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Consolidated Financial Statements 2019

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Consolidated Financial Statements 2019 CONSOLIDATED FINANCIAL STATEMENTS 2019 Contents Consolidated Financial Statements The Board of Directors' and CEO's Report 1 14 Property, plant and equipment 41 Independent Auditor's report 7 15 Right of use assets 43 Consolidated Statement of Income 11 16 Goodwill 44 Consolidated Statement of Comprehensive Income 12 17 Intangible assets 46 Consolidated Statement of Financial Position 13 18 Investments in associates 47 Consolidated Statement of Changes in Equity 14 19 Trade receivables, other receivables and Consolidated Statement of Cash Flows 15 prepayments 48 Notes to the Consolidated Financial Statements 16 20 Deferred income tax 49 1 General information 16 21 Inventories 51 2 Summary of significant accounting policies 17 22 Equity 52 3 Critical accounting estimates and 23 Borrowings and lease liabilities 56 assumptions 31 24 Provisions 61 4 Business combinations 32 25 Post-employment benefits 62 5 Non-IFRS measurement 34 26 Financial instruments and risks 62 6 Segment information 35 27 Trade and other payables 68 7 Revenues 37 28 Contingencies 69 8 Expenses by nature 38 29 Related party transactions and information on 9 Net finance costs 38 remuneration 70 10 Staff costs 38 30 Subsequent events 71 11 Fees to Auditors 39 31 Subsidiaries 72 12 Income tax 39 32 Quarterly results (unaudited) 73 13 Earnings per share 40 33 Definitions and abbreviations 75 The Board of Directors' and CEO's Report Marel is a leading global provider of advanced utilization levels the interest and finance cost is processing equipment, systems, software and expected to decrease as the new facility includes services to the poultry, meat and fish industries with more favorable terms. around 6,400 full-time equivalent employees (“FTEs”) and a presence in over 30 countries and six Further information is provided in note 9 and note continents and a global network of more than 100 23 of the Consolidated Financial Statements. agents and distributors. In December 2019, a new corporate tax law was The Consolidated Financial Statements for the year enacted in the Netherlands. Consequently, the 2019 comprise the financial statements of Marel hf. reduction in corporate tax rate as approved by the (“the Company”) and its subsidiaries (together “the Dutch Government in 2018 will be delayed by a year Group” or "Marel”). The Consolidated Financial and the rate will only be reduced from 25.00% to Statements are prepared in accordance with 21.70% as of 2021. This change resulted in a loss of International Financial Reporting Standards (“IFRS”) EUR 1.7 million related to the remeasurements of as adopted by the European Union (“EU”) and deferred tax assets and liabilities of the Group’s additional Icelandic disclosure requirements. Dutch subsidiaries being recognized during the year ended 31 December 2019 that anticipated already Operations in 2019 for the lower future rate of 20.50%. Consolidated Statement of Income In December 2018, a new corporate tax law was The consolidated revenues for Marel for the full year substantially enacted in the Netherlands. 2019 are EUR 1,283.7 million (2018: EUR 1,197.9 Consequently, as of 1 January 2020, the corporate million). The adjusted result from operations for the tax rate in the Netherlands was planned to be same period is EUR 173.4 million or 13.5% of reduced from 25.00% to 22.55% and was planned to revenues (2018: EUR 175.2 million or 14.6% of be further reduced to 20.50% as of 1 January 2021. revenues). This change resulted in a gain of EUR 7.6 million related to the remeasurement of deferred tax assets The bridge between adjusted result from operations and liabilities of the Group’s Dutch subsidiaries and result from operations as shown in the being recognized during the year ended 31 Consolidated Statement of Income is as follows: December 2018. 2019 2018 Further information is provided in note 12 of the Adjusted result from operations 173.4 175.2 Consolidated Financial Statements. PPA related costs (10.8) (14.3) Net result for 2019 is negatively impacted by the Result from operations 162.6 160.9 finance costs of EUR 6.7 million (after tax) and tax In December 2019 Marel received commitments charge as a result of the change in the Dutch from a mixture of current and new banking partners corporate tax rate of EUR 1.7 million. Net result for for a new EUR 700 million revolving credit facility 2018 was positively impacted by the gain in taxes which will replace the current syndicated loan following the change in the Dutch corporate tax rate facility. The new facility was signed at 5 February of EUR 7.6 million. Next to these items, earnings per 2020 and will be closed soon after, subject to share is negatively impacted by the higher number standard condition president provisions. of outstanding shares in issue as a result of the secondary listing on Euronext Amsterdam. With these commitments in place, Marel revaluated the fair value of the current syndicated loan Consolidated Statement of Financial Position commitments, releasing the capitalized finance According to the Consolidated Statement of charges, IFRS 9 revaluation, embedded derivatives Financial Position, the Group's assets amounted to and interest rate swaps linked to the facility resulting EUR 1,861.2 million at the end of 2019 (2018: in additional finance cost of EUR 8.9 million in the EUR 1,565.9 million). Total equity amounted to fourth quarter of 2019. Going forward and subject to EUR 955.8 million at the end of 2019 (at year-end Consolidated Financial Statements 2019 1 2018: EUR 560.9 million) or 51.4% of total assets (at Investment in associate Curio year-end 2018: 35.8%). As a result of the dual listing On 22 October 2019, Marel entered into an shareholders’ equity increased by EUR 370.0 million agreement to acquire a 50% stake in Curio ehf. partly offset by transaction costs net of tax of EUR (“Curio”), a highly innovative primary processing 14.2 million. Net interest bearing debt decreased equipment provider for whitefish processing. Curio’s from EUR 431.6 million at the end of 2018 to EUR 97.6 complimentary product portfolio of deheading, million at the end of 2019. filleting and skinning solutions brings Marel closer to becoming a full-line provider to the global fish The goodwill of the Group was tested for industry. Curio is domiciled in Iceland and has impairment at year-end by calculating its annual revenues of around EUR 10 million. recoverable amount. The results of these impairment tests were that there was no impairment The transaction was finalized on 8 November 2019. as the recoverable amount of the goodwill was well Closing was subject to customary closing conditions. above book value. Short term the acquisition is not expected to have material impact on Marel’s earnings. Further Consolidated Statement of Cash Flows information is provided in note 18 of the Cash generated from operating activities during the Consolidated Financial Statements. year is EUR 142.5 million (2018: EUR 166.8 million). The decrease in cash generated from operating Acquisition Cedar Creek Company activities is mainly due to an increase in inventories On 23 October 2019, Marel agreed to acquire Cedar in fast moving and critical parts in spares and trade Creek Company (“Cedar Creek”), an Australian receivables, partly offset by timing of production provider of specialized software and hardware and receipts of payments from large projects. The solutions for red meat and poultry processors. The increase in net cash provided by financing activities transaction will strengthen Marel´s presence in is mainly due to the cash generated as a result of the Australia and New Zealand. Cedar Creek has annual equity raise, EUR 370.0 million, of which a part is revenues of around EUR 3 million. used to repay borrowings. The transaction was finalized on 15 November 2019. Other Closing was subject to customary closing conditions. At 31 December 2019 the Company’s order book The acquisition is not expected to have material amounted to EUR 414.4 million (at 31 December impact on Marel’s earnings. Further information is 2018: EUR 476.0 million). provided in note 4 of the Consolidated Financial Statements. The average number of full time employees was 6,303 in 2019 (2018: 5,794). Total salaries and wages Acquisition of MAJA Maschinenfabrik Hermann were EUR 372.3 million (2018: EUR 343.6 million). The Schill GmbH & Co. KG ratio female / male employees is 16 / 84 for 2019 On 14 August 2018, Marel concluded the acquisition (2018: 15 / 85). of the limited partner interest in the company of MAJA Maschinenfabrik Hermann Schill GmbH & Co. Strategic minority investment in Worximity KG to get transferred all business assets and On 19 June 2019, Marel acquired a 14.3% interest in liabilities. As part of this transaction Marel also the Canadian software company Worximity acquired 100% of the shares of related companies in Technology (“Worximity”). France and the United States (“MAJA”). Further information is provided in note 4 of the Marel’s initial investment of EUR 1.8 million (CAD 2.5 Consolidated Financial Statements. million) in new share capital in Worximity corresponds to 14.3% of the total share capital on a Dual listing fully diluted basis. Marel will invest an additional On 7 June 2019, Marel began trading on Euronext CAD 2.5 million in new share capital in the company Amsterdam, marking the dual listing of Marel on in the next six months, bringing Marel’s total both Nasdaq Iceland and Euronext Amsterdam. ownership to 25.0%. Further information is provided in note 18 of the Consolidated Financial Statements.
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