AAK AB (publ.)

Good morning, everyone. Thank you for joining us here today. And thanks to all of you who joined us a few months ago, also at our Capital Markets Day in Karlsson. We really appreciate interacting with our investors and analysts. Joining me today, as you heard, we are in Malmö at our headquarters. We're going to review our fourth quarter financial results. And I have Thomas Bergendahl with me here today, our CFO. With that, let's turn to page number two. Here is what we will cover today. The quarterly highlights, selected events, a business and financial update, and then some concluding remarks from our side. And after that, we will have a Q&A session. With that, let's move to page number three. Just a few comments. This presentation 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 just please keep that in mind when we are going over the material that we have in front of us. Please turn to page number four. Let's start with the quarterly highlights for Q4 2024. We had a solid finish to what has been another strong year for AAK. In the quarter, volumes decreased by 1%, mainly driven by food ingredients. Our operating profit per kilo, our margin continued to increase up by 16% year on year at fixed currencies. This was largely driven by our global optimization programs, which have improved our operations as well as continued favorable market conditions in chocolate and confectionery fats. As a result, our absolute operating profit increased by 11% or 14% at fixed FX. This builds on the 47% growth we delivered in quarter four last year in 2023. So while we are seeing slightly softer volumes here in the fourth quarter, we have managed to maintain momentum and we delivered a very solid result driven by improved profitability. Moving on to cash flow, operating cash flow amounted to 118 SEC, 118 million SEC. Our financial position remains strong. Our net debt to EBITDA stands at 0.29 which highlights our ability to maintain a healthy, strong balance sheet. This also gives us flexibility going forward. Our return on capital employed, our ROSI, came in at 22.4. This is a reflection of the strong operating profit we have achieved and our ongoing focus on driving returns. We have proposed a dividend from the board of directors, which is at five sec per share. This corresponds to an increase of 35% compared to last year. So a nice increase also driven by our increased earnings. Overall, it's been a solid finish to what has been a very strong year for us at AAK. With that, let's turn to the next slide. Before diving into the performance of each respective business areas, let us take a brief pause to reflect on a few events that shaped the fourth quarter. We have opened up a biotechnology innovation center in Lund to support industries such as food, feed and cosmetics. By bringing enzyme and fermentation research in-house, we can improve efficiency, drive idea development, and strengthen our expertise within the company Lund the city of Lund and the location was chosen for its active innovation environment with a mix of startups established biotech firms and its proximity to academic institutions and research facilities offering opportunities for collaboration and knowledge sharing I would also like to take a moment to highlight an important achievement AEK's win at the Food Ingredients Europe FIE 2024 with the Sustainability Innovation Award for our company. This recognition celebrates our efforts in empowering women in West Africa through our own program called Kolonafaso and reducing emissions across the SHI supply chain. It's a reminder of our ongoing commitment to sustainability and responsible sourcing across the industry a big thank you to everyone who contributed this achievement continues to inspire our work at aek and as briefly mentioned already back in november we hosted a well-attended capital markets day at our carlson facility in sweden where we raised our 2030 profitability aspiration to sec three per kilo or above sec three per kilo reinforcing our belief in the future growth for those who could not attend i encourage you to watch the recordings available on our website to catch up on the insights shared during this event thomas could you please give us an update on the food service divestment that we also announced

Yes, thank you, Johan. And good morning, everyone. As I'm sure most of you recall, we announced in October of 2024 that we had entered into an agreement to divest our food service facility located in Hillside, New Jersey in the US. The transaction was finalized as scheduled on December 31, resulting in a one time positive cash flow impact of 646 million Swedish kronors. uh which came in then the fourth quarter of 24. the impact on the p l from the divestment was as previously communicated not material we are confident that the new owners together with all employees from the hillside plant will continue to develop the business and we wish them all the best going forward meanwhile our investments has also announced into our food service plant in sweden as well as the upgrade to one of our food service plants in the UK, are both progressing according to plan. With that, I'll hand it back to you, Johan, to go through the different business areas.

Thank you. So let's move on to the next slide. Business area highlights, starting with food ingredients. Starting with volumes, we saw a year-over-year decrease of 4% in the quarter for food ingredients. this decline was primarily driven by lower sales of non-speciality oils with lower margins as well as a decline in dairy operating profit per kilo increased to 2.28 sec up from 1.96 sec representing a 16 growth in operating profit per kilo currency effects had a negative impact of 0.11 per kilo The growth in operating profit per kilo was broad based with improvements across the major segments that we deliver to. Baker in particular led the way with strong performance. When we exclude currency effect, operating profit per kilo increased by 21%. Operating profit increased to 767 million compared to 685 million last year. This represents a solid growth despite the headwind on negative currency translation effect amounting to a SEC 36 million. At fixed foreign exchange rates operating profit increased by 17% in the quarter. So with that let's move into chocolate and confectioner fats on the next slide. We saw a modest increase of 1% year on year in chocolate and confectionary fats. This growth was primarily driven by Europe, Asia and the Middle East and Africa. However, this was somewhat offset by weaker results in the Americas and a softer consumer demand for chocolate. On the profitability side, operating profit per kilo increased to 4.19% up from sec 3.91 last year marking a seven percent improvement the currency translation effects were minimal with only a sec 0.01 per kilo impact the primary drivers here were strong contributions from europe and the americas supported by favorable market conditions Our operating profit rose to 520 million SEK compared to 481 million last year, an increase of 8% year on year. This reflects our ongoing ability to generate consistent and meaningful profit growth, even in a mixed consumer demand environment. And with that, let's move into the next page. Now some business area highlights for technical products and feed. Let's look at the results for technical products and feed. Volumes increased by 7% year on year, with growth coming from both technical products and feed. Operating profit per kilo saw a healthy increase, reaching 0.86 sec per kilo, which represent a 9% improvement year on year. Operating profit for this segment totaled a sec 69 million, which is a 17% increase compared to the same period last year. With that, we have now covered the business area and I will hand it over to you, Thomas, to provide some further details to our financial results.

Thank you. Thank you. Please turn to slide nine. Operating cash flow in the quarter amounted to 118 million SEC, as Johan mentioned before, and was driven by earnings offset by an increase in working capital, mainly driven by inventory. Inventory increased by just over 1.4 billion SEC, made up of roughly 550 million SEC related to inventory level increases from seasonality driven sourcing of primarily she and palm. This number also includes 200 million from the previously communicated temporary ramp up of conventional raw material in preparation for the implementation of EUDR. In addition, inventory values are up just above 850 million sec, driven by an increase in raw material prices based on the six to nine months lag that we've mentioned before. The excess EUDR related inventory now totaling just over 400 million SEK at the end of 2024, which is conventional without EU DR-related premiums, is temporary and will be run down during the first half of 2025, primarily in Q1. Accounts receivable was slightly reduced in the quarter, while payables remained relatively flat. CapEx amounted to just over 363 million SEK in the quarter, slightly higher compared to the level in Q3, The total capex spent for the year was 1.25 billion SEK, right in line with our communicated estimate. As previously mentioned, the divestment of Hillside generated a positive cash flow in the quarter of 646 million SEK. We have also in the quarter restructured two of our sourcing agreements, which is expected to deliver financial and operational benefits over the term of the agreements. However, with a one-time negative operating capital impact, negatively, of roughly 500 to 600 million SEK, which will come in in the first quarter of 2025. Please turn to the next slide. Return on capital employed increased following the continued strong development of operating profit. EBIT for the last 12 months was 4.9 billion SEK. up roughly 130 million sec sequentially from Q3, together with capital employed at 21.8 billion sec, the latter somewhat flat over the last few quarters, resulted in a return on capital employed of 22.4%, which is up 0.3% from Q3 in 24. Next slide, please. Driven by the strong operational earnings, as well as a positive cash flow and the divestment of Hillside, net debt to EBITDA remains at a level that provides us with financial flexibility. At 0.29 in Q4, slightly down from 0.39 in Q3, and significantly down from the peak of about 2 in Q2 2022. With a strong balance sheet, the board is, as Johan mentioned before, proposing a dividend of five sec per share for the financial year of 24. Subject to approval at the AGM, it represents a 35% increase from the previous years compared to the 20% increase in EPS for the same period and an 82% increase compared to the dividend paid for the 2022 financial year. With that, I'll hand it back to Johan for some concluding remarks and then some questions.

Thank you. Let's move into the slide on concluding remarks. We are wrapping up a strong year with a solid quarter four performance. We achieved 11% operating profit growth on top of last year's 47% growth. Our return on capital employed stands at 22.4%, driven by a strong operating profit, reinforcing our financial resilience and efficiency. Looking ahead, we have just raised our 2030 aspiration. Given our strong performance and early achievement of a key milestone, we now target a plus 3 sec per kilo margin going forward. Demonstrating our belief in future improvements and long-term growth opportunities for AK. For 2025, we remain focused on continued progress while maintaining a prudent yet optimistic outlook for the year ahead. Above all, we stay dedicated to making better happen. And with that, I will hand it back to the operator and we would love to get some questions from the audience.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Johan Fred from SEB. Please go ahead.

Good morning, Johan and Thomas. Thank you for taking my question. One per segment, if I may. So, starting off on a question on food ingredients. Volumes were down 4% year-over-year, while operating profit grew 12%. You alluded a bit on this during the call, but could you elaborate on what drove the strong earnings development? Is this due to the optimization programs or mix, or how should we think about the discrepancy between volume and operating profit? Thank you.

All right, thank you. So I think yes, the optimization programs that we have has contributed, but if we if we look at volume and mix in this case, as I mentioned briefly there. was a lower sales of non-speciality. And that was specifically due to a large part of that was to lower sales of lower value added rapeseed solution. So call it lower sales on lower value added products and higher sales or good sales volumes on higher margin products. So it was a positive mix effect for food ingredients while also being supported by our optimization program.

Great. Makes sense. And on CCF, how should we interpret the commentary around demand or market conditions? In the report, you state that volumes were negatively affected by reduced consumer demand for chocolate, while later you say that operating profit per kilo was driven by continued favorable market conditions. How should we interpret these two statements?

great question good opportunity to uh to clarify so when we look at the uh intel that we have on the chocolate and confectionery market as all meaning the consumption by consumer what is procured in the in retail right we have seen we have seen chocolate and confectionery producers uh be call it the market being down some two three percent everything else equal uh what we then supply what is our addressable market we have built up a portfolio a broad portfolio of plant-based oils and fats ingredients to the chocolate and confection space where part of that is replacing cocoa butter which is an important ingredient with a cost-efficient functional ingredient that we have and that's where you see the favorability in terms of market conditions because with high cocoa prices and so forth we see customers being even more interested in trying to offset cost and achieve good functionality in their products hence looking at some of the products that we have like cocoa butter equivalents and we have seen a good growth within our portfolio on these products so if that makes sense you could see the end consumer market being slightly soft but also positive trends within our addressable market with our solutions

And we can also add that within CCF, it still grows by 1% despite the market conditions that Johan talked about on the overall. We see CBEs doing well and growing more than the 1% we see for the segment in total.

Okay, makes sense. And are you seeing this? reduction in demand for chocolate globally, or is it linked to any specific geographies that's performing worse than others?

I mean, we are certainly active. So our total chocolate and confectionery business area is delivering to the global chocolate and confectionery industry. We supply the big players in this industry. So everything that we sum up here is kind of the sum of the global trends. uh then of course there could be regional differences within the industry uh we've seen america's being slightly down and the others are growing again we we show you know one percent so it's it's around that but more importantly when we look at the chocolate and confectionery market as a whole You have seen over many years that there is a positive trend around chocolate and confectionery. There's still a great opportunity going forward with a large part of Asia consuming a lot less chocolate than in the rest of the world. So when I speak to experts or more colleagues in the industry, if you will, there is a positive view on a continued good development and growth for chocolate and confectionery. products out there. However, in the short term, we have seen this spike in cocoa prices having an impact on inflation. Of course, that could create short term reactions. But long term, we are positive to the total market growth in the sector.

Okay, thank you. And a final follow up, if I may, there. So the volume growth was 1%, yet you state that CBEs grew

um faster than that how should we think about sort of the volume development for the segment going into 2025 well it's the sum of what we just discussed i think so um we need to look for what is the end consumer uh demand which drives the production of chocolate and confectionery products in total and then uh also really you know Realizing or coming back to what I said before, within that, AAK has a strong position on being able to replace cocoa butter. So that's an opportunity given the certain market condition. And we have a strong position for chocolate and confectionery ingredient as a whole. So looking into 25, keep an eye on consumer demand, how that develops, and then knowing that AAK has a strong position within the market.

Thank you so much for those answers. I'll get back in the queue. Thank you.

Thank you.

The next question comes from Benjamin Wahlstedt from ABGSC. Please go ahead.

Good morning. I would like to follow on the previous question on chocolate demand. You mentioned 2% to 3% lower chocolate volumes in the quarter. Could you specify if this is across both chocolate bars and chocolate snacks or are you talking about chocolate as an ingredient here or what is this metric?

Thank you. So when we comment, we comment on the total chocolate and confectionery market, which includes chocolate bars, snack bars, etc. And we speak about when we said down, we mean the end consumer market. So in essence, consumers go into retail to buy snacks. When we then talk about our volumes. Yeah, perfect.

Go ahead.

Go ahead.

Yes, so what I'm after is I know your exposure to chocolate or your total addressable market in chocolate bars and chocolate snacks differ quite a lot. And in perhaps tougher consumer times, it's not unreasonable to think that consumers would opt for chocolate snacks, especially if cocoa prices are way up. So are there differences between categories in these lower 2% to 3% lower chocolate volumes is basically what I'm after.

yes uh great question right so it's difficult for us to see uh you know the full granularity of that and i don't have that full data but yes there are differences and especially with regards to our addressable market so keep in mind if you see a chocolate product which says 100 cocoa and so forth there is not there is no ak ingredients inside however when you go to a energy bar or a snack bar with different kinds of ingredients included could be fruits and nuts and filling layers and wafers and coating chocolate that's where our prime market is where we have lots of solutions going into that including the possibility with the CVEs to also replace a bit of pure cocoa butter into a chocolate bar. So the combination of the chocolate demand plus the total market for snack bars etc. is our addressable market. So yes there are differences and one should also keep in mind that we have been called resilient or strong in scenarios in the past as well because within a downturn upturn or inflationary environment consumers might opt for what is called trading down choosing something that is maybe less expensive on the shelf but in those products there could be even more of the aak ingredient or address of market if you will so sometimes difficult to give you the precise answer on what's moving and up and down but we have seen a strong resilience and a good play for ak in different environments

Perfect, that's clear. And then another question. Could we have another update on your views of the balance sheet as well? Low leverage post Q4. Can you share anything new on M&A or what are your thoughts on your balance sheet in general, please?

Yeah, I would have loved to comment on M&A, right? We have a strong balance sheet. We're certainly capable of executing uh a good m a i say good m a because we're not going to throw uh good money after bad opportunities if you will and i mean um and i mentioned this before our our market is not a fragmented market with lots of transactions ongoing in any time period. So we are active, we are searching for M&A, we're looking at good investments for internal capacity improvements or efficiency improvements in our optimization program. That's the primary focus for our capital allocation. As we mentioned in the capital markets day, if we are not executing M&A or organic growth investments, and we still continue with a very strong balance sheet, we will consider other capital allocation mechanisms like dividend going forward. But for the time being, we have a strong balance sheet. We're not nervous about that. We propose a strong good increase of the annual dividend, and we're still looking for M&A. But again, it's not a fragmented market, so we cannot just flip the switch, but we are active.

Perfect. I think that's about as much as you can say. That was all from me for now. Thank you. Thank you.

The next question comes from Priya Patel from UBS. Please go ahead.

Hi, I've got two, sorry, three questions. So firstly on food ingredients, volumes were negative and part of that was due to weakness in the dairy business. Could you explain the dynamics that you're seeing within the Asian dairy market and just color on whether this weakness has continued into Q1?

Thank you. First, I take the latter part of the question. We do not give guidance on forecasts, so I will not do that on dairy specifically within food ingredients either. So in food ingredients, we have a broad portfolio where we sell to bakery, dairy, infant formula, plant-based dairy, etc. So it's quite a broad portfolio. And we saw a bit of weakness in dairy, a bit of weakness in AMEA, which is Asia and at least in Africa. However, when you look at the volume decrease, again, that was primarily driven by low sales of some low value added non-speciality rapeseed solutions. So in the total food ingredients, quite confident we had a strong quarter. And that's what you see on the margins as well, that we had a good sale of the products that we focus on.

Okay, thank you. And then just on the non-specialty oils, are these products that you've removed from the portfolio as part of the internal optimization program?

In this case, not. It's rather active decisions on what we sell and what we don't sell and so forth. But we have we have had during the course of the last couple of years, active de-selection of products that we don't sell anymore, or we repriced them to have a decent margin to continue them. So that's part of the optimization program. But in this specific case, it was our choice not to sell these products in the market.

Okay. And then finally, just in the chocolate division. So you mentioned that CBEs grew more than 1%. in the quarter. Just wondering if you can disclose what percentage of the overall chocolate volumes are CBEs?

Thank you for the question. I fully understand it. This is where we draw a line in the sand, if you will, and not detailing that in order to keep confidentiality and our position in the market. We're not alone. We have strong competitors, even though we have a very, very strong product portfolio. So I'm going to pass on that. But just to give a bit of color to it, when looking at at CCF specifically, let's not forget that we grew. We have been growing 8% in chocolate and confectionery in 2024 as a whole. compared to 2023. The growth was 1% in the quarter, but again, with a very positive mix. So we've been able to continue to grow the cocoa butter equivalents, the high value added products, somewhat softer volumes on the other ingredients. So all in all, a very positive development and good momentum still for AK in chocolate.

Okay, thank you.

The next question comes from Alex Jones from BAFA. Please go ahead.

Great, thank you. I've got a couple, but I'll start back on chocolate. You talked in response to one of the prior questions about this gap between the end market and your performance that's now a couple of percent. Do you think that's the full effect of COCOA reformulation activity? Or as customers continue to look at their products, do you think there's potentially greater outperformance you can deliver versus the end market into 2025, especially in Q1 when some of the annual contracts reset in January?

Thank you. Again, I will not comment specifically on Q1, but I'll just repeat some of the dynamics in there. So do we believe that there is still reformulating activities ongoing? Yes, we do. Is the Kaukua prices still high? Yes, they are. the industry, our customers, they are certainly interested in better functionality, better cost efficiency in their ingredient list. So I forecast that to stay. There's going to be a good demand for high quality ingredients that could help offset cost and be competitive versus cocoa butter as an example. Whether that has an impact on Q1, Q2, and so forth, it's a combination, of course, the end consumer markets, you know, who is reformulating what and when, and also our ability to deliver to those volumes and our competitors' behavior, right? So it's always that mix. I just want to repeat that. But from a long-term perspective, again, we are positive to the development of the end market, and we're also positive to the development and opportunities that we see within our addressable markets.

Great, thanks. And then following up on the non-specialty oils in food ingredients, should we expect that type of volume optimization to continue to weigh on volume growth of the division going forward? Because I suppose at the capital markets that sounded like you are now a little bit more focused on driving volume growth. So just wanted to check if that is the case or if there's still some of this optimization that we can expect in future quarters and years.

Yeah, great question. There will always be tactical decisions, you know, one quarter to another. Overall, we maintain our strategy. We are fully committed to deliver on our 2030 aspiration. That stands for food ingredients as well. There is more optimization to be done, but yes, we are also focusing on driving volume. Again, for the products, the opportunities that we see. So I'm glad that we do not, as an organization, just give after on price and sell to any price just to get volume. That's not the task for the organization. It is to really looking for that value over volume and a healthy balance. Now, in this case, we're addressing more of an active decision not to move volume and find other opportunities instead. And that's not the systematic trend that one would extrapolate, but could happen in a quarter, could happen in another quarter. If we see an opportunity to move volume to a decent price, we'll sell it. But we will also keep on being tactical and trying to always optimize the end result. And you see that. So in this case, it was a positive opportunity to drive margin versus lower margin volume.

And these type of products are also more price sensitive than the more complex and high end products. And therefore, back to Johan's statement before, that also allows us to make some judgment calls of what we want to take on or not, quarter by quarter. And demand varies as well, of course, right, on these type of products.

Yeah, understood. One final question on the restructured sourcing agreements that you talked about. Could you just give a little more detail about sort of why there's a negative impact initially and what the offsetting benefits might be in the longer term? Thank you.

Well, as I mentioned, we do see in these new updated contracts that we have a financial and operational benefit. So primarily financial benefit is the end of it EBIT wise. but we also then see some negative impacts primarily in this case due to some transportation timing and also on the payable side so we've adjusted our purchasing on these two contracts to enable us to have a better price versus the working capital effects mainly on payables

Thank you.

The next question comes from Oscar Lindstrom from Danske Bank.

Please go ahead.

Good morning. A couple of questions from my side. First off on volumes. I mean, you said you had sort of weaker volumes due to replacing simple products with more complex products. Do these more complex products require more of your capacity in the system? So what I'm trying to get at is, has this switch meant that you have a higher or a lower or an unchanged capacity utilization? And where are you now in terms of capacity utilization and available capacity given the Q4 product mix? So that's my first question. Should I take the other ones or?

Again, we can start with this one. To sum up, if you look at it from an overall perspective, yes, there is a difference, right? So some of the higher margin products are higher margin products because we have refined them to that. We have blended them to that. So they can take longer time in some processes. They can also utilize more processes in the factory in order to get to the end ingredient with that specific functionality. So yes, some of these solutions take more of the capacity, if you will. However, I also want to be clear that in food ingredients, this volume drop that we refer to on a less refined, low speciality rapeseed, it's not a capacity free up or capacity drained. So that's kind of excluded in that. It's more like a tactical decision. So I wouldn't call that, I wouldn't extrapolate that too much and there's no drama in that. Then when it comes to pure capacity, it's also dependent on some of the chocolate solutions have specific processes, infant formula solutions to some extent have specific processes. So we need to go line by line in order to give you a statement on capacity. There's no big change from today, quarter four versus quarter three, quarter two last year. uh we still have some uh headroom in many of the processes and there's a bit tighter in others and where it's tighter we have an ongoing default connecting agenda and investment agenda to to keep on raising demand but quarter to quarter could obviously be that we sometimes hit the ceiling but then we may be sure that we have an default connecting and investment agenda to increase capacity over time okay thank you on on

Do you have any deeper understanding of the reasons for the weakness in the U.S. chocolate market? Is there any indication that it was driven meaningfully by a wider use of weight loss drugs? Or were there other factors behind the weakness in the U.S. chocolate market demand?

I do not want to speculate at all in relation to weight loss drugs and so forth. I've had that question many times before. I personally do not think that that has a link to it at all. These drugs are there for reasons that others can comment. I think in the longer term, we are human beings. We will continue to eat food. We will continue to snack. We hopefully will have a good balance on exercising and keeping our health right. And with that, I hope that the population of the world will continue to be healthy and stay healthy and live long. But when you break it down to chocolate and confectionery Americas, what we see is the end consumer market data. We don't have the full visibility and we don't get the full transparency on that from our customers. what we have seen and you have all seen it is of course there is an inflation ongoing towards the shelf in retail with increased cocoa prices there's no doubt about that what is the exact impact in quarter four difficult to say whether it came from x or y but the inflation is there again we have seen uh in a positive trend for chocolate confectionery for many years many of the industry uh representatives that i talk to are positive to the long-term development for chocolate and confectionery and the markets total and within that, AAK has a strong position with our solution for feeling fats, et cetera, and last but not least, the cow-coa-butter alternatives that we have.

Thank you. My final question is on acquisitions versus greenfields. For some time I've been saying that you're looking for acquisition targets and I guess you've got some geographical white spots in Southern Europe and parts of the US as well, I guess. Could you opt for greenfield investments in these regions if you don't find anything soon or is it not big enough of a problem that you can wait sort of several years to find suitable acquisition targets rather than go ahead with the greenfield.

I rephrase the question to be more generic than Southern Europe or Americas. Would we opt for greenfield? Yes, that is exactly what we did in China and in Brazil. We were looking for targets and didn't find suitable acquisitions and we then decided to go greenfield in China and go greenfield in Brazil. We then added additional investments in China for infant formula production, which was a greenfield factory on the site that we already had. And we are certainly considering that in regions where we would like to grow. We made a brownfield, you could call it, acquisition on the southeast coast of India recently, where pretty much we bought an old factory that we are going to move into AAK standards, if you will, in order to grow in India. That is like, it's a brownfield technically, right? But it's greenfield investments going in there. So that's how we operate. So I would love to do a good M&A again. There's not that many out there. So we need to just be patient and be ready. In the meantime, we evaluate any organic opportunity that we would see benefits AAK.

But it should also be said that if we do have good targets, but take some time to realize them, we will work that pipeline before making a decision on a greenfield, given that it adds capacity and what in most places are mature markets.

Right. Thank you.

Thank you.

Those were my questions.

Thank you so much, Oskar.

The next question comes from Joan Lim from BNP Paribas Exane. Please go ahead.

Hello. Just three questions for me, please. So one, you reiterated your ambition to outgrow end markets. Can you help us understand what is the end market growth you're seeing? I know you said for chocolate and confectionary fats, but what about food ingredients in areas like bakery, dairy, and special nutrition? And what are some of the drivers of volume growth that will help AAK outgrow end markets? This is my first question.

Thank you. So over time, we've seen low single-digit growth in plant-based oils and fats across the board, right? So you look at food ingredients, a mix of bakery, dairy, infant formula, plant-based alternatives to meat and dairy and so forth. We've seen a low single-digit growth. And we are saying that we're going to target growing faster than that, but we add to the markets the segments that we address. So we're not saying that we're going to grow faster than the commodity type market, but we're going to try to grow faster on the speciality oils and fats market. What is it that will make AEK successful? It's to remain where we are. So we are a downstream, specialized, multi-sector, plant based oils and fats ingredient player. So we will remain focused on delivering functional fat ingredients, sustainable oils and fats ingredients and nutritious oils and fats ingredients that enable our customers to either shift from going to be an animal based solution they have today or shift from cocoa butter to the cocoa butter equivalent. uh etc and that's our focus that is where we try to differentiate if you raise above a bit and look at overall trends there is no doubt that in order to really you know have an impact on climate we in the world we need to get food right So to get food right, there's no doubt that we need to continue to optimize every single source of food that we have, be that the plant-based source or animal-based source. But long term, there is no doubt that we also need to look at the mix of what we eat, the diets. And we have a quite positive view that in the long run, with the focus on science-based targets, avoiding being dependent on fossil-based ingredient in non-food products, but also arriving to a more healthier nutritious and sustainable diet or food plate over the week, there should be a positive impact on plant-based oils and fats. And that's where we focus our innovation to enable healthy, nutritious and affordable food ingredients based on, in our case, plant-based oils and fats. So that's a short-term and a long-term perspective.

Okay, thank you. That actually feeds quite nicely into my second question. So on RFK Jr. So if, you know, potentially if he gets appointed as health secretary, what impact would increase regulations on seed oils or on fats have on AAK? And I guess a link to that on US tariffs as well. AAK sources about 25% of your palm oil from Latin America and Mexico is about 12% of group sales. Are you worried at all about the impact of U.S. tariffs?

We obviously follow that just like everyone else is doing at the moment. I would like to be crystal clear on the majority of what AAK sells in the region is also produced in the region. So if we look at from that perspective and we zoom in on the US, a majority of what we sell in the US, we also produce in one of the three plants that we have. Now you bring up the raw materials, which is correct. Do we import raw materials into the US? Yes, we do. But this is where we then look at what we have been seeing over many, many years. There is a volatility in raw material markets. We've seen it under COVID and with disruptions in supply chains around the world. we are very capable to manage raw material fluctuation. So if you look at the raw material, if there is a tariff impact in raw material, at the end of the day, it will only impact the cost of the raw material. And we are well equipped to manage that and also price of products to that. That would likely lead to inflation maybe on the shelf in retail in the US. But that's something that we have dealt with before. You've seen fluctuations on palm before. We've seen fluctuations on on soy or coconut before. So no, not that worried about that. Back to the first part of the question. We do not speculate on anyone being elected or not and what that would have. Allow me to still answer the question on oils and fats ingredients. I think, first of all, we have a broad portfolio. There will be a continued demand for food and food solutions within the oils and fat space. Whatever the regulation is, it could maybe shift demand towards x or y but we have a broad portfolio and we're very strong at helping customers reformulate so let's not speculate on what kind of regulation will come or not but we're very capable on reformulating and offering a very strong portfolio and maybe last but not least i think we in general should be very careful on on kind of black and white opinions on what is what is good or bad it needs to be fact driven i think it's up to us as an industry to always put facts on the table uh strive for healthy nutritious ingredients to affordable prices and that's going to remain our focus going forward so many of these kind of that would be seen as disruptions often turn out to be an opportunity for us

But I just want to be clear on the first point as well. Our operations in the US have almost no imports from any of the countries that the US are now discussing tariffs on, right? Most of it's sourced through Southeast Asia. What we source in Latin and South America is used for our production in Latin and South America, such as Brazil, Mexico, but also in Colombia. So the impact of the tariffs as we look through our operations is minimal as it stands right now.

Thank you. That's very helpful. And my last question is just going back to your optimization program. At the end of 2023, you had said that AAK successfully addressed about 60% of capacity across your five largest sites. And at that time, there was a remaining 40% to address across your smaller and medium units. Can you provide more color on how much more is there to go on improving capacity in 2025?

Yeah, we've done a few more plants in the AK footprint. So we're doing another three. We're on the third one since we made that comment in addition to where we were then. So without having a number in my head, I think we're sort of above 70, closer to 75% of the install capacity. And we still continue to find good improvements. But as we also mentioned during the CMD, we're also making then a second run. We mentioned our facility in Port Newark as an example where we had one of the first deep dives. We're now going back there again and doing a review on the opportunities that weren't fulfilled in the first run. So it's more of an irritative sort of process to find additional opportunities. And we think there's more to be gained also in a plant like Port Newark, where we were a year and a half, two years ago with one of the first deep dives. So it's ongoing. We've been through then, let's say, above 70 percent of the install capacity all in all. We're also going back to take a look at the plants we've been to with learnings from the later plants in the process, if you will.

So you're still confident on, you had said you expect EBIT growth to grow 10% of which 70% will be led by optimization. You're still confident that this can help your EBIT growth ambition?

We are still very confident in all the activities that we do internally, such as the deep dives, also our procurement efficiency programs, the cost program that we also announced that we're going through right now. We're confident that that will contribute to our aspiration in 2030 of plus three sec per kilo. Yes.

Okay. That's very helpful. Thank you.

Thank you.

Now we have time for the last question. The next question comes from Victor Hansen from Carnegie. Please go ahead.

Thank you, operator. A couple of detailed follow-up questions. I'll begin with chocolate. I was hoping that you could give us some color on how much of your CCF volumes are to relatively new customers, meaning those that have switched to you recently due to the high COCO prices versus your existing customers.

Okay, thank you. Sorry, but we don't disclose exactly that, but I can only confirm that, yes, we have received new customers on the back of that, and we have received call it the opportunity to supply into existing customers, but on new products where they have not used, for example, cocoa butter alternatives before. They have now addressed that and gave us an opportunity to reformulate into those products. So I can confirm that that's a positive impact, but we will not disclose exactly how much.

Okay, fair enough. And a second question on chocolate. Could you say now with the high raw material prices and volatility, also for palm oil, for instance, could you say how much cheaper your CDs are currently versus cocoa butter?

Again, I fully understand the questions on why, but we refrain from, if I did that, you wouldn't exactly, and I would offer our competitors the opportunity to back calculate our pricing. So not do that. There is still a gap, right? So the cocoa prices are much higher. The cocoa butter prices are much higher than the price in our products. And we price our products against our margin targets as well as being forced to, of course, deal with the competitive landscape because we're not alone. So what we sell our products for is a function of what we can deliver in terms of value to our customers, but also what our competitors offer. So that's where it is. But it's a big delta to Kaukua butter prices versus call it the CB market price of today. But even before this spike that we saw, we had a good offering still at those levels where we were back then. so uh and then with regards to fluctuations like palm oil and others i i encourage you to look at some of the material from the capital markets day and some of the trends for ak over the last five six more years there has been ups and downs in raw material prices we have a very strong organization that is that is used to and capable to manage fluctuations and with that still growing our margins and growing our earnings. You can backtrack the fluctuations in raw materials for five years and then you look at our overall trend in terms of earnings and you see that we've been able to fly through disruptions, if you will, with good stability.

And we should also add and reiterate what we've said before. This is not just a price game. This is also functionality in the product. So we offer something else than what you can get from a cocoa butter

uh with our equivalent we also add functionality in there and that's also very important to our end to our customers and to the end product and when we you know invest in innovation a new product product development that's what we target longer shelf life better functionality taste etc nutrition you know health all of that we bring into our innovation pipeline also within chocolate and coffee

That's perfect. And a final question for me. On M&A, now that your profitability levels have moved higher, so you've expanded the gap versus smaller competitors, profitability-wise, would you consider paying a bit more for your targets in order to perhaps get them over the finish line?

That becomes a great question, but somewhat hypothetical. We are always assessing any opportunity, and we are, of course, active. I've said that we are active in the market, so we're obviously having dialogues. And we would make a call based on current market conditions, what we see as an opportunity, synergies, and et cetera. It's not as easy to say we're prepared to pay more, but it's always good with a strong balance sheet and a good currency.

We want to, of course, pay fair market value for any acquisition and try to avoid to pay for something that we add to the business after the acquisition. Because that's our knowledge and know-how and that's how we, and have in the past, improved on the acquisitions that we've bought and built them into what AK is today.

I should probably add to that question. I would like to send a signal that we're very active and looking and we want to, but we also have a solid process and a solid team that avoids us making a decision which wouldn't be beneficial for the company. So I will also send that signal and feel confident that we're really trying to evaluate making, you know, throwing good money after good opportunities, not vice versa. right there are no more questions at this time so i hand the conference back to the speakers for any closing comments thank you so much thank you again everyone for listening in uh we have had a solid finish to a very strong