AAK AB (publ.)

five 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 five 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 Tomas 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 are going over the material. 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 5%. 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 7%. This was supported by our ongoing global optimization efforts and continued favorable market conditions in the chocolate and confectionary 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 quarter one last year. This is showing the strength and the resilience of our business model. If we turn into cashflow, operating cashflow was as expected negative at the SEC 492 million. This was primarily driven by higher raw material prices and the restructuring of the previously communicated sourcing agreements. Net debt to EBTA 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 AEK 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 AEK. Marcel will be taking over from David Smith, our dear colleague who joined AEK 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 -on-year scores in two global ESG ratings, Ecovaries and CDP. Starting with Ecovaries, 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. The 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 AEK? 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 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 5%, with food ingredients making up the majority of the decline. 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 confectionary fats and technical products and feed, we also see a slight decline. Volumes in chocolate and confectionary fats were down 4% year on year, following a very strong 7% growth last year. The chocolate and confectionary fats grew 1% versus Q4 in 2024, the last quarter. So a solid performance given the current market environment. So in summer, while the hillside divestment was a one-time factor, the volume decline in food ingredients reflects soft rent 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 core. 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 the 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 confectionary fats. Volumes in the quarter were down 4% 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 and 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 of 0.18 per kilo in the quarter. In total, operating profit came in at sec 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 nine, 10, sorry. 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 Tomas for some further details on the financials. Go ahead, Tomas.

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 three plus sec per kilo. The roadmap outlined 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 sec. This 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. At one time restructuring costs 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 wanna 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 cashflow 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 cashflow, as presented at the CMD still stands, with an average long-term operating cashflow before tax at 80 to 90% of EBITDA, all else equal. CAPEX amounted to 272 million sec in the quarter, comprised of investments related to maintenance investments, productivity improvements, capacity increases and the bottlenecking. Turn to the next slide, please. Return on capital employed is in line with the last few quarters, following the continued strong development of operating profit. EBIT for the last 12 rolling months was 4.9 billion sec, on par with Q4 2024. Together with an increase in capital employed, 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 .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. Thank you, Thomas. To wrap it up, it's clear that Q1 was a bit of a challenging quarter with ongoing uncertainty in the market, leading to increased customer caution and lower volumes across the board. Despite this, I am very pleased to report that our resilient business model delivered a 1% increase in operating profit, again, building on the strong 32% increase that we had last year. So really maintaining on a very high and strong level. We remain focused on what we can influence. We continue to optimize our product mix. We drive operational efficiency and we unlock productivity improvements across the organization. At the same time, we continue to prioritize innovation and work even more closely with our customers to deliver value-creating solutions. And while sentiment remains soft and global trade uncertainty persists, we are confident in AAK's long-term potential and we remain fully committed to delivering on our 2030 aspiration. And with that, I hand it back to the operator and we are open for questions.

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 Benjamin Walsit from ABG Sundal Collier. Please go ahead.

Hello, you might be able to hear me now. Good morning. Quite a big step up in EBIT per kilo for the food ingredient segment specifically. You write about softer performance in bakery and lower volumes in non-specialized products. And I was wondering if you could give us some more flavor here. Was this a decision of yours, so to speak, to make room for more high-value products or was the change demand driven?

Yeah, thank you. Obviously, everything you can control a lot, right? Then obviously there is a mix here. So yes, we actively divested hillside. So taking that aside and commenting on the volume reduction excluding hillside. We continue to focus on our strategy, which is to move into more and more specialty sales. And with that, there is always a negotiation and some contracts across the board. We have yearly tenders or six months tenders. So we do make active choices on whether to go down or remain where we are in open up capacity for better business. And definitely the volume decline in this quarter has those decisions. So is it an active decision? Yes, but you could also say it's market dynamics because for some non-speciality oils, there are competitors out there and we decide whether we wanna sell at a certain price or not. So I would argue that these are strategic choices that we make and hence that's where we land. But on the other hand, this is also making business, right? It's a fine tuning all the way. And some decisions we make are for six to 12 months and some are more quarter by quarter or month by month.

Yeah, thank you. And in the current environment, how sort of confident are you that you can fill the open capacity with more high value products?

I think the uncertainty out there is of course, I mean, the absolute consumer demand. What is the dynamics in the world creating with consumers? That one is hard to predict. What we know is that food and chocolate confectionery has a tendency to be quite resilient. And we also know that we have an organization that is decentralized and very active pushing forward. So we can react and we have shown that before. This is no guarantee of course, but we remain confident in the mid to long term ability for AK to deliver and with that grow and load our plan. But it's gonna be active decision making and finding the right balance on leverage over fixed cost and what contracts to go for and not. I mean, that's the business we're in and that's the task for our go to market teams. But long to midterm confident, short term, always difficult to say exactly what disruptions are gonna do to the short term demand. And obviously to let's keep in mind that we also deliver, not also, we do deliver to production. So we deliver to the, our customers are the producers of food. So if they choose to reduce their forecast a bit or have a slower sales on the product line, then that could lead to a short de-stocking to adjust to a new market volume, right? And that impacts how we deliver. So could be a bit up and down in a quarter, but then stabilizes towards consumer demand.

Yes, thank you. And then finally for me for now, I was wondering if you have an assessment of the magnitude of what I assume to be negative calendar effect from a late Easter in, well, in Q1 now and Q2, if there is any or if lead times are just too long for that to matter.

Yeah, I wouldn't like to overplay it, but obviously shipments are always lower over weekends and a longer weekend is lower shipment. So with Easter in April, that means that fewer shipping times in April versus if it is in March. But then at the same time, you also have the overlaying effect, which is for season, for festivities like Easter, there is a chocolate demand, which is building up through quarter four and quarter one. So there are some dynamics that plays in favor of whether Easter is late or early, but in absolute terms, we ship lower volumes on weekends, including long weekends.

Right, thank you. I'll get back in line.

Thank you.

The next question comes from Johan Fred from SEB. Please go ahead.

Hi, good morning, you wanted to thank you for taking my questions. Firstly, a follow up on Benjamin's question on the volume development in food ingredient. As you mentioned, the volume decline, excluding the divestment was primarily driven by bakery and non-specialty oils. Could you give us a rough split on how much of the decline was driven by bakery versus non-specialty oils? And also, if you could develop on the dynamics behind the volume decline in bakery, please.

Yes, thank you. So roughly, to make it easy, let's say 50-50 between the two, right? So bakery and then non-specialty, and in non-specialty, more so active decisions not to go after low-specialty business at low margins, which also reflects, I mean, again, AAK, and I think that's worth mentioning, AAK, we focus on absolute EBIT and trying to grow EBIT. So if we do make a choice not to go after low value added or low-specialty oils at low margin, that also means that you lose a bit of volume, yeah, but we don't lose that much of EBIT, and I think that's worth keeping in mind on how we operate. Obviously, we need loading in our plants to cover fixed costs and so forth, but that is the ongoing balance. Adding to a bit of the bakery decline, we saw a bit in Mexico and Turkey and so forth. So I think more like market dynamics, as well as a bit of a seasonal calendar factor, including when the Ramadan and Eid holidays is in Turkey.

And we should also mention what we call lower-specialty products. We have a segment that we call industrial. Just to give you an idea of the size of that, we're talking about 10% of the overall volumes, right, and it varies quite a bit over the quarters, and this is also where we see a lot of the volatility in both Q4 and Q1 in terms of our overall volume, and those are side-stream volumes and some other low margin volumes. That's where we see half of the fluctuation as Joar referred to, right? But it is a quite sizable segment if you look at the overall volume as well.

Very clear, thank you so much for the clarification. If I may continue with one question on CCF as well, profitability improved year on year despite the lower volumes. Do you mind elaborating on the profitability drivers here, i.e. essentially what is driven by cost-saving slash optimization and how much is mixed?

Thank you, yeah. I mean, this is predominantly, call it an optimization and .k.a. leveraging the capabilities that we have. So, I mean, we still have favorable market condition in the terms of with high cocoa prices, the need for having functional ingredients with a cost-efficient alternative to cocoa butter is there. That's how we have built our portfolio over time, and that still is there even more driven by the high cocoa prices. So, it is in that context that we continue to optimize our portfolio and what we deliver, and with the market dynamics, we try to maximize the opportunities we have within that portfolio. I think that's the number one point to our performance, if you will.

And there is also some mixed effects with the higher end products within CCF taking a slightly bigger share as well.

Got it, got it. And the follow-up on your answer there. You speak about that.

And then of course, the general optimization that we have been speaking about overall, I mean, that hits everything. So, the optimization of factories or deep dives, that hits bakery, that hits food ingredients, et cetera. So, that's also there, but unique to CCF is what we just mentioned.

Yeah, got it. And as you state that the market for CBAs remains strong and given that volumes decline, how much of CCF volumes are CBAs currently?

Yeah, so let me, what we see, the strong demand there, that is linked to the market dynamics that we just talked about, right? However, also CBE go up and down. We have already established a very strong position with CBEs in the market. So, when general chocolate and confection volumes are down, so is products that contains our CBE. So, we follow the market, but then there is a overlaying interest of using cocoa butter alternatives due to the high cocoa prices. So, need to keep that in mind. So, there is a bit of penetration, but on the other hand, volume dynamics. And that's how you should read that. In terms of the split, we don't communicate the actual split between the different segments underneath. But it's a sizable, but it's several legs that we stand on, including filling fats, coating fats, barrier fats, et cetera. And they all have a strong performance within the chocolate and confection trees.

I think if I recall from prior quarters, I think you've mentioned the number roughly around half is CBE and half is filling fats. Is that still a relevant number?

Roughly, yes, I think. At least cocoa butter alternatives per se.

Got it, thank you. Those were all my questions for now. Thank you so much for taking the time.

The next question comes from Sathusharda from Barclays. Please go ahead.

Hi, good morning. Thanks for taking my questions. So just following up on the food ingredient volumes, like what do you think the end market volumes were for food ingredients against the 7% you did? And how sustainable it is to drive margins with declining volumes there? Just to add to this question, like at what point does the volume delieverage becomes an issue? And where do you think capacity utilization today is?

Could you just repeat the second, the first question was regarding, call it forecast on end markets if I got it right. The second question I couldn't quite hear.

Yeah, how sustainable it is to drive margins with declining volumes?

Yeah, okay. Very good. So with regards to forecasting end markets, difficult and I refrain from making that forecast. We, what we do know what we've seen over time is of course that food in general is resilient because we continue to eat. What we can see is shifts in consumer behavior. So there can be shifting categories. There could be up trading for some, it could be down trading for others. But we have a broad portfolio. So I think the best forecast that we have is that the AAK has a broad portfolio and we have been able in other type of disruptions or market conditions to be able to navigate well. With regards to how sustainable is it to maintain push for margin versus volume and accept maybe losing volume. Of course, we, that's a balanced game, but it has to be driven plant by plant. And that's why we are, we're not overly concerned with losing volume if it is within a specific segment or specific country with an active choice. We'll be more concerning with a general volume reduction across the board, but what we have seen in many of these cases that we comment is more local active decisions and or local specific market dynamics. And if we are indeed losing low profitable business, that's fine. What we do need to protect and be careful with is of course that we keep a good loading so that we don't end up in under absorption. And that is the balanced game that we are working with in our organization to finding the leverage over fixed cost by plant by line and with that evaluating when to go or not to go for certain volumes. But that's how it is. It's not easy. That's the game, but that is what it is to do business.

Thank you. And just to follow up on this, like you mentioned, declining food ingredients, mainly in non-speciality oils. So could you like define non-speciality oil and how much of a case food ingredient portfolio is non-speciality versus speciality as it stands today?

Yeah, thank you for the question. As I mentioned previously in the call on the overall volumes of the group, that segment that we then internally call industrial makes up about 10% of the volume for the group. So higher share than of food ingredients, right? There are also some lower margin products and volumes in both bakery and dairy. So the number is slightly higher than that. If we look at the low margin non-speciality segment industrial, then it's made up to a great extent of side streams and things that we have coming out of our plants based on the process that we run to generate some of the higher speciality products as well. But it's a big mix. But the common denominator is that it's low margin products, I would say, right? And not something that we have as a primary production aim in the plants, if you will. But it's still significant volume you can deduct, right?

Thanks. And just one more question related on tariffs. You mentioned about the tariff impact, which is quite minimal. But in terms of an indirect impact, could the palm oil be less competitive in US versus domestic veg oil? How does this impact AAK versus any vertically integrated beers?

Thank you. Great question. And of course, it is the, as I mentioned, I think the overall direct impact is quite equal to the industry and will be treated like any raw material fluctuation, which is by the way, quite usual, right? There's often fluctuations in raw materials. So as an industry, we're quite used to dealing with that. With regards to indirect impact, like, is there another oil or ingredient that would be used instead of, let's say, a palm base or something else? Yes, that's possible. And that would lead to reformulations. And again, reformulations is an opportunity. I see AAK being well positioned in the Americas. We have competition as well. So it's not a given exactly how that would fall. But the absolute effect of this could lead to reformulations into another type of oil. I think it's too early to say where that would land, but what we do know is that we are a highly rated supplier and partner to our customers. So we will be chipping in for that opportunity if that comes to fruition. But again, that needs to be a more long-term difference in price versus different raw materials. A short-term one wouldn't lead to reformulations and change of recipes and change of label. But I do think it's there. I think it's more marginal than a systemic change. But we're in the game and we have a broad portfolio of oils to work with in AAK as well.

And it should also be stated that, as you've seen as well over the past four or five years, we have seen large variations in raw material prices and also on palm, doubling and almost tripling and the demand has still been there in the US and other markets as well, even though there might be other sources of raw materials. So at the current levels, we see this as, you know, within the normal range of how raw materials would move, right, price-wise. And as Johan said, we also see that with our competitors. They see the same impact as far as we can judge.

I think also worth having a bit of perspective on the tariffs, although some of the tariffs talked about are significant ones. They are smaller than the raw material fluctuations that we've seen over the last couple of years.

Thank you. Thanks for that, I would leave it there.

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

Hi, I've got two questions. So firstly, just on CCS, you spoke about the local and regional customers, demand from the local and regional customers was strong in the quarter. I was just wondering if you could disclose how much of the CCS volumes are exposed to the local and regional?

Thank you. We don't disclose that, but let me just talk you through a bit of the dynamics there. So what we have in the chocolate and confection space is we have some very large global players with a broad portfolio of products, and then we have local players. And what we have seen is a bit of shift between categories, and that is also a shift between categories within the big ones, but to some extent, it's also shifting from some product lines with the big companies, global players, into more local players. Good thing for AK is that we have a broad portfolio and a broad customer base, meaning that we have both global players and local players. And with that, we have an opportunity to take part of that shift. So we're more highlighting the shift that we've seen, and to some extent, that has been a positive win in one bucket, but a negative loss in another bucket. And obviously, there are marginal effects to that, depending on how we are positioned, but overall, we're just highlighting the dynamics in the market, but also saying that with our setup and the customer portfolio that we have, we are resilient, or even if you turn it into a positive, we're well-hatched in that way.

Okay, thank you. And the second question is just on cash flow. Could you give us an update on the progress of the cash optimization program that you spoke about last year, and I guess some of the aspects that are within your control that can help improve cash flow?

Yes, thank you for that question. Yes, the program is still ongoing. And as previously mentioned, we expect it to continue for the duration of this year, at least, to cover most of the sites that we have within AK. So the structure is that we, as mentioned before, we focus on the things that the teams locally can affect. So we're talking payables and receivables and inventory, going through the different levels, both on inventory to see how things move, but also to look at payment terms with suppliers, which is then connected back into our procurement track as well. And we've had good progress. I think I've mentioned before that at the sites where we've been, and when we go in a couple of months later, we see a reduction of six to seven days of working capital days based on these initiatives. And that's not with everything concluded, right? So we see good effects from it, but we also have, as I've mentioned before, we have impacts of change in raw material prices that of course can fluctuate to a much greater extent. And that's what we also see here now in Q4 and Q1 as well. But the program is progressing well and is on track.

So if you, I mean, not the Jeff, but if you assume that the program that we, or rather the structure change that we made and is now finalizing, and then we have raw material fluctuation, if you assume stable raw materials, then the impact that you saw in Q1 will disappear and then you will be back to the positive impact of the program, which runs through more sustainability.

Okay, that's great. Thank you.

The next question comes from Oscar Lindstrom from Dansky Bank. Please go ahead.

Yes, good morning, Joanne and Thomas. Two sets of questions from me. The first one is on the volume decline. And here, just a first off here, you talked about a strategic choice on reducing exposure to non-specialty oils. Is this the same effect that we saw already, I think in Q4 impacting food ingredients?

Thank you. To some extent, yes, but also another example in one of the factories where we actively said no to lowering prices and called it lost or walked away from a quite large contract. That is separate from the one we mentioned earlier, but it's in the same type of business making or business decision.

And is it possible to sort of say what your capacity utilization across all your production facilities was in the first quarter? Did you have sort of free capacity to increase production? I think let's stay with that.

Let's stay with that. Over the years, we have done deep dives. We have worked with optimization. There's no doubt that with the current market dynamics and somewhat slower volume development now in the first quarter, we have capacity to grow. Not on every line, but definitely from where we stand today, it's absolutely possible to grow. And with that, we also have the possibility to see, with calculations on leverage over fixed costs, we might give some price in order to win volume and vice versa, but definitely on a more industry-driven volume uptick when that comes, it's really good leverage in our plans. So yes, we have capacity, and it's higher now than it was some time ago, both from optimization and from the -on-year reduction here in Q1.

And would you care to sort of quantify what the sort of potential to increase volumes? To be from here in terms of filling out capacity? I realize it's not, you know, it's not a

cross-referred, but I think we could. Commodity is the favorite. Let's say we are at somewhere around 80%, so we could, you know, a 10% volume increase would be 10 to 15.

10 to 15, all right, thanks. And a second question here on volume. As I understand you, the weakness in bakery in Mexico and Turkey, that seems to have been sort of seasonal, while the weakness in the US is more cyclical. And you talked about customer de-stocking. Have you seen that customer de-stocking already, or is that something that you're expecting to come, you know, potentially in the coming quarter?

It is a market situation where it's not like one big, and I think I want to be crystal clear, it's very, very, I think it's very dangerous to point that one thing, right? What is tariff impact on consumers? What is de-stocking only? I think we've seen a mix in our customer conversations. We have seen a bit of wait and see around tariff conversations. We have seen some product areas where we know customers have had a lower consumer demand or demand on the shelves in retail. And of course, that leads to one way or the other, a slower production pace or a short-term de-stocking. So I think we have evidence of that happening, but not the massive. There's not one bucket that has massively moved on or up, but you have a mix of it all. And that's, I think, quite normal in the business environment that we have today.

And as we've stated before, we don't have full transparency into the exact inventory levels of our customers and so forth, right? So just to keep that in mind.

Yeah, yeah, thanks. And my final question is on working capital. And we saw this inventory buildup ahead of the year end, 24, due to the EUDR. That was perhaps a bit premature, given how that was delayed. Are you unwinding this inventory? And is that gonna be built up again then, ahead of this year end, when I guess they will introduce the EUDR for 2026? What's the situation here?

Yeah, good, yeah. As we've stated in the report as well, yes, we have unwound most of the safety stock buildup that we did during the second half, I would say, of last year. That's also why you see a positive effect from reduced inventory into our working capital. So most of it's been unwound. When we look at the introduction of EUDR at the end of this year, we are planning and we're scheduled to be compliant at the end of the year, following the regulation. And we're monitoring closely what that would mean to our inventory levels to make the transition smooth. But I would expect that there would be some buildup towards the end of the year, but that's something we can communicate on as we get closer as well. But looking at the overall inventory levels, it's not significant amounts that way. If you look at 400 million, it's of course a large inventory, but on the overall working capital piece, it's a smaller piece, of course.

And if I may, maybe a bit of correction there. I don't see that as an immature behaviour. This delay was communicated very late. So it's rather a quite mature and active choice we make to build a bit of a safety caution to implementation. And we plan to do the same.

Yeah.

All right. Thank you. Thank you. Excuse the prudence. Those were my questions.

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. Again, thanks for great questions and the interest in AAK. To wrap it up again, we see a solid, resilient delivery in Q1 with a good result, although some soft volumes and dynamic market environment. So all in all, shows the strength of AAK. Thank you for listening.