) Additions ............................................................................... 1,055 4,604 1,696 7,355 Disposals .............................................................................. - (116) (262) (378) Reclassification to intangible assets ..................................... - - (111) (111) Depreciation charge ............................................................. (3,059) (3,423) (2,788) (9,270) Closing net book amount ........................................................ 79,751 17,734 7,222 104,707 At 31 Decem ber 2013 Cost ...................................................................................... 115,497 66,693 44,767 226,957 Accumulated depreciation ..................................................... (35,746) (48,959) (37,545) (122,250) Net book amount .................................................................... 79,751 17,734 7,222 104,707 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 29

    56 57 12 Intangible Assets Developm. Patents & Other Total other Amortisation of intangible assets analyses as follows in the Consolidated Statement of Comprehensive Income: Goodw ill costs Trade name Intangibles Intangibles At 1 January 2012 2013 2012 Cost .......................................................................... 380,419 80,305 51,661 14,480 146,446 Cost of sales ...................................................................................................................................... 104 78 Accumulated amortisation ......................................... - (29,438) (12,060) (4,875) (46,373) Selling and marketing expenses ........................................................................................................ 355 353 Net book amount ....................................................... 380,419 50,867 39,601 9,605 100,073 Research and development expenses .............................................................................................. 12,162 10,586 Administrative expenses ................................................................................................................... 4,645 3,920 17,266 14,937 Year ended 31 Decem ber 2012 Opening net book amount ........................................ 380,419 50,867 39,601 9,605 100,073 Goodwill impairment testing Exchange differences .............................................. (435) 168 (439) (239) (510) Additions ................................................................... - 22,459 - 5,694 28,153 Annually goodwill is tested for impairment at the level of the Group's Cash Generating Units (CGUs). For Marel, the Reclassification ......................................................... - 1,275 (625) (650) - CGUs are based on the market oriented business model (Poultry, Fish, Further Processing and Meat) in accordance Amortisation charge ................................................. - (9,337) (3,603) (1,997) (14,937) with IFRS 8 Operating Segments. Only at the level of the operating segments the connection can be made between Closing net book amount ........................................... 379,984 65,432 34,934 12,413 112,779 the business for which the goodwill was originally paid and the results of the synergies after the acquisition of Stork Food Systems by Marel. The annual impairment test includes all fixed assets and net working capital allocated to CGUs. At 1 January 2013 The purpose of impairment testing is to determine whether the recoverable amount exceeds the carrying amount. Cost .......................................................................... 379,984 103,575 50,985 19,187 173,747 The recoverable amount of an operating segment is determined as the present value of the future cash flows Accumulated depreciation ........................................ - (38,143) (16,051) (6,774) (60,968) expected to be derived from a CGU, based on amongst others: Net book amount ....................................................... 379,984 65,432 34,934 12,413 112,779 • the estimated future cash flows that the Group expects the CGU to earn; • possible variations in the amount or timing of those future cash flows; Year ended 31 Decem ber 2013 • the time value of money, which is reflected by using a discount rate based on the current market risk-free Opening net book amount ........................................ 379,984 65,432 34,934 12,413 112,779 rate of interest; Reclassification ......................................................... - (654) 556 98 - • the price for the uncertainty inherent in the CGU. Exchange differences .............................................. (1,276) (440) (626) (26) (1,092) Future cash flows are based on financial budgets approved by management with an average weighted growth rate of Additions ................................................................... - 21,484 - 2,545 24,029 9% to 17% for a five year period. Cash flows beyond the strategic plan period are extrapolated using estimated Reclassification from tangible assets ....................... - - - 111 111 growth rates as shown in the table below, as well as a post-tax discount rate of 9.5%. The growth rate does not Amortisation charge ................................................. - (10,915) (3,534) (2,817) (17,266) exceed the long-term average growth rate for the business in which the CGU operates. Closing net book amount ........................................... 378,708 74,907 31,330 12,324 118,561 The Goodwill impairment test performed in the fourth quarter, which was based on the numbers of 30 September At 31 Decem ber 2013 2013, confirmed the recoverability of existing goodwill. Since the outcome of the impairment testing exceeded the Cost .......................................................................... 378,708 122,537 50,512 22,792 195,841 carrying amounts with significantly more than 10%, sensitivity testing is not required. At 31 December there were no Accumulated amortisation ......................................... - (47,630) (19,182) (10,468) (77,280) triggers which indicated that a new calculation was required. Net book amount ....................................................... 378,708 74,907 31,330 12,324 118,561 The key assumptions used for the impairment test in 2013 are listed below. Further Total 2013 Poultry Fish Meat Processing Goodwill Goodwill 320,394 25,869 21,052 11,393 378,708 Growth rate 1) …………………………………………… 3.0% 3.0% 3.0% 3.0% 3.0% Discount rate 2)………………………………………… 9.5% 9.5% 9.5% 9.5% 9.5% 1) Weighted average growth rate used to extrapolate cash flows beyond strategic plan period. 2) Discount rate applied to the cash flow projections. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 30

    58 59 The key assumptions used for the impairment tests in 2012 are shown in the table below: The ageing of these receivables is as follows: 2013 2012 Further Total 2012 Poultry Fish Meat Processing Goodwill Provision Provision Goodwill 321,121 26,245 21,235 11,383 379,984 Gross for Gross for am ount Im pairm ent am ount Im pairm ent Not overdue ................................................................................ 51,963 - 46,815 - Growth rate 1) …………………………………………… 3.0% 3.0% 3.0% 3.0% 3.0% Up to 90 days overdue ............................................................... 15,385 - 21,823 - Discount rate …………………………………………… 10.0% 2) 10.0% 10.0% 10.0% 10.0% Over 90 days overdue ................................................................ 4,420 (2,340) 7,099 (2,337) 1) 71,768 (2,340) 75,737 (2,337) Weighted average growth rate used to extrapolate cash flows beyond strategic plan period. 2) Discount rate applied to the cash flow projections. The carrying amounts of the Groupʼs trade and other receivables (current portion) are denominated in the following currencies: 2013 2012 13 Trade and Other Receivables EUR ................................................................................................................................................. 40,968 43,936 US Dollar ......................................................................................................................................... 17,938 14,711 Current receivables and pre-payments: 2013 2012 UK Pound ........................................................................................................................................ 2,881 4,322 Trade receivables ........................................................................................................................... 71,768 75,737 Other currencies ............................................................................................................................. 9,290 10,184 Less: w rite-dow n to net-realisable value ....................................................................................... (2,340) (2,337) 71,077 73,153 Trade receivables - net ................................................................................................................... 69,428 73,400 Provision ......................................................................................................................................... (2,340) (2,337) Less non-current portion ................................................................................................................ (691) (2,584) 68,737 70,816 Current Portion 68,737 70,816 Movements on the Group receivables impaired to net-realisable value are as follows: Other receivables and pre-payments Pre-payments .................................................................................................................................. 5,484 5,220 2013 2012 Other receivables ........................................................................................................................... 16,651 22,437 At 1 January ................................................................................................................................... 2,337 3,447 22,135 27,657 Provision for receivables impairment .............................................................................................. 854 725 Receivables w ritten off during the year as uncollectible ............................................................... (315) (1,105) Total Trade and Other receivables 91,563 101,057 Unused amounts reversed ............................................................................................................. (536) (730) All non-current receivables are due between one and five years. At 31 December .............................................................................................................................. 2,340 2,337 The impairment to net-realisable value and reversals has been included in Administrative expenses in the The carrying amounts of receivables and pre-payments approximate their fair value. Trade receivables that are less Consolidated Statement of Comprehensive Income. than 90 days past due are not considered impaired. As of 31 December 2013, trade receivables of EUR 13,655 (2012: EUR 16,765) were past due but not impaired. In 2013 the write-down of trade receivables to net-realizable The other classes within trade and pre-payments do not contain impaired assets. value amounted to EUR 854 (2012: EUR 725). These relate to a number of independent customers for whom there is no recent history of default. As of 31 December 2013, trade receivables of EUR 6,149 (2012: EUR 9,431) were tested for impairment and written down when necessary. The individually impaired receivables mainly relate to customers, which are in unexpectedly difficult economic situations. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 31

    60 61 14 Deferred income tax Taxable effects of losses will expire according to below schedule: Deferred income taxes are calculated in full on temporary differences under the liability method. 2013 2012 The gross movement on the deferred income tax account is as follows: Total tax Of w hich not Total tax Of w hich not losses capitalised losses capitalised At 1 January 2012 2,862 Less than 6 years ........................................................................ 8,008 7,201 5,881 3,861 Exchange differences and changes w ithin the Group .............................................................................................. (93) Betw een 6 and 10 years .............................................................. 39,143 301 35,803 2,100 Consolidated Statement of Comprehensive Income charge (excluding rate change) ................................................ (5,494) More than 10 years ...................................................................... 11,931 1,656 8,945 1,801 Effect of change in tax rates ...................................................................................................................................... (92) Indefinite ....................................................................................... 34,465 12,928 26,559 7,638 Hedge reserve & translation reserve directly booked through equity ........................................................................ (389) 93,548 22,086 77,188 15,400 At 31 Decem ber 2012 (3,206) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: At 1 January 2013 (3,206) Exchange differences w ithin the Group .................................................................................................................... (375) Assets Liabilities Net Consolidated Statement of Comprehensive Income charge (excluding rate change) ................................................ 4 2013 2012 2013 2012 2013 2012 Effect of change in tax rates ...................................................................................................................................... 121 Property, plant and equipment .......... 592 367 (6,980) (7,406) (6,388) (7,039) Hedge reserve & translation reserve directly booked through equity ........................................................................ (818) Intangible assets ............................... 5,386 7,353 (24,570) (23,463) (19,184) (16,110) At 31 Decem ber 2013 (4,274) Other financial assets ....................... 1,885 2,714 (57) (139) 1,828 2,575 Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax Receivables ...................................... 147 116 (2,526) (2,588) (2,379) (2,472) assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The Inventories ........................................ 2,941 2,718 (524) (439) 2,417 2,279 following amounts, determined after appropriate offsetting, are shown in the Consolidated Statement of Financial Current liabilities ................................ 724 872 (326) (278) 398 594 Position. Long term liabilities ............................ 707 692 - - 707 692 Provisions for pensions .................... 662 546 (29) (50) 633 496 The deferred tax charged / (credited) to equity during the period is as follow s: Provisions for reorganisations .......... 12 - - - 12 - Fair value reserves in shareholders' equity 2013 2012 Provisions for guarantees ................ 441 440 (248) (399) 193 41 - Employer's contribution social charges on stock option excercises ............................................. 10 11 Provisions others .............................. 132 319 (83) (75) 49 244 - Hedge Reserve .............................................................................................................................. (828) (400) Subtotal ............................................. 13,629 16,137 (35,343) (34,837) (21,714) (18,700) (818) (389) Tax losses ........................................ 22,432 19,314 (4,992) (3,820) 17,440 15,494 2013 2012 Overall total ....................................... 36,061 35,451 (40,335) (38,657) (4,274) (3,206) Deferred income tax assets ............................................................................................................. 9,611 7,988 Deferred income tax liabilities ........................................................................................................... (13,885) (11,194) (4,274) (3,206) Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. Based on future profits expected in the strategic plan the recoverability has been tested; a reversal of EUR 484 (2012: impairment of EUR 655) has been applied. Sensitivity analysis on impairment of tax losses used the assumption of decreasing the forecasted profit before tax by 5%. Based on the outcome of this calculation the impairment is not affected. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 32

    62 63 15 Inventories Other Booked in compre- 2013 2012 At 1 Compre- hensive Effect of At 31 Raw materials .................................................................................................................................. 7,120 11,543 January Exchange hensive income change in tax Decem ber Semi-finished goods ......................................................................................................................... 75,629 74,017 2013 differences income charge rates 2013 Finished goods ................................................................................................................................. 27,343 30,494 Property, plant and equipment .......... (7,039) (19) - 641 29 (6,388) 110,093 116,054 Intangible assets ............................... (16,110) 142 - (3,426) 210 (19,184) Other financial assets ....................... 2,575 (7) (828) 87 1 1,828 Provision ........................................................................................................................................... (18,297) (16,876) Receivables ...................................... (2,472) 19 - 81 (7) (2,379) 91,796 99,178 Inventories ........................................ 2,279 (123) - 255 6 2,417 The cost of inventories recognised as expense and included in Cost of sales amounted to EUR 354,695 (2012: EUR Current liabilities ................................ 594 (47) - (151) 2 398 379,132). In 2013 the write-down of inventories to net-realizable value amounted to EUR 4,108 (2012: EUR 3,055). Long term liabilities ............................ 692 - - 15 - 707 Provisions for pensions .................... 496 (10) - 144 3 633 There were no material reversals of write-downs to net realizable value. The write-downs recognized following a Provisions for reorganisations .......... - - - 12 - 12 recoverability analysis are included in Cost of sales. Provisions for guarantees ................ 41 (10) - 165 (3) 193 Provisions others .............................. 244 (24) - (174) 3 49 Subtotal ............................................. (18,700) (79) (828) (2,351) 244 (21,714) 16 Production Contracts 2013 2012* Subtotal tax losses ........................... 15,494 (296) 10 2,355 (123) 17,440 Ordered w ork in progress ............................................................................................................... 2,634 4,511 Overall total ....................................... (3,206) (375) (818) 4 121 (4,274) Advances received on ordered w ork in progress .......................................................................... (22,686) (8,195) (20,052) (3,684) Cost exceed billing ........................................................................................................................... 24,829 40,163 Booked in Compre- Billing exceed cost ........................................................................................................................... (44,881) (43,847) At 1 Compre- hensive Effect of At 31 (20,052) (3,684) January Exchange hensive income change in tax Decem ber * 2012 numbers have been restated to enable comparison over the years. 2012 differences income charge rates 2012 Property, plant and equipment .......... (6,258) 13 - (705) (89) (7,039) An amount of EUR 128.8 million (2012: EUR 133.6 million) has been included in the Revenues of 2013 as included in Intangible assets ............................... (10,625) 3 11 (5,604) 105 (16,110) the Consolidated Statement of Comprehensive Income. For this portion of the revenues the conditions of sale of Other financial assets ....................... 2,922 (2) (400) 55 - 2,575 goods are not met, therefore the IFRS treatments of construction contracts have been applied. Construction contract Receivables ...................................... (2,995) 18 - 492 13 (2,472) revenue has been determined based on the percentage of completion method (cost based). Inventories ........................................ 2,147 (75) - 202 5 2,279 Current liabilities ................................ 696 (7) - (99) 4 594 Long term liabilities ............................ 1,207 - - (515) - 692 Provisions for pensions .................... 104 (22) - 425 (11) 496 Provisions for reorganisations .......... - - - - - - Provisions for guarantees ................ (89) (4) - 135 (1) 41 Provisions others .............................. 239 (5) - 13 (3) 244 Subtotal ............................................. (12,652) (81) (389) (5,601) 23 (18,700) Subtotal tax losses ........................... 15,514 (12) - 107 (115) 15,494 Overall total ....................................... 2,862 (93) (389) (5,494) (92) (3,206) Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 33

    64 65 17 Equity Outstanding Ordinary shares Treasury shares number of shares Share Capital (thousands) (thousands) (thousands) Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: Average exercise Options At 1 January 2012 .............................................................................. 735,569 (6,725) 728,844 price per share (thousands) Treasury shares - purchased ............................................................. - (4,070) (4,070) At 1 January 2012 .............................................................................................................. ISK 89 25,668 Treasury shares - sold ........................................................................ - 6,666 6,666 Granted ................................................................................................................................ EUR 1.083 10,578 At 31 Decem ber 2012 ....................................................................... 735,569 (4,129) 731,440 Exercised ............................................................................................................................. ISK 89 (1,900) Treasury shares - purchased ............................................................. - (4,700) (4,700) Exercised ............................................................................................................................. EUR 0.537 (4,766) Treasury shares - sold ........................................................................ - 8,712 8,712 Cash settled ......................................................................................................................... ISK 87 (375) At 31 Decem ber 2013 ....................................................................... 735,569 (117) 735,452 Forfeited in 2012 .................................................................................................................. EUR 0.743 (345) At 31 Decem ber 2012 ....................................................................................................... ISK 125 28,860 Exercised ............................................................................................................................. ISK 85.83 (5,750) Class of share capital: 2013 2012 Exercised ............................................................................................................................. EUR 0.537 (988) Nominal value ....................................................................................................................... 6,727 6,691 Exercised ............................................................................................................................. EUR 0.549 (1,974) Forfeited in 2013 .................................................................................................................. EUR 0.881 (2,040) Share premium ..................................................................................................................... 316,044 315,561 At 31 Decem ber 2013 ....................................................................................................... EUR 0.820 18,108 Reserve for share based payments .................................................................................... 1,250 1,617 Total share premium reserve ............................................................................................... 317,294 317,178 Exercisable options at 31 December 2013 .......................................................................... 4,988 The total authorised number of ordinary shares is 735.6 million shares (2012: 735.6 million shares) with a par value of Options granted in the year 2010 - 2012 - ISK 1 per share. All issued shares are fully paid. Expiry in year 2015 2018 Share options are granted to directors and to selected employees. The exercise prices of options granted in May The exercise prices* per share after: 2010 are higher than the market price of the shares on the date of grant. The exercise prices of options granted in 1 May 2012 ........................................................................................................................................... EUR 0.537 - June 2012 are higher than the market price of the shares on the date of grant. Options are conditional on the 1 May 2013 ........................................................................................................................................... EUR 0.549 - employee completing particular period's / yearsʼ service (the vesting period). The Group has no legal or constructive 1 May 2014, latest 9 May 2015 ............................................................................................................. EUR 0.572 - obligation to repurchase or settle the options in cash. 31 October 2015 ................................................................................................................................... - EUR 1.056 31 October 2016 ................................................................................................................................... - EUR 1.085 31 October 2017 ................................................................................................................................... - EUR 1.114 Latest 31 October 2018 ........................................................................................................................ - EUR 1.143 * Exercise prices after dividend payment in 2012, EUR 0.0095 and after dividend payment in 2013, EUR 0.0097 per share. In 2013, 5,750 thousand shares were exercised at exercise price ISK 85.83 per share, 988 thousand shares were exercised at exercise price EUR 0.537 per share and 1,974 thousand shares were exercised at exercise price EUR 0.549 per share. No options were cash settled. In 2012, 500 thousand shares were exercised at exercise price ISK 92.00 per share, 1,400 thousand shares were exercised at exercise price ISK 87.41 per share, 4,766 thousand shares were exercised at exercise price EUR 0.537 per share. Options equal to 375 thousand shares were cash settled as decided by the Group, due to rules on foreign exchange in Iceland, which make it complicated at the moment for employees of Marel subsidiaries abroad to exercise and settle their share options with share purchasing. The exercise price of the cash settled options was ISK 87.41 per share. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 34

    66 67 Variables used in the Black Scholes calculation: 18 Borrowings Weighted Exercise Expected average Non-current: 2013 2012 price per Expected Annual risk-free Esti- remaining Bank borrow ings .............................................................................................................................. 214,822 239,572 share term dividend interest mated contr. life in Finance lease liabilities ..................................................................................................................... 24 175 (EUR) (years) yield rate volatility months 1) 214,846 239,747 Option plan May 2010, 50% exercisable > 1 May 2012 ................ 0.546 5.0 0.00% 4% 21.29% 16.2 Option plan May 2010, 25% exercisable > 1 May 2013 ................ 0.568 5.0 0.00% 4% 21.29% 16.2 Current: Option plan May 2010, 25% exercisable > 1 May 2014 ................ 0.591 5.0 0.00% 4% 21.29% 16.2 Bank borrow ings excluding bank overdrafts ................................................................................... 21,857 19,244 Finance lease liabilities ..................................................................................................................... 220 196 22,077 19,440 Option plan June 2012, 50% exercisable ≥ 31 October 2015 .... 1.066 5.4 0.96% 3% 19.68% 58.0 Total borrow ings .............................................................................................................................. 236,923 259,187 Option plan June 2012, 25% exercisable ≥ 31 October 2016 .... 1.095 5.4 0.96% 3% 19.68% 58.0 Option plan June 2012, 25% exercisable ≥ 31 October 2017 .... 1.124 5.4 0.96% 3% 19.68% 58.0 1) Based on last possible exercise dates in each option plan. Secured bank loans .......................................................................................................................... 236,679 258,816 Finance lease liabilities ..................................................................................................................... 244 371 Total borrow ings .............................................................................................................................. 236,923 259,187 Reserves The hedge reserve contains revaluations on derivatives, on which hedge accounting is applied. The value of 31 Capitalised December 2013 relates to derivatives for the Group, the interest rate swap contracts. 2013 Finance lease finance Other Total Annual maturates of non-current liabilities: liabilities charges borrow ings 2013 The translation reserve contains the translation results of the consolidation of subsidiaries reporting in foreign Year 2015 .................................................................................. 16 (1,365) 20,000 18,651 currencies, as well as a currency revaluation related to financing of subsidiaries. Year 2016 .................................................................................. 1 (1,365) 197,552 196,188 The share premium reserve consists of payment in excess of par value of ISK 1 per share that shareholders have Year 2017 .................................................................................. 3 - - 3 paid for shares sold by the Company, less payments in excess of par value that the Company has paid for treasury Year 2018 .................................................................................. 4 - - 4 shares. Year 2019 .................................................................................. - - - - Later ........................................................................................... - - - - 24 (2,730) 217,552 214,846 Capitalised 2012 Finance lease finance Other Total Annual maturates of non-current liabilities: liabilities charges borrow ings 2012 Year 2014 .................................................................................. 169 (1,390) 20,642 19,421 Year 2015 .................................................................................. - (1,390) 20,647 19,257 Year 2016 .................................................................................. 6 (1,392) 196,078 194,692 Year 2017 .................................................................................. - - 613 613 Year 2018 .................................................................................. - - 621 621 Later ........................................................................................... - - 5,143 5,143 175 (4,172) 243,744 239,747 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 35

    68 69 As of 31 December 2013, interest bearing debt amounted to EUR 241,018 (2012: EUR 264,749), of which EUR 19 Provisions 237,553 (2012: EUR 255,448) are secured against shares that Marel hf. holds in certain subsidiaries and EUR 3,221 (2012: EUR 8,929) against real estate with a book value of EUR 5,412 (2012: EUR 12,363). Lease liabilities are Guarantee Pension Other effectively secured as the rights to the leased asset revert to the lessor in the event of default. commitments commitments *) provisions Total At 1 January 2012 4,464 4,586 858 9,908 The Group has the following headroom in committed ancillary facilities: Release ................................................................................ (525) - (24) (549) Additions .............................................................................. 799 1,607 101 2,507 The Group has the follow ing headroom in committed ancillary facilities: Used ..................................................................................... (88) (3,529) (419) (4,036) Floating rate: 2013 2012 At 1 January 2013 4,650 2,664 516 7,830 - Expiring w ithin one year - - - Expiring beyond one year 57,091 62,806 Release ................................................................................ (1,078) - (220) (1,298) 57,091 62,806 Additions .............................................................................. 369 1,338 723 2,429 Used ..................................................................................... (120) (364) (310) (793) The fair value of borrowings equals their carrying amount, as the impact of discounting is not significant. The fair At 31 Decem ber 2013 3,821 3,638 709 8,168 values are based on cash flows discounted using a rate based on the borrowings rate of 4.68% (2012: 4.84%). *) Including the provision for early retirement rights, which has increased to EUR 1,698 (2012: EUR 838). An amount of EUR 20 was recognised as an expense in the Consolidated Statement of Comprehensive Income in Analysis of total provisions 2013 2012 respect of finance leases (2012: EUR 28). Current ............................................................................................................................................ 2,103 2,889 Non current ..................................................................................................................................... 6,065 4,941 Interest Interest 8,168 7,830 Future future Present Future future Present Specification of major items in provisions: minimum minimum value of min. minimum minimum value of min. lease lease lease lease lease lease Nature of obligation for 2013 Country Maturity Likelihood Am ount payments payments payments payments payments payments Guarantee ............................................................................ Netherlands Dynamic Dynamic 1,693 2013 2013 2013 2012 2012 2012 Guarantee ............................................................................ Denmark Dynamic Dynamic 531 Less than 1 year ................................ 239 19 220 211 15 196 Guarantee ............................................................................ US Dynamic Dynamic 625 Betw een 1-5 years ............................ 25 1 24 202 26 175 Total 264 20 244 413 41 371 The fair value of the finance lease liabilities is approximately equal to their carrying amount. The Group loan agreements contain various restrictive covenants. At year 2013 the Group complies with all restrictive covenants. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 36

    70 71 20 Employee benefits 21 Derivative financial instruments The Group maintains various pension plans covering the majority of its employees. Interest-rate swap To protect Marel from fluctuations in Euribor-EUR-Reuters/Libor-BBA and in accordance with Interest hedge policy The Companyʼs pension costs for all employees for 2013 were EUR 15,766 (2012: EUR 13,751). Marel has entered into interest rate Swaps (the hedging instruments) to receive floating interest and to pay fixed This includes defined contribution plans for EUR 7,845 (2012: EUR 6,395), as well as a pension plan based on multi- interest. employer union plan for EUR 6,934 (2012: 6,704) and the defined benefit plan of the US up to settlement of EUR 987 (2012: EUR 408). The notional principal amount of the outstanding interest rate swap contract at 31 December 2013 was EUR 130,842 (2012: EUR 135,490). The Companyʼs employees in the Netherlands, 1075 in full-time employees (“FTEs”), participate in a multi-employer union plan (“Bedrijfstakpensioenfonds Metalektro”, PME) determined in accordance with the collective bargaining The contractual maturities are as follows: agreements effective for the industry in which Marel operates. This pension plan is treated as a defined contribution scheme based on the following grounds: 2013 Currency Principal Maturity Interest % 1. It is an industry-wide pension fund, used by the Company in common with other legal persons; Interest rate SWAP ................................................................. EUR 80,000 2016 3.1% 2. Under the regulations of the PME, the only obligation for the affiliated businesses towards the PME is to pay Interest rate SWAP ................................................................. USD 70,000 2016 2.4% the annual premium liability. The affiliated businesses are under no obligation whatsoever to pay off any deficits the PME may incur, nor have they any claim to any potential surpluses. 2012 Currency Principal Maturity Interest % The multi-employer plan covers approximately 1,300 companies and 146,000 contributing members. The plan Interest rate SWAP ................................................................. EUR 104,325 2013 4.3% monitors its risks on a global basis, not by company or employee, and is subject to regulation by Dutch governmental Interest rate SWAP ................................................................. USD 53,387 2013 4.1% authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, Forw ard Starting Interest rate SWAP 2013 ............................ EUR 80,000 2015 3.0% including the coverage ratio of the planʼs assets to its obligations. This coverage ratio must exceed 104.3 percent for the total plan. Every company participating in a Dutch multi-employer union plan contributes a premium calculated as Forw ard Starting Interest rate SWAP 2013 ............................ USD 50,000 2015 2.8% a percentage of its total pensionable salaries, with each company subject to the same percentage contribution rate. The pension rights of each employee are based upon the employeeʼs average salary during employment. The Companyʼs net periodic pension cost for this multi-employer plan for any period is the amount of the required 22 Trade and other payables contribution for that period. The coverage ratio of the multi-employer plan increased to 103.4 percent as per end of December 2013 (December 2013 2012 31, 2012: 93.9 percent). This is just below the legally required coverage ratio. The increase is mostly thanks to the Trade payables ................................................................................................................................ 48,731 55,562 execution of the “Recovery Plan” which was approved by De Nederlandsche Bank (the Dutch central bank, the Accruals .......................................................................................................................................... 5,216 3,435 supervisor of all pension companies in the Netherlands). Other payables ................................................................................................................................ 51,715 66,420 In 2014 the pension premium will be 24.1 percent of the total pensionable salaries (2013: 24.0%), in accordance with 105,662 125,417 the articles of association of the Pension Fund. The coverage ratio is calculated by dividing the fundʼs capital by the total sum of pension liabilities and is based on actual market interest. The settlement of the defined benefit plan in the USA, of which the risks and rewards were settled in 2012, was executed in 2013. The only remaining defined benefit obligation in the USA is the medical benefit plan, which is not disclosed separately because of its immateriality. Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 37

    72 73 23 Contingencies 25 Related party transactions At 31 December 2013 the Group had contingent liabilities in respect of bank and other guarantees and other matters At the end of December 2013 and 2012, there are no loans to directors. arising in the ordinary course of business from which it is anticipated that no material liabilities will arise. In the Bought ordinary course of business the Group has given guarantees amounting to EUR 18,842 (2012: EUR 15,882) to third shares acc. parties. Board fee for the year 2013 and shares at year-end Pension Stock to stock Shares at year- Board fee contribution1) options2) options 2) end 2) From time to time claims are filed against the Group. Although the outcome of current claims cannot be predicted with 3) any certainty, it is assumed – partly on the basis of legal advice – that these will not have any significant impact on Árni Oddur Þórðarson, former Chairman (until 31 October 2013).................... 75 6 - - 215,499 the consolidated financial statements. Ann Elizabeth Savage, Board Member (as of 6 March 2013)......................... 25 2 - - - Arnar Þór Másson, Vice Chairman (until 31 October 2013 Board Member)..... 35 3 - - - Ásthildur Margrét Otharsdóttir , Chairman (until 31 October 2013 Board Member ).. 65 5 - - 32 Friðrik Jóhannsson, Board Member (until 6 March 2013)............................. 5 - - - 4,300 24 Commitments and insurance Helgi Magnússon, Board Member............................................................. 30 2 - - 4,505 Margrét Jónsdóttir, Board Member............................................................ 30 2 - - 200 At the end of the reporting period, the future minimum lease payments under non-cancellable operating leases are Theo Bruinsma, Board Member (until 31 October 2013)................................ 25 2 - - 1,000 4) payable as follows: Bought Share shares acc. 2013 2012 Salary and based Incentive Pension Stock to stock Shares at year- Less than 1 year .............................................................................................................................. 6,253 4,237 benefits benefits payments contribution1) options 2) options 2) end 2) Betw een 1 and 5 years ................................................................................................................... 8,736 5,581 Árni Oddur Þórðarson, CEO (as of 31 October 2013). 65 - - 5 - - 215,499 Later than 5 years ........................................................................................................................... 3,350 1,147 Theo Hoen, former CEO (until 31 October 2013)....... 2,224 569 78 82 - 2,000 1,500 Total operational lease liabilities ....................................................................................................... 18,339 10,965 Erik Kaman, CFO.................................................. 388 462 61 33 800 1,500 1,675 Sigsteinn Gretarsson, COO.................................... 343 34 51 37 538 88 26 Five Managing Directors......................................... 1,083 410 147 107 2,185 1,313 124 5) During the year an amount of EUR 6,386 was recognised as an expense in profit or loss in respect of operating 1) leases (2012: EUR 4,513). Pension contributions for all board members are part of a defined contribution plan. 2) Number of shares * 1000 3) Insurance Shares owned by Eyrir Invest hf., where Árni Oddur Þórðarson was CEO till 31 October 2013, including those of The Group has covered Business Interruption Risks with an insurance policy underwritten by an independent financially related parties. Margrét Jónsdóttir is the MD of Operations of Eyrir Invest hf. Theo Bruinsma was previously President of Townsend Inc. which was acquired by Stork in 2006. Thereafter, he 4) insurance company for a maximum period of 24 months. The insurance benefits for Business Interruption amount to EUR 514 million for 2013 for the whole Group. The Group Insurance value of buildings amounts to EUR 137 million, was part of Stork and Marel's management team until 2010. In accordance with his employment agreement, Mr. productions machinery and equipment including software and office equipment amount to EUR 132 million and Bruinsma received payments in 2013 in addition to the board fee amounting to EUR 406. inventories to EUR 96 million. Currently there are no major differences between appraisal value and insured value. 5) Marel has identified five managers other than the members of the Board of Management who have material significance for Marelʼs operations. This group consists of the four Managing Directors of Marelʼs Industry Centers and the Managing Director of Marelʼs international sales and service network. Stock options Average Number of exercise shares 2) price Erik Kaman, CFO............................................................................................................................. 350 0.549 EUR per share 450 1.073 EUR per share Sigsteinn Gretarsson, COO............................................................................................................... 88 0.560 EUR per share 450 1.073 EUR per share Five Managing Directors.................................................................................................................... 925 0.549 EUR per share 1,260 1.073 EUR per share 2) Number of shares * 1000 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 38

    74 75 Bought 26 Events after the balance sheet date shares acc. Board fee for the year 2012 and shares at year-end Pension Stock to stock Shares at year- No significant events have taken place since the reporting date. Board fee contribution1) options 2) options 2) end 2) Árni Oddur Þórðarson, Chairman................................................................ 87 7 - - 243,499 3) 27 Subsidiaries Arnar Þór Másson, Board Member............................................................. 29 2 - - - Ásthildur Margrét Otharsdóttir, Board Member............................................. 58 5 - - 32 The largest subsidiaries are listed below: Friðrik Jóhannsson, Board Member........................................................... 33 3 - - 4,300 Country of Ownership Helgi Magnússon, Board Member............................................................. 29 2 - - 5,105 Incorporation Interest Margrét Jónsdóttir, Board Member............................................................ 29 2 - - 200 Smári Rúnar Þorvaldsson, Board Member (until 29 February 2012)................ 4 - - - - Theo Bruinsma, Board Member.................................................................. 29 2 - 375 1,000 4) Marel Iceland ehf. ………………………………………………… Iceland 100% Marel A/S …………………………………………………………. Denmark 100% Bought Marel Salmon A/S ……………………………………………….. Denmark 100% Share shares acc. Marel Seattle Inc …………………………………………………. USA 100% Salary and based Incentive Pension Stock to stock Shares at year- Marel Singapore Pte. Ltd ……………………………………….. Singapore 100% benefits benefits payments contribution1) options 2) options 2) end 2) Marel Ltd. ………………………………………………………..… UK 100% Theo Hoen, CEO................................................... 418 - 136 92 2,950 - 1,500 Marel Slovakia s.r.o. ……………………………………………… Slovakia 100% Erik Kaman, CFO.................................................. 376 - 109 32 2,300 - 1,675 Marel Holding B.V. ……………………………………………..… Netherlands 100% Sigsteinn Gretarsson, COO.................................... 333 285 93 24 625 825 26 Marel Stork Poultry Processing B.V. …………………………… Netherlands 100% Five managing directors ......................................... 925 150 177 107 3,435 425 124 5) Marel Stork Poultry Processing Inc. ………………………….… USA 100% 1) Pension contributions for all board members are part of a defined contribution plan. Marel Townsend Further Processing B.V. …………………..… Netherlands 100% 2) Number of shares * 1000 Marel Meat Processing B.V. ………………………………….…. Netherlands 100% 3) Shares owned by Eyrir Invest hf., where Árni Oddur Þórðarson is CEO, including those of financially related parties. Marel Meat Processing Inc ……………………………………… USA 100% Margrét Jónsdóttir is the CFO of Eyrir Invest hf. Stork Inter Ibérica S.A. …………………………………………… Spain 100% Theo Bruinsma was previously President of Townsend Inc. which was acquired by Stork in 2006. Thereafter, he 4) was part of Stork and Marel's management team until 2010. In accordance with his employment agreement, Mr. Marel Inc. …………………………………………………………. USA 100% Bruinsma received payments in 2012 in addition to the board fee amounting to EUR 433 as well as share based Marel Norge AS ………………………………………………...… Norway 100% benefits amounting to EUR 128. At the year-end 2012 he does not hold any stock options. Marel Food Systems GmbH & Co. KG ………………………… Germany 100% 5) Marel has identified five managers other than the members of the Board of Management who have material Marel GB Ltd. …………………………………………………….. UK 100% significance for Marelʼs operations. This group consists of the four Managing Directors of Marelʼs Industry Centers Marel Food Systems do Brasil Comercial Ltda. …………….… Brazil 100% and the Managing Director of Marelʼs international sales and service network. Marel France SARL ……………………………………………… France 100% Marel Benelux B.V. ………………………………………….…… Netherlands 100% Stock options Average Marel Australia Pty Ltd. ………………………………………..… Australia 100% Number of exercise Marel Stork Food Systems Máquinas Alimenticias Ltda …….. Brazil 100% shares 2) price Theo Hoen, CEO.............................................................................................................................. 2,000 87.41 ISK per share 350 0.553 EUR per share 600 1.083 EUR per share Erik Kaman, CFO............................................................................................................................. 1,500 87.41 ISK per share 350 0.553 EUR per share 450 1,083 EUR per share Sigsteinn Gretarsson, COO............................................................................................................... 175 0.570 EUR per share 450 1,083 EUR per share Five Managing Directors.................................................................................................................... 1,250 87.41 ISK per share 2,185 0.86 EUR per share 2) Number of shares * 1000 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated


  • Page 39

    76 77 28 Quarterly results (unaudited) Q4 2013 Q3 2013 Q2 2013 Q1 2013 Total Revenue ............................................................................ 168,182 156,896 178,430 158,028 661,536 Cost of sales ..................................................................... (109,594) (98,866) (118,913) (100,519) (427,892) Gross profit 58,588 58,030 59,517 57,509 233,644 Selling and marketing expenses ........................................ (24,447) (21,871) (24,715) (24,072) (95,105) Research and development expenses ............................. (11,537) (10,728) (10,926) (11,197) (44,388) Administrative expenses ................................................... (15,273) (12,615) (11,514) (11,911) (51,313) Other operating income / (expenses) ............................... 79 38 (48) 2 71 Result from operations (EBIT) 7,410 12,854 12,314 10,331 42,909 Finance costs .................................................................... (4,966) (4,706) (5,940) (3,815) (19,427) Finance income ................................................................. 97 54 140 72 363 Net finance costs .............................................................. (4,869) (4,652) (5,800) (3,743) (19,064) Result before incom e tax 2,541 8,202 6,514 6,588 23,845 Income tax ........................................................................ 1,160 (2,225) (1,294) (866) (3,225) Profit for the period 3,701 5,977 5,220 5,722 20,620 Profit before deprec. & amortisation (EBITDA) .................. 14,086 19,523 18,978 16,857 69,444 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Total Revenue ............................................................................ 178,363 164,264 186,469 184,864 713,960 Cost of sales ..................................................................... (118,277) (105,393) (124,192) (116,872) (464,734) Gross profit 60,086 58,871 62,277 67,992 249,226 Selling and marketing expenses ........................................ (23,100) (21,440) (23,666) (21,913) (90,119) Research and development expenses ............................. (9,943) (10,638) (10,940) (10,045) (41,566) Administrative expenses ................................................... (14,061) (12,547) (15,681) (14,656) (56,945) Other operating income / (expenses) ............................... 650 (127) 220 (258) 485 Result from operations (EBIT) 13,632 14,119 12,210 21,120 61,081 Finance costs .................................................................... (5,271) (4,303) (4,103) (4,689) (18,366) Finance income ................................................................. (6) (264) 24 582 336 Net finance costs .............................................................. (5,278) (4,567) (4,079) (4,107) (18,030) Result before incom e tax 8,354 9,552 8,131 17,013 43,051 Income tax ........................................................................ (1,211) (1,144) (1,143) (3,944) (7,442) Profit for the period 7,143 8,408 6,988 13,069 35,609 Profit before deprec. & amortisation (EBITDA) .................. 19,527 20,465 18,570 27,401 85,963 Marel hf., Consolidated Financial Statements 31 December 2013 Marel hf., Consolidated Financial Statements 31 December 2013 All amounts in EUR*1000 unless otherwise stated All amounts in EUR*1000 unless otherwise stated


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