JBT Marel Corporation (JBTM) Earnings Call Transcript & Summary

Good morning, and welcome to JBT Marel's Earnings Conference Call for the Fourth Quarter and Full Year 2024. My name is Pam, and I will be your conference operator today. As a reminder, today's call is being recorded. [Operator Instructions]. I will now turn the call over to JBT Marel's Director of Investor Relations, Marlee Spangler, to begin today's conference.

Thank you, Pam. Good morning, everyone, and thank you for joining our conference call. With me on the call today 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 in the Investor Relations section of our website. Also, our discussion today includes references to certain non-GAAP and non-IFRS measures. A reconciliation of these measures to the most comparable GAAP and IFRS measures can be found in the Investor Relations section of our website. With that, I'll turn the call over to Brian.

Thanks, Marlee, and good morning. We are excited to be hosting our first earnings call since uniting JBT and Marel. The combination, which we completed on January 2, represents the culmination of more than a year of work, bringing together 2 leaders in the food technology industry. We are now 7 weeks into integration and are increasingly confident in our ability to generate long-term value for our customers, shareholders and other stakeholders. Given our focus on realizing the benefits of this combination, I will begin today's call providing an update on our progress. Then Arni will provide color on the integration process and talk about Marel's 2024 performance. Lastly, Matt will provide an overview of JBT's 2024 performance, followed by guidance for the combined company in 2025. In uniting JBT and Marel, we have the ability to be an even more valuable partner to our global customers by providing holistic equipment solutions with enhanced application knowledge, service capabilities and innovative technology. In terms of integration, our efforts are focused on best serving our customers' constantly evolving needs. That starts with a purpose-built company, leveraging talent from both organizations. We have already made significant progress establishing the JBT Marel organizational design and expect to be materially complete by the end of March. We are also focusing on a customer-centric go-to-market commercial strategy that adopts an end market focus. This will allow us to cross-sell the breadth of our solutions. We believe this customer-driven approach versus one organized by technology will streamline our commercial presence and enhance our value proposition to the customer. In fact, our diverse technology solutions were on full display at the recent IPPE trade show, otherwise known as the Poultry Show. The combination of JBT and Marel's complementary portfolio of innovative technology and service capabilities allows us to integrate primary, secondary, further and end-of-line processing under one brand. This matters for our customers as it reduces the complex engineering required to integrate and commission full-line solutions. It also leads to improved operational efficiency, machine uptime and traceability in high-volume operations. Additionally, our software and digital solutions are a differentiator as customers increasingly adopt digital technologies to optimize processing efficiency and improve profitability. Overall, our many productive conversations at IPPE, along with the recently reported financial results of our customers confirm the strong fundamentals of the poultry industry. We believe we will see incremental investment in 2025 as customers look to take advantage of our technology to support automation and efficient operations by investing in existing facilities as well as consider greenfield opportunities in a more meaningful way than we have seen in some time. I am pleased that we are already seeing the commercial strategies created by the combination. We secured a few significant orders at IPPE that included equipment we booked on the strength of each other's existing relationships. Speaking of orders, as you saw in our earnings release, JBT reported record orders of $523 million in the fourth quarter. Marel also reported record orders of EUR 474 million. Together, orders totaled more than $1 billion for the period, benefiting from broad-based strength. Geographically, we enjoyed a pickup globally with the sole exception of Asia Pacific. From an end market perspective, as already mentioned, the poultry industry remained strong in the fourth quarter and is expected to improve further in 2025. Other proteins, we enjoyed a very solid quarter for both meat and fish. While the fundamentals of these markets remain uncertain, we are starting to see increased pipeline activity for pork and remain confident in the long-term fundamentals for fish. We also enjoyed strong order demand in the fruit and vegetable and pharmaceutical markets, which have continued into the first quarter of 2025. While the beverage end market was weaker through most of 2024 due to challenging industry fundamentals, we saw some pickup exiting the year. Lastly, both pet food and ready meals performed well in the quarter, while AGV, our Automated Material Handling business experienced another solid quarter of demand. Our positive view on the key end markets must be balanced against macro concerns, including U.S. and potential retaliatory tariffs and the prospect of higher inflation. However, we believe that end market dynamics are generally favorable for investment, while our recurring revenue franchise for parts and service is expected to provide resilience, growth and close to half of our total revenue. Most importantly, we are increasingly confident in the value created by this combination as it relates to serving our customers. Now let me turn the call over to Arni.

Thanks, Brian. When JBT and Marel began exploring the potential to combine the 2 businesses, it quickly became clear that we share a common purpose, which is to transform the future of food. We achieved that purpose by helping our customers improve their operations, solutions uptime and sustainable processes. I'm very pleased to see and experience the momentum generated in just the first few weeks as JBT Marel. Right after finalizing the transaction, we launched our new JBT Marel brand. We also introduced our new purpose, vision and values, which resonated well with our teams as it builds on the 2 company cultures while we transition to a new and exciting future. We also went on the road hosting welcome days at key locations around the world, introducing the leadership team and the strategic pillars of JBT Marel. It was a great success, and I'm excited about the future. We also recognize the respective strengths that each company brings to the table that makes this combination so exciting. For example, I'm very proud of the reputation that Marel has for its industry-leading technology and ongoing investment in innovation. And JBT beyond its technology brings a highly disciplined and efficient operational culture focused on continuous improvement. We realize that a combination of this scale requires rigorous execution and oversight by an experienced team of operators across the organization. The integration teams are co-led by top talent from our respective legacy organizations and report directly to Brian and me. Throughout this integration, our highest priority is to ensure business continuity and a seamless experience for our customers. Moreover, we are focused on cultural integration as our talented teams across the world represent our greatest asset. Since the close of the transaction, we have been able to have full transparency with one another, allowing us to do a deeper analysis into the benefits of the combination. Based on this extensive work, we have raised our expectations for cost synergies to an annual run rate savings of $150 million, and that's by the end of year 3. That compares with our prior guidance of greater than $125 million. Most of that increase is the result of supply chain savings as we leverage our purchasing power and optimize our combined footprint. Looking at Marel's performance in 2024, I'm happy to report that we had a strong fourth quarter to close the year. On an IFRS basis, record orders of EUR 474 million increased 18% sequentially and reflect the improvement we have been expecting. We saw sequential growth in orders for meat, fish and pet food, while poultry had another healthy quarter. The strong book-to-bill of 1.11 increased the order book 8% sequentially to $600 million. Marel's full year revenue of $1.64 billion declined 4.6% compared to the prior year due to lower project revenues. At the same time, there were continued gains in recurring revenue with a record fourth quarter. For the full year, recurring revenues were EUR 821 million and grew 5%. Full year adjusted EBITDA of EUR 200 million included a net year-end adjustment of EUR 17 million, resulting from initial efforts to align policies related to balance sheet reserves as a part of our combination with JBT. Underlying performance improved year-over-year as a result of cost discipline and efficiency improvements. Excluding the balance sheet adjustments, Marel's adjusted EBITDA margin for 2024 was in line with our most recent guidance of 13% to 14%. I want to take this opportunity to commend the dedication and valuable contribution of our teams across the world. We are excited by legacy Marel's momentum entering 2025, underpinned by order growth and strengthening order book and our ability as JBT Marel to do even greater things for our customers with the combined and highly complementary product portfolios. With that, let me turn the call over to Matt.

Thanks, Arni, and good morning. Let me begin with a quick recap of JBT's performance in 2024. We ended the year with extremely strong orders in the fourth quarter, up 25% year-over-year and 19% sequentially. For the full year, orders increased 7%. JBT's full year revenue increased 3% or about 3.5% organically, excluding the impact of foreign exchange. Adjusted EBITDA of $295 million increased 8%. The adjusted EBITDA margin of 17.2% for the year was an improvement of 80 basis points, driven by supply chain savings and continuous improvement initiatives. Specific to the fourth quarter, our results came in at the lower end of our guidance due to a mix of lower-than-expected volume on quick-turn book and ship revenue and some delayed equipment shipments. On the expense side, we had higher-than-expected employee health care costs. That said, adjusted EBITDA margins for the quarter were 19.7%, which represented a 150 basis point improvement over the prior year. Beginning in 2025, we are revising our adjusted EPS calculation to exclude acquisition-related items such as intangible amortization expense. We believe this change will be -- will better reflect our core operating earnings and improve comparability versus peers. When further adjusted for this change, JBT's 2024 stand-alone adjusted EPS would have been $6.15 compared to the reported figure of $5.10. Finally, for 2024, we delivered strong cash flow performance, driven by more efficient management of inventory and higher deposits from the strong order growth. For the year, we generated free cash flow of $199 million, an increase of 20% from the prior year period. Now let's move to the results and expectations for the combined JBT Marel business. On a combined basis, which reflects adjustments to align Marel's IFRS results with U.S. GAAP, 2024 results were as follows: orders of $3.6 billion, revenue of $3.5 billion and adjusted EBITDA of $479 million, representing an adjusted EBITDA margin of 13.7%. In 2025, we are forecasting full year revenue growth on a constant currency basis of 4.5% to 6.5%, which excludes the projected negative foreign exchange impact of approximately $75 million or 2% due to the recent strength in the U.S. dollar. We are guiding to adjusted EBITDA margin of 15.75% to 16.5% in 2025, which represents more than 200 basis points of improvement. We expect to realize cost synergies of $35 million to $40 million in 2025 and exiting the year, estimate achieving run rate synergies of $80 million to $90 million. For the full year, we are projecting adjusted EPS of $5.50 to $6.10, which excludes certain onetime items and acquisition-related costs, which were outlined in yesterday's press release and investor presentation. For the first quarter of 2025, we expect revenues to be in the range of $820 million to $850 million, inclusive of an estimated negative $23 million of year-over-year FX translation impact. The first quarter is historically JBT's seasonally lightest. For Marel, pickup in orders occurred in late 2024. And given the large project nature of its business, the conversion time from order to revenue is longer. We are forecasting adjusted EBITDA margins of 12% to 13% and adjusted EPS in the range of $0.70 to $0.90. On the balance sheet, we expect CapEx of $90 million to $100 million for the year. Starting leverage post-merger was just under 4x, which excludes the benefit of any projected synergies. We continue to expect to delever to below 3x by year-end 2025 due to higher adjusted EBITDA, which includes realized cost synergies and strong cash flow generation. Let me turn the call back to Brian for some concluding remarks.

Thanks, Matt. There's been a tremendous amount of hard work getting to this point where we can leverage our combined expertise and achieve more for our employees, customers and communities at JBT Marel. Together, we've established an unmatched position across the value chain as the premier global food and beverage solutions provider. Thank you to everyone across the organization for all you've done. We look forward to the exciting things to come as we transform the future of food. Now let's open the call to questions. Operator?

[Operator Instructions] And your first question comes from Saree Boroditsky with Jefferies.

So I wanted to touch on the synergies. So you are now kind of 2 months into owning Marel and you are able to increase the cost synergy guidance on the kind of supply chain synergies. So can you talk more about what gave you confidence to raise the guidance, like a little bit more color on the supply synergies? And was there a lot of like low-hanging fruits that you were able to identify after owning them?

Yes, good question. So we've been working together, the 2 companies for the last year or so, but there has been certain limitations on vendor names, customer names, et cetera, that until we combined, we were able to have access to. So after getting access to that, we were really able to determine our strategy as it relates to supply chain savings and including some of the early hits, we do feel that, that $35 million to $40 million first year savings will include some early hits on the supply chain side as well as some of the organizational design things that we're doing. So it really -- the confidence really came along from access to information that we otherwise didn't have in the past.

Got it. Great. And I guess kind of staying on the synergy more on the revenue side. I think you noticed some benefit to like customers like providing like integrated solutions and opportunities to kind of cross-sell. So can you provide more color on kind of revenue synergy opportunities?

Yes. We're really excited about this. So as I mentioned in the prepared remarks, we had a really excellent IPPE show, the Poultry Show, and the conversations were great. And frankly, the thing that was most exciting about it was the way our commercial teams interacted with one another. They really fell right into understanding each other's product lines. We obviously have experts across the industry. So it was fairly natural for them to be able to engage in conversations with customers on a combined basis. And as part of that, what we also found was each company, a legacy company has some particularly strong relationships with certain customers, and that really facilitated conversations about providing either JBT or Marel solution to some of the projects that they were considering that perhaps they had not considered one or the other in the past. So that was -- that really developed nicely. And then I would say we announced earlier $75 million of revenue synergies by year 3. We haven't updated that, but we are taking a close look at it. Again, now that we have access to customer data and conversations on a more combined basis, we are taking a review of that, and we'll follow up in the next quarter or 2 what that means.

And just briefly to add on that, I think what was exciting around kind of what we heard and saw and experienced at IPPE was a lot of conversation in the prepared foods area where our portfolio is quite complementary. And we've talked in the past, for example, a chicken nugget line when you just see kind of the different technologies across that same line. So that's where we saw some interesting opportunities, which was really kind of confirming what we believe, but it was just nice to see that really happen.

Your next question comes from Mig Dobre with Baird.

I apologize in advance. I actually have a bunch of questions. So hopefully, you can humor me here. I guess maybe we can start with a clarification. Maybe I missed this in the guidance slides, but free cash flow for '25, how should we think about that? Yes, let's start with that. Let's start with free cash flow.

Yes, Mig, I think from a free cash flow perspective, it's still a little early for us to provide sort of specific numbers around that, I'd say, as we try to get a better feel for how the cadence and cash flows will go through the year. But I think the fundamentals of the business -- both businesses together still remain strong with relatively low CapEx, high recurring revenue and deposits from customers. And so when we account for some of the onetime items on the P&L side, our expectation is that we should be able to achieve 100% free cash flow for the year.

On adjusted net income, right?

Right.

So yes, so we'll provide more guidance. But if you think about the general profile of this business, Mig, it's still quite attractive. When you think about the math just between the CapEx spend versus the depreciation and kind of how that flows. We will have a lot of onetime costs in 2025, as mentioned in the press release. But if you kind of look away from that, it's certainly a profile of more than 100% of adjusted net income.

That's helpful. One of the things that also stood out to me was the order intake, right? For -- I think Marel had a bit of a tough comp and yet they were able to grow off of that. You had quite a bit of growth in legacy JBT. Maybe talk a little bit about what's going on here. We heard from you that the poultry markets are getting better, but I guess it's more than just poultry. And the question here is on sustainability into 2025. Has this quarter simply been a bit unusual? Was there like a CapEx flush or something like that, that helped you out? Or are these trends kind of sustaining into Q1? I mean we're almost through February. What have you seen in Q1 thus far?

Sure. I'll provide some comments on legacy JBT and Arni can provide a little bit on legacy Marel and kind of how we're thinking about this going forward. So on the JBT side, what we normally see is -- I'm talking from an end market perspective, there's always pluses and minuses. Fruit and juice is up, maybe beverage is down. And that's -- since I've been here, that's always been the case because these are lumpy projects often. So you see a lot of variability and almost magically, it kind of evens out by the end of the quarter. However, in the fourth quarter, there was really no weak markets, which is quite unusual. So everything kind of hit. We mentioned ready meals, pet food, our AGV business, fruit and juice, even beverage improved in the quarter. Poultry remained strong. So it really kind of just flow through in a nice way. I can't say this was a CapEx dump, but here's the way I think of it generally is a $900 million is kind of the baseline for us, right? And that $1 billion in the month was extraordinarily strong. So I still think we're going to coalesce around that number, plus or minus, and there'll still be variability given the lumpy nature of our business. So I do think there will be some general reversion. But overall, the markets are strong right now. And I put the caveat about regarding tariffs and whatnot. But kind of aside from that, conditions do seem strong.

Yes. And on the Marel side, obviously, very pleased with the orders in the quarter and poultry, the poultry market continues to be quite attractive, and we see that in -- also just if you look at the results of some of our customers, I mean, they're showing very robust numbers on the poultry side. So that continued to be healthy in the fourth quarter for us. But then if we look at it sequentially, then we saw improvement in the Other segment as well on the Marel side. And what I would say is on the pork side, kind of the market sentiment is improving, but kind of from a very low level. There is kind of with the low investment that has been there for kind of throughout the cycle, there needs to be, at some point, catch-up in kind of renewing the installed base and more automation. And we kind of -- consolidation in Europe is in the final steps. Kind of we saw improved pipeline in the fourth quarter on the pork side. So that was kind of encouraging. I mean fish also improved sequentially. But I think I'm not as confident about the market there yet, even though we really believe in the fundamentals of that market.

And Mig, just to clarify, that $900 million baseline, that's the combined company quarterly kind of, I'll say, baseline, if you will, for orders.

And I want to move on to your outlook, your guidance. I apologize for the numbers and the math here, but I'm trying to understand the moving pieces, right? So at the midpoint, your EBITDA, you're guiding at $582 million. On a combined basis, the company has done pro forma $479 million. So we're looking at $103 million of EBITDA growth, $37 million of that is synergies. So the rest of it, $66 million would be the lift from the 2 businesses. When we look at the $66 million, how much of it comes from legacy JBT versus lift in Marel's business relative to the prior year?

Yes. I think the starting point on the $479 million for 2024, Mig, is you have to adjust for the year-end piece at Marel was about $20 million or so, USD 20 million of sort of year-end adjustments. You kind of add that back as a starting point. So you're kind of starting closer to $500 million for the combined company. And then you add in the synergies. So now you're at $538 million. So now you're kind of doing the math off of that number. And so the flow-through from the combined business is closer to like 35% to 40%. And it's a little higher than we would typically expect for flow-through on the combined business. But there is a benefit from Marel on some of the restructuring activities that they took in 2024 that's also coming through. And we estimate that sort of around $8 million to $10 million benefit in 2025.

Right. So you've got the benefit of the synergies, the volume as well as some of the, I'll say, rollover of some of the actions that Marel took in last year. So overall, Mig, I'd say more of the improvement is coming from the Marel side, giving -- given some of the -- they have a little bit higher growth rate in their forecasted revenues versus JBT because of the recovery -- continued recovery of the poultry market as well as some of the restructuring actions that they took last year, which will flow into this year.

To be honest with you, based on what you've just told me, to me, it seems like it's the opposite where you end up with ex synergies, you end up with maybe like less than $50 million of EBITDA lift, but a good chunk of that would probably come just from JBT and the growth that you have on your business, assuming normal incremental margins on that organic revenue growth, which -- I mean, maybe I'm missing something or you're just being conservative, which is perfectly fine. Just looking to make sure that we understand the moving pieces.

Yes. So I think we've given revenue guidance for the 2 businesses individually. And if you look at that and apply -- generally, you apply 30%-ish flow-through on that incremental volume. And then from there, you add on the benefit of the synergies and whatnot. So take a look. We're happy to walk through in more detail as we go from here. But our math shows a little bit more contribution from the Marel side than the JBT side, at least from an EBITDA perspective.

Perfect. Then my final question is on Marel specifically. As we're trying to look through what the fourth quarter looked like, at least on our math, the fourth quarter looked to be a sequential step down in margin and maybe even tougher than some of the prior quarters in '24. Maybe you can give us some context or Arni can give us some context as to what's been going on with margins in the fourth quarter. And big picture, sort of how you think about progression here through 2025? And maybe you can comment on fish and meat specifically because it's pretty clear that poultry is doing all right. It's the other 2 segments that have struggled.

Yes. So what I would say kind of we saw healthy kind of absent the balance sheet adjustment that we talked through, we saw a good margin in Q4, both improving sequentially and year-over-year. So I think kind of that is moving in the right direction. We also saw that kind of moving in the right direction for fish and meat, but there's still a lot of work to be done on that front. So we are kind of just taking kind of -- so that's kind of on the margin side where we kind of are on the right track and kind of exiting the year at a healthy level or more healthy level kind of improving over the year. And we expect to be able to kind of do more as we enter 2025. And I mean, some of the initiatives that we have been going through, we will continue with, such as kind of standardizing the portfolio, more rigorous kind of project control and selecting the projects. And then we're also -- kind of we have designed the combined organization in a way where we believe those businesses will benefit more with greater scale in emerging markets, embedding the service capabilities and some of the other designs that we have taken.

And to add on to that, Mig, as we look to bring some of the continuous improvement capabilities, we've already started that on both meat and fish. And we obviously have a large tool chest. One of the things we're actually looking at right now is applying some of the 80-20 approach to the business and looking at the segmentation of the larger customers, larger projects and product lines and how that profitability is segmented and making sure that we've got the right resources in the right places to attack that. So as well as some of the general continuous improvement things that we're looking at. So we are laser-focused on the overall improvement and the synergies perspective, but in particular, meat and fish are getting good attention all the way up to the top.

Yes. And Mig, just to clarify again on the Q4 margins, again, we want to make sure we kind of look at it with and without the year-end adjustments that were booked at Marel in December. Those were really some sort of alignment on accounting policies and procedures between Marel and JBT. And so they're a little bit, I think, kind of onetime in nature and related to some older inventory and some older AR valuation reserves. And I think if you look at the underlying business, I think what Arni had said that they are seeing some improvements in the margins, and that's what we would expect to see heading into 2025.

I'm sorry, just to clarify, the EUR 20 million -- that was a EUR 20 million add-back. So in the fourth quarter, with the IFRS margin at Marel be somewhere close to 15%? And that was my last question.

Yes, I think it's in the 13% to 14% range. It's $20 million, it's about EUR 17 million. We're not adding that back from an adjusted perspective. It's just a different -- I think, again, a different kind of accounting approach. So I don't want to blur the underlying performance of the operations with that -- those adjustments.

But you're correct, Mig. If you look at the reported results, IFRS EUR 200 million, that is burdened by about $17 million (sic) [ EUR 17 million ], $18 million (sic) [ EUR 18 million ] of onetime items.

And if you would -- absent of that, you would have kind of EBITDA margin for the full year kind of a little bit north of 13%. And so fourth quarter was more healthy.

Your next question comes from Ross Sparenblek with William Blair.

Matt, you touched on this in your opening remarks, but can you maybe just remind us of the timing for backlog conversion for JBT and Marel and kind of what that mix looks like on a pro forma entity going forward?

Yes. I mean, for the most part, we look at about -- for JBT, it's in the 50% or so of our equipment revenue is in backlog that we'd expect. So the backlog for equipment is sort of in the $450 million range for JBT historically or legacy JBT. And only a small portion of that sort of bleeds into next year. We did take some bigger pharma projects and fruit and veg projects. So those will bleed into 2026. For Marel, they do have some larger greenfield type projects that do have longer lead times. I don't have the exact sort of timing of that, but I would expect their revenue cadence to look very similar in terms of the backlog for equipment. So I'd expect probably 80% to 85% of their backlog on equipment would result in revenue in 2025.

And I'd say, as a whole, when you consider the stability of the recurring revenue business, when you kind of add that into kind of the visibility as we start the year on the equipment side, we have somewhere ballpark 70% visibility for the full year revenue.

Okay. So with that expectation, then on recurring revenue is probably being implied over 50% in kind of your 2025 guidance? Or how are you thinking about...

Actually a little bit less because your equipment -- we were at about combined right about 50% last year. However, we do expect equipment growth to outpace aftermarket growth in 2025. So the mix will actually -- will grow both, but the mix will change a little bit just because of the outside growth on the equipment side.

Okay. That's helpful. And then just going back to a prior question on kind of the Marel margin lift for next year. The filings called out, I believe, 11,700 employees, which does imply some material attrition over the past year. So just trying to get a sense of timing there around reductions and maybe how we should think about sizing that benefit in the context of the 8 to 10 Marel prior restructuring actions that are going to step up next year?

Yes. I think there's 2 things to kind of mention there, Ross. First, I think there is -- as we're going through this integration process, some definitional differences between what was reported historically for Marel and what we reported as at 11,700. So that's a little bit of the difference. But I do think that Marel has taken some significant actions in 2024 to reduce their FTEs. That's sort of already built into our guidance and part of the additional self-help that we were talking about in terms of the margin uplift for Marel. And that is before we actually think about this, the benefit from synergies.

Okay. And is there any definitional changes between the recurring revenue from Marel and JBT? Kind of look like there might have been...

Slightly. There's -- the big question is -- open question is refurbishments and how we both treat those. Otherwise, we haven't married those up quite yet. So we will do that as we report out the first quarter, but not materially.

Your next question comes from Walt Liptak with Seaport Research Partners.

Congratulations on the deal. I wanted to ask about the year 1 synergy savings. And I wonder if you could just help bucket it for us in terms of procurement versus people costs versus plant consolidation. And then on that procurement side, how are you thinking about pricing and tariffs this year? And if there are inflationary pressures, how do you expect to deal with those?

Yes. I'll take the first part, Walt. So in terms of bucketing, I would say approximately of the $35 million to $40 million, 45% to 50% of that is related to procurement and cost of goods sold. And the remainder of the synergies is going to be related to either redundant contracts, logistics and other SG&A-related sort of redundancies that we may have between the 2 businesses.

And then as it relates to tariffs, it's still a little bit early to tell. We still don't know all the specifics of the tariff policies and any potential retaliation. So we haven't factored in a tremendous amount into the numbers right now, mainly because as it sits today with what has been announced, we can largely manage through that in terms of our supply chain. So over the last few years coming out of COVID, and this applies to both legacy Marel and JBT, we've enhanced our supply chain in terms of more options, I'll say, more diversification of our supply chain just because of some of the challenges we saw a few years ago. So I think we're both well positioned. And we're particularly well positioned relative to our competition given our global scale, our strength of our procurement organization as well as our diversified manufacturing footprint. So we do need to see how this plays out. But I think in the short term, in terms of at least what we know today, we don't see a material impact in 2025.

Okay. Okay. Great. And then I wanted to ask a follow-on. You commented about doing some segmentation and some 80-20 work, and that's very interesting to me. I wonder if you could talk a little bit more about that. Is this like a homegrown thing? Or are you bringing in experts? Like is it how robust of an 80-20 program are you thinking about?

Yes. Well, we are the experts on continuous improvement in 80-20. So we have more than enough resources within the company. So what we're going to do is just to get a little bit more specific, what you do is look at the revenue streams and you segment that and look at the underlying, I'll say, concentration and then what are the costs associated with those buckets, if you will. And then you make sure that you're serving your best customers and your best product lines in a way that allows you to grow them and then taking a close look at your projects otherwise and I'll say the discipline around pricing, the discipline around costing those projects before you give those quotes and then strongly in execution on those projects as you go through. So there's a lot of different tools that we'll have. It's not just 80-20. But as continuous improvement experts, we are focused on this.

Okay. Great. And then with regard to the change in focus to end markets, is that -- has that happened already? Or what's the timing on that taking place?

It's happening as we speak. It started -- organizational design started in the fourth quarter and continues through the end of the first quarter here. So organizationally wise, we should be done by the end of the first quarter. I think there'll be some transition over the next few months. But I would say we would be done with that transition by the middle of the year completely.

Your next question comes from Justin Ages with CJS Securities.

During the prepared remarks, there was a comment about some greenfield opportunities. But just hoping to get a little more color on either end markets or where that is?

Yes. So I mean, I would say, first and foremost, that is in the Poultry segment. I mean that is an area where kind of the fundamentals have been improving. We've seen some of those opportunities kind of in the past. I mean, I think Marel spoke to kind of one big one in the fourth quarter of 2023, which kind of explained the tough comp for Q4 2024. And then we've seen kind of just the improvement in the market in the second half of 2024. Also, what is very interesting, which I've spoken about in Marel's results is some of the solutions and technologies that we've been introducing in the U.S. market, such as a line split solution that allows our customers to increase the line speeds, and we -- Marel has kind of very good technologies to be able to advance the industry and help our customers, in particular, in the U.S. market to invest. So there's a lot of -- there's a few very interesting opportunities that we see there. It's still early, but we're optimistic.

And just to follow up on that. So on the poultry side, Marel's technology is best-in-class without question. And some of these techniques of line split allows, I'll say, the unleashing of the speed on that technology that is currently, I'll say, under some restrictions under the USDA policy, but this line split solution effectively allows us to, again, leverage this technology while still remaining compliant with USDA. So that's exciting for our customers. In fact, what we do here is if you can unleash this technology in these line speeds, it allows customers to take current, I'll say, inefficient operations. Maybe you can close 2 facilities and open 1 new greenfield facility that you could take on that capacity with one operation. So those are the type of conversations that are happening on the poultry side. And then on the non-poultry side, what we are -- what we have been seeing is particularly in the Middle East, a lot of greenfield opportunities on fruit and juice. And then we're also seeing greenfield opportunities on the pharma side. So those are the areas where we are seeing some good activity.

That's helpful. And then just one more on AGV, and I know it's a smaller portion of the combined entity now. But I was hoping to get a little more color. I know you said demand in fourth quarter was good. But looking ahead, what is -- what are expectations for that segment or end market, however you want to define it?

Yes. AGV is a great business. It was probably -- it was definitely our most improved business in 2024. We talked quite a bit about that. I won't go into all those details, but there is a very good business. So -- and in terms of go-forward expectations, continued double-digit revenue growth, and they are in that 20% EBITDA range, so accretive on the growth and accretive on the margins.

There are no more questions. I will now turn the conference back over to Mr. Brian Deck for closing remarks.

Thank you all for joining us this morning. As always, our Investor Relations team will be available if you have any additional questions.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.