As announced in the Q4 2023 results, management presented an updated outlook for 2024 and the medium term based on the challenging macro environment, the business cycle within the food industry, and uncertainty on timing of recovery. Headwinds are expected to moderate in the coming quarters, supported by positive signs in the market.
Outlook
Outlook for 2024 and medium term
Long-term average market growth is unchanged and expected at 4-6% annually. Labor scarcity and continued wage inflation, coupled with favorable secular trends, focused on automation, robotics technology and digital solutions that support sustainable food processing, will continue to support Marel’s organic growth outlook.
In the medium term, there are positive signs of improvement in both market outlook and customer sentiment. To deliver strong revenue growth and improved operational performance in the future, build up of the order book to a healthy level is needed. Medium term outlook for revenues is expected to be above market growth (4-6% annually) with EBITDA2 margin above 18% and EBIT2 margin above 14%.
In the outlook for 2024, orders received and revenues are expected to build up throughout the year resulting in low single digit organic revenue growth for the full year, and improvement in operational performance to 14-15% EBITDA1 margin and 10-11% EBIT1 margin. Revenue decline and weaker operational performance is expected in Q1 2024 based on the soft order book, representing 34% of trailing twelve-month revenues, and low level of projects orders received in previous quarters.
Other considerations include the continued improvement of working capital, full focus on cash and EBITDA generation to reach targeted capital structure of 2-3x net debt/EBITDA, and CAPEX3 to be at normalized levels of 2-3% after a period of elevated investments.
Assumptions include long-term average market growth of 4-6% annually, no material escalation of geopolitics or disruption in supply chain and logistics, and effective tax rate of ~20%. Growth is not expected to be linear but based on opportunities and economic fluctuations, operational results may vary from quarter to quarter.
Notes: 1 Result from operations and EBITDA adjusted for PPA related costs, including depreciation and amortization, acquisition related expenses and restructuring costs. In Q4 2023, result from operations is also adjusted for one-off write-offs related to product portfolio rationalization. 2 Net debt (excluding lease liabilities) / Pro forma LTM adjusted EBITDA (including recent acquisitions) excluding non-cash and one-off costs per Marel's credit agreement. 3 Capital expenditures excluding investments in R&D and right of use assets.
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