Scandi Standard AB (publ)

Good morning, everyone, and welcome to this presentation of Scandi Standard's result for Q1 2026. My name is Jonas Thunestad, and I'm the CEO and managing director of Scandi Standard. By my side, I have Fredrik Sylvan, our CFO, and I'm pleased to have him by my side today. I'm also glad to report the strong growth and result in the quarter. Next slide, please. We report Q1 2026 with strong growth in net sales and margin. We have a 9% growth in net sales and increasing volumes, supported by growth across all countries, channels and segments. Sales are supported by continuous strong underlying demand. EBIT is up 35%, solid improvements in ready to cook. We have low ready to eat margin, but a positive outlook. Improvement program continued with full force, supported by significant investments in 2026. And the integration of Lithuania and Netherlands are progressing well. So generally, we have a strong outlook for the business. Next slide, please. And now we move into the growth and value drivers and the reason why we see a strong demand. It's related to these three value drivers for chicken, responsible, safe and nutritious, convenient, versatile and tasteful and affordable because it's sustainable. So next slide, please. And here you can see the strong historical and ongoing consumer trend for chicken. On the graphs on the right hand side, you can see long term growth in chicken benefiting from substitutions from other proteins like pork and beef. And as you can see in the top bullet, we're estimating 3% volume CAGR in the Nordics and Ireland. So next slide, please. And one of the three value drivers is the affordability and it's benefiting from other proteins just because it's sustainable and affordable. So price has always been important for consumers and the focus has increased even more in the current environment of high food prices. Beef prices are increasing and are becoming more and more expensive, which chicken is benefiting from. But also the long-term trend of switching proteins from red meat to poultry. So chicken is affordable in all segments, and that gives us further opportunities to drive long-term volume value creation. So we see further opportunities to drive more volumes out of the chicken due to its affordability relative to peers. So that you can see on the right-hand side in the graphs at the top. So next slide, please. And on this slide, we present our EBIT per kilo measure. And EBIT per kilo is a good measurement of value creation for our business. And in Q1 2026, EBIT per kilo was 2.22 SEC compared to 1.73 last year. And that is an increase of 29%. And our whole markets are contributing well, and Osterwalder will be an addition for us reaching our 2027 goals. So we're expecting to take another material step in 2026. And in the different colors in the diagram, you can see the development in different segments. And as you can see, RT is a very small part of the earnings, which gives us fundament for future growth when recovering prices and ramping up our new RT capacity. So next slide, please. Now we're moving into the segments and the table shows the reconciliation of our segments, strong net sales growth in all markets and strong EBIT contribution from ready to cook, whereas ready to eat still has low results in the quarter. And as always, we want to remind you of the category other includes our ingredients business and our corporate costs. So next slide, please. And here you can see the summary of our sustainability scorecard, and we are transparent on multiple parameters. Q1 shows mixed results, partly driven by an exceptionally cold winter this year. You see slightly higher numbers in the quarter on antibiotic use, linked to some challenges in our Irish and Lithuanian operations, but we expect a positive trend during 2026. So next slide, please. And if we look at the segment ready to cook, and that's another step forward with 10% increase in net sales, we have 5% increase in chicken processed, our grill weight, and we have a positive volume and mix effect. EBIT is 151 million SEK compared to last year's 93 million SEK. And the margin is 5.3% compared to 3.6 last year. And it is broad improvements across all markets and channels. And I'm glad to see that our structured improvement programs are yielding results. So if we move into next slide, please. Then we move to the feed prices, and we have now been seeing fairly stable feed prices for some quarters. In quarter one, the prices declined slightly versus previous year, but there are still uncertainties, and we need to be prepared for further volatility. We also want, as always, highlight that feed costs are one third of our cost base, and that the short production cycle compared to other proteins enable us to be more agile in the supply chain. Generally, we look at feed costs and other costs such as packaging and energy and transport. We carefully follow the effect of the Middle East crisis with the view to pass on cost increases to our clients. Next slide, please. And then we're moving into the export prices. And we see volatile export prices. In 2025, volatility was driven by supply issues. And that was mainly bird flu issues in Newcastle, in Poland, and bird flu in Brazil. Q1, also to mention, is seasonally our weakest quarter. And that's the effect of the Christmas season, where the chicken consumption or poultry consumption is low. When we compare prices versus last year, some prices are up 2%, and we also see that current prices is above Q1 2026 levels. And our aim is to reduce exposure to volatile markets, so we're looking for long-term partnership, optimized S&OP, and an integration benefits with our ready-to-eat business. So next slide, please. And on this slide, you can see the channel development more in detail. And through these details, you can notice the increase in both food service and retail in the quarter. So in general, we're seeing strong demand growth in all of our markets in the quarter. Next slide, please. And this slide is to remind you of a strong market position. All of our five home markets and the countries are highly consolidated. These markets have large hurdles for new entrants. They can individually be regarded as semi-closed market due to the strong consumer preference for domestic produce. And due to our strong market position, our own supply decision have a meaningful impact on market balance, which has proven to be a strong instrument in periods with volatile markets. And note that each market, however, also includes consumer segments less sensitive to provenance. So next slide, please. And here you can see our ready to cook plants. And as we always mention, we should note that 11 million chicken in Lithuania is just one shift. If the market have a positive momentum, we have the possibility to scale up another shift and double the production. So next slide, please. And then we move into ready to eat. And the headline is low result and positive outlook. and we see a gradual margin recovery underway. 10% growth in net sales, and that is driven by strong recovery of food service demand. What we see is a significant drop in EBIT versus Q1 2025. Part of this is driven by a planned maintenance stop in Faroe during the first quarter, but it's also a structure that takes longer time to pass through increased raw material costs. But we're on track with our sequential startup in Netherlands, successful kebab processing in factory A, outperforming our internal targets. And we're also looking into double capacity during the second half of 2026 on the kebab production. In the factory C, we will do the trial runs as planned in the second half 2026. So next slide, please. And here, you can see the figures. It's, of course, very encouraging to see growth in food service after several periods of weak demand in ready-to-eat. Growth in the retail channel continued to be very strong. Ready-to-eat will be an important long-term tool in developing a bit per kilo. And more specifically, I will talk about that later in our strategic pillars. It is about increasing the value of our protein. So next slide, please. And this slide is a reminder of the strong historic organic growth in ready-to-eat business the latest 10 years. I'm confident that it will continue that trend and that two main type of businesses, three quarter is breaded products on the European market and one quarter is integrated local business in Sweden, Norway and Finland. And it gives us normalized a high return on capital employed, an average EBIT margin of 6% the last five years. But in the quarter, we only had 2.7 for the reasons described earlier, which also shows the potential going forward. And it is low capital employed compared to ready to cook. And as you remember, we lost the continental contract in 2023, but since December 2023, we have growth quarter by quarter. So next slide, please. And we're also expecting a healthy market growth in Europe over the coming years. Market players are divided into tiers, European players, regional players and local players. And Scandi Standard has been a large regional players with 36,000 tons product weight in 2024. And that is about 5% of the European market share. But there's been a stagnant market after COVID-19 and inflation and some European overcapacity. But we see the expected growth to 2030 is about 120 tons. And this acquisition takes Scandi standard breaded activities to the top tier. So our Osterwalder plant acquired in Q1 2025 in an idle state. We're on fire in factory B under previous ownership. And then we'll start up factory A in Q3 2025 after refurbishment. And that has increased our capacity for our popular and profitable kebab products. And factory C is being prepared for the second half 2026 startup. And factory C has two of Europe's largest and most efficient breaded products lines with 50,000 tons annual capacity. And one of the few with advanced form product capability. And tailored to meet the criteria of the largest clients. And this is and will be a significant growth platform for Skandi Standard in the future. So next slide, please. And here we show our four main processing plants in Skandi Standard. And the two European plants is Faro plant in Denmark and our Osterwalder plants in Netherlands. And then stock in Norway and honka jokk in Finland are serving our local markets. So I hand over now to Fredrik Sylvan.

Thank you, Jonas. And good morning, everyone. Next slide, please. As Jonas mentioned, Q1 was a very strong quarter. We see a positive development where top line was driven by both RTC and RT, supported by strong underlying EBIT growth in RTC, partly slowed down by RT, which is normal when raw material prices increase. We expect the RT profitability to recover during the coming quarters. In total, EBIT is up 35% in the quarter with almost 90 basis points margin improvement. Q1 last year includes startup costs in Lithuania amounting to 17 million SEK. Adjusted for that effect, it is clear that the underlying performance is very strong. Finance net is down 14% versus previous year. And the cost for increased bank loan is more than offset by lower interest rates. On the back, the reduced positive impact from interest rate swaps have expired, so we don't see that positive effect during this quarter. The effective tax rate is higher than last year, and this is due to correction of capitalized tax losses in the Netherlands. And the effective tax rate is expected to return to previous level. The deficiency remains stable and at a strong level. And as Jonas mentioned earlier, lost time in years is up during the quarter. Next slide, please. Capital employed increased year on year from 4.5 to 4.9 billion SEK, reflecting acquisition activity and integration ramp up. Return on capital employed improved to 13.3%, which is almost two percentage points up, despite higher capital employed, indicating that incremental capital is being deployed efficiently. Our return on equity also strengthened to 14.9% from 10.7%, driven by improved profitability and disciplined capital allocation. The equity ratio increased to 36.2% from 34.7. And as said, the company remains well capitalized and within our targeted capital structure. And as always, we continue to monitor our leverage position to ensure financial stability and maintain flexibility for future investments. Next slide, please. Operating cash flow was 69 million SEK in the quarter, primarily driven by strong EBITDA together with reduced CAPEX, as the Oosterwold acquisition last year was an asset deal. Other operating items are driven primarily by FX impact on personnel costs. Paid tax is below previous year due to less tax paid in both Norway and Sweden. And other items are impacted by FX on interest bearing debt as well as the stock buyback linked to the 2025 year long term incentive program. Our net interest bearing debt is close to flat versus year end. Reported leverage landed at 1.9, which is below our internal aim of 2.5. Next slide, please. Working capital remains low in the quarter despite unfavorable impacts from stronger sales and a low level exiting 2025. We see a 7% inventory decrease versus year end and almost flat versus Q1 last year. and despite having a higher level of live birds, as Lithuania was basically not in the base last year. Other working capital consists mainly of personnel related costs, such as and VAT. Our target for working capital as a percentage of the sales adjusted for financing remains at 6%, In Q1, this metric stood at 4.4, including financing adjustments, meaning that we are at an efficient and low working capital level for the quarter. Next slide, please. For this year, we expect CAPEX to increase to approximately 650 million SEK, which is driven by focus on three main areas, which are the same as last time. which the first one is increased chicken farming capacity in Lithuania, then the bottlenecking and increased capabilities. And the third one finalized the Netherlands for the startup of factory C. And as we ramp up factory C, we expect an increase in working capital, which will start in the middle of the second half of this year. We also expect finance costs to be around 7% of our net interest being debt, which includes costs for leasing, factoring, and vendor financing. The blended effective tax rate is expected to be approximately 19%. Next slide, please. And back to you, Jonas.

Thank you, Fredrik. This slide I want to talk about one of our cornerstones and license for us to operate. There are three key areas when it comes to creating trust for what we do. It is responsible animal welfare, safety for consumers and employees, and nutritious products. And this is closely linked to our strategic pillars. So if we move into next slide. And those of you who have followed us for a while have seen these pillars before. These are the four strategic pillars that will support us achieving our goals. And it is about increasing the value of our protein, e.g. taking out more value out of the bird and processing more and utilizing more of the bird. Then it is about ramping up efficiency, and that is ramping up efficiency in the whole value chain end-to-end. That's a lot of gains to do with that focus. And that with integrated sustainability. And doing this in every step along the way as one company, making us constantly better together. And it emphasizes the collective effort of shared goals and team cooperation, and that leads to improved performance and outcomes. So if we move into next slides, we then will show the slide and remind you of our targets for 2027. And you can see them at the right hand side. And we are expecting strong growth over the coming years. So we have set the targets 2027 to five to 7% net sales growth. We have targeted an EBIT margin in excess of 6% by 2027. And we're also measuring the progress in terms of EBIT per kilo, for which we have support and targets of three SEC as presented in former slides. So next slide, please. And we also want to remind you of this slide is to remind that we are structurally working with improved ESG work and improve ourselves in ESG ratings. So we have an A in the CDP rating for climate. That's only a few companies that has achieved A minus rating and even smaller group with an A rating. So the high scores reflects our standards and the sustainability nature of our business. If we move into the next slide. And once again, we want to show you our average per kilo measure. And average per kilo is an important measure for our value creation. And as you can see, the the ready-to-eat part of the EBIT per kilo is very small, part of it today. So the potential of growing our ready-to-eat business in the future is an important part for us to increase our EBIT per kilo. So if we move into next slide, please. And this is to summarize and the outlook. So strengthen organic growth trend. It is another material step on our margin journey. Ready to cook that we have strong improvement momentum and ready to eat. We have a positive outlook after a low period. And our improvement program are continuing with full force, supported by significant investments in 2026. And we are well positioned for further consolidation. and expecting a strong outlook for 2026. So with that said, we are moving to the next slide and open up for Q&A.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. And to remove your question, press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We'll pause here briefly as questions are registered. Our first question comes from Daniel Schmid with Danske Bank. You may proceed.

Yes, hello, do you hear me?

Yes, yes. Hi, Daniel.

Good morning.

Yes. Okay. Good. Good morning. But a couple of questions from me. And you clearly performed well, again, on the group. But ready to eat is still sort of sluggish when it comes to margin performance. And, of course, we, I do understand you had that maintenance stopper that also impacted. But you also talked about longer lead times to pass on raw material. costs and on that topic we are of course in a situation now where the world is quite uncertain and it has an impact on commodity prices in general and maybe also so fertilizer prices and of course that lead time is quite long but what do you see there and what do you expect in terms of eventually passing those extra costs on down the line?

I would say if we take on the cost side, that will reflect the Reddit cook part. And the thing that you mentioned about fertilizers and so on, that is a long-term thing. Our focus is that we see at the moment stable feed costs. We see, of course, as everyone, increasing oil prices and costs for transport and plastics and so on. But we have a really close monitoring that and focus to pass those costs further to the customers. And I think we have a... good model for that. If we're linking it to the ready to eat part, it has more been driven that we have such a strong demand for our ready to cook raw material, the sales out of them that has been a lack of poultry. And that, of course, optimized the ready-to-cook business, but keeps some short-term challenges with the ready-to-eat business because that's the raw material into the ready-to-eat. So what we have been focusing on is to increase the efficiency in our ready-to-eat part and, of course, pass the prices through. But they have a strong link to what the demand is in ready-to-cook. And there is a little bit longer lead time, as stated. But for us, it's more about the high demand for ready-to-cook. So they will come after a while. But the cost base, we are following that really closely. expect to pass those costs through but we don't see anything on our big cost parameter yet on the feed prices but of course it is as you say if fertilize prices are high that can have an effect for the crops that will be harvested next year and so on but we are monitoring it yeah

But I'm just coming to, I understand that these two channels are sort of dependent on each other in terms of raw material cost and so on. But the fertilizer prices and then hence the feed prices is of course something that could come later, maybe this year or start of next year. And what makes you sort of confident that you won't see longer lead times to pass that cost on as well now that you have seen it in RTE.

Because the RTE sourcing of changing. Let me give an example to give it more practical. If we have a high demand for minced meat because of the minced meat and red meat is really high. Then we sell the ready-to-cook raw material, offcuts, as minced meat and drive value out of that. But that's also raw material into our ready-to-eat. And then that product is not available. Then you need to change that to another product due to the high demand of offcuts to minced meat. And then we need to change the recipes and push the prices through because we need to use another raw material. So the ready-to-eat business is more linked to the high demand in ready-to-cook. And those costs we need to pass through because the raw material is utilized better in ready-to-cook at the moment. That's one example. More than the cost base backwards in terms of higher feed costs. If that's one practical example.

So basically, the ready-to-eat input base is more complicated maybe and maybe you also feel that you have a stronger pricing power and ready to cook if you start to see feed prices going up.

Yeah, exactly. That's where it starts.

And you also talk about, of course, high inflation driving people to look for more affordable choices. And of course, that's been very true for some years now. But we actually have seen food inflation hitting zero in Sweden in March. And it might take off again, given the talk that we just had on fertilizer prices. But that's going to be further down the line. Do you feel that with the food price inflation hitting zero in March and probably not a big change in the coming months, is that something that could change the behavior of the Nordic consumer?

I think that if we take the Nordic consumer and including Ireland in that, we see a structural change to poultry. Of course, there's a short-term effect because the mince meat prices, especially on beef, are really high, but there's a structural change from red meat into white meat. even if there's not high meat prices. So that's two effects that are driving in the positive way for us at the moment. But the structure has been for a while and it seems to increase.

Okay, so no change in momentum despite food inflation coming down?

Not what we can foresee now.

Okay. And maybe also back to the last question on input costs. Fuel costs have gone up quite a lot on the back of the situation in the Middle East. How big part of your cost base is related to fuel prices?

I cannot specify the exact number of you because it's only a part of our fuel prices that actually they call the DMT, drivmedelstilläget, that are changing. So I cannot say that exact percentage by heart, but it's a minor part compared to the other input costs.

Yeah. Okay. Okay. Thank you guys.

Thank you.

Thank you. There are no questions waiting at this time. So once again, if you'd like to ask a question, please press star followed by one on your telephone keypad.

Good.

We have a follow-up question from Daniel Smith with the Danske Bank. You may proceed.

Thank you. I might as well continue then. We did talk about the VAT cut coming through by the 1st of April in Sweden when you reported last time and that was still ahead of us back then. Any sort of reflections now? It's been basically close to a month since that happened.

We see a high demand from the market, but we have seen that before the VAT was lowered and we still see a high demand. Our challenge at the moment is actually to be able to provide the consumers with chicken due to some lower volumes. So we see high demand for chicken even before. So no, we haven't seen any change in consumer behavior that we can see after the change.

Oh, yeah. And maybe on sort of a political question, given that this has become such a hot potato in Sweden when it comes to food prices and the lowering of VAT and the special commission that's going to follow the pricing in Sweden and its election year on top of that. So politicians are trying to make a thing out of it. Do you feel in any way that sort of your counterparts, i.e. retailers in Sweden, are more forcefully trying to push prices or if you need to come through with price increases or any change to that dynamic?

I think that of course There's competitors in the retail that want to have the best offers as possible, and there are competitors around us that want to create the best offer. Of course, there's always tough discussions when it comes to price negotiations and with a sensitivity of consumer. That is always a discussion. But I think... And as I said before, I think we have a good model where we actually can present the costs. And I think it has also been proved in media that when the cost comes, it's the cost that we are pushing forward. And I think that model is actually working pretty well. But of course, it's always a tough discussion when it comes to prices. That's the nature of it.

Yeah, OK, thank you so much. That's all for me. Thank you.

Thank you, we currently have no further questions, so I'll pass the conference back over to Jonas for closing remarks.

Thank you very much and I want to thank you all of you for for listening in to our quarterly report so. I will wish you all a good day and thank you very much for joining. Thank you very much.