AAK AB (publ.)

Thank you and welcome. Good morning, everyone. This is the AAK Q4 earnings call. As you heard together with me, as usual, I have our CFO, Thomas Bergendahl. We will take you through the presentation today. And then, as usual, we are happy to take all your questions afterwards. On page two, you will see the agenda for today. And with that, I suggest that we jump right into page four and start our presentation of the Q4. We are really closing the year with strength. It's been a strong year for AKA in total, and quarter four was no exception to that. Our operating profit increased by 50% at fixed FX rates. This was very much driven by internal process optimization. We've talked about that earlier, but very much in line with what we have been doing and executing throughout the year. Also better portfolio and price management, including a continued focus on selling more of our speciality solutions. And that is a focus that will continue with age. Our volumes, however, declined 4% year on year. But worth mentioning is that we continue to see a sequential improvement, which we also saw in quarter three. So really good to see that the volume loss to last year, quarter four, is lower than the losses to the previous quarter that we saw during 2023. And if you then go in and look at that sequentially, Q2 to Q3 to Q4, we did see improvement in volume. Further to the operating results, we also had a very strong cash flow. The strong cash flow was really driven by the increase in earnings in the quarter. We have a proposed dividend from the board of directors which is at 3.70 per share. This corresponds to an increase of 35% compared to last year. So a nice increase also driven by our increased earnings. In summary, a strong quarter, very much in line with the trend for the first nine months of 2023. For those comments, let's move on to page five. Few comments to some events during the quarter. We are very happy and proud that we have now got our targets, our sustainability targets, reduction targets have been approved by the science-based target initiative, SPTI. And that marks a milestone. It shows that AAK is really moving ahead. We are also an early adopter with regards to the SPTI targets because we have now, as one of the first companies, also secured approval for the flag part of SPTI, which is focusing on forest, land, and agriculture. So our emission reduction targets have also been approved with regard to scope three under the flag directive. Further to this, we have launched a new product, SEBIS Shoku 15. It has received good recognition at the Food Ingredients Europe. We were, in November, At this conference, Food Ingredients Europe, we were one of the finalists with regard to or in the category for Sensory Innovation Award. It's an affordable, it's targeting affordable indulgence. So in essence, living our purpose, making better happen. In this case, making it an opportunity for the consumer to enjoy indulgence to an affordable price. Moving on to page six. With regards to our three areas, starting with food ingredients. Volumes were down 3% year on year, but also in this area we improved volume sequentially. Baker special nutrition volumes declined. But it was somewhat mitigated by a strong performance within dairy. Coming back to bakery, our bakery optimization that we have talked about earlier this year had a negative impact on this order. But that was, again, very much according to plan. With regards to our margin EBIT per kilo, it increased to 1.96 SEC per kilo, which is a 52% increase versus last year at fixed FX rate. This increase was mainly driven, or rather broad-based driven, throughout the sub-segments. Pretty much all of them improved, with the exception of special nutrition, which decreased slightly due to lower volumes and lower leverage on that lower volume. Sequentially, the EBIT per kilo declined a little bit compared to a very high 2.15 sec per kilo in quarter three. With that, we're moving into chocolate and confectionery on page seven. For the chocolate and confectionery fats, volumes decreased by two percent year on year, but grew three percent versus quarter three, 2023. The performance was a bit mixed within the total chocolate and confectionery space. We saw a bit of a decline for solutions to products like chocolate bars and so forth. But on the other hand, compensated by nice growth for solutions where we target ingredients towards spreads and fillings within the shoplift and confectionery space. With regard to margin, EBIT per kilo was strong. It increased by 67% at fixed FX. It's very much in line with the rest of 2023, where we have seen a strong performance driven by internal optimization, continued portfolio and price management, improving the way we operate. And this also includes our continued focus on selling more of our speciality solutions into various sub-segments of the chocolate and confectionery space. To name an example, speciality solutions that we sell to spreads and fillings did very well and had a positive mix effect for the quarter or in the quarter for chocolate and confectionery. With that, I move into technical products and feed. Volumes declined by 12%. Really also, when looking at that, it is a high comp in 2022. Q4, it was very high volumes. But again, we grew sequentially in the quarter versus the second quarter. So for the second quarter in a row, we grew sequentially. So really from Q2 to Q3, and now from Q3 to Q4. So again, a slightly positive trend versus Q2, Q3, but when comparing to Q4, it was negative 12%. The year-on-year decline was mainly driven by lower sales or lower volumes in the feed business, which again had a strong quarter for 2022. With regards to technical products, including solutions where we replaced paraffin to candles, it declined slightly. but still on a good level in a historic perspective. EBIT per kilo declined on lower volumes, so lower leverage, also lower margins into our solution for biofuel, and slightly lower crush margin also in our crushing of rapeseed. From a rolling perspective, the Q4 results were very much in line with Q2 and Q3, both when looking at volumes and EBIT per kilo. And with that, I hand it over to you, Thomas, for a bit more details on the financials.

Thank you, Johan. And good morning, everyone. Continuing on slide nine. During Q4, we saw continued positive underlying trend that we've seen in the previous four quarters with a strong cash flow driven in Q4 as in Q3, mainly by strong earnings. uh the quarter generated a positive operating cash flow of 1.4 billion sec and a free cash flow of 1 billion and for the full year of 23 we've generated operating cash flow 5.3 million sec and the free cash flow 4.1 billion as it relates to working capital we had a slight positive overall impact on cash flow in the quarter and we see a positive contribution primarily from accounts receivable which is driven by a seasonal reduction towards the end of the year. Inventory values grew and had a negative impact in the quarter. This is also driven by seasonality and primarily related to the sourcing of sheet kernels. Interest cost paid in the quarter was 59 million, and this was a fairly significant decrease compared to the same quarter the year before, mainly driven by reduced debt levels. Tax rate was 19% in the quarter and 23% for the full year. And the tax rate in the quarter, the reduction was mainly related to the utilization of tax losses carried forward. And there are applicable for the full year of 2023. So that's the average to look at. Other non-cash items had a positive effect of 241 million SEK. and mainly driven by unrealized hedging contracts of raw materials and valuation of pension commitments. For the full year of 23, the effect from other non-cash items was a negative 65 million SEK versus a positive effect 63 million in 2022. Moving on into CAPEX, the quarter totaled 325 million SEK. It was slightly below Q4 of the previous year. And this, as before, is related to production improvements, de-bottlenecking, capacity optimization, as well as the completion of the two bio-boilers in Aarhus, Denmark. For the full year of 23, the CAPEX spend ended up at 1.2 billion SEK, which is in line with our guidance for the year. For 2024, we expect CAPEX related to maintenance, production improvements, and capacity optimization. to reach roughly the same level, 1.2 billion SEC. And our focus and efforts to manage our cash flow has yielded good results, as you can see. And we remain committed to maintain this momentum in the future through our Cash to Grow program. And I will get back to this later on in the presentation. Next slide, slide 10. Here we see return on capital employed, which in the quarter reached 19.1%. up from 17.2 in Q3 of the same year. This is driven mainly by improved profitability. Capital employed has remained roughly flat in absolute terms despite ongoing inflationary pressure. The ROC is up from 14.5 at the end of 22 and well above the last peak we saw at 15.6% at the end of 2021. Slide 11, please. The net debt EBITDA ratio was further reduced in the quarter, ending at 0.49, down from 0.73 in Q3, and significantly down, of course, from the peak that we saw mid-2022 at just above 2. And now well below the level before the impact of the increased raw material prices that we saw started off in mid-2020. The improvement primarily driven by a strong cash flow, which has then resulted in a reduction in net debt position, as well as a strong development of profits. Back to you, Johan.

Thank you, Tomas. Before wrapping up, I would like to review the structural drivers behind our profitability improvements. As I'm sure most of you are aware, or already aware, AK is a decentralized operation or have a decentralized organization. We are very close to the market and our customers. In the decentralization lies also our strength, and it is a reason for our success. Nevertheless, the decentralized nature of our operations presents certain challenges, particularly in ensuring consistent implementation of best and capitalizing on synergies across our production sites and regions. To tackle this, we have over the last couple of years been building an increasingly aligned organization on top of a decentralized structure. And while we have made significant progress, as shown by our results in 2022 and 2023, there is still work to be done on further aligning our organization and our culture. And Thomas, can you give a bit more color to that?