AAK AB (publ.)

Good morning, everyone, and welcome to our second quarter results presentation. Joining me today, I have our CFO, Thomas Bergendahl, and we also have Tim Stiffensen, our president of global sourcing and trading, as well as sustainability. With that, let's head into slide number two. This is what we will cover today. We will run through our quarterly highlights, some select events. We'll do a business and financial update, including a progress update on EUDR from my colleague Tim. And then some concluding remarks from myself. And we will also have a Q&A session at the end. So save your questions for that. On slide three, just very shortly, regarding forward-looking statements, this is the presentation that includes forward-looking statements that come with risks and uncertainties. These are our views on future events and financial performance, but actual results could be different. So please keep that in mind when digesting the material. With that, page number four. and some comments to our key financials for the quarter two of 2024. In Q2, our volumes grew by 4%, driven mainly by chocolate and confectionery fats and food ingredients. Our operating profit per kilo increased by 21% at fixed currencies, mainly driven by our global optimization programs and operational leverage from higher volumes. Profitability was also supported by continued favorable market conditions. Overall, operating profit increased by 26% at fixed currencies. Operating cash flow was solid, even with increased working capital due to the higher volumes that we are seeing. Our leverage remains low at 0.41 in net debt to EBITDA. and our return on capital employed was strong at 21.5%. Please turn to the next page, page five. We had our AGM or annual general meeting on May 8th in Malmö, Sweden with good representation, 77% of the shareholding represented. We also now are up and running with our bio boilers in the Aarhus site in Denmark, and we're nearing full capacity And this helps us to reduce our CO2 emissions from this plant with over 90%. And it's also saving us 100 million SEK annually in cost savings. So really good projects there that is now up and running. With that, please turn into page number six. Comments on our business area, starting with food ingredients. We grew our volumes. They increased by 4%. driven by bakery and dairy, while special nutrition declined. Operating profit per kilo increased by 15%, thanks to continued optimization and portfolio management. From an industry perspective, it was primarily driven by dairy, special nutrition, and food service. And with that, our operating profit, all in all, rose by 19% and reached SEC 756 million. despite a three million negative currency effect. Heading on to chocolate and confectionary fats on slide seven. Our volumes increased by 40%, building on last year's soft second quarter performance, and it was further supported by favorable market conditions. So really a strong volume growth. Our operating profit per kilo increased to SEC 3.55. with a SEC 0.1 per kilo positive currency impact. And that all in all led to an operating profit that reached 433 million SEC, an increase by 58% versus last year. And that was driven by further optimization of the CCF portfolio, good leverage on increased volume, as well as increased market penetration for our alternatives to Kaukawabak. With that, page eight, technical products and feed. Volumes declined 11% in the quarter. This was due to production challenges during the restart process after our annual and planned maintenance stop. So really an isolated event with a longer stop than anticipated. As a result, production remained offline longer than anticipated. Adjusted for this one of stop volumes in technical products and feed actually grew by 3%. Operating profit per kilo and operating profit was, of course, negatively impacted by the low volume following the longer than normal stop that we had. And with that operating profit per kilo dropped to SEC 0.15 and the overall operating profit fell to 9 million SEC, a decrease by 80%. But again, very much linked to a longer than normal stop. Production did come back up and has returned to normal. With that, I hand it over to you, Tim, for an update on EUDR and what we are doing.

Thank you, Johan, and good morning, everybody. Please turn to slide nine, which deals with progress on deforestation-related targets. First, some context from our sustainability report for 2023. You can see that up to 2023, we have made excellent progress towards our target of having 100% deforestation-free sourcing of palm oil by the end of 2025, and it's at 83%. And on traceability to plantation, which is at 93% in 2023. We are also now making progress in planning to meet our science-based targets for 2030, which were accepted by the SBTI in December last year, and which comprise various targets in relation to carbon emissions. This is all very good news. and displays the positive impact which AA can and does make, being one of our key aspirations for 2030. Please turn to the next slide. Slide 10 deals with several actions to meet EUDR compliance. The EU deforestation regulation, enforced since mid-2023, provides mandates for traceability and deforestation for commodities placed on the EU market. including palm oil, soy, cocoa, coffee, rubber, cattle, and timber. Starting from December 30th, 2024, so this year, all imported raw materials in these categories must comply with EUDR requirements, including evidence of traceability to source, proof of legal production, and being deforestation free since 2020. For AAK, this impacts palm and soy in particular, and their imports into the EU. It's a regulation already in force, and although there is speculation that its application may be delayed beyond the end of this year, it is a regulation with which we are planning and expecting to comply in line with the timeline of 30th of December. We've already taken steps to comply, including working with suppliers, revising our make or buy strategy, and preparing our production setup for increased processing in Europe. We're also maintaining an open dialogue with stakeholders, underlining IT systems and documentation requirements with customers and authorities, so far as those requirements are already known. There do remain some gaps which we expect to be filled and need to be filled by the EU Commission and Member States in order to allow a smooth transition. We're working with suppliers to meet EUDR requirements by year end and strategically replacing elements in our supply chain to safeguard compliance. We're also adjusting our sourcing strategies and increasing production flexibility in Europe to mitigate risks. Our 2024 capital expenditure includes 100 million SEC for upgrading European fractionation facilities and to ease compliance with EUDR standards. And we're investing in expanding our presence in the port of Rotterdam and integrating IT systems for raw material traceability requirements. These investments represent early steps in our careful approach to EUDR compliance. And with that overview, I'll hand back to Johan.

Thank you so much, Tim, for that clarification on EUDR. As mentioned by Tim, we are indeed allocating some 100 million SEK to upgrade our facilities in Europe for compliance. We've also invested a similar amount to enhance our presence in Rotterdam, as you just mentioned, and we're also integrating a new IT system. And these investments really mark our initial steps to cautiously monitor regional EUDR implementation and enforcement. And we are consistently and continuously assessing potential future CAPEX in order to comply and develop as AAK. And with that, let's move into further comments on our financials with you, Thomas.