2014 was a year of progress and transformation for Marel. The year started off slowly, but in the spring we changed the game and we have managed to be at the customer, for the customer while refocusing our operations.
With good tailwind in the market and a focused market approach, Marel delivered record order intake and sales in the second half of the year; the operational results also improved over the course of the year. Marel achieved 7.7% revenue growth in 2014 and an adjusted EBIT of €49 million, in line with management guidance. Free cash flow was €75 million leading to strong capital structure with net debt/EBITDA x2.1 within corporate targets.
Marel is at the forefront of the industry of innovating and delivering advanced equipment, software and solutions to the poultry, meat, and fish industries. Our customer base ranges from small family-owned businesses to leading global food processors. The Marel team is committed and passionate about serving the needs of the processors to operate at peak productivity, and directly enhancing the overall quality and value of food. Our customers constantly strive for better yield and throughput, with increased focus on sustainability and lower costs, with less use of resources such as water and energy.
We had good order intake in 2014, with orders received at €755 million compared with revenues of €713 million, leading to a stronger order book while we enter 2015. Marel is a truly global company with a good geographical mix in sales.
In the U.S. and Europe, we worked on expansion and modernization projects with our long-term customers. We also saw the customer base expanding, with various greenfield projects in growing markets such as Africa, Asia and South America.
Maintenance remains the backbone of the business, delivering 40% of revenues in good and bad times. We see the service and spare part business as a clear growth opportunity and a value driver for both customers and shareholders. We are now moving in a systematic way from reactive services to more proactive ones, with long-term service contracts to serve the needs of processors that want to secure limited downtime of factories and peak productivity at all times.
In January 2014, we launched our two-year refocusing plan Simpler, Smarter, Faster. The aim of the program is to become more efficient in serving our customers’ needs, to reduce costs, and to increase overall efficiency in the company. The program is fully on track and several actions have already been taken to simplify Marel’s structure and reduce the annual recurring cost base.
An essential part of the refocusing program is to focus the product portfolio and optimize the manufacturing footprint.
In order to continue to advance the global food industry and to create significant and sustainable value for our customers, we want to leverage our strengths and focus on our unique and innovative solutions to drive further growth and value creation. The other side of the coin is that we will discontinue some product families or partner up with other providers in fields such as freezing and packaging to bring world-class turn-key solutions to our customers.
Marel is moving from a diverse manufacturing footprint to a few multi-industry sites to deliver higher and more consistent quality products with more speed at lower cost. With fewer and larger sites, Marel can attract further talents to the company with much better utilization of manpower and capital investments.
In addition to streamlining, we are also investing in future growth through innovation and we are advancing our business with investments in business tools and IT systems that enable us to better manage our most valuable assets; customers and install base as the development of our people – the Marel team. Marel´s aim is to be the preferred partner. In fact, we are doing the same as our suppliers and our forward looking customers; Streamlining the business, innovating and investing in future growth and value creation to enhance the whole value chain.
Marel operates in a dynamic growth market and our customers are facing increased demand for more convenience and practicality. Marel is driven by the constant challenges our customers face in delivering food more efficiently and always ensuring food safety with minimal usage of resources such as water and energy.
Our commitment to innovation and to providing sustainable value has led to continuous advancement in food processing, benefitting consumers around the world. Our partnerships with customers keep the wheels of innovation turning at Marel and we will continue to deliver the new processing technology that enables processors to accommodate the increased volume, as well as the greater demand for value-added processing.
My first year as Marel’s CEO proved to me what I already knew — that Marel has endless possibilities and potential. We are commercially strong, with exceptional products and systems, a strong global network, and talented, dedicated employees.
We are on a journey to change a good company into a great one. Many of the steps that have been taken to streamline our operations have not been easy ones, involving manufacturing optimization and general reduction of employees. It has been truly inspiring to see the commitment of the Marel team and to learn that people are willing to embrace and adapt to necessary changes.
Marel’s future is bright. We have endless potential and opportunities ahead of us. The destination of our journey is a Simpler, Smarter and Faster Marel that will be better equipped to increase value to customers and shareholders. We are moving in the right direction and on track to deliver best in class profitability in line with our competitive position and potentials.