Annual Report 2017
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Marel – Annual Report 2017 ANNUAL REPORT 2017 TO OUR STAKEHOLDERS 1 Marel – Annual Report 2017 CONTENT TO OUR STAKEHOLDERS 3 Chairman’s statement 4 Chief executive officer’s review 6 MAREL IN BRIEF 8 Who we are 9 Vision and values 10 Business model 11 Strategy 16 DELIVERING GROWTH 19 Poultry 20 Meat 25 Fish 31 Innova 37 Innovation 40 Sales and services 44 Global supply chain 45 INVESTORS 49 Shares 50 Financials 55 Investor relations 62 RESPONSIBLE GROWTH 64 Corporate responsibility 65 Social 68 Environmental 72 Economic 76 Corporate governance 79 Board of directors 83 Executive team 87 Organizational chart 90 Risk management 91 2017 CONSOLIDATED FINANCIAL STATEMENTS 94 TO OUR STAKEHOLDERS 2 Marel hf. – Annual Report 2017 TO OUR STAKEHOLDERS TO OUR STAKEHOLDERS 3 Marel – Annual Report 2017 CHAIRMAN’S STATEMENT We are proud of the achievements of the Marel team in 2017. It was a great year with strong financial results. Revenues exceeded EUR 1 billion, operating profit margin was above 15% and net profit increased by almost 50% over 2016. Significant investments were made in strengthening Marel’s foundation and important progress achieved towards our growth targets, benefitting both customers and shareholders. This year, Marel celebrated the 25th anniversary of its listing on NASDAQ Iceland and 2018 will mark the 35th anniversary of its founding. Those of us who have the privilege of being part of Marel today are grateful for the courage and passion of those who paved the way and laid the groundwork for our great company, a leading global provider of advanced food processing systems and services. The unprecedented speed and magnitude of change today demands no less. Courage to challenge convention and explore new directions, spot opportunities and take calculated risks to reach strategic goals. Passion in believing we can accomplish great A strong foundation aspirations, such as transforming the way food is processed, Marel is well positioned for this journey. A broad product by continuously striving for excellence, doing more with less, offering, superior technology, global presence and significant being better than yesterday. investments in our infrastructure in recent years provide a strong foundation to build on. Revenues are well diversified Investing in profitable growth across business segments and geographies. Digitalization and At the 2017 Annual General Meeting, an ambitious growth further automation present new opportunities to work with strategy for the next 10 years was introduced. Marel targets our customers to advance food processing. Marel’s Innova 12% average annual revenue growth, both organic and food processing software has already been installed in over through acquisitions. Organic growth, driven by innovation 1,800 plants worldwide and offers countless opportunities. and market penetration, is expected to outstrip average market growth, and strategic acquisitions will further accelerate our Capital structure and distribution of profits full line product offering and market penetration. Earnings Marel’s financial position is strong. In 2017, EUR 15.3 million per share are expected to exceed revenue growth. In other were paid in dividends to shareholders, treasury shares were words, we are investing in profitable growth. purchased amounting to EUR 63.5 million and Sulmaq in Brazil was acquired for a combination of cash and treasury shares. Significant investments were made in solidifying the company’s footing as a global leader in its field and preparing for its future growth, including investments in: innovation; taking IT to the next level; expanding our existing manufacturing facilities; and improving the working environment of our employees. Strong operating results and debt reduction resulted in a leverage of 1.9 times debt to EBITDA at the end of the year, which is just below the lower end of the 2-3 times targeted leverage ratio. TO OUR STAKEHOLDERS 4 Marel – Annual Report 2017 In line with our capital allocation and dividend policy, the Board of Directors will propose to the 2018 Annual General Meeting that a dividend of EUR 4.19 cents per share, corresponding to 30% of net profits for 2017, be paid to shareholders. Furthermore, the Board of Directors has authorized the purchase of treasury shares of up to 20 million To guide the organization on responsible conduct, Marel nominal value, which can be used as payment for potential has established a policy on corporate social responsibility, future acquisitions. which focuses on three areas: people, planet and profits. We are a signatory of the United Nations’ Global Compact and participated in NASDAQ’s Sustainable Markets Initiative in 2017. We are proud of the advancements made in corporate social responsibility reporting during the year and will continue on that journey in 2018. Shared value creation Calls for rethinking the role of businesses in society grow ever louder. Companies are continuously being pressured to play a more prominent role in addressing social challenges. The de- Since its listing, Marel has created excellent value for mand for greater private sector involvement in achieving the shareholders. In 2017, the share price increased by close to United Nations’ Sustainability Development Goals is a good 33%, measured in Icelandic krona, and 27% measured in euros. example. The combined forces of public, private and civil ac- The number of shareholders increased from 1,907 to 2,206. tors are necessary to achieve the required scale and impact. Since its listing, Marel has created excellent value for share- The immense societal challenges of sustainably feeding holders. In 2017, the share price increased by close to 33%, the world’s growing population can only be addressed with measured in Icelandic krona, and 27% measured in euros. The technology, innovation and changes in behavior. We simply number of shareholders increased from 1,907 to 2,206. must find ways to do more with less. This is the core of Mar- el’s business; increasing yields and quality, optimizing the use Corporate social responsibility of scarce resources such as water and energy, increasing food Marel’s Board of Directors is committed to good corporate safety and traceability, as well as improving employee satisfac- governance and ethical business practices, promoting the tion and animal welfare. long-term interests of shareholders. We strive to be a good corporate citizen. We emphasize corporate social responsibility Our business is about creating economic value that also makes not least because we are convinced it is good business. A good a positive contribution to society. In partnership with our cus- reputation, responsible use of resources, taking care of the tomers we are transforming the way food is processed. Our environment and having employees who take pride in their vision is of a world where quality food is produced sustainably work is good business. and affordably. On behalf of the Board of Directors, I congratulate the Marel team on their impressive results and achievements in 2017. We express our recognition of their dedication and hard work. We fully appreciate the continuing commitment and support of our shareholders. Asthildur Otharsdottir, Chairman of Marel’s Board TO OUR STAKEHOLDERS 5 Marel – Annual Report 2017 CHIEF EXECUTIVE OFFICER’S REVIEW I would like to begin by expressing my gratitude for the continuing trust and support of our shareholders, customers, partners and employees. Together we are transforming the way food is processed. Marel is a global leader in a dynamic growth industry with over EUR 1 billion in revenues and an EBIT margin of 15%. Our team of 5,400 dedicated members, located in more than 30 countries, serves poultry, meat and fish processors that have operations in more than 100 countries. Our core values are Unity, Innovation and Excellence. Our vision is of a world where quality food is produced sustainably and affordably. Robust operational performance In transforming the way food is processed we have also been growing and advancing Marel as a company. We are proud of our 2017 results with revenues of EUR 1,038 million and Clear vision and gradually expanding operational profits of 15.2%. Revenues are up by 6% year- playing field on-year and we have now been operating at EBIT level of In our everyday work we are guided by our clear vision and set around 15% for eight consecutive quarters. With an innovative of values. Our playing field has been gradually expanding and portfolio and continued good partnerships with our customers our business operations continuously improved, reflecting our we had a record order intake of EUR 1,144 million in 2017, up core value of Excellence. 13% over last year. Our playing field has expanded from its original focus The strong cash flow from our operations enables us to invest solely on yield and throughput in the Icelandic fish sector in a stronger infrastructure to prepare for the future. to become the global leader of today, serving poultry, meat and fish processors from post-farm gate to dispatch of final In the past two years we have also acquired two companies, products. The emphasis is on increased value, quality, safety MPS and Sulmaq, at a cost of over EUR 400 million without and sustainability of production, in addition to high yield requesting any additional equity contribution from investors. and throughput. Innovative solutions that have recently We have continued to invest around 6% of revenues in been introduced also focus on taking animal welfare to new innovation and have purchased our own shares and paid standards. dividends in line with our long-term strategy. The financial position is strong at year-end with around two times net debt The Sulmaq acquisitions closed successfully in August 2017 and to EBITDA. I would like to restate my welcome to the Sulmaq team. Most of our acquisitions have been focused on closing application We are entering 2018 with a strong order book equaling to gaps in our full-line offering, in particular Scanvaegt, Stork and 45% of trailing twelve-month revenues.