AAK AB (publ.)

report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Johan Westman and CFO Tomas Bergendahl. Please go ahead.

Good morning, everyone. Thank you for joining us today and for your interest in AAK. With me here today in Malmö to review our first quarter financial results is Thomas Bergendahl, our CFO. With that, let's turn to page two. This is what we will cover today. Quarterly highlights, selected events, a business and financial update, and then some concluding remarks. The presentation is scheduled for 45 minutes, including Q&A at the end as normal. on page three just a few comments there our presentation includes forward-looking statements that come with risk 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 we go when we are going over the materials All right, let's get to it on slide number four, quarterly highlights for Q1 2025. Let us start with an overview of our performance in the quarter. As you see in the Q1 report published this morning, we delivered a resilient operating profit despite somewhat soft end markets. Volumes excluding the hillside divestment that we communicated earlier, was declining by five percent. This decline was primarily driven by food ingredients with lower sales of non-speciality oils and a decline in bakery. Despite the lower volumes operating profit per kilo excluding the hillside divestment increased by seven percent. This was supported by our ongoing global optimization efforts and continued favorable market conditions in the chocolate and confectionery fat segment And in addition, we had a strong Q1 product mix, primarily due to the lower sales of non-speciality oils. In absolute terms, our operating profit increased by 1%, and this is on top of the very strong increase by 32% in Q1 last year. This is showing the strength and the resilience of our business model. If we turn into cash flow, operating cash flow was as expected negative at SEC 492 million. This was primarily driven by higher raw material prices and the restructuring of the previously communicated sourcing agreements. Net debt to EBITDA is now at 0.43 and return on capital employed came in at a solid 22%. All in all, a resilient first quarter result in a challenging environment. With that, let's turn to next page. Slide number five. Before moving into the business and financial update, let me just briefly touch on a few events from the quarter. First, We published our 2024 annual and sustainability reports. These reports were shared together with the invitation to our upcoming annual general meeting and show both our financial results and our ongoing focus on sustainability. Second, we announced and I'm proud to announce that Marcel Mansink will join the AAK executive committee as president of global operations in June. Marcel brings solid experience in supply chain and operations and we are excited about the perspective that he will bring to our team in AAK. Marcel will be taking over from David Smith, our dear colleague who joined AAK in 2001 and he is now retiring after a long and successful career with this company. We thank David for his contributions and wish him all the best in his well-deserved retirement. And third, we continue to strengthen our position in sustainability with improved year-on-year scores in two global ESG ratings, Ecovades and CDP. Starting with Ecovades, we're proud to share that AEK is ranked in the top 6% of all companies assessed. A small improvement from last year and places us at the very top of the silver category. Improvement was primarily driven by higher scores in the areas of environment, labor and human rights, as well as ethics. Turning to CDP, we also raised our overall grade from a D to a C. This reflects improvements across all three evaluated areas. So what does this mean then for us at AAK? it's this is not just about internal progress our esg efforts are increasingly being recognized and validated also externally this recognition helps us build even more trust with customers and other stakeholders and in some cases it's essential for doing business overall we are encouraged by the momentum and remain committed to continuous improvement in sustainability Please now turn to the next page regarding US tariffs and the current business climate. How are we adopting the global trade dynamics? Let me take a moment to talk about our sourcing and production setup. AEK operates with a decentralized model and localized productions, which helps us reduce complexity. It shortens lead times and lower the risk of disruptions across borders. Some raw materials, such as palm oil, still need to be sourced internationally and can be affected by tariffs or other trade measures. That said, as always, we are actively seeking cost-efficient sourcing alternatives, always with a strong focus on maintaining quality and reliability. Our diversified setup and proactive sourcing strategy are designed to protect our margins even in a dynamic global trade environment. And thanks to our diversified model and proactive sourcing approach, we do not expect any material impact on our margins. And we remain committed to minimizing the impact to our customers as well. And all in all, you could say that this is the way we manage this is the way we manage any raw material fluctuations in the markets where we source raw materials. So with that, let's turn into next page, a bit of the volume development. let's take a closer look on that as shown on the slide reported group volumes were down 10 compared to the first quarter last year but this was mainly driven or the largest part was driven by the divestment of hillside and active divestment excluding this divestment volumes were down five percent with food ingredients making up the majority of the declines The decline in food ingredients was primarily driven by lower non-speciality oil sales in the Americas and Europe. We also saw softer performance in the bakery segment also in the Americas and Europe. For chocolate and confectionery fats and technical products and feed we also see a slight decline. Volumes in chocolate and confectioner fats were down 4% year on year, following a very strong 7% growth last year. The chocolate and confectioner fats grew 1% versus Q4 in 2024, the last quarter. So a solid performance given the current market environment. So in summary, while the hillside divestment was a one time factor, the volume decline in food ingredients reflects software and markets demand and particularly in the Americas and to a lesser extent in Europe. With that, please turn to the next page for a review of the full performance, including volumes for food ingredients. Business area food ingredients. Volumes excluding hillside were down 7% year on year, mainly due to lower sales in bakery and non-speciality oils. Despite the volume decline explained on the previous slide, the business delivered solid margin performance, operating profit per kilo increased by 15%, up from 2.42 to 2.59 in the quarter. It is worth noticing that Hillside contributed eight percentage points to this growth. So this divestment shows also how we're focusing on our high value added ingredients and also the strong performing businesses in AK. In absolute terms, operating profit declined by 1%, but at fixed currencies, it grew by 3%. Adjusting for the small effect from the Hillside divestment, but including the negative currency effect, operating profit was flat. so overall despite some softer volumes the business continued to show resilience through solid margin delivery supported by a favorable first quarter product mix with that we're moving into chocolate and confectionery fats volumes in the quarter were down four percent year on year following a strong q1 last year It is, however, worth pointing out that volumes improved slightly versus the first quarter. The year-on-year decline was mainly driven by soft-end market conditions, especially in the Americas and AMEA, or Asia, Middle East, and Africa for us. That said, absolute volumes remained solid, supported by resilient demand from regional and local customers. Despite the softer volumes, profitability was strong. Operating profit per kilo rose to 4.09 SEC per kilo, which is up 8% year on year, or even 12% at constant FX. The currency translation had a negative effect of SEC 0.18 per kilo in the quarter. In total, operating profit came in at SEK 523 million, up 13% compared to the same quarter last year. At fixed exchange rates, profit was up 8%. So overall, the business continues to show resilience and a solid profitability, even in a more challenging demand environment. With that on CCF, let's turn into the business area highlights for technical products and feed on slide 10. Volumes were down 1% year on year, mainly due to lower volumes in feed, which makes up 80% of the business area. Operating profit per kilo remained stable at 0.67, on par with the same period last year. Absolute operating profit came in at SEC 52 million, down 2% year on year, reflecting the lower volume. So while volume development was modest, the overall performance was held up by a steady margin in terms of EBIT per kilo. With that, we have now covered the three business areas, and I will hand it over to Thomas for some further details on the financials. Go ahead, Thomas.

Thank you, Johan. Please turn to slide 11. We shared AAK's updated 2030 aspiration at our latest capital markets day in November 2024, focusing on the ambition to achieve a margin of 3 plus sec per kilo. The roadmap outline to accomplish this continues to build on the strategy programs that we announced in 2022. production process optimization, our deep dives, portfolio and price management, as well as procurement excellence. In addition, to secure that we meet our updated aspiration, we also introduced further focuses at the Capital Markets Day, including cost performance. On the back of this, and as part of our continued effort to improve efficiency and unlocking value in the business, we're now launching, subject to union negotiations, a cost optimization program. With the implementation of this program, we expect to generate an annual cost reduction of 300 million SEK. This is driven by organizational simplification, efficiency improvements and targeted initiatives, including reduced spend on travel and consultants. The program also includes a workforce reduction of up to 5%. We aim to reduce cost in 2025 by approximately 50 million SEC and achieve the full run rate impact of the program 300 million SEC by mid-2026. A one-time restructuring cost associated with the cost optimization program of between 200 to 250 million SEC will be recognized and accounted for in Q2 2025. The restructuring cost is mainly related to severance and notice pay. as well as right sizing of the related physical footprint i want to stress though the program will not significantly impact our current production capabilities or capacities and we will maintain our strong focus on innovation commercial excellence and our customers requirements as outlined at the cmd last year next slide please Operating cash flow in the quarter amounting to a negative 492 million SEC was mainly driven by an increase in working capital of 1.4 billion SEC with accounts receivables and accounts payables as the main contributors to the development. Starting with accounts receivable, this was impacted by sequentially higher sales driven by mainly higher raw material prices. Account payable in line with our previous communication, was negatively impacted by a change to two sourcing agreements, as well as lower sourced volumes. Inventory decreased in the quarter, mainly driven by a reduction in line with previously mentioned EUDR-related safety stocks. Other working capital was negative 382 million SEC and includes changes in accrued and prepaid expenses related to inventory, taxes, and lease costs. Our model assumptions on cash flow as presented at the CMD still stands with an average long-term operating cash flow before tax at 80 to 90% of EBITDA, all else equal. CAPEX amounted to 272 million second a quarter, comprised of investments related to maintenance investments, productivity improvements, capacity increases, and the bottlenecking. Turn to the next slide, please. Jone Peter Reistadler, return on capital employed is in line with the last few quarters, following the continued strong development of operating profit. Jone Peter Reistadler, EBIT for the last 12 rolling months was 4.9 billion SEC on par with Q4 2024 together with an increase in capital employed. Jone Peter Reistadler, ending up at 22.3 billion SEC driven by the increase in working capital that I mentioned before. resulted in a return on capital employed of 22%, slightly down from 22.4% in Q4. Next slide, please. Despite a slight increase in net debt to EBITDA ratio, ending up at 0.43 in the quarter, driven by the increase in working capital, the measurement remains at a level that provides us with financial flexibility. At 0.43 in Q1, we're slightly up from the 0.29 we achieved in Q4, but still significantly down from the peak of 2.03 that we had in Q2 of 2022. And with that, I'll hand it back to you, Johan, concluding remarks and then some questions, please.