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Year 2006

Sales in 2006 totaled EUR 208.7 million compared with EUR 129.0 million, which is about a 61.7% increase from the previous year. AEW Delford Systems in Britain impacted Marel’s Consolidated Financial Statements from last 7 April, and Scanvægt from last 4 August.  “Proforma” sales in 2006 totaled EUR 272 million.

Profit from operations EBIT before one-time integration expense was 11.5 million (5,5% of sales), and EUR 7.5 million after it, which is 3.6% of sales revenue, compared with 9.7 million or 7.5% of revenue the previous year.  Charged one-time expenses resulting from integration totaled about EUR 4 million, of which about 2.5 million was in the fourth quarter.

Financial expenses were about EUR 5.0 million, compared with EUR 2.6 million the previous year. The increase stems from increased activity due to external growth in connection with the purchase of AEW Delford Systems and Scanvægt.  Losses related to associated companies (EUR 1.4 million) may be traced to a share-price decrease in the Dutch company Stork NV, and are entered at market price.

Net profit for the 2006 was EUR 159 thousand, compared with 5.7 million in 2005.

Net cash at end of the period totaled EUR 63.1 million.  The equity more than tripled during the year, an increase from EUR 44 million to 144 million and the equity ratio was 39.6% at end of year 2006.  The company’s capacity to invest in further external growth is considerable without new share capital.

Marel is well financed and approx. 75% of total long term loans are repayable in more than 5 years.

4th Quarter 2006

Sales in the 4th quarter totaled EUR 71.9 million, compared with 34.8 million, which is more than double (107%) compared with the same period the previous year. Since the 4th quarter 2005, the companies AEW Delford Systems and Scanvægt have been added, on7 April and 4 August respectively. 

A “Proforma” sales increase in the fourth quarter from the same period in 2005 amounts to 4%.  

Profit from operations EBIT during the fourth quarter 2006 was EUR 1.1 million, which is 1.5% of income compared with 1.3 million last year. 

There was a loss in the fourth quarter of EUR 0.5 million.

Hörður Arnarson, CEO:

“The year 2006 was very eventful for Marel.  It saw the company move forward in its ambitious strategy to triple its size. At the start of the year steps were taken to purchase two companies: AEW/Delford in April and Scanvægt International in Denmark last August. With these acquisitions, and their ensuing integration, Marel will become a leading company in its field. The companies' extensive integration process has progressed well and on schedule. A reduction of costs will be achieved in most areas of the company’s operations, the sales and marketing network will be strengthened, as will the company’s services, and the number of new products entering the market every year will double.”

Prospects

Prospects for company operations are good. The consolidation of Marel, Carnitech, AEW/Delford and Scanvægt will create a company with a broad product range, strong marketing network, outstanding service network and a unique position in various product categories. The integration of the companies’ is proceeding well and will generate significant operational rationalization, which will begin impacting the company’s performance in the second half of 2007. Coordinating product development will double the number of new products that the company markets every year, and will support the company’s strong internal growth. The economy of scale of the new company is considerable, for example in purchasing and production. It is projected that the company will achieve a minimum 10% profit from operations (EBIT) beginning in 2008
In the short term – particularly the next quarter – one-time expenses resulting from integrating the companies will have a significant impact on the Group’s performance. It is projected that they will total approximately EUR 5-6 million in 2007, most of which will be charged in the first quarter.

Operational Results 2006

The audited Financial Statements of the Marel Group for 2006 were approved at Marel’s Board of Director’s meeting today, 13 February 2007.
The Marel Group comprises 35 companies with operations in 22 countries and with sales and service activities in total 60 countries.

Sales for 2006 totaled EUR 208.7 million, compared with EUR 129 million the previous year. Sales have therefore increased by about 61.7%. Without the impact of AEW Delford Systems, which entered Marel’s consolidated financial statements last 7 April, Scanvægt, which entered from last 4 August, and Dantech, which entered in the fourth-quarter of 2005, sales would have remained virtually unchanged.

The contribution margin of product sales during the period was EUR 69 million or 33.0% of sales, compared with EUR 43.6 million or 33.8% of sales during the same period in 2005. Income in Icelandic króna was about 3% of the Group’s total sales, but expenses were about 15%, in particular employee wages in Iceland. The company has entered into forward exchange rate contracts to offset all estimated costs in Icelandic króna until March 2008. The average exchange rate of these contracts from January 2007 to March 2008 is just over ISK/EUR 100.

Operating expenses other than the cost of goods sold totaled EUR 63 million and were 30.2% of sales, compared with 27.1% the year before.  Sales and marketing expenses were EUR 29 million, which is about 82% higher than the previous year. Charged development expenses, including depreciation of product development costs from previous years, were about EUR 11.7 million, an increase of about 50%. The primary emphasis in sales and marketing, as well as in product development, has been to improve productivity and synergy, and to increase integration within the Marel Group. Administrative costs were EUR 22.2 million, compared with 11.2 million the year before.  The increase may in part be attributed to the affect of charged integration expenses, which totaled about 4 million króna.

Profit from operations (EBIT) was EUR 7.5 million or 3.6% of sales, compared with 7.5% in 2005.

Net finance costs totaled EUR 5 million, compared with EUR 2.6 million last year. The increase is the result of borrowing in the form of a debenture offering, which has in part been earmarked to purchase the companies AEW Delford and Scanvægt, as well as shares in Dutch company Stork NV through LME ehf, and investment in property, plant and equipment. Marel’s share in the operational loss of associated companies totaled EUR 1.4 million, which may be attributed to investment by LME ehf in Stork NV, and Marel owns 20% in LME. LME currently owns 8% of Stork NV’s shares.

Profit of operations of the Marel Group for 2006 totaled EUR 159 thousand, compared with EUR 5.7 million the previous year.     

Total assets of the Group at year-end 2006 were charged at EUR 365 million, and they have more than tripled since the New Year. This increase is primarily due to the establishment of AEW Delford Systems, which took over operations and assets of two UK companies, the acquisition of Scanvægt, a debenture offering and new share capital. The equity ratio has increased: it was 39.6% at the end of December, compared with 35.7% at year-end 2005.

Investment in property, plant and equipment in excess of that sold during 2006 was EUR 8.1 million, compared with EUR 3.4 million during the same period last year. Most investment was earmarked for the expansion of production facilities in Garðabær, Iceland.

Net cash to operations totaled EUR 3 million. The main reason for this is increased financial commitment in inventory and accounts receivable, but this is offset by an increase in accounts payable. At year-end 2006, net cash was EUR 63 million, compared with 3.9 million at year-end 2005.

On average, 1,615 employees worked for the Marel Group during 2006, compared with 1.098 last year. At year-end 2006, employees totaled 2,116. Of these 2,116 employees, 354 were in Iceland while 1,762 worked outside Iceland in 34 companies in 21 countries.

Operational Results 4th quarter

Key events in 2006

Integration activities

The integration of AEW/Delford and Scanvægt with Marel is proceeding according to schedule. The task addresses all elements of the companies' operations. The most extensive task entails integrating their sales and marketing networks. The companies’ sales offices will decreased from 45 to about 20. This will strengthen the company’s sales efforts while significantly reducing costs. Work is also proceeding on integrating and rationalizing the companies’ service network, production, product development and purchasing. One-time expenses connected with the changes have been in line with projections, and in 2006 they were EUR 4 million. One-time expense projections for 2007 are about EUR 5-6 million, and will be mostly charged during the first quarter. The affect of integration measures, which are expected to increase the Group’s annual operational profit by about EUR 15 million, will start impacting the Group’s performance during the second half of 2007, and be fully felt during 2008.

LME holding company

Marel hf., Eyrir Invest and Landsbanki Íslands founded the holding company LME ehf last February for the purpose of purchasing shares in Dutch company Stork NV (www.stork.com). Stork’s management intended to delist Stork from the stock exchange, but that plan has been discarded. Shareholders reacted badly to this attempt, and to the large expense that consequently fell on the company, which caused a lowering of Stork NV´s share price. This has resulted in a controversy between a majority of company shareholders and company management regarding the direction to be taken in this matter.  
Marel has held informal discussions with Stork’s management regarding closer cooperation between the companies. No formal discussions have been held regarding the merger of Marel and Stork Food System.
LME ehf has an 8% share in Stork, which was financed with loans from company shareholders, and other loans. Marel’s share in LME is 20%, and capital employed in this investment is in proportion with its share. Marel believes that despite the charged loss last year, in the long-term the investment will prove to be profitable for the company.

Debenture issue

Marel hf. issued debentures for ISK 6 billion. Half was issued last February and the second part in April 2006. Marel has also concluded an interest swap agreement on part of the amount that is connected with the issuance of debentures that ensured the company financing in foreign currency with payment of the interest and principal due in 2012.

New shares sold

A public offering of Marel shares proved successful. Investors subscribed for shares in excess of ISK 35.8 billion, which is significantly more than the company’s overall market value.
A total of 75 million new shares were sold for ISK 5,550 million. The total number of Marel shares after the offering and delivery of shares to Scanvægt’s former owners is 367,080,732. Eyrir Invest hf is Marel’s largest single shareholder with a 29,6% share. Landsbanki Íslands has a 24.0% share and Grundtvig Invest ApS has a 14.2% share. Number of shareholders in Marel hf almost tripled in 2006 and are around 3000 at end of year 2006 compared to 1100 in the beginning of the year.

5-year comparison

*) Previous presentation that is not in conformity with IFRS

Presentation of Results

Marel will present performance results at a meeting on Wednesday 14 February 2007 at 8:30 in the company’s headquarters at Austurhraun 9 in Garðabær, Iceland.

Annual General Meeting and publication days of the Consolidated Financial Statements in 2007

The Annual General Meeting for Marel is scheduled for Thursday 8 March 2007 at 15:00 in the company‘s headquarters at Austurhraun 9 in Garðabær. 

Marel will publish the Financial Statements for 2007 on the following days:

AGM Marel hf                                                                         8 March 2007
Interim Financial Statement – 1st quarter 2007                          8 May  2007
Interim Financial Statement – 2nd quarter 2007                         10 August  2007 
Interim Financial Statement – 3rd quarter 2007                          7 November 2007 
Annual Financial Statements and 4th quarter 2007                    12 February 2008
AGM Marel hf                                                                         7 March 2008

For further information, contact:

Hörður Arnarson, CEO                            Phone: 563-8000