Q2 2026 JBT Marel Corp Earnings Call

August 4, 2026

Speaker #1: Please stand by, your program is about to begin. Welcome to JBT's Marel Earnings Conference call for the second quarter 2026. My name is Aaron, and I will be your conference operator today.

Operator: Please stand by. Your program is about to begin. Welcome to JBT Marel Earnings Conference Call for Q2 2026. My name is Aaron, and I will be your conference operator today. As a reminder, today's call is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. To register to ask a question anytime, please press star one on your telephone keypad. I will now turn the call over to JBT Marel Senior Director of Investor Relations, Marlee Spangler. Please go ahead.

Speaker #1: As a reminder, today's call is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Speaker #1: To register to ask a question anytime, please press star 1 on your telephone keypad. I will now turn the call over to JBT Marel's Senior Director of Investor Relations, Marley Spangler.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Aaron. Good morning, everyone, and thank you for joining our second quarter 2026 conference call. With me on the call is our Chief Executive Officer, Brian Deck.

Marlee Spangler: Thank you, Aaron. Good morning, everyone, and thank you for joining our Q2 2026 conference call. With me on the call is our Chief Executive Officer, Brian Deck, President Arni Sigurdsson, and Chief Financial Officer Matt Meister. In today's call, we will use forward-looking statements that are subject to the safe harbor language in yesterday's press release and 8-K filing. JBT Marel's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available on the IR website. Also, our discussion today includes references to certain non-GAAP financial measures. A reconciliation of these measures to the most comparable GAAP measure can be found on our website. With that, I'll turn the call over to Brian.

Speaker #2: President Arnie Sigurðsson, and Chief Financial Officer, Matt Meister. In today's call, we will use forward-looking statements that are subject to the Safe Harbor Language and yesterday's press release and 8K filing.

Speaker #2: JBT Marel's periodic SEC filings, also contain information regarding risk factors that may have an impact on our results. These documents are available on the IR website.

Speaker #2: Also, our discussion today includes references to certain non-GAAP financial measures. A reconciliation of these measures to the most comparable GAAP measure can be found on our website.

Speaker #2: With that, I'll turn the call over to Brian.

Speaker #3: Thanks, Marley. And good morning, all. First and foremost, we are very pleased with the continued robust demand environment in the second quarter. Orders increased 10% year-over-year, and marked our third consecutive quarter with orders exceeding $1 billion, reinforcing the strategic benefits of the JBT Marel combination.

Brian Deck: Thanks, Marlee, and good morning, all. First and foremost, we were very pleased with the continued robust demand environment in the second quarter. Orders increased 10% year-over-year and marked our third consecutive quarter with orders exceeding $1 billion, reinforcing the strategic benefits of the JBT Marel combination. By bringing together our complementary technologies, we are strengthening our ability to serve customers around the world. Contributing to the gain was double-digit year-over-year growth in our Prepared Food and Beverage Solutions segment, which was led by our value-added prepared foods technology. The strong orders also reflect the success of our synergistic cross-selling initiatives.

Speaker #3: By bringing together our complementary technologies, we are strengthening our ability to serve customers around the world. Contributing to the gain was double-digit year-over-year growth in our prepared food and beverage solutions segment.

Speaker #3: Which was led by our value-added prepared foods technology. The strong orders also reflect the success of our synergistic cross-selling initiatives. It is also clear that investment by the poultry industry remains solid, and JBT Marel is uniquely positioned to benefit from investment across the entire poultry value chain from primary and secondary processing through further processing and end-of-line solutions.

Brian Deck: It is also clear that investment by the poultry industry remains solid, and JBT Marel is uniquely positioned to benefit from investment across the entire poultry value chain, from primary and secondary processing through further processing and end-of-line solutions, allowing us to capture growth wherever our customers are investing. At the same time, we continue to advance our cost synergy initiatives. As we have discussed previously, the majority of our synergy actions in 2026 and 2027 are related to supply chain and footprint optimization projects. As Arni will highlight, we have taken decisive actions to advance our footprint optimization strategy, allowing us to leverage our global scale and simplify our manufacturing and distribution network. As Matt will discuss, we are restructuring our warehouse automation business to optimize the cost structure and take advantage of product standardization to operate more efficiently.

Speaker #3: Allowing us to capture growth wherever our customers are investing. At the same time, we continue to advance our cost synergy initiatives. As we have discussed previously, the majority of our synergy actions in 2026 and 2027 are related to supply chain and footprint optimization projects.

Speaker #3: As Arnie will highlight, we have taken decisive actions to advance our footprint optimization strategy allowing us to leverage our global scale and simplify our manufacturing and distribution network.

Speaker #3: And as Matt will discuss, we are restructuring our warehouse automation business to optimize the cost structure and take advantage of product standardization to operate more efficiently.

Speaker #3: There were temporary and other factors that impacted our second quarter, which Matt will discuss. Absent the net benefits of these factors, results fell short of our expectations and our prepared food and beverage segment.

Brian Deck: There were temporary and other factors that impacted our Q2, which Matt will discuss. Absent the net benefits of these factors, results fell short of our expectations in our Prepared Food and Beverage Solutions segment. That said, we remain optimistic about the short and long-term future of that segment. At the same time, we are thrilled with the continued profitable growth of the Protein Solutions segment. Taken together, our backlog visibility, integration efforts, and continuous improvement initiatives gives us confidence in realizing our H2 2026 forecast and achieving our longer-term financial targets, including an adjusted EBITDA margin of 20% in 2028. Let me turn the call over to Matt to provide analysis of our Q2 and guidance for the remainder of the year.

Speaker #3: That said, we remain optimistic about the short- and long-term future of that segment. At the same time, we are thrilled with the continued, profitable growth of the Protein Solutions segment.

Speaker #3: Taken together, our backlog visibility, integration efforts, and continuous improvement initiatives give us confidence in realizing our second-half 2026 forecast and achieving our longer-term financial targets, including an adjusted EBITDA margin of 20% in 2028.

Speaker #3: Now, let me turn the call over to Matt to provide analysis of our second quarter and guidance for the remainder of the year.

Speaker #4: Thanks, Brian. Second quarter consolidated revenue was $981 million. An increase of 5% year-over-year which made up of 3% organic growth and 2% from foreign exchange.

Matt Meister: Thanks, Brian. Q2 consolidated revenue was $981 million, an increase of 5% year-over-year, which made up of 3% organic growth and 2% from foreign exchange. At the segment level, strong protein revenue of $467 million grew 11% year-over-year, which was 8% organic and 3% from foreign exchange. Prepared Food and Beverage Solutions segment revenue was flat versus Q2 last year, which included an approximate 2% favorable impact from foreign exchange. Equipment revenue in the segment was short of our expectations due to a combination of logistics constraints and production inefficiencies resulting from our efforts to optimize our manufacturing footprint. At the same time, we are quite pleased with the segment's strong order and backlog growth. Q2 consolidated adjusted EBITDA of $168 million was impacted by the timing of equipment shipments described above and the following discrete items not included in our forecast.

Speaker #4: At the segment level, strong protein revenue of $467 million grew 11% year-over-year. Which was 8% organic and 3% from foreign exchange. Prepared food and beverage segment revenue was flat versus Q2 last year, which included an approximate 2% favorable impact from foreign exchange.

Speaker #4: Equipment revenue in the segment was short of our expectations due to a combination of logistics constraints and production inefficiencies resulting from our efforts to optimize our manufacturing footprint.

Speaker #4: At the same time, we are quite pleased with the segment's strong order and backlog growth. Second quarter consolidated adjusted EBITDA of $168 million was impacted by the timing of equipment shipments described above, and the following discrete items not included in our forecast.

Speaker #4: We recognized $17 million of IEPA tariff refunds. Which was partially offset by $4 million in higher-than-expected tariff expense and associated with prior years, and $5 million in accelerated long-term incentive compensation expense.

Matt Meister: We recognized $17 million of IEEPA tariff refunds, which was partially offset by $4 million in higher-than-expected tariff expense associated with prior years and $5 million in accelerated long-term incentive compensation expense. We are operating in a higher inflationary environment as the pace of higher logistics, metals, and other input costs put pressure on our year-over-year margins. That said, we have taken appropriate pricing actions to address these cost pressures. As mentioned, we are investing significant effort in optimizing our manufacturing footprint, primarily impacting the Prepared Food and Beverage Solutions segment. These efforts delayed some revenue recognition in the quarter and correspondingly weighed on margins. We believe this short-term disruption is part of the transition to lower cost operations, which are critical to achieving our 2028 margin targets. At the same time, we took action to restructure our warehouse automation business.

Speaker #4: We are operating in a higher inflationary environment as the pace of higher logistics metals and other input costs put pressure on our year-over-year margins.

Speaker #4: That said, we have taken appropriate pricing actions to address these cost pressures. As mentioned, we are investing significant effort in optimizing our manufacturing footprint.

Speaker #4: Primarily impacting the prepared food and beverage segment. These efforts delayed some revenue recognition in the quarter and correspondingly weighed on margins. We believe this short-term disruption is part of the transition to lower-cost operations, which are critical to achieving our 2028 margin targets.

Speaker #4: At the same time, we took action to restructure our warehouse automation business. We have made significant progress in advancing our product standardization, enabling us to more efficiently deploy engineering resources and consolidate two facilities into one.

Matt Meister: We have made significant progress in advancing our product standardization, enabling us to more efficiently deploy engineering resources and consolidate two facilities into one. These actions are expected to generate approximately $9 million in total annual savings, including approximately $3 million in H2 2026. While the Prepared Food and Beverage Solutions segment margins were disappointing, we expect meaningful improvement in the back half of the year, which is supported by our strong backlog visibility, pricing actions, and operational improvement initiatives. Meanwhile, adjusted EBITDA margins in the Protein Solutions segment improved year-over-year, even excluding the benefit from tariff refunds, primarily due to volume leverage in our poultry business, as well as benefits from our synergy and continuous improvement actions across the segment. During the Q2, we also took a non-cash impairment charge to write off intangibles associated with the 2021 acquisition of Prevenio within the Protein Solutions segment.

Speaker #4: These actions are expected to generate approximately $9 million in total annual savings, including approximately $3 million in the second half of 2026. While the prepared food and beverage segment margins were disappointing, we expect meaningful improvement in the back half of the year, which is supported by our strong backlog visibility, pricing actions, and operational improvement initiatives.

Speaker #4: Meanwhile, adjusted EBITDA margins in the Protein segment improved year-over-year, even excluding the benefit from tariff refunds. This was primarily due to volume leverage in our poultry business, as well as benefits from our synergy and continuous improvement actions across the segment.

Speaker #4: During the second quarter, we also took a non-cash impairment charge to write off intangibles associated with the 2021 acquisition of Prevenio within the protein segment.

Speaker #4: This impairment is a reflection of a shift in demand from Prevenio's value-added antimicrobial offering for poultry to a more commodity-based customer approach. Moving to the balance sheet, we generated $179 million in year-to-date free cash flow.

Matt Meister: This impairment is a reflection of a shift in demand from Prevenio's value-added antimicrobial offering for poultry to a more commodity-based customer approach. Moving to the balance sheet, we generated $179 million in year-to-date free cash flow, representing a conversion to adjusted EBITDA of 58%. With leverage at the end of the quarter just below 2.5 times, we are pleased that we are now within our target range of 2 to 2.5 times after just 18 months after the close. In terms of guidance, the actions we have taken in our operations are expected to improve production efficiency as we progress through the H2 of the year. Therefore, we expect a steeper ramp in the Q4 results compared to the Q3.

Matt Meister: This impairment is a reflection of a shift in demand from Prevenio's value-added antimicrobial offering for poultry to a more commodity-based customer approach. Moving to the balance sheet, we generated $179 million in year-to-date free cash flow, representing a conversion to adjusted EBITDA of 58%. With leverage at the end of the quarter just below 2.5 times, we are pleased that we are now within our target range of 2 times-to-2.5 times after just 18 months after the close. In terms of guidance, the actions we have taken in our operations are expected to improve production efficiency as we progress through the H2 of the year. Therefore, we expect a steeper ramp in the Q4 results compared to the Q3.

Speaker #4: Representing a conversion to adjusted EBITDA of 58%. And with leverage at the end of the quarter just below 2.5 times, we are pleased that we are now within our target range of 2 to 2.5 times, after just 18 months after the close.

Speaker #4: In terms of guidance, the actions we have taken in our operations are expected to improve production efficiency as year. Therefore, we expect a steeper ramp in the fourth quarter results compared to the third quarter.

Speaker #4: For the third quarter, we are guiding to a year-over-year revenue growth of 2 to 4% organic, partially offset by 1% FX impact. We expect adjusted EBITDA margins of 17 to 17.5%.

Matt Meister: For the Q3, we are guiding to a year-over-year revenue growth of 2% to 4% organic, partially offset by 1% FX impact. We expect adjusted EBITDA margins of 17% to 17.5%. Given our record backlog, which provides visibility to over 90% of H2 equipment revenue, coupled with our resilient aftermarket revenue and operational improvements within the Prepared Food and Beverage Solutions segment, we are maintaining our full year 2026 guidance for revenue and adjusted EBITDA. At the midpoint, that reflects consolidated revenue growth of 6% and adjusted EBITDA margin expansion of 145 basis points. Finally, we have refined our adjusted EPS guidance to reflect updated assumptions for depreciation, amortization, and our effective tax rate. With that, let me turn the call over to Arni.

Speaker #4: Given our record backlog, which provides visibility to over 90% of back half equipment revenue, coupled with our resilient aftermarket revenue, and operational improvements within the prepared food and beverage segment, we are maintaining our full year 2026 guidance for the revenue and adjusted EBITDA.

Speaker #4: At the midpoint, that reflects consolidated revenue growth of 6%, and adjusted EBITDA margin expansion of 145 basis points. Finally, we have refined our adjusted EPS guidance to reflect updated assumptions for depreciation, amortization, and our effective tax rate.

Speaker #4: With that, let me turn the call over to Arnie.

Speaker #5: Thank you, Matt. As Brian mentioned earlier, we have made significant progress on cross-selling allowing us to realize synergy orders of $45 million through the first six months of the year, and $75 million over the last 18 months.

Arni Sigurdsson: Thank you, Matt. As Brian mentioned earlier, we have made significant progress on cross-selling, allowing us to realize synergy orders of $45 million through the H1 of the year and $75 million over the last 18 months. Many of our opportunities are in prepared foods, where we meaningfully strengthened our integrated offering through the JBT Marel combination. For example, we secured a multi-line order with a leading poultry customer. We leveraged technologies from across the combined portfolio, including forming, coating, frying, and heating for branded fully cooked chicken distributed to the retail channels. This is a testament to the strategic benefits of the combination and to our enhanced value proposition with customers. Additionally, as discussed at the top of the call, we continue to take decisive actions to optimize our operating footprint. To date, we have announced facility consolidations with a total of approximately 1.3 million square feet.

Speaker #5: Many of our opportunities are in prepared foods, where we meaningfully strengthened our integrated offering through the JBT model combination. For example, we secured a multi-line order with the leading poultry customer.

Speaker #5: We leveraged technologies from across the combined portfolio, including forming, coating, frying, and heating, for branded fully cooked chicken distributed to retail channels. This is a testament to the strategic benefits of the combination and to our enhanced value proposition with customers.

Speaker #5: Additionally, as discussed at the top of the call, we continue to take decisive actions to optimize our operating footprint. To date, we have announced facility consolidations with a total of approximately $1.3 million square feet.

Speaker #5: This includes approximately $1.1 million square feet of manufacturing and distribution space, and $200,000 square feet of office space, and represents in total an approximately 15% reduction of our global footprint.

Arni Sigurdsson: This includes approximately 1.1 million square feet of manufacturing and distribution space and 200,000 square feet of office space and represents, in total, an approximately 15% reduction of our global footprint. More than just the reduction in square footage, the footprint optimization allows us to take advantage of our scale, reduce complexity, and utilize low-cost operating capacity across our global network, such as in Eastern Europe, Brazil, and India. As a result of these initiatives, we expect to record a cash benefit on the sale of real estate assets in 2027 or 2028.

Arni Sigurdsson: This includes approximately 1.1 million sq ft of manufacturing and distribution space and 200,000 sq ft of office space and represents, in total, an approximately 15% reduction of our global footprint. More than just the reduction in square footage, the footprint optimization allows us to take advantage of our scale, reduce complexity, and utilize low-cost operating capacity across our global network, such as in Eastern Europe, Brazil, and India. As a result of these initiatives, we expect to record a cash benefit on the sale of real estate assets in 2027 or 2028.

Speaker #5: Nearly 80% of the manufacturing space reduction is associated with the prepared food and beverage segment as we focus on that segment's full margin potential, and other opportunities do remain.

Speaker #5: For more than just the reduction in square footage, the footprint optimization allows us to take advantage of our scale reduce complexity, and utilize low-cost operating capacity across our global network, such as in Eastern Europe, Brazil, and India.

Speaker #5: As a result of these initiatives, we expect to record a cast benefit on the sale of real estate assets in 2027 or 2028. In terms of the P&L effect, we expect these initiatives will deliver annualized savings of approximately $25 to $30 million by 2028, well exceeding our original estimated savings of $10 to $15 million.

Arni Sigurdsson: In terms of the P&L effect, we expect these initiatives will deliver annualized savings of approximately $25 to 30 million by 2028, well exceeding our original estimated savings of $10 to 15 million. Of these anticipated annual savings, roughly $4 to 5 million is embedded into our 2026 forecast. Let me now turn the call back to Brian.

Speaker #5: Of these anticipated annual savings, roughly 4 to 5 million is embedded into our 2026 forecast. Let me now turn the call back to Brian.

Speaker #6: Thanks, Arnie. We are pleased with the progress we are making on our next-gen strategic initiatives. The strong market reception to our integrated and full-line solutions demonstrates the differentiated value proposition we provide to customers and our cross-selling capabilities.

Brian Deck: Thanks, Arni. We are pleased with the progress we are making on our NextGen strategic initiatives. The strong market reception to our integrated and full line solutions demonstrates the differentiated value proposition we provide to customers and our cross-selling capabilities. We are in the early innings of deploying our customer-first service initiatives, which, combined with the global reach and digital offering, are expected to deepen customer engagement and support our goal of increasing our aftermarket wallet share. We continue to make progress on our cost synergy initiatives. As Arni articulated, one of the most significant benefits of the JBT Marel combination is the flexibility to leverage our global scale and relocate production from higher cost and underutilized facilities to our most efficient, lower cost operations. These footprint optimization initiatives are just one of the many levers we have to capture the value-creating benefits of the business combination.

Speaker #6: We are in the early innings of deploying our initiatives, which combined with the global reach and digital offering are expected to deepen customer engagement and support our goal of increasing our aftermarket wallet share.

Speaker #6: We continue to make progress on our cost synergy initiatives. As Arnie articulated, one of the most significant benefits of the JBT Marel combination is the flexibility to leverage our global scale and relocate production from higher-cost and underutilized facilities to our most efficient, lower-cost operations.

Speaker #6: These footprint optimization initiatives are just one of the many levers we have to capture the value-creating benefits of the business combination. Supply chain optimization is another pillar.

Brian Deck: Supply chain optimization is another pillar as we consolidate our purchasing and execute value-add engineering projects to lower the cost and complexity of equipment and achieve further standardization of parts and subcomponents. While the tariff environment has made these efforts more challenging, it has also motivated us to accelerate the localization of European supply chain to the US to better serve the US domestic market from a lead time and cost perspective. All told, we are demonstrating the industrial logic of the JBT Marel combination. This pool of opportunities enhances confidence in our ability to deliver our profitable growth objectives and our target of 20% adjusted EBITDA margins in 2028. Before we take your questions, I'd like to thank our team.

Speaker #6: As we consolidate our purchasing and execute value-add engineering projects, to lower the cost and complexity of equipment, and achieve further standardization of parts and subcomponents.

Speaker #6: And while the tariff environment has made these efforts more challenging, it has also motivated us to accelerate the localization of European supply chain to the US, to better serve the US domestic market from a lead time and cost perspective.

Speaker #6: All told, we are demonstrating the industrial logic of the JBT Marel combination. This pool of opportunities enhances confidence in our ability to deliver our profitable growth objectives and our target of 20% adjusted EBITDA margins in 2028.

Speaker #6: Before we take your questions, I'd like to thank our team. It is their commitment and hard work every day that has enabled us to make such significant progress on the integration of JBT and Marel.

Brian Deck: It is their commitment and hard work every day that has enabled us to make such significant progress on the integration of JBT and Marel and positions us as a stronger partner to our customers around the globe. Let's open the call to questions. Operator?

Speaker #6: It positions us as a stronger partner to our customers around the globe. Now, let's open the call to questions. Operator?

Speaker #4: Thank you. If you'd like to ask a question, press star 1 on your keypad to leave the queue at any time press star 2.

Operator: Thank you. If you would like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question, and we will pause for just a moment to allow everyone a chance to queue. We will take our first question from Mircea Dobre. Your line is now open.

Speaker #4: Once again, that is star 1 to ask a question, and we'll pause for just a moment to allow everyone a chance to queue. We will take our first question from Mig Dobre. Your line is now open.

Speaker #7: Thank you very much. Good morning, everyone. Just maybe a little bit of clarification on the guidance and your thoughts here on prepared food and beverage.

Mircea Dobre: Thank you very much. Good morning, everyone. Just maybe a little bit of clarification on the guide and your thoughts here on prepared food and beverage. I am curious as to how you think about the margin cadence, relative to what we have seen in Q2. You have done 17.5% in Q2. How do we think about Q3 and Q4, given everything that you talked about in terms of footprint consolidation and some of the challenges that you had in Q2? Is there some sort of a catch-up that we need to consider here in terms of revenue that got pushed out from Q2 into either Q3 or Q4? How do we maybe frame that as well?

Speaker #7: I'm curious as to how you think about the margin cadence relative to what we have seen in Q2. So, you've done 17.5% in Q2.

Speaker #7: How do we think about Q3 and Q4? Given everything that you talked about in terms of footprint consolidation, some of the challenges that you've had in Q2, and then is there some sort of a catch-up that we need to consider here in terms of revenue that got pushed out from Q2 into either Q3 or Q4?

Speaker #7: How do we maybe frame that as well?

Speaker #6: Yes, Mig. This is Brian. Good morning. I'll start, and then I'll hand it off to Matt to talk a little bit about the margin cadence.

Brian Deck: Yes. Mircea, it is Brian. Good morning. I will start, and then I will hand it off to Matt to talk a little bit about the margin cadence. When you think about the revenues in the second quarter, you exclude the impact of FX, I would say we were short about $20 million in revenue in the quarter, all of which being in the prepared food and beverage segment. If you take a look at that, about half of that was, I would say, from delayed, associated with logistics availability, and the other half associated with some of these production inefficiencies with some of the moves we are making within our facilities. That $20 million, we do feel just changes the cadence moving from Q2 into Q3.

Speaker #6: So when you think about the revenues in the second quarter, the exclude the impact of FX, I would say we were short about $20 million in revenue in the quarter, all of which being in the prepared food and beverage segment.

Speaker #6: And if you take a look at that, about half of that was, I would say, from delayed associated with logistics availability. And the other half associated with some of these production inefficiencies with some of the moves we're making within our facilities.

Speaker #6: So that $20 million we do feel is really just changes the cadence moving from Q2 into Q3. And then obviously, we're trying to be very thoughtful in terms of the Q3 guidance to account for any other inefficiencies that we see or any other logistics challenges.

Brian Deck: Obviously, we are trying to be very thoughtful in terms of the Q3 guidance to account for any other inefficiencies that we see or any other logistics challenges. We have essentially redistributed that $20 million across the back half of the year. That $20 million obviously comes with a margin impact in the quarter. Again, which certainly hurt the PFB margins. Typically, we look at somewhere in the range of a flow-through on margins of 25%, sometimes 30%. Those caught a five, maybe a $6 million impact on EBITDA just from the revenue. Again, that will flow through here in the back half. In terms of the margin cadence on PFB, I think Matt can give some color there.

Speaker #6: So we've essentially redistributed that $20 million across the back half of the year. That obviously that $20 million obviously comes with a margin impact in the quarter.

Speaker #6: Again, which certainly hurt the PFB margins. So typically, we look at somewhere in the range of a flow-through on margins of $25, sometimes 30%.

Speaker #6: So it was called a 5, maybe a $6 million impact on EBITDA just from the revenue. And again, that will flow through here in the back half.

Speaker #6: So in terms of the margin cadence on PFB, I think Matt can give some color there.

Speaker #2: Yeah. Mig, I think what we expect to see in Q3 for the prepared food and beverage segment is about a 25 to 50 basis point sequential improvement sorry, year-over-year improvement from Q3 of last year, year-over-year and then we expect to see improved margins from Q3 to Q4, probably about another 100 basis points or so.

Matt Meister: Yeah, Mig, I think what we expect to see in Q3 for the Prepared Food and Beverage Solutions is about a 25 to 50 basis point sequential improvement. I am sorry, year-over-year improvement from Q3 of last year-over-year. We expect to see improved margins from Q3 to Q4, probably around another 100 basis points or so. You could see the sequential improvement from Q2 to Q3 to Q4 as we work through some of these inefficiencies and see some benefits from the higher up volume.

Speaker #2: So you can see the sequential improvement from Q2 to Q3 to Q4 as we work through some of these inefficiencies and see some benefits from the higher volume.

Speaker #7: Okay, that's helpful. I mean, that would suggest that in Q4, you would have pretty significant margin expansion in the segment year-over-year, which I guess is good to hear.

Mircea Dobre: Okay. That is helpful. That would suggest that in Q4 you would have pretty significant margin expansion in this segment year-over-year, which I guess is good to hear. Maybe my follow-up, sticking with margins here. Protein Solutions had much better margin than I was anticipating, but presumably there is a good chunk contribution from the IEEPA refunds. Maybe you can clarify that.

Speaker #7: And then maybe my follow-up, sticking with margins here, protein had much better margin than I was anticipating, but presumably there's a good chunk contribution from the IEPA refunds.

Speaker #7: Maybe you can clarify that. And a similar question here: how should we think about margins in the back half? Thank you.

Brian Deck: Yes.

Mircea Dobre: Similar question here, how do we think about margins in the H2? Thank you.

Speaker #6: Right. Yes. So you're correct that, I think it's 24% margins for protein in the second quarter. There was, I would say, about a 200 basis point impact from the tariff refunds.

Brian Deck: Right. Yeah. You are correct that the, I think it is 24% margins for Protein Solutions in the Q2. There was, I would say, about 200 basis points impact from the tariff refunds. They have been running at about in that low to mid-20s. We would expect that general cadence to continue through the H2. It will be relatively flat for the H2 of the year. Part of the reason is they will have a higher mix of equipment versus aftermarket. The mix is changing a little bit. As you know, the flow through on the equipment is a little bit less than the flow through on some of the aftermarket. They will be relatively flat in the H2.

Speaker #6: So they've been running at about that low to mid-20s range. We would expect that general cadence to continue through the back half. Keeping in mind that they have a higher mix, it would be relatively flat for the back half of the year.

Speaker #6: And part of the reason is they'll have a higher mix of equipment versus aftermarket. So the mix is changing a little bit. And as you know, the flow-through on the equipment is a little bit less than the flow-through on some of the aftermarket.

Speaker #6: So they'll be relatively flat in the back half. And by the way, just generally speaking, in terms of the going back to PFB and the margin progression, keeping in mind that we are going to see start to see some of the benefits of some of these facilities combinations as well as the AGV restructuring that Matt mentioned in the prepared remarks.

Brian Deck: By the way, just generally speaking, in terms of the going back to PFB and the margin progression, keeping in mind that we are going to start to see some of the benefits of some of these facilities combinations as well as the AGV restructuring that Matt mentioned in the prepared remarks. That's part of the reason why you're seeing maybe a faster ramp-up than you might otherwise expect.

Speaker #6: So that's part of the reason why you're seeing maybe a faster ramp-up than you might otherwise expect.

Speaker #7: All right. That's helpful. I'll get back in the queue.

Mircea Dobre: All right. That's helpful. I'll get back in queue.

Speaker #6: Thank you.

Brian Deck: Thank you.

Speaker #4: And we will take our next question from Justin Ages with CJS Securities. Please go ahead.

Operator: We will take our next question from Justin Ages with CJS Securities. Please go ahead.

Speaker #8: Hi. Morning, all.

Justin Ages: Hi. Morning all.

Speaker #6: Morning.

Brian Deck: Morning.

Matt Meister: Morning.

Speaker #8: Morning. You mentioned ongoing strength in poultry. I was just wondering if you could elaborate on some of the strength in protein solutions outside of that poultry category.

Justin Ages: You mentioned ongoing strength in poultry. Was just wondering if you could elaborate on some of the strength in Protein Solutions outside of that poultry category.

Speaker #6: Yes. So, we have pork, beef, fish, and poultry. Poultry is certainly the largest segment and continues to show strength. We're particularly excited about some of the investments we're starting to see on the prepared food and beverage side.

Brian Deck: Yes. We have pork, beef, fish, and poultry. Poultry is certainly the largest segment and continues to show strength. We're particularly excited about some of the investments we're starting to see on the prepared food and beverage side. Sorry, the prepared food side. You've probably heard from some of our customers speaking about some of the investments we're making there. We saw some really nice progress there. That's actually within the PFB segment. Specific to the Protein segment, we do expect continued investments even on the primary and secondary side of poultry. On the fish side and on the pork side, I would say continued modest strength. It's not robust the way we've seen from poultry. However, as beef prices continue to be high, pork and fish become alternatives from a consumer perspective, and we are seeing some decent volume there.

Speaker #6: Sorry, the prepared food side. You've probably heard from some of our customers speaking about some of the investments we're making there. So we saw some really nice progress there.

Speaker #6: And that's actually within the PFB segment. But specific to the protein segment, we do expect continued investments, even on the primary and secondary side of poultry.

Speaker #6: And on the fish side and on the pork side, I would say continued modest strength. It's not a robust the way we're seeing from poultry.

Speaker #6: However, as beef prices continue to be high, pork and fish become alternatives. From a consumer perspective, and we are seeing some decent volume there.

Speaker #6: So, the backlog and the orders were fairly strong in the second quarter, and outlook is generally positive. The weakest part, by far, is the beef side, right, given the lack of cattle inventory for the processors.

Brian Deck: The backlog and the orders were fairly strong in Q2 and outlook is generally positive. The weakest part by far is the beef side, right? Given the lack of cattle inventory for the processors. We're not seeing much in the way of investments on the beef side. That's the weakest for sure. Just for your reference, beef is less than 5% of our Protein Solutions portfolio.

Speaker #6: So we're not seeing much in the way of investments on the beef side. So that's the weakest for sure and it's and just for your reference, beef is less than 5% of our protein solutions portfolio.

Justin Ages: That's helpful. Thanks, Brian. You mentioned outside of the restructuring in the AGV business, you mentioned that the business itself was improving, I think, in the deck. Just wanted to know if you can give us an indication if you're seeing that continuing, like beyond Q2, is that improvement being sustained?

Speaker #8: That's helpful. Thanks, Brian. And then you mentioned outside of the restructuring in the AGV business, you mentioned that the business itself was improving. I think in the deck.

Speaker #8: So, I just wanted to know if you can give us an indication if you're seeing that continuing beyond Q2—is that improvement being sustained?

Speaker #6: Yes. Specific to prepared food and beverage, indeed, yes. Again, we are seeing a lot of strength on what we call when you think about our PFB segment, it's prepared foods, it's diversified food and health, and it's AGV.

Brian Deck: Yeah. Specific to prepared food and beverage, indeed, yes. We are seeing a lot of strength. When you think about our PFB segment, it's prepared foods, it's diversified food and health, and it's AGV. Clearly from a demand perspective, that prepared food side is quite strong. I think this is largely on investments not only from the poultry segment but also other segments including pork, et cetera. The other thing I would mention is within that segment, AGV had its strongest quarter in 6 quarters. On volume. As you may recall, AGV was a lot more impacted on the volume side from some of the disruptions from the tariffs as folks pulled back on some of their warehouse automation, and that seems to be behind us. Again, extraordinarily strong quarter.

Speaker #6: Clearly, from a demand perspective, that prepared food side is quite strong. And again, I think this is largely on investments not only from the poultry segment, but also other segments including pork, etc.

Speaker #6: The other thing I would mention is within that segment, AGV had its strongest quarter in six quarters. On volume. So as you may recall, AGV was a little bit more was a lot more impacted on the volume side from some of the disruptions from the tariffs as folks pulled back on some of their warehouse automation.

Speaker #6: And that seems to be behind us. Again, extraordinarily strong quarter. And that increased volume that we expect in the back half along with the restructuring has a nice ramp-up of AGV in the back half.

Brian Deck: That increased volume that we expect in the H2, along with the restructuring, has a nice ramp up of AGV in the H2, which, to be frank, was disappointed in the Q2 while AGV saw some improvements from the Q1 to the Q2 as we had hoped. It just didn't reach the levels that we had anticipated, again, in part, some of the motivation for some of the restructuring. That coupled with the higher volume should have a nice ramp up here in the H2 of the year.

Speaker #6: Which, to be frank, was disappointing in the second quarter, while AGV saw some improvements from the first quarter to the second quarter, as we had hoped.

Speaker #6: It just didn't reach the levels that we had anticipated. Again, in part, some of the motivation for some of the restructuring. But again, that coupled with the higher volume is should have a nice ramp-up here in the back half of the year.

Justin Ages: That's helpful. Thanks for taking the question.

Speaker #8: That's helpful. Thanks for taking the question.

Speaker #6: Sure. Thank you.

Brian Deck: Sure. Thank you.

Speaker #4: And we will take our next question from Ross Barenblech with William Blair. Your line is open.

Operator: We will take our next question from Ross Sparenblek with William Blair. Your line is open.

Speaker #5: Hey. Good morning, gentlemen.

Ross Sparenblek: Hey, good morning, gentlemen.

Speaker #6: Good morning.

Ross Sparenblek: Morning.

Speaker #5: Maybe just starting with pricing actions—can you remind us where we stand in the backlog from the 2025 actions? And then, how should we think about the impact of this inflationary cost and the catch-up of additional pricing actions throughout 2026?

Ross Sparenblek: Maybe just starting with pricing actions, can you remind us where we stand in the backlog from the 2025 actions, how should we think about the impact of this inflationary cost and the catch-up of additional pricing actions throughout 2026?

Speaker #6: Yes. So I would say that when you think about the backlog, obviously, 90% of the backlog is on the equipment side. And the pricing actions that we saw in the back half of last year and earlier this year were associated with known costs.

Brian Deck: I would say when you think about the backlog, 90% of the backlog is on the equipment side. The pricing actions that we saw the H2 of last year and earlier this year associated with kind of known costs. As we quote each project, we have known costs for goods and materials. That's embedded into the numbers. Again, I do think that is reflected in the margin guidance that we have. I will say, in the current environment, we are seeing a lot of inflation on logistics in particular. I do think we didn't recover all of that in the Q2. A little bit of leakage there for sure. If you think about logistics, we spend more than $100 million a year in logistics, and call it 60% to 65% of that is on inbound logistics and intercompany logistics.

Speaker #6: So, as we quote each project, we have known costs for goods and materials, so that's embedded into the numbers. And again, I do think that is reflected in the margin guidance that we have.

Speaker #6: I will say in the current environment, we are seeing a lot of inflation. On logistics in particular. And I do think we didn't recover all of that in the third second quarter.

Speaker #6: And so a little bit of leakage there. For sure. If you think about logistics, we spend more than $100 million a year in logistics.

Speaker #6: And call it 60, 65 percent of that is on an inbound logistics and intercompany logistics. That's a little bit harder to obviously to pass through.

Brian Deck: That's a little bit harder, obviously, to pass through. Outbound logistics, we do pass through to our customers as we go. We do see a little bit of pressure there and a bit of a lag between the cost that we're seeing and the pricing actions that we've taken here in the Q2 and Q3. Again, all this is reflected in the updated guidance.

Speaker #6: Outbound logistics—we do pass through, kind of, to our customers as we go. So we do see a little bit of pressure there and a bit of a lag between the costs that we're seeing and the pricing actions that we've taken here in the second and third quarter.

Speaker #6: Again, all this is reflected in the updated guidance.

Speaker #5: Okay, no, that's helpful. And when we think about the guidance, I mean, it sounds like the sensitivity around 2026 on the top line remains just, I guess, this logistics issue.

Ross Sparenblek: Okay. No, that's helpful. When we think about the guidance, I mean, it sounds like the sensitivity around 2026 on the top line remains just this logistics issue. I mean, orders are strong. The backlog is pretty much covering 2026. We have more pricing offset. I'm just trying to think through some of the caution on why we didn't see even a slight guidance range for the year or guidance increase for the year on the top line.

Speaker #5: I mean, orders are strong. The backlog is pretty much covering 2026. We have more pricing offset. I'm just trying to think through some of the caution on why we didn't see even a slight guidance range for the year or guidance increase for the year.

Speaker #5: On the top line.

Speaker #6: I think we're being given those logistics issues, and we're still moving things around from some facilities to others. We thought it was really appropriate to just keep the guidance as is.

Brian Deck: I think given the logistics issue and we're still moving things around from some facility to the other, we thought it was really appropriate to just keep the guidance as is, given a little bit of the pressure we saw in the Q2. We have a bit of a makeup in the Q3 and Q4 from that miss in the Q2. However, you are right in the sense that our backlog is at record levels. Both Protein Solutions and PFB segment have great backlogs. We're looking forward to, as we get more efficient, that we get better flow through on that. However, again, given the Q2, we felt it was prudent to keep the revenue guidance flat for the year.

Speaker #6: Given a little bit of pressure we saw in the second quarter. So we have a bit of a makeup in the third and fourth quarter from that miss in the second quarter.

Speaker #6: However, you are right in the sense that our backlog is it's at a record levels. Both protein and PFB segment have great backlogs. We're looking forward to as we get more efficient that we get better flow through on that.

Speaker #6: However, again, given the second quarter, we felt it was prudent to keep the revenue guidance flat for the year.

Speaker #5: Okay. Well, thanks, Brian. I'll pass it along.

Ross Sparenblek: Okay. Well, thanks, Brian. I'll pass it along.

Speaker #6: Thank you.

Brian Deck: Thank you.

Speaker #4: And we will take our next question from Walt Liptak with Seaport Research. Your line is open.

Operator: We will take our next question from Walt Liptak with Seaport Research. Your line is open.

Speaker #7: Hi. Thanks, good morning, everyone.

Walt Liptak: Hi, thanks. Good morning, everyone.

Speaker #6: Hi, Walt.

Brian Deck: Hi, Walt.

Walt Liptak: I wanted to ask about some of the US industrial environment's getting better, the ISM are moving up, and that seems to be sort of you guys have been in a pretty good place with new orders, and it looks like Q2 was pretty good, too. Is that sort of general industrial trends somehow beneficial for your outlook, too?

Speaker #7: A one-day ask about some of the U.S. industrial environments getting better. The ISMs are moving up, and that seems to be—sort of, you guys have been in a pretty good place with new orders.

Speaker #7: And it looks like second quarter was pretty good too. Are you guys on a different cycle? Or is that sort of general industrial trends somehow beneficial for your outlook too?

Speaker #6: Certainly, food production has somewhat of its own peculiarities, right? I think there is a very, very strong backdrop of protein consumption going on right now.

Brian Deck: Certainly, food and food production has somewhat of its own peculiarities, right? I think there is a very strong backdrop of protein consumption going on right now. I do think that in itself is a bit unique for our industry. I do think some of the pro-growth initiatives that are supporting the overall economy are good for us, right? When you think in reasonable interest rates, et cetera. I just generally think that a strong economy provides confidence, but I do think this protein trend is particularly strong for us. For your benefit, when you include the protein exposure we have within our PFB segment, about 70% of our overall revenues are associated with the protein market. I do think that's been quite helpful.

Speaker #6: And so, I do think that in itself is a bit unique for our industry. I do think some of the pro-growth initiatives that are supporting the overall economy are good for us, right?

Speaker #6: When you think in a reasonably reasonable interest rates, etc. So I just generally think that a strong economy is provides confidence. But I do think this protein trend is particularly strong for us.

Speaker #6: And for your benefit, about when you include the protein exposure we have within our PFB segment, about 70% of our overall revenues are associated with the protein market.

Speaker #6: So I do think that's been quite helpful. And then there are within our businesses, you still see some other pockets of weakness that buck the overall, I'll say, industrial trends because some of the CPG companies are a little bit weaker right now.

Brian Deck: Within our businesses, you still see some other pockets of weakness that buck the overall, I'll say, industrial trends, because some of the CPG companies are a little bit weaker right now. The benefit of JBT Marel with our broad portfolio, we're there to provide support wherever our customers are investing. Right now, it happens to be very strong in proteins across both Protein Solutions and the PFP segment.

Speaker #6: But the benefit of JBT Marel with our broad portfolio, we're there to provide support wherever our customers are investing and right now it happens to be very strong in proteins across both protein segment and the PFB segment.

Speaker #7: Okay. I appreciate that. Thank you. And then with the factory consolidations, those relocations are extremely difficult. So timing issues, I guess that's totally understandable.

Walt Liptak: Okay. I appreciate that. Thank you. With the factory consolidations, those relocations are extremely difficult. Timing issues, I guess that's totally understandable. When do we think that the consolidations are done? Do you have them completed by the end of the year or is it into 2027?

Speaker #7: When do we think that the consolidations are done? Do you have them completed by the end of the year or is it into 2027?

Speaker #6: Sure. There'll be a phase in, right? We started some here in the second quarter. There's another one wrapping up here in the back half of the year.

Brian Deck: Sure. There'll be a phase-in, right? We started some here in Q2. There's another one wrapping up here in the back H2. Two facilities, I'm talking larger facilities, will happen in 2027. One will be done by mid 2027 and another one by the end of 2027. I would say it's a phased-in approach. Obviously, it partially depends on the local laws dealing with works councils, et cetera, as well as have a, I'll say, a moderate pace that does not overwhelm the receiving plant. I think that's an important consideration. Again, we saw a little bit of pressure on the receiving plant here in Q2. We're trying to be very thoughtful about that.

Speaker #6: And then two facilities larger I'm talking larger facilities will happen in 2027. One will be done by mid-2027. And another one by the end of 2027.

Speaker #6: So I would say it's a phased-in approach. Obviously, it partially depends on the local laws dealing with works councils, etc., as well as having, I'll say, a moderate pace that does not overwhelm the receiving plant, right?

Speaker #6: I think that's an important consideration. Again, we saw a little bit of pressure on the receiving plant here in the second quarter. We're trying to be very thoughtful about that.

Speaker #6: I think one of the nice benefits of the plants that are being moved going forward here is that the receiving plants are already manufacturing these products.

Brian Deck: I think one of the nice benefits of the plants that are being moved and going forward here is that the receiving plants are already manufacturing these products. That helps out quite a bit. It's more of a consolidation into someone who already has that knowledge. This is going to be a phase-in all the way through the end of 2027.

Speaker #6: So that helps out quite a bit. So it's more of a consolidation into someone who already has that knowledge. But that said, this is going to be a phase in all the way through the end of 2027.

Speaker #7: Yeah. I think that's an important differentiation to make is that the experiences that we're having right now in the consolidation of some of the footprint is moving product to plants that haven't produced that product.

Matt Meister: Yeah, I think that's an important differentiation to make is that the experiences that we're having right now in the consolidation of some of the footprint is moving product to plants that haven't produced that product yet or before, versus what Brian just said about the moves in 2027. That is really more of a consolidation of production into one facility so that the transition is going to be a lot smoother in those 2027 consolidations versus what we're experiencing in Q2 and Q3 of this year.

Speaker #7: Yet or before. Versus what Brian just said about the moves in 2027. That is really more of a consolidation of production into one facility so that the transition is going to be a lot smoother in those 2027 consolidations versus what we're experiencing in Q2 and Q3 of this year.

Speaker #7: Okay. Great. Thanks for calling that out. And then maybe a final one for me. On capital allocations, you guys announced to share buyback of 200 million.

Walt Liptak: Okay, great. Thanks for calling that out. Maybe a final one for me. On capital allocations, you guys announced a share buyback of $200 million. Can you talk about the buyback versus M&A deals or what you're seeing in the environment?

Speaker #7: Can you talk about the buyback versus M&A deals or what you're seeing in the environment?

Speaker #6: Yeah, I think, Walt, we're still really focused on the integration of the two companies. And so, M&A is still something that's in the future.

Matt Meister: Yeah, I think, Walt, we're still really focused on the integration of the two companies. M&A is still something that's in the future. With the buyback that was announced in Q2, we are able to choose between debt paydown and share buybacks. We've chosen to do some share buybacks where it makes the most sense opportunistically relative to the price of the market versus what we expect the price to be. That's why we made some of those share buybacks in the quarter, and we'll continue to be opportunistic going forward and make the decision in the short to medium term between debt paydown and share buybacks.

Speaker #6: And so with the buyback that was announced in Q2, we are able to sort of choose between debt pay down and share buybacks. And we've chosen to do some share buybacks where it makes the most sense opportunistically relative to the price of the market versus what we expect the price to be.

Speaker #6: So that's why we made some of those share buybacks in the quarter. We'll continue to be opportunistic going forward and will make the decision in the short to medium term between debt paydown and share buybacks.

Speaker #6: Yeah. And Zarnir, I

Arni Sigurdsson: Yeah, this is Arni here. What we've also talked about is not only a balance sheet question, it is the management capacity. Like Matt said, we're laser focused now on maximizing the benefits of the combination of JBT and Marel. We spoke about all the work that we're doing. There's still a lot of work on the footprint in other areas, so we're really focused on that. We do believe and anticipate there will be a time where M&A will be a lever to really accelerate our strategic journey and strengthen the offering that we have.

Speaker #3: I mean, what we've also talked about is that it's not only a balance sheet question. It is the management capacity, and, like Matt said, we're laser-focused now on maximizing the benefits of the combination of JBT and Marel.

Speaker #3: We spoke about all the work that we're doing. There's still a lot of work on the footprint and other areas. So we're really focused on that.

Speaker #3: But we do believe and anticipate there will be a time where M&A will be a lever to really accelerate our kind of strategic journey and strengthen the offering that we have.

Speaker #7: Okay. Great. Thank you.

Walt Liptak: Okay, great. Thank you.

Speaker #1: And we will move next to Ian Zaffino with Oppenheimer. Your line is open.

Operator: We will move next to Ian Zaffino with Oppenheimer. Your line is open.

Speaker #8: Hi, thank you very much. On PFB—not to kind of beat a dead horse here—but what are your customers seeing as far as their end customer demand?

Ian Zaffino: Hi. Thank you very much. On PFP, not to kind of beat a dead horse here, but what are your customers seeing as far as their end customer demand? What are they saying maybe about the state of the consumer? Do they feel good? Because I know you gave us a lot of commentary on your customers, but maybe you talk a little bit about your customer's customer.

Speaker #8: What are they saying? Maybe about the state of the consumer—do they feel good? Because I know you gave us a lot of commentary on your customers, but maybe you could talk a little bit about your customers' customers.

Speaker #6: Yes. I would say it is very mixed. Again, I think on some of our CPG customers, they are seeing some trade-offs from maybe higher branded products to more the generic products, etc.

Brian Deck: Yes, I would say it is very mixed. Again, I think on some of our CPG customers, they are seeing some trade-offs from maybe higher branded products to more the generic products, et cetera. There's definitely a fair amount of activity at the consumer level. Again, it does depend on the category. You still even have some GLP-1 impacts, which is net positive for us given the protein focus. In some categories like snacks and sweets, you're seeing some shifting of consumer behavior. I think the thing that we hear a lot from our customers in terms of how they're focused on the consumer is that they need to be responsive in terms of product innovation, different sizing, different flavors, even adding some of this protein of an aspect to some of the different offerings. There's a fair amount of noise ensuing happening.

Speaker #6: So, there's definitely a fair amount of activity at the consumer level. And again, it does depend on the category. You still even have some GLP-1 impacts, which is net positive for us given the protein focus.

Speaker #6: But in some categories, like snacks and sweets, you're seeing some shifting of consumer behavior. I think the thing that we hear a lot from our customers, in terms of how they're focused on the consumer, is that they need to be responsive—not just in terms of product innovation, but also different sizing, different flavors, even adding some of this protein.

Speaker #6: Aspect to some of the different offerings. So there's a fair amount of noise and churn happening. However, with a I would say general strong backdrop with quite a bit of our customer focus again, with 70% plus exposure to protein, we're net good in that regard.

Brian Deck: However, with a, I'll say, general strong backdrop with quite a bit of our customer focus, again, with 70% plus exposure to protein, we're net good in that regard. We still see a fair amount of noise on the CPG side that I think will take some time to settle out as inflation works its way through the system.

Brian Deck: However, with a, I'll say, general strong backdrop with quite a bit of our customer focus, again, with 70%+ exposure to protein, we're net good in that regard. We still see a fair amount of noise on the CPG side that I think will take some time to settle out as inflation works its way through the system.

Speaker #6: But I do see we still see a fair amount of noise on the CPG side. I think we'll take some time to settle out as inflation works its way through the system.

Speaker #3: Yeah. And just to add a little bit, on the consumer side, customers on the protein side have been very specific that they still see good demand.

Arni Sigurdsson: Yes. Just to add a little bit, on the consumer side, customers on the protein side have been very specific that they still see good demand. What you tend to see is consumers don't stop consuming protein. That's why it's such a great category. It's more around optimizing within protein, and that's where we have good exposure and diversification across the different protein segments. That's a pretty good spot to be in. The other trend that we see is there's more value added, more prepared foods, and we're seeing that side of the market also picking up and our customers are talking about that, which should help our prepared food and beverage segments, just like we saw on the order side in Q2.

Speaker #3: And what you tend to see is like consumers don't stop consuming protein. That's why it's such a great category. It's more around optimizing within protein.

Speaker #3: And that's where we have kind of good exposure and diversification across the different kind of protein segments. So that's a pretty good kind of spot to be in.

Speaker #3: And then the other trend that we see is this more value-added, more prepared foods and we're seeing kind of that side of the market also picking up and kind of our customers are talking about that, which should help our prepared food and beverage segments just like we saw on the order side in Q2.

Speaker #8: Okay. Thanks. And then can you guys maybe give us an update or some color on where the USDA is as far as speeding up the inspection lines for chickens and what is that actually mean for you guys as far as addressable market or opportunity?

Ian Zaffino: Okay, thanks. Can you guys maybe give us an update or some color on where the USDA is as far as speeding up the inspection lines for chickens? What does that actually mean for you guys as far as addressable market or opportunity? Any specifics you can give us there would be helpful. Thanks.

Speaker #8: Any specifics you could give us there would be helpful. Thanks.

Speaker #6: Sure. Yes. We do converse with the USDA. We're obviously a proponent and have given our white papers, if you will, to them and answered a lot of questions to the USDA about the line speeds.

Brian Deck: Sure. Yes. We do converse with the USDA. We're obviously a proponent and have given our white papers, if you will, to them and answered a lot of questions to the USDA about the line speeds. What we currently hear or understand is that we'll expect some kind of decision either late summer or early fall. Obviously, we're talking about the government, so you never know precisely where they stand. That's our current expectation. Just in terms of the benefits, I think one thing to understand is that the US line speeds, which are currently at 140 birds per minute versus, I'm talking poultry, and with waivers, 175 birds per minute. That compares to Europe of 240 birds per minute on average that the lines run. The US is at a fairly distinct disadvantage from a productivity perspective.

Speaker #6: What we currently hear or understand is that we'll expect some kind of decision either late summer or early fall. Obviously, we're talking about the government, so you never know precisely where they stand.

Speaker #6: But that's our current expectation. And then just in terms of the benefits, I think one thing to understand is that the US line speeds which are currently at 140 birds per minute versus I'm talking poultry and with waivers 175 birds per minute.

Speaker #6: That compares to Europe, where the average is 240 birds per minute. That's the rate the lines run. So the US is at a fairly distinct disadvantage from a productivity perspective.

Speaker #6: So with over 350 lines in the US and less than 20% of them are running at 175 birds per minute, we would expect a fairly durable cycle.

Brian Deck: With over 350 lines in the US and less than 20% of them are running at 175 birds per minute, there we would expect a fairly durable cycle, and it'll take multiple years. This will not all happen in 1 year or 2. This will be, I would say, a tailwind for multiple years if we get this permanent 175 instead of needing to get to 175 with waiver. We are hopeful and excited about what that means for us. Hopefully we'll see a decision here sometime in Q3.

Speaker #6: And it'll take multiple years. This will not all happen in one year or two. This will be, I would say, a tailwind for multiple years.

Speaker #6: If we get this permanent 175 instead of needing to get to 175 with waivers, we are hopeful and excited about what that means for us.

Speaker #6: And hopefully, we'll see a decision here sometime in the third quarter.

Speaker #2: Just to highlight, like our value proposition is much stronger as the line kind of as the speed of the line is higher. So kind of generally that's because we have the leading technology

Arni Sigurdsson: Just to highlight, our value proposition is much stronger as the speed of the line is higher. Generally, because we have the leading technology and are able to operate at that level, that really helps us in terms of from a value proposition standpoint.

Speaker #3: and are able to operate at that level. That really kind of helps us in terms of, from a value proposition standpoint.

Brian Deck: A differentiation versus our competitors.

Speaker #6: And a differentiation versus our competitors.

Brian Deck: A differentiation versus our competitors.

Speaker #8: All right. Great. Thank you very much.

Ian Zaffino: All right. Great. Thank you very much.

Speaker #1: And as a reminder, it is Star 1 to ask a question today. We'll take a follow-up from Mig Dobre with Baird. Your line is open.

Operator: As a reminder, it is star one to ask a question today. We'll take a follow-up from Mig Dobre with Baird. Your line is open.

Speaker #4: Thank you, guys, for taking a follow-up. Just one quick question from me. And Brian or Arnie, when we're kind of looking at your orders here over the past three quarters, they've been actually remarkably consistent, right, between $1.03 billion and $1.07 billion.

Mircea Dobre: Brian or Arnie, when we're looking at your orders here over the past 3 quarters, they've been actually remarkably consistent, between $1.03 billion and $1.07 billion. I guess one of the concerns that I keep hearing about is this notion that we've had a pretty big investment cycle in poultry, and eventually that's going to run its course. I'm curious how you think about this going forward in terms of visibility that you have on orders. As you think about 2027, for instance, is there a makeshift that maybe we should be thinking about here between the two segments, maybe away from Protein Solutions and maybe more towards Prepared Food and Beverage, where, at least from your comments, it sounds like demand and orders have actually picked up?

Speaker #4: And I guess one of the concerns that I keep hearing about is this notion that we've had a pretty big investment cycle in poultry.

Speaker #4: And eventually, that's going to kind of run its course. So I'm curious how you think about this going forward in terms of visibility that you have on orders.

Speaker #4: And as you kind of think about 2027, for instance, is there a mix shift that maybe we should be thinking about here between the two segments?

Speaker #4: Maybe away from protein solutions and more towards prepared food and beverage, where—at least from your comments—it sounds like demand and orders have actually picked up.

Speaker #4: So any context here, I think, would be really helpful.

Mircea Dobre: Any context here I think would be really helpful.

Speaker #6: Yes. And so I'll give you a little bit from our customers' point of view. And there is a lot of poultry demand in general right now.

Brian Deck: Yes. I'll give you a little bit from our customer's point of view. There is a lot of poultry demand in general right now. It's by far the number 1 protein. We may even see poultry sell more per capita than beef and pork combined at some point. We are seeing a very strong trend. There's an underlying backdrop of absolute demand on the proteins on the poultry side. I do think that general trend is good for us on the primary and secondary side. You're right, there's been a tremendous, over the last year or so, investments on that primary and secondary side. What I would tell you is, the Q2, the Prepared Foods side has now lapped the primary and secondary side in terms of investment.

Speaker #6: It's by far the number one protein and we may even see poultry sell more per capita than beef and pork combined. At some point.

Speaker #6: So we are seeing a very strong trend. There's an underlying backdrop of absolute demand on the protein, on the poultry side. So I do think that general trend is good for us, on the primary and secondary side.

Speaker #6: But you're right. There's been a tremendous amount, over the last year or so, of investments on that primary and secondary side. And what I would tell you is, in the second quarter, the prepared foods side has now lapped the primary and secondary side in terms of investments.

Speaker #6: So on our prepared foods business, it was about 15% order growth year over year. So it was really quite strong. And I think this is if you listen to the earnings calls from our customers, you hear about how they're shifting some of that commodity-based volume to added value volume into their prepared food side.

Brian Deck: In our Prepared Foods business, it was about 15% order growth year-over-year. It was really quite strong, and I think if you listen to the earnings calls from our customers, you hear about how they're shifting some of that commodity-based volume to added value volume into their Prepared Food side. We saw some really nice projects out of that here in the Q2, and it even started in the Q1. That pipeline is quite strong from here. However, given the overall backdrop of the demand for protein, the primary and secondary pipeline is actually quite strong too. It's global. I think that's one important consideration also as different regions want to become more self-sufficient in terms of protein production. We do see some other shifts from export, import, and people wanting to be self-reliant.

Speaker #6: So, we saw some really nice projects out of that here in the second quarter, and it even started in the first quarter. That pipeline is quite strong from here.

Speaker #6: However, given the overall backdrop of the demand for protein, the primary and secondary pipeline is actually quite strong too, and it's global. I think that's one important consideration, also, as different regions want to become more self-sufficient in terms of protein production.

Speaker #6: We do see some other shifts in from export-import and people wanting to be self-reliant. So as we sit here today, one, we have backlog going well into 2027.

Brian Deck: As we sit here today, one, we have backlog going well into 2027, and the pipeline remains strong. We feel very good about 2027 on the protein side.

Speaker #6: And the pipeline remains strong, so we feel very good about 2027 on the protein side.

Speaker #4: That's great. Thank you.

Mircea Dobre: That's great. Thank you.

Speaker #8: Thank you.

Brian Deck: Thank you.

Speaker #1: And this does conclude the question-and-answer session. I'd like to turn the program back over to Mr. Brian Deck for closing remarks.

Operator: This does conclude the question and answer session. I'd like to turn the program back over to Mr. Brian Deck for closing remarks.

Speaker #6: Thank you all for joining us this morning. As always, our Investor Relations team is available if you have any additional questions. Thank you.

Brian Deck: Thank you all for joining us this morning. As always, our investor relations team is available if you have any additional questions. Thank you.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Q2 2026 JBT Marel Corp Earnings Call

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