Acomo N.V.

Good afternoon and thank you for joining us on ACOMO's first investor and analyst call. As presented at the annual general meeting of shareholders in April, we will more frequently engage with our investors and analysts. In today's call, the result of the first six months of 2024 will be covered. This morning, the H1 2024 earnings press release was issued and was published on the ACOMO website. This call is a webcast and its transcription will be made available on the company's website. Please note that this call may contain forward-looking statements. These statements do not, however, guarantee future performance and therefore no reliance can be placed upon them. The company undertakes no obligation to publicly correct or update any forward-looking statement made during today's call, except as may be required on the applicable securities laws. Today's agenda will cover several topics. I will start with the overall performance of the group, after which the results of the individual segments will be discussed. As ESG is an important building block of our strategy, I will explain what we have done in this respect. After that, some strategic initiatives will be presented and explained how these relate to the strategy as presented during our last AGM in April. Finally, I will elaborate on two important organizational developments after which you will have the opportunity to ask questions. The Q&A process will be channeled through a moderator. You are invited to submit your questions during or after the presentation using the mail functionality. Analysts will be allowed to raise questions verbally via phone during the Q&A session. The headlines of H1 2024, as mentioned in the press release, are the excellent performance of the spices and nuts segment and the continued impact of the cocoa market prices on the organic segment results. I will cover these topics in more detail later in the presentation. The consolidated sales in the first six months were 668 million euros, and were stable versus prior year. Volume and revenue increased for the spices and nuts segment, as well as for our tea business. The edible seeds and organic segments reported somewhat lower volumes. The gross margin was healthy, which underlines the robustness of our portfolio and our value added services. The G&A expenses increased due to higher labor costs in especially North America. The EBITDA is with €41 million, 9% below prior year. The results from our organic cocoa business account for more than 100% of the reduction in EBITDA. Financial expenses increased slightly despite lower working capital usage due to a changed currency mix compared to the first six months of 2023. The operational cash flow was below the cash generated in the first half of last year. After a long period of high cash flows due to a reduction in working capital, the cash flow changed due to a slight increase in working capital over the last few months. The current working capital level is however still below the first half of last year. During the last two years, our working capital decreased significantly. This was mainly driven by inventory volume reductions. Besides volumes, the inventory value on the balance sheet is also impacted by the purchase price development of our products. Higher prices result in higher values, which for a number of our products is the case. Our inventory levels play also an important role in our commercial policy. We have long and short positions based on our expectation of market developments and, for example, supply chain disruptions. Wearing capital remains an important area of attention However, as stated, it is also an important instrument of our commercial policy. When looking at the ratios per the end of June, it shows that the solvency ratio is very solid with 54%. The equity per share increased to €13.89 and the leverage ratio slightly increased due to the EBITDA development. The headroom in our financing facility is large. and provides sufficient availability of funds for growth. Based on the underlying performance and the financial fundamentals of the group, the board has decided to set the interim dividend at 40 euro cents per share, which is equal to the interim dividend of 2023. To take a closer look at what the underlying performance of the group drives, I will now discuss the individual segments. I will first start with the cocoa market situation as it continued to impact the first six months performance. As presented during our last AGM, cocoa is an important product group for Trident Organic and for the group. The graph on this slide shows the cocoa market price development during 2023 and the first six months of 2024. During 2023, the cocoa prices increased in a straight line by more than 60% that impacted materially market behavior and the financial results. The first four months of 2024, the situation became even more extreme and the price development accelerated very fast, leading to an unprecedented level of $11,000 per ton. Since then, there is a downward trend, but now the volatility is extreme. We see market changes of more than 10% plus and minus in a single day, showing the high uncertainty in the market about crop development and expected bean processing volumes. As the levels change materially per day, it is difficult to manage and time correctly. The measures taken have reduced our exposure and have shortened the timing between purchase and sales. But with the set volatility, the environment is very challenging. Defaults at the supplier side still exist and impact the availability of beans. Organic ingredients reported a low result versus prior year. This reduction was for more than 100% contributable to the cocoa results. As presented on the previous slide, the price developments have been and still are extreme. It should be noted that actual margins on physical sales reflect the high price levels, but that the availability of beans and the timing of sales have an impact on the reported results. During the AGM, we said that the higher margins will offset a major part of the losses of the hedges during 2024. We also indicated that it was impossible to predict how much would be reported in the first half of 2024, and how much in the second half of the year. Based on what we know today, we do not have a different view. Having said that, if the extreme price volatility continues, the full year results cannot be predicted. The other product groups are generally picking up with good performance of North American Fruits and Vegetable Desk, as well as the premium juices business. Furthermore, I'm very happy that Floris Veseling will start for the 1st of September as the new CEO of Trident Organic after an extensive search process. I will come back to this at the end of the presentation. Our spices and nuts business performed again very strong. I'm very happy that this is applicable to all our companies in this segment. Both sales and margins increased, which shows the strength of the business, how professional our teams are, and how attractive this segment is for us. Therefore, I am pleased that we reached an agreement with Caldic on the acquisition of their nuts and dried fruits business in Northern Europe. I will discuss this in more detail later in the presentation. Edible seeds had a slow start of the year in the US. Overall, the North American business sold lower volumes, but the performance of the individual lines of business differed. The wildlife business, which sells bird food and backyard poultry products, was impacted by a warm winter, which led to lower demands and consequently lower volumes. This was a market broad development. Versus last year, our market share remained similar and margins were at comparable levels. The export of sunflower products to Europe was substantially lower due to non-competitive pricing for US grown products. The contract manufacturing volumes increased, showing our value add to our CPG customers, resulting in increased demand. Our Sunbutter brand, which is a healthy and free from alternative to peanut butter, reported increased sales and margins and benefited from the launch of Jemmys, which is a frozen Sunbutter jelly sandwich. European seeds business improved their performance through increased sales and profits due to an extended and broader product portfolio. Royal Van Rys RT business achieved higher volumes and sales. Margins were slightly lower due to market price developments. Geopolitical and economic developments continue to have an impact on Van Rys. The unpredictability in ocean freight routes with the tension in the Red Sea, as well as freight rates, have a negative impact. The North American business that works closely with a number of customers performed very well and continues to develop positively. Although food solutions saw declining volumes of distribution products, the focus is on dry and wet blends, and the volumes of these product groups increased. Consequently, the margin increased because of the higher value-add component of these product groups. For wet blends, we are reaching maximum capacity, and we are making investments in this area, which I will explain in a minute. ESG is important to us. And in this area, there are a number of internal and external developments. As from the reporting year 2024, ACOMO has to report on ESG items in accordance with the corporate sustainability reporting directive called CSRD, which is part of the European Green Deal. In relation to the CSRD requirements, we performed the double materiality and gap assessment. This resulted in applicable ESRS standards and for our business relevant metrics. We are in the process of taking the necessary steps to collect data, compile information, draft disclosures, and secure limited assurance on the sustainability statements. Last year, we also set targets to be achieved by 2030 and implemented initiatives helping us to progress on our route to these ambitions. The first set of targets were partly included as a sustainability component of the financing agreement and serve as a basis for further target setting on the material sustainability topics. Besides CSRD, another EU directive will become applicable for ACOMO. This is the Corporate Sustainability Due Diligence Directive, called CSDDD. To prepare ourselves, we have started the usage of the SEDEX methodology and data for all Acoma companies. Greenhouse gas emissions are an important indicator for measuring the environmental impact. In H1, we further reduced our Scope 1 and 2 emissions through energy reduction initiatives, purchase of renewable electricity and installation of solar panels. Furthermore, we launched the Scope 3 calculation project within the group. As said, Acoma has a sustainability improvement loan as part of the group financing facility. Acoma achieved three out of four targets in relation to this loan for 2023, resulting in a reduction of the charged interest rates. Now I would like to share with you two strategic initiatives which are in line with the strategy as presented during our last AGM. On the 1st of July, we announced that we have reached an agreement with Caldic on the acquisition of their nuts and dried fruits business in the Nordics. This business is based in Malmö, Sweden and is active in the food service and retail channels in Sweden, Norway and Denmark. The company has its own processing and packing facility and employs 28 FTE. The turnover is around 20 million euros. The rationale for this acquisition is twofold. Firstly, during the AGM, we said that the spices and nuts segment is core to us and we want to further grow in this area. We have expertise and skill and the market characteristics are attractive to us. Secondly, the Caldic business is well positioned in a geographical market where we had no physical presence so far and which we currently serve via export. In addition, we know the company well as we have supplied them with both conventional as well as organic products in the past. We will bring the business under management of DailyNuts and we'll rename the company into DailyNuts Nordics. The profile of the Caldic business perfectly fits the structure of DailyNuts and the sales channels are similar. We believe we can leverage the portfolio and the capability from all our Acoma companies, both conventional as well as organic, and combine this with the expertise and knowledge of our new Swedish colleagues. Finalization of the acquisition is subject to approval of the Swedish authorities, and the transaction is suspected to close in Q3. Another strategic initiative is the capacity expansion for the production of wet blends by our food solutions business, SNIC Euro Ingredients. SNIC operates three different lines of business, the distribution and trading of ingredients, the production and sales of dry blends and the production and sales of wet blends. The wet blends production is reaching maximum capacity and for further growth, we need to expand. We believe expansion is justified as the margins and returns of our food solutions business are attractive and we see opportunities for further growth. For the expansion, we have rented a building in Ostende, Belgium, not far from our existing facility. The building suits our plans very well and will house both wetland production as well as storage of products. We expect that production will start early 2025. Besides the strategic initiatives, we made two important steps in relation to the organization. I'm very pleased that two key vacancies will be filled shortly. Firstly, our new AACOMA Group CFO, Mirjam van Tiel, will start for the 1st of October. Mirjam is currently Finance Director Americas for Friesland Campina, where she has worked since 2015. She also was finance director Malaysia and finance director for the Philippines. From 2002 to 2015, she worked for Kraft Heinz in various senior finance positions in the Netherlands, France, Indonesia, and Australia. She has broad international and business experience, which is very relevant to us. She also proved to be successful in different settings, and her experience will be an asset to our group. Secondly, Floris Wesseling will start as new CEO of Trident Organic for the 1st of September. With over 20 years of experience in the food industry, Floris has a successful track record across various geographies and product categories. He held roles with full P&L responsibility for a major part of his career and developed a broad management skillset. Floris is a purpose driven leader and a true globalist. with the firm belief that business can be a force for good. He is therefore a very good fit for Trident Organic and will develop the organic value add concept and the organization further. As I have now covered all topics of the agenda, we now open the call for questions. The moderator will coordinate the process. Thank you. Okay, are there people who want to ask a question? You can do it via the message box. Okay, the first question is, does Acomo have any plans for buyback shares in the short term or medium term? Acoma has no such plans as we have discussed before during AGMs. That buyback of shares is not something we consider as an option for the shorter term. We like to expand our business and buying back shares is not part of our strategy. Okay, another one is, can I explain the hedging mechanism on the COCO? Well, obviously this is something which is close to our heart, as you can imagine, given the developments in the COCO market. We tried to explain that a little bit more in detail during the AGM. In essence, what we do is we, as soon as we have an obligation to purchase, so we have a purchase contract, we enter into a hedging contract sell the product for a similar price. And as soon as we have the sales contract, we close our hedging contract and then we lock in the margins we make on the sales. In essence, that's the way how it works. It's a standard mechanism in the market. And the way how we use our hedging is not dissimilar to what other companies are doing in the market. And historically, it has proven to be a very successful instrument to hedge and to mitigate the the risk connected to COCO. What we have seen in the market development during both 2023 as well as 2024, there was in some cases a mismatch between the lapsing of the hedge and the time of the sale. We have taken measures during 2023 to make that much closer to reduce the number of hedge contracts and that's basically where we are now. So we have a very close monitoring of our hedge contracts and the positions that we have. Okay, Reg, you're on the call. You'd like to ask a question. Reg is an analyst from ING. Reg?

Yeah. Good afternoon. Thank you for the opportunity to ask the call. I guess it does relate to the hedge. I think what would be helpful is if you could provide us with more details of how much of an impact that hedge is having. I know you've given us some guidance that more than 100% of the EBITDA loss in organic is coming from that hedge. But if you could quantify it, that would be really helpful because I think what we would need to see is a trajectory where we see a diminution of this hedge impact over time. And you've given some sort of range, but perhaps you can give us more granularity.

Yeah, no, that's fine, Reg. I understand. The impact, so the decline or the change in EBITDA that you see at the organic segment, Like I said, it's for more than 100%. It's a little bit more than 100%. So it gives you an indication of, in absolute terms, what the amount is. So it's a little bit over 100%. What we have seen is that, and if you recall the price graph that I've shown during this call, you've seen that the market has changed. So what we have seen that the COCO results have improved during the first half of year. Having said that, Again, it's very difficult to predict where we will end at the end of the year, but we see a positive trajectory in recent months. But again, difficult to predict how it will develop in the course of the year, given the extreme volatility that we are facing in the market. But there is a downward trend, which is positive to our results.