AAK AB (publ.)

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. Today's event will last for 45 minutes. Now I will hand the conference over to the speakers, CEO Johan Westman and CFO Tomas Bergendahl. Please go ahead.

Thank you. Good morning everyone and thank you for joining us and thank you also for your interest in AAK. As you heard, I have today with me our CFO Thomas Bergendahl. And with that, please turn to page number two. What we will cover today is quarterly highlights, some selected events, business and financial update as well as some concluding remarks and then we take Q&A and we are scheduled to continue for about 45 minutes. With that, let's move to page number three. 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 may differ. So please keep that in mind when we are going over the material for you today. With that, let's move into the presentation on page number four. Against the backdrop of disciplined execution and on a strong making better happen culture within our company, we enter 2026 strengthened by a solid execution in 2025. For the full year, operating profit increased by 9% at constant exchange rates and excluding the hillside divestment and the second quarter restructuring cost that we took. Leveraging our decentralized operating model, we adapted well to what we could call a challenging volume environment and continued to really generate value for the company and our shareholders. Moving on to the fourth quarter performance. We delivered a solid result in a demanding market environment in the quarter four. Consumer sentiment and demand in our key end markets remained under pressure, particularly due to elevated chocolate prices. Despite that, operating profit increased by 7% year-on-year, excluding the hillside divestment and a 80 million SEC negative currency impact. When including the currency translation effect, operating profit declined by 2% compared to the corresponding quarter last year. Volumes amounted to 507,000 metric tons in the quarter, which is a decline by 2% year-on-year if we exclude the hillside divestment. Profitability remained strong in the quarter, with operating profit per kilo reaching SEC 2.45. Excluding the hillside divestment, this represents a 2% increase year-on-year and a 9% increase at fixed exchange rates. The improvement was partly driven by continued internal optimization, including productivity and procurement improvements at our oil refining plants, and progress in the fit-to-win cost optimization program that we launched in 2025. Profitability was also supported by portfolio and price management, with continued higher sales of specialty solutions. In addition, the fourth quarter profitability benefited from favorable market conditions for cocoa butter alternatives. Operating cash flow amounted to SEK 288 million in the quarter. Cash flow was supported by strong earnings and was adversely impacted by seasonal sourcing and rising costs for some of the raw materials that we use. With regards to capital structure, Our return on capital employed was 20.9%, excluding the second quarter one-time restructuring cost. Net debt to EBITDA was at 0.60, also excluding the one-time restructuring cost. This reflects a strong balance sheet and a financial flexibility for AK. The board, supported by management, is proposing an ordinary dividend of SEK 5.50, per share for 2025 corresponding to a 10% increase to previous year. In addition, the board proposes the introduction of a multi-year share buy back program of SEK 1 billion per year over three years to a total of SEK 3 billion starting in 2026. The board also proposes an extraordinary dividend of CEP 3.85 per share for 2025. Supported by a strong balance sheet, we remain well positioned to deliver on our capital allocation priorities while continuing to invest in the business and pursue value-accretive M&A opportunities. Overall, we are pleased with the quarter. given the challenging market condition, but we are not satisfied and see further room for improvement. We remain focused on disciplined execution, profitability and cash generation as we move forward. With that, let's move to next slide, page five. Some selected events. And where we... Then if we turn into some more notable events of the quarter, these highlights are continuing to show the progress that we have on impact and the growing recognition for the work that we do. During the quarter, AAK's Colonna Faso sourcing program in West Africa achieved fair wild certification, a first globally for SHEA. This certification verifies the legal and sustainable collection of wild harvested she kernels across roughly 400,000 hectares. Our Colonial Fossil Program directly supports and empowers more than 230,000 women collectors and their families. The certification further strengthens our ethical sourcing agenda and enables customers to leverage Fair Wild claims on their products. In chocolate and confectionary fats, our Ileksav EN10 was awarded Ingredient of the Year 2025 by International Confectionery Magazine. Launched in June 2025, the product addresses industry challenge during the enrobing process that helps our customers improve their operational efficiency, while also providing all other benefits that comes with a high speciality cocoa butter alternative from AAK. We also made strong progress in CDP's 2025 environmental ratings. Our scores improved in two out of the three categories. Climate improved to B from C, Forest improved to A- from C, placing AAK in the CDP's leadership band for forest. These improvements reflect continued progress in areas such as deforestation-free palm oil, low-carbon investments, and stronger sustainability governance and reporting. Starting with the 2025 annual report, we will prepare our sustainability reporting in accordance with the CSRD. Fit on people and culture. Following our latest employee survey with an impressive 91% participation rate, 16 AAK countries achieved Great Place to Work certification, up from 12 in the previous one. This recognition reflects a consistent, positive, and inclusive workplace experience across our organization. More importantly, the survey provides valuable insights to how we can continue to improve the performance of the organization in AK. And with that, let's move to slide number six, some business highlights starting with food ingredients. In food service, volumes excluding the hillside investment were on par with the same period last year. Lower volumes in the bakery segment were largely offset by growth in dairy. Operating profit per kilo was at 2.36 SEC, broadly in line with last year, and included a currency headwind of SEC 0.18 per kilo. At fixed exchange rates and excluding the hillside divestment, operating profit per kilo increased by 7%. Our operating profit excluding hillside amounted to SEC 735 million. This included a negative currency translation effect of SEK 57 million. And if we look at this operating result at fixed foreign exchange rates and excluding the hillside divestment, our operating profit increased by 7%. Moving on to chocolate and confectionery on slide 7. Fourth quarter volumes in chocolate and confectionery fats declined by 4% year-on-year compared to the same period last year. Overall, the challenging market environment and the elevated cocoa prices continue to weigh on consumer demand in the fourth quarter. Against this backdrop, we delivered a fourth quarter volume performance that held up well compared to development in the underlying chocolate market. Operating profit per kilo remained strong and increased to SEC 4.40 from SEC 4.19 last year. Currency translation had a negative impact of SEK 0.19 per kilo. At fixed foreign exchange rates, operating profit per kilo increased by 10%. Operating profit amounted to SEK 524 million, up 1% year on year, but included a 23 million SEK headwind from currencies. At fixed foreign exchange rates, operating profit increased by 5%. Then next slide over to business area technical products and feed. Volumes in technical products and feed declined by 5% year on year, mainly driven by lower volumes in technical products. Operating profit per kilo was at CEC 0.84, down slightly from CEC 0.86 last year and representing a 2% decrease. Operating profit amounted to CX 64 million compared with CX 69 million last year, a 7% decline year on year. With that, we have now covered the three business areas, and I will hand it over to Thomas for some fourth quarter financial results. Please go ahead.

Thank you, Johan. Please turn to slide nine. Operating cash flow amounted to a positive 288 million in the quarter and 862 million SEC for the full year of 25. Working capital increased in the quarter, mainly driven by negative impact from the development of inventory and accounts payable, while accounts receivables had a positive impact on the cash flow. The value of inventory increased with roughly 800 million SEK in the quarter, driven by seasonal sourcing activities mainly related to SHE, but also to rapeseed, as well as an increase in price of several raw materials. The negative impact in the quarter on working capital from account payables is driven by the raw material mix and related payment terms. Account receivables decreased with roughly 500 million SEK in the quarter, driven by lower sales at year-end, in line with normal quarterly seasonality. CapEx amounted to 335 million SEK in the quarter, comprised mainly of investments related to maintenance, productivity improvements and capacity increases, as well as the bottlenecking. The capex spend for the full year of 25 ended up at 1.3 billion SEC in line with previous indications. Directional capex spend for 2026 is 1.5 billion SEC. Free cash flow amounted to a negative 47 million SEC in the quarter. Please turn to the next slide, slide 10. Return on capital employed for the quarter is somewhat down from the 22.4% achieved in Q4 2024, ending up at 20.9%, adjusted for the one-time restructuring cost of 250 million SEC recognized in Q2 2025. The outcome of the ratio was driven by an increase in capital employed, mainly due to the previously mentioned increase in working capital. Please turn to slide 11. The net debt to EBITDA ratio remains stable at 0.6 in the quarter compared to Q3 2025, slightly up from the low of 0.29 in Q4 2024. The increase from the end of 2024 is mainly driven by the dividend paid in May of 2025, as well as the previously mentioned increase in working capital. Please turn to slide 12. As Johan mentioned earlier in the presentation and is outlined in our Q4 report published this morning, we're updating our capital allocation framework. Our first priority remains to invest in organic growth of the business. This includes continued investments in innovation, capacity expansion and capability development. We also focus on efficiency improvements to support profitability and scalability over time. Acquisitions are a second capital allocation priority and remain an important part of our strategy. We focus on M&A activity that supports geographical expansion and capacity expansion, bolt-ons, as well as potential adjacent product portfolios. We also look to strengthen technology and capabilities where it enhances our strategic position. Third, return to shareholders. Within capital returns, the ordinary dividend is the primary and foundational mechanism. Our dividend policy targets 30 to 50% of net profit with the ambition to continue to grow ordinary dividend over time in line with our long-term financial targets. Share buybacks are a second priority tool and subject to maintaining leverage within 1 to 1.5 times net debt to EBITDA target range. and may be suspended in connection with significant increases in raw material prices, M&A activity, or other strategic cash needs. Extraordinary dividends are not structural and may be proposed when balance sheet capacity allows. To conclude, we maintain a solid balance sheet that provides financial flexibility. Where relevant, we have the potential to temporarily operate with a net debt EBITDA ratio of up to three times to support acquisitions ahead of the upcoming agm in may the board supported by management proposes an ordinary dividend of sec 5.5 per share for 2025 an increase of 10 year-over-year the introduction of a disciplined share buyback program of one billion sec per year over three years three billion sec in total starting in 2026. as well as an extraordinary dividend of SEK 3.85 per share amounting to 1 billion SEK for 2025. Each of the proposals are subject to separate approvals by the annual general meeting in May. Our capital allocation framework is designed to drive long-term shareholder value creation through sustainable and profitable growth. With that, I hand it back to Johan for a summary and concluding remarks before we open up for questions. Go ahead.

Thank you, Thomas. Let's move into page number 14, slide number 14. Over the past five years, AAK has delivered strong performance against our foremost KPI, the operating profit. This performance translates into operating profit growth of more than 20% per year on a compound basis over the past five years. well above our long-term financial target. And while we reported a 1% growth in 2025 compared to 2024, the underlying earnings momentum was stronger, showing a 9% growth at fixed FX. But making better happen means that past success does not slow us down. It raises the bar. This is the mentality within AAK. So with that in mind, we will continue to push forward, push towards our 2030 aspiration, targeting profitability at plus three sec per kilo and the volume growth that outpaces the underlying market. And with that, let's move into some concluding remarks. We delivered a solid year overall, including a 7% operating profit growth in the fourth quarter, Volumes were softer, down 2% year on year. Despite this, profitability remained strong with operating profit per kilo reaching set 2.45 in the quarter. Overall, we remain prudently optimistic about the long-term potential of the business and we're fully committed to delivering on our 2030 aspiration. And with that, we would love to take questions from the audience.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Johan Fred from SEB. Please go ahead.

Yes, good morning, Johan and Thomas. Thank you for taking my questions. Starting with a question on volumes and food ingredient and more specifically bakery, volumes declined again in Q4. Could you give us some color on a few things? Firstly, roughly, how much was Baker down in Q4 specifically? And secondly, how much of that decline would you attribute to sort of end market weakness versus your own decisions to potentially walk away from lower margin contracts? And third, as you look into 2026, do you feel like you've now sort of worked through most of these the contract optimization or should we expect data volumes to remain under pressure as we continue, as you continue to focus on higher value products?

Great questions. Thank you and good morning. Within food ingredients, as you spot there, right, so flat all in all, positive being dairy, but let's focus on the question on bakery segments. We largely see this being down in the market, but we also know that we have still, and that is still relevant for the fourth quarter. Some of our decisions that you alluded to, decisions of optimizing our portfolio, not following down and just lowering prices in all contracts, that still impacts quarter four. We took some decisions late to 24, that was for a yearly tender, for example, that still impacts. However, with our focus on now returning to volume growth with a better tactical decision toolbox, we are also targeting growth in bakery. We believe bakery market was down mid-single digits. So our performance was roughly in line with market, but including some tactical decision going forward, we remain focused on growing with the market and hopefully slightly better than that.

Thank you. That's very helpful. And sort of zooming out a bit, looking at the group as a whole, volumes are down, but profitability is up. How much of the margin expansion is price-driven versus cost reduction? And a follow-up to that, are you seeing any customer pushback on pricing?

Yeah. Well, totally, I think. the total market, right, is obviously food ingredients plus chocolate and confectionery, and then we have lower volumes and a smaller business in technical products and feed. But obviously, as we all know, we need to go down into the different segments to really understand, and so chocolate and confectionery is certainly a bit different from food ingredients in general at the moment. But overall, I would say that given the geopolitical environment, even given years of inflation, there's no doubt that there's been a, you know, fairly tough market conditions you could say with consumers looking at affordability etc. I think that's a general comment in the market and with disruptions like tariffs on and off and so of course that has an impact also on the food system. However, it hasn't had a significant impact because we've been able to adjust for this and we are used to adjusting based on raw material fluctuations etc. But I do think that this has had an overall impact on the market. With regards to customers pushing back, there's also no doubt that global large customers and local large customers, they are the ones that we sell to. They are the ones that in turn sell into retail where consumers are facing the prices. Obviously, they are also very keen on managing costs. So price is always a discussion at the table and has absolutely been more relevant over the last couple of years. And that still holds. So we need to fight and win with our differentiation and being relevant, offering our functional ingredients. But at the end of the day, that's, of course, a decision for our customers where price is an important factor.

And when you look at our margins and the continued journey, it is as it has been in the past, mainly driven from internal activities, as we've outlined on, amongst others, the latest Capital Markets Day. It is that continued journey towards the 2030 aspiration of three SEC per kilo.

And also, I think, worth mentioning, I highlighted this, the the example we did of being rewarded with the ingredient of the year, that solution is actually an ingredient that has the same functionality in the product, but actually improves the operational efficiency of our customers, enabling them to run their lines longer. So in that example, we're actually offering a cost-efficient solution for our customer, help them reduce cost and downtime in their production. So that's also how we focus on not just in innovating better ingredients from a taste and functional perspective but also for how to improve the customers production lines so those are examples of how we can still win business in a cost focused environment yeah thank you for that for that answer and finally if you could just you continue to mention a favorable market within cbes but as we've all seen cocoa prices have come down a lot how how sustainable is

the margin performance that you're currently posting in CCF if COCOA prices continue to sort of normalize and volumes in the market stay weak?

I think there are separate dynamics here. I think, first of all, with the high COCOA prices, where most of the products and many of the products does include COCOA, That has had a negative impact in terms of inflation. So I think reducing or the reduced cocoa prices now coming down has, I think, a positive impact going forward because it reduces inflation. So that's a positive for the chocolate segment as a whole. Now, we are replacing part of the cocoa butter segment with our solutions. And that's where the delta from our solutions to the cocoa butter prices has been very, very high, supporting, and that's the favorable piece we're talking about, supporting the reformulation agenda at our customers. But the prices of calcua today is still at the level where our solutions are cost competitive to calcua butter. And that's also what we have seen for many, many, many years going back that that has been the case, even before this rapid inflation. So calcua prices needs to fall significantly down in order for calcua butter alternatives to not be cost efficient.

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

Thanks. The next question comes from Setu Sharda from Barclays. Please go ahead.

Yeah. Hi. Thanks for taking my question. So I have three questions. Continuing on the volume growth question, so FY25 was quite challenging with tough end markets. So what are the key drivers you are assuming for a volume rebound in 2026? in both your food ingredient and CMCF business? And how much of the growth is expected from our customer when driven versus market recovery? And my second question would be around your margins. Like in Q4, your gross margin was down 400 BPs, but the EBIT margin is kind of stable. So what is the roadmap to build margins from here in 2026? Should we expect further optics efficiencies? And my third question would be, again, on the CNCF margins. Given lower cocoa butter prices and rising share cost, how confident are you in sustaining recent CNCF EBIT per kg?

Thank you. So first, if we look at the volume growth, I do think that it's hard to speculate, right? But I think overall market, both in food ingredients and chocolate and confectionery, I think if we see, call it stabilizing price environments where inflation is at least halted, right? I think that that would speak in favor of returning into, call it normal consumption patterns, where, for example, indulgence has been on a long growth journey, if you look back. And I think that's where Lower cocoa prices is a positive in my mind because that reduces the inflationary pressure. We still have a very cost competitive and functional ingredient in our cocoa butter alternative. So I think all in all, it's been negative to the end market with the higher cocoa prices, even though it's given us a reason to have a continued dialogue with customers on reformulation. So I think on a volume perspective, that should be positive if we see a a slowdown or no inflation or even maybe reduced prices on the shelf in retail. Let's see. And then with regards to margins and gross margin, Thomas.

Yeah, as we can see in the quarter, gross margin is down compared to the same quarter last year. If we look at the net sales, first of all, adjusted for Hillside and FX were up 10 to 12% in line with what we see in terms of raw material increases. Gross margins that are under pressure, but primarily due to a very strong comparison in Q4 last year. We see this compounded to some extent by unfavorable product mix, which has a shift then to relatively lower sales in CCF and higher sales in food ingredients. It should be stated, of course, that gross margins varies over time. to some extent, driven by mix and timing and so forth. So we don't see any drama in this. The offset down to EBIT is on the cost side. And this is mainly driven by the fit to win program that we announced in April 2025 that is performing well. And we expect that to reach the targeted savings of 300 million by mid-2026.

Well, I would also like to add on the first question on volume. So my comments there were more on the market side of things. But as we announced earlier last year, we have targeted actions on volume growth, where we number one target is still to grow our EBIT. So whenever we have a decision at hand, our main focus is to drive EBIT growth. which can lead to, as you know, that we sometimes say no to business or renegotiate. But we have a clear focus across the world of AK by being better at evaluating business opportunities for how to load our factories with an EBIT decretive volume that might be to a lower price or lower margin, but to drive still absolute EBIT growth. So there are really actions ongoing to drive volume growth. And that's where we intend to take back market share, if you will, and continue to grow higher than the market. That's the ambition, that's the actions that are in place. But again, we will not do that to any price, if you will. We will still remain focused on absolute EBIT growth. Last question being on the sustainability of CCF margins. And obviously, margins at the end of the day is a function of price versus cost. So no doubt that increased shea prices is hitting the cost for everyone producing cocoa butter equivalents with shea. That is, you know, normal raw material fluctuations, if you will, that we try to then compensate for in the way we price. The price that we win to our customers is always a function of what our competitors are offering, right? So the link between Calcoa butter prices and our CB prices, that's a disconnect. We talked about that a lot, right? So I do repeat that. Seabees based on shea still cost competitive to cocoa butter. the absolute margin will be a function of how well we and others price our products against the cost uplift that we've seen in shape. But we have been sourcing well, and we are well covered to continue to deliver. And then let's see what that margin looks like. Our focus remains strong on continuing to optimize our flow, both in the way we procure, the way we produce, and the way we run our factories. And the net of that becomes the future margin.

Thank you, and I will be back to mic you. Thank you.

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

Hello, good morning, everyone. Three questions from me, please. First is, would you expect the infant formula recall with customers to have a material impact on your special nutrition divisions? And can you remind us of your exposures to the big multinational customers versus the local and regional customers in China? That's my first question. The second question is on the Fit2Win program. You had expected, I think, $100 million of cost savings in 2025. Is this unchanged? Do you see any acceleration or phasing effect for Q4? And the third question is, In the context of continued soft end market volume and, you know, with a competitive pricing environment, are you worried about operating leverage for AAK? Thank you.

Thank you, Johan. First question on the impact of the infant recall. Let me start with saying that this was not linked to any products sold or the product categories from AAK. However, we obviously follow this closely, and it seems like the market and the producers have reacted early and professionally. So I don't see a major impact to our infant formula business more than that, of course, there needs to be a filling the shelves in retail, of course, like with any recall, which has a slight positive volume impact. But the main focus is, of course, for the industry to make sure that there is food safe products on the shelf and that's where we will always cooperate with our customers to help. But in this case it's nothing to do with our products. I don't think it has a major impact to AEK more than the fact that we together with other ingredient suppliers needs to help produce for filling the shelves. And then Our exposure to the multinationals as well as the local producers is quite balanced. We have been part of this over many, many years where when it shifted to international players, we grew a lot with them, but we have also grown volume back with the local players. So we're quite balanced in that regard.

And I would say that we shift with how the producer shifts basically, because we are present in both customer segments, if you will.

So if that concludes the answer on the first question, then over to the second one, Thomas, on Fit2Win.

Yeah, so good question. Fit2Win, when we outlined it, we said, just as a repeat, we would have 300 millions of cost reduction by mid-2026. We estimated the savings in 2025 at 50 million and then a ramp up through the first half of 26. The actual of that is closer to just north of 150 million. So the program has impacted with larger cost reductions quicker than we expected it to. And to me, that's a phasing of being quicker to act rather than increasing the overall amount to 300, which we are very comfortable with achieving by mid-2026.

All right, and then over to the third question, which was, if I recall correctly, are we concerned with operation leverage or negative operating leverage due to softer volumes? Obviously, if volumes go down over time and significant volume reduction, yeah, that is a concern for us, just like any other company producing high volumes like we do. I think it's worth mentioning, though, that despite a 2% volume decline this year, at fixed exchange rates, we delivered an operating profit which was up 9% year on year. So at the moment, at these levels, we have been able to really adopt, be agile, focus on our improvement programs like Thomas alluded to, but if volumes would continue to go down by a significant amount, that would be a challenge and a concern. Yes, on the other hand, I am also very energized by the fact that if we do get back to volume growth, we would also have the positive leverage in the current situation with our optimized factories, the way it sits at the moment.

And I want to be clear that at current levels, we don't see the negative leverage impact as is today.

Yeah. If we put it in another way, we don't see under-absorption yet at these levels, right? So you would have positive negative leverage on any volume uptick or downtick, but not in an under-absorption situation. Right?

Is that helpful? Very helpful.

Good.

There are many people in line, so please limit to two questions per person. Thank you. The next question comes from Victor Hansen from DNB Carnegie. Please go ahead.

Hi. Good morning, gentlemen. Yeah, two questions from me, Dan. Firstly, on cash flow, working capital has been increasing for eight quarters straight despite your Cash to Grow program. I know some have been discretionary, for instance, when you move the palm oil sourcing, but it's still quite negative. So what are the key reasons for this? And did you see an EU DR impact in Q4 specifically? That's the first one. We can start with that one.

Thank you. So, as you mentioned, we had the change to certain supply agreements and so forth. I would say the main driver overall is the increase in raw material prices that we've seen over the last would say 12 to 18 months and this is usually as we mentioned before this hits our working capital with a lag of six to nine months and if you go back we see that we've seen an increase for q4 of about 30% in prices if you go back nine months so that is the the main driver of the increase in working capital and the negative impact on on That said, the cash to grow focus remains and we have now conducted the program throughout all major facilities. We have actions in place and those are being followed closely on a monthly basis and do and will continue to yield positive impact.

Okay, perfect. And then a follow-up on the special nutrition market.

And by the way, we did not see any significant impact of the EUDR.

No, sorry, I forgot that. No, the EUDR ramp-up that we had towards the end of 2025 was much less than what we had in 2024. And the small amounts that are there, maybe 100, 200 million, will roll out in Q1.

Second question.

Thank you for clarifying that. Perfect. So on the special nutrition market of follow-up, do you see any impact on your fundamentals from the contamination? Are you seeing any more incoming requests rather than dynamics here? Because you, of course, remember what happened in China after the scandal many, many years ago that the market got more premium. Is that a positive possibility for you?

It's a great question and I just want to just be very careful with the words here. Contaminants is never positive, right? So our responsibility as a whole market is always, always to focus on food safety. And that is what we're doing. But you're also correct in the context that is AAK one of those companies that sees this as an important topic that is always trying to be in the forefront? Yes, we are. So we have together with the industry been able to solve issues that comes across or be proactive in identifying better opportunities for better ingredients, better food, better food safety. So that is a priority of AAK. So whenever there is a raised bar or tougher restrictions, we choose to see that as an opportunity. But again, focus is always for the industry on food safety.

but no immediate request from more customers.

Not in this case. This was a bit outside what we do, so not in our processes and our raw materials. So not in this specific case, but there is an ongoing dialogue on raising the bar as a whole, and that's where we have a role to play and an opportunity to continue to be in the forefront.

Okay. Thank you very much. Thank you.

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

Yes, good morning, gentlemen. Well, two questions from me. The first one is on the share buyback program. And could you say anything about how that will be structured? Are you going to be buying back a steady amount of shares or for a steady amount of money each week, month? or is it going to be more sort of ad hoc? And also, if I may just shoehorn in on that question, given these cash returns to shareholders, what's your outlook for acquisitions, big and small? That's my first question.

Thank you. I think very short, as we also communicate, we intend to do a disciplined share buyback, so we don't intend to do it ad hoc. We will come back with more exactly in what time periods, etc. But we intend to do it disciplined and not Not in a way that it disrupts the normal daily trading, if you will. That's the intent on that one. And the second piece was M&A, right? So no, we remain as focused as ever on M&A. We just conclude that Our balance sheet is strong. Shareholders are indeed looking for returns, and we think we have the capacity to do that. So that's, as Thomas said, also the number one priority is to grow the business, find M&As. And if we do, and we don't have the headroom, then we could pause something, right? But at the moment, we see this opportunity. So we remain focused. focused on M&A we try to get the companies to flip but as I said many times there's not a lot of companies for sale in our industry so therefore we need to be patient and with the strong balance sheet we see an opportunity to now return cash in this way.

Thank you and my second question is on the demands from several West African countries where you source some raw materials that you and others start with more in-country processing. Can you give an update on how you're being impacted by that or are handling it? And is there any sort of potential capex for such investments included in your, was it 1.5 billion sec capex guidance for 26? Again, two questions in one.

Sorry about that. Without going into specifics, let me be clear. We follow this development. We are well spread in West Africa. We have a long, long history of sources. So number one, we are resilient in the way we operate to get kernels out in our current structure. We are also looking at how to build a resilient supply chain going forward, which might include investments locally. And with that will come CapEx. So short answer is we are on top of that and there might be investments going forward, but that's where we need to evaluate our different options and choose the best optimal model for AK.

All right. Thank you. Those were my questions then. Thank you.

The next question comes from Matthew Yates from Bank of America. Please go ahead.

Hey, good morning, gentlemen. Two questions. The first one, just to go back on Q4 for a moment and understand, I think there was a question earlier about bridging that gap between the gross margin and the operating margin. I'm working off your condensed P&L. So, you know, I don't have full visibility on the line items, but I see the employee cost was down about 100 million year on year and other external expenses down a bit more than 200 million year on year. I assume some of it is currency, some of it is probably the restructuring program, but did you make sort of, did you release provisions for things like bonus accruals if you were coming in under budget or just any other granularity you can give on how you've managed to control the costs? And then second question, Thomas, just looking into 2026, I appreciate you're not being overly specific on guidance per se, but if we take one just mechanical element, which is the currency, if you were to mark to market based on where rates currently are, what sort of a delta would you be thinking about for operating profit in 26 year-on-year? Thank you.

Thank you. Starting with your question on the continued question on gross margin. And yes, there is FX effect in that 400 million. The main driver, as I mentioned before, is the effects of the fit to win program, both on the wage side and then on the external expenses, such as consultants and travel and all the things that we put into the program when we launched it in April of 2025. That follows the plan and for the full 300 million by mid-2026. And as I mentioned before on an earlier question, we do see quicker returns on the program than expected. As related to a question on bonus releases, there is a slight such impact but not big overall if you compare 25 to the bonus levels of 24. So the main driver again are the impacts from the Fit2Win program.

And the currency?

Yeah, when we look at, I mean, it's very difficult to predict. The Swedish krona has continued to strengthen early here in the year. So it's difficult to give guidance, and we don't give guidance on annual performance as is. But we have our long-term guidance of 10% EBIT year over year. We have our 2030 aspiration. But the introduction of 2025 or 2026 continues to see a strengthening Swedish SEC, which would have and will have impact, I would at least say, in Q1 on the EBIT development year over year. Especially on the dollar side. Yeah, especially on the dollar side, as Johan mentioned, yes.

Okay, but would you be willing to put a figure on that in terms of how much of the headwind... from currency is, given sort of where prices are, but also whatever hedges or other things you have in place?

No, we don't go into that detail. And as I said, things move every day and it's very difficult to predict. We are very clear on the impact on historical numbers as we are in Q4 and for 2025 as a whole.

And I think maybe as a clarifying, the bigger ticket item in this is not the rolling of hedges and such, it's the translation effect of the operating result. So I think that's a way to maybe look at it.

And in 2025 you saw in total 330 million and 80 million alone in Q4, and that's translational effects.

Thank you, guys. Thank you.

Now on to the last question of today. The next question comes from Eric Cederberg from Handelsbanken. Please go ahead.

Yes, good morning. So regarding the volume development, I think you said at the last report that the volumes for the food ingredient segment saw sequential improvement throughout the quarter, and you also talked about already seeing some traction in your volume mitigation actions. Is there something that has during the fourth quarter that explains why this sequential improvement is not more visible?

No, not really. And I think I had an intermediate interview earlier today that was on the same thing. I think it's worth keeping in mind that we deliver to a global food system with consumers not rapidly changing behaviors, but on the aggregate you do see that. high inflationary pressure, you see a bit of shift between categories, but nor when it goes down, nor when it goes up, you see a massive change. So we do see positive effects on our programs. That means that our organization is doing more and better tactical decisions, but it doesn't change overnight. And our contract with customers or versions of mid to long term, if you will, So that's why it takes a bit of time, both when it goes up and when it goes down. So with that, I don't think that Q4 was an outlier versus what we saw in Q3 in the early communication. Food ingredients being flat with strong traction in dairy, a bit weaker in bakery is okay, and chocolate and confectionery down 4% for us, but we see that as in line with or slightly better than the market.

All right. And then I also have one more. You had some of your industry peers talking about an inflection point for the innovation cycle as the cocoa price is trending down. And given your position as a co-innovator together with your customers, are you seeing any significant pickup in demand in regards to this?

Yeah, we have seen a great interest, yes. I would argue that there's been an ongoing, especially if you, was your question linked to chocolate and confectionery or was it in general? Yeah. Was it in general or chocolate?

Chocolate and confectionery.

Yeah. So I cannot say that I've seen an infliction point as of now, but I would argue we've seen the increased interest that's been there over some time. And we've talked about this in the calls before that there is more new products on the shelf, the chocolate bakery segments where you include, you know, wafers and fillings and coatings, etc. So I would say that there is an ongoing, you know, innovation, new product pipeline with our customers. And at the moment, you know, that continues. But I wouldn't over exaggerate and to say that we have seen an infliction point in Q4. But I would say that, yes, there is a a clear interest to innovate and put new products on the shelf and try to drive them on. That's something that we see.

All right. Perfect. Thank you very much.

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. Not a lot to add more than thank you for listening. Lots of insightful questions. As always, we remain prudently optimistic. We closed a strong quarter, 7% operating profit increase that fixed FX in a year with 9% increase in a somewhat demanding market. And with that, we are confident in our ability and focus going forward. Thank you.