8 August 2006                                          
PRESS RELEASE
Sales for the second quarter 2006 totaled EUR 46.6 million (ISK 4.3 billion), compared with EUR 33.9 million (ISK 2.7 billion) during the same period the previous year. Sales therefore increased by about 38%.

Profit from operations EBIT during the second quarter 2006 was EUR 4.3 million (ISK 399 million), which is 9.3% of income, compared with 3.3 million (ISK 262 million) last year. This is the largest profit from operations in one quarter to date.

Net profit for the 2nd quarter totaled EUR 797 thousand (ISK 74 million).

Sales for the first six months of 2006 were EUR 79.1 million (ISK 6.7 billion), compared with EUR 63.8 million (ISK 5.1 billion) which is an increase of 24% over last year. AEW Delford Systems in Britain began impacting on Marel’s consolidated financial statements last 7 April. Internal growth in sales during the period was about 7%.

Profit from operations EBIT in the first half of 2006 was EUR 4.8 million (ISK 406 million), which is 6.0% of sales income, compared with 6.3 million or 9.9% of sales the year before.
Net profit from January to June 2006 was EUR 1.3 million (ISK 115 million), compared with 3.9 million in 2005. Shares in Dutch company Stork NV are booked at market price and appear as a loss in associates.

Financial expenses during the first half of the year were about EUR 1.9 million, compared with EUR 1.3 million the previous year. The increase is in particular the result of increased leverage due to external growth connected with the acquisition of AEW Delford, and further purchases of companies in the third quarter as has been announced.

Hörður Arnarson, CEO:

“The company’s performance during the second quarter went well. It was gratifying to see that income growth is about 38%, while at the same time profit from operations (EBIT) has been brought to an acceptable level (9.3% of sales) after slack results from working in a difficult operational environment in recent quarters.  Alongside traditional operations, work has progressed vigorously on implementing the strategy of placing increased emphasis on external growth that was presented at the last Annual General Meeting. In addition to publishing the Consolidated Financial Statement, Marel’s acquisition of the Danish company Scanvaegt is being announced. Integration between Marel, AEW Delford and Carnitech is progressing on schedule, and ahead is very exciting integration with Scanvægt. The second half of this year will be framed by extensive integration measures and a one-time expense in this connection, and prospects in the long-term are good”.

The Financial Statements for the Marel Group for the first half of 2006 was approved at Marel’s Board of Director’s meeting today, 8 August 2006.

The Marel Group comprises 19 companies with operations in 15 countries.

The following are the main results from the consolidated financial statements for Marel:

Sales for the first six months of 2006 totaled EUR 79.1 million (ISK 6.7 billion), compared with EUR 63.8 million (ISK 5.1 billion) the year before. Sales have therefore increased by about 24%. Without the impact of AEW Delford Systems, which entered the Group’s consolidated financial statements last 7 April, the increase would have been 7%.

The contribution margin of product sales during the period was EUR 26.2 million or 33.2% of sales compared with EUR 22.4 million or 35.1% sales during the same period in 2005. Income in Icelandic króna was about 2% of the Group’s total sales, but expenses were about 21%, in particular because of employee wages in Iceland. The króna has weakened by about 7% toward the euro from the average during the first six months of 2005 to the same period in 2006. The company had negotiated forward exchange rate contracts to offset all projected costs in Icelandic króna until November 2007. The average exchange rate of these contracts during the period March – June 2006 was ISK/EUR 82, so the company has not fully benefited from the decrease in the Icelandic króna’s exchange rate. The average exchange rate of forward contracts during the period July 2006 to November 2007 is 96 ISK/EUR.

Operating expenses other than the cost of goods sold totaled EUR 22.0 million and were 27.8% of sales, compared with 26.0% the year before.  Sales and marketing expenses were EUR 10.7 million, which is about 39% higher than the previous year. Charged development expenses, including depreciation of product development costs from previous years, were about EUR 4.2 million, an increase of about 30%. 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 7.1 million, compared with 5.7 million the year before, an increase of about 26%.

Profit from operations (EBIT) was EUR 4.8 million or 6.0% of sales, compared with 9.9% in 2005.

Net finance costs totaled EUR 1.9 million, compared with EUR 1.3 million last year. The increase is the result of borrowing in the form of a debenture offering, which in part has been used to purchase the company AEW Delford, and will be used in the acquisition of Scanvaegt in the third quarter. 

Marel’s share in the operational loss of asscoiates totaled EUR 715 thousand, which may be attributed to the investment of LME ehf in the Dutch company Stork NV, and Marel owns 20% in LME hf. It is projected that this investment will in time be profitable.

Net profit of the Marel Group for the first half of 2006 totaled EUR 1.3 million (ISK 115 million), compared with EUR 3.9 million (ISK 314 million) the previous year.        

Total assets of the Group at the end of 2006 were EUR 193 million, an increase of about 78 million or 68% since the New Year. This increase is primarily due to the influence of an ISK 6 billion debenture offering and to establish AEW Delford Systems which took over operations and assets of two British companies.   Equity ratio has decreased somewhat due to excess financing and had become 20.9% on 30 June. With the purchase of Scanvaegt, the equity ratio will increase to about 30% at year-end because part of the purchase price will be paid with new shares in Marel.

Investment in fixed assets in the first half year of 2006 was EUR 4.7 million, compared with EUR 1.6 million during the same period last year.

Net cash to operating activites totaled EUR 6.7 million. The main reason for this is increased financial commitment in inventory and accounts receivable, but this is partly offset by an increase in accounts payable. At the end of the 2nd quarter of 2006, cash and cash equivalents amounted to EUR 35.7 million, compared with 4.0 million at the end of June 2005. It is projected that inventories of finished products will decrease, and that a shift will have occurred in sales between the 2nd and 3rd quarters.

On average, 1,179 employees worked for the Marel Group during the first half of 2006, compared with 851 at the same period the previous year. Of the 1,179 employees, 358 were in Iceland and 821 outside Iceland working at 19 companies in 15 countries. At the end of June 2006, there was a total of 1,386 employees.

5-year comparison

*) Previous presentation that is not in conformity with IFRS.

Equity ratio has decreased and was at the end of the second quarter 20.9%, compared with 35.7% at year-end 2005. Part of the purchase price of Scanvaegt will be paid with new shares in Marel. This increase will lead to a rise in the equity ratio, which is projected to be about 30% by year-end 2006.

Overview of the Group’s main elements
The Marel Group comprises three principal operations as depicted in the half-year financial statements: Marel companies with headquarters in Iceland and ten sales and service offices located worldwide, Carnitech a/s with its four subsidiaries, and AEW Delford Systems with two subsidiaries.  Extensive work on integrating the operations of these companies is currently in progress, and is therefore felt that a correct portrayal of operations would not be achieved by discussing the performance of individual units. The following is a synopsis of the main elements of each operation.

Marel Companies
The first half of the Marel Companies operational year was somewhat more sluggish than projected. The effect of the weakening Icelandic króna has to date only slightly impacted operations. In addition, an unusually large number of new products are entering the market, and their potential sales and contribution margins are very good. However, initial sales of new products usually have lower contribution margins. Prospects for the second half of the year are good.  

Carnitech
The second quarter was very good for Carnitech, and results for the first six months are fully in line with management’s expectations. Work on organizational changes over recent months is progressing well.  It is anticipated that these changes will have returned results for the second half of 2007 so that Carnitech’s performance will have become acceptable, and the company’s profit from operations (EBIT) will on average be over 8% of turnover.

AEW Delford Systems
Marel acquired AEW Delford Systems on 7 April 2006. The company’s operations have been doing well, and its excellent product range creates significant future potential. Work is progressing on integrating operations internally at AEW Delford, as well as with other companies within the Group. It is projected that a one-time expense resulting from integration will be about EUR 2.5 million, which will return about EUR 3 million in annual rationalization beginning in mid 2007.  

LME holding company
Marel, 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  intention was to delist from the stock market, but that plan has been discarded. Investors reacted badly to this attempt, and to the large expense that consequently fell on the company, which resulted in Stork’s share price dropping. Stork NV is the owner of Stork Food Systems, which is a leader in manufacturing equipment for poultry processing. Marel believes that despite the charged loss in the quarter, the investment will in the long-term prove to be profitable for the company.
This investment is made to contribute to continued good cooperation between the companies. In all, LME purchased a total of 5.1% in Stork NV as of last 30 June. In July, the company increased its holdings in Stork and now owns 7.0% of its stock. A total of EUR 100 million has been earmarked to purchase shares in Stork, which is financed with loans from company shareholders and other loan capital. Marel’s share in LME is 20%, and capital tied up is in line with participating holdings.

Bond issue
Marel has issued bonds 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, which was obtained with the issuance of bonds that ensured the company financing in foreign currency with payment of the interest and principal after six years.
The purpose of the bond issue is to finance the company’s future growth in accordance with the growth objectives that were presented at the company’s Annual General Meeting last February.

Prospects
Sales prospects for the year continue to be considered good, and new products that have been introduced over the past months have been well received. The 3rd quarter, however, will as usually be framed by summer holidays and fewer deliveries and less income as a result.
Trends in exchange rates have recently been favorable to the company. The correction in the Icelandic króna reduces the company’s Icelandic costs and increases its operating profit. The company has concluded forward exchange rate contracts that ensure an advantageous rate of the króna until November of next year.
Performance over the following quarters will, however, be shaped somewhat from expenses as a result of integration at AEW Delford, which has begun, and also because of extensive integration with Scanvægt that will commence in the coming weeks.

Consolidated Financial Statement publishing for 2006
Marel will publish the Financial Statements for 2006 on the following days:

3rd quarter:  Tuesday 7 November 2006
4th quarter:  Tuesday 13 February 2007
The Annual General Meeting for Marel is scheduled for Thursday 8 March 2007

Marel will present performance results for the 2nd quarter of 2006 at a meeting on Wednesday 9 August 2006 at 08:30 at company headquarters at Austurhraun 9 in Garðabær, Iceland.