Scandi Standard AB

Good morning, everyone, and welcome to this presentation of Scandi Standard's result for Q2 2026. My name is Jonas Thunestahl, and I'm the CEO and Managing Director of Scandi Standard. I'm pleased to have Fredrik Sylvan, our CFO, by my side today. I'm also glad to report a strong growth and result in the quarter.

So next slide, please.

And when we look at Q2 2026, margins continue to improve. We have a 4% growth in net sales and increase in volume supported by strong demand. We have a 30% increase in EBIT and a margin of 4.9%. And it's mainly two things. It's a focus in ready to cook to climbing the value ladder and in ready to eat. It's about our growth journey and passing through our cost increase. We also see that our improvement program continued with full force, supported by significant investment in 2026. I'm also glad to present a new five-year financing in place at approved terms. So altogether, we have a strong outlook for the business in the coming period. Next slide, please. 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 graphs on the right-hand side, you can see the long-term growth in chicken benefiting from substitution from other proteins like pork and beef. And as you can see, we're estimating a 3% volume CAGR in the Nordics and Ireland. The next slide, please. And one of those three value drivers is affordability. And it is benefiting from other proteins just because it's sustainable and affordable. 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 at a high level and are expensive, which chicken is benefiting from. But also, and that is important, the long-term trend of switching proteins from all the red meat to poultry. So chicken is affordable in all segments and it gives us further opportunities to drive long-term volume and value creation. And we see future opportunities to drive more value out of the chicken due to its affordability related to peers. That you can see on the right-hand side in the diagram. So next slide, please. And on this side, we want to present our EBIT per kilo measure. And EBIT per kilo is a good measurement of value creation for our business. And Q2 2026, our whole markets and Scandish Chicken are contributing well, and Osterwalder will be a good addition for us reaching our 2027 goals. And our AB per kilo in Q2 was 2.37 compared to 1.88 last year, which is an increase of 26%. And we are expecting to continue to take material steps also in the second half of 2026. And in the different colors in the diagram, you can see the development in the different segments. And as you can see, RTE is increasing, but still a small part of the earnings, which gives fundament for future growth when recovering prices and ramping up the new RTE capacity. So next slide, please. And now we're moving over to our segments, and the table shows the reconciliation of our segments. strong net sales growth in most of the markets, strong EBIT contribution from RTC and improved results from RTE. And as always, we want to remind you of the category other includes ingredients, business and our corporate costs. And ingredients had a negative contribution in the quarter due to an adverse price environment and operational challenges. We, however, see a positive start in the third quarter. So next slide, please. And here you can see the summary of our sustainability scorecard. We are transparent on multiple parameters, and Q2 shows improvements in all areas compared to last quarter, but still on a level with room for improvement, especially on the LTI side. So we expect a positive trend during the second half of 2026. Next slide, please. And moving into ready to cook. And as we said before, it's another step on the value ladder. We see 3% increase in net sales, and we also see 3% increase in chicken process, what we call the grill weight. To mention Sweden held back due to low supply driven by a few disease cases in our external parent stocks, but full production since July and the demand is high. And we also see positive volume and mix effect. And that comes up to an EBIT of 156 million SEC compared to last year of 115. An EBIT margin of 5.6 compared to 4.2 last year. And we'll remain focused to continue to climb the value ladder. And there's a lot of different activities in that. Of course, product development, going into more convenience and branding is one important thing. But it's also supported by more investment like Legdi bonus and robo batches to improve the quality, improve the efficiency and improve the yield. But we also have had a project of reduced giveaway and improved our product mix. And that is together with our Promatic customers to actually find more value out of the chicken. And at the same time, we do further investment in our backward integration. So next slide, please. And when we move into the feed prices, so we have now been seeing fairly stable feed prices for some quarters. In Q2, the prices decreased slightly versus last year, but still a lot of uncertainties and we need to be prepared for further volatility. Latest days have shown a significant increase in wheat prices. And generally, we look at feed costs and other costs such as packaging, energy and transportation. So we carefully follow the effect of the Middle East crisis where we see some challenges with the fertilizer supply that can have impact on the grain prices in the future. But we also see challenges with El Niño that can cause an uncertainty if it will have impact on the grains. And also the Ukraine war where we see disturbances in the sales of grains. So we're following this closely. We have seen a stabilization, but there are uncertainty. We also want to highlight that feed cost is one third of our cost base and also that the short production cycle compared to other proteins enable us to be more agile in our supply chain. So next slide, please. So moving into export prices. As you know, 2025 volatility was driven by supply issues, bird flu in Poland and Brazil. But we have seen stable prices versus Q1 2026 and Q2 2025. But we see possible disruptions driven by EU import restrictions on Brazilian chicken in late 2026. There will be a ban of Brazilian chicken from September, but there are a lot of stock in Europe. So we think if that continues to go, there will be effects in late 2026 or in 2027. But there's a lot of uncertainties in that. But we are aiming to reduce our exposure to the volatile markets. So we have long-term partnership. We have optimized sales and operation planning. And we're also benefiting from integration with Ready to Eat. So next slide, please. And in this slide, you can see the strong demand in retail. You can see our challenge development more in detail. And through these details, you can notice the increase in retail in the quarter. So in general, we're seeing a strong demand in all of our home markets in the quarter. Next slide, please. This slide is to remind you of our strong market position in all 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 markets due to the strong consumer preference for domestic produce. So due to our strong market position, our own supply decisions have a meaningful impact on the market balance, which has proven to be a strong instrument in the period with volatile markets. Note that each market, however, also includes consumer segment less sensitive to provenance. So next slide, please. And here you can see our ready to cook plants. Note that 11 million chickens in Lithuania is just one shift. And if positive momentum in the market, we will have the possibility to scale up another shift and double the production. So next slide, please. So now moving over to ready to eat. And we see improved results and a positive outlook. We have a 12% growth in net sales driven by demand in both food service and retail. We have an EBIT margin of 4.1 compared to 3.2 last year. And we continue to build back margins towards historical average. But our lead time in passing through raw material pricing, but we have a positive outlook for the second half. And when we look at our Netherlands plant, we're on track with a sequential startup. So our kebab line in factory A is fully utilized and we're installing another. And factory C is preparing for the second half trial runs. So next slide, please. And here you can see the figures. It's of course very encouraging to see the growth in food service after several periods of weak demand in ready-to-eat. Growth in retail channel continued to be very strong. And ready-to-eat will be an important long-term tool on developing AB per kilo. And more specifically, to increase the value of our protein. So next slide, please. And this slide is also a reminder of the strong historic organic growth in our ready-to-eat business the latest 10 years. And I'm confident that we will continue the trend. and are two main type of businesses. Three quarters is breaded products, European market, and one quarter is integrated local business in Sweden, Norway, and Finland. And there is a high return on capital in this segment, and our average EBIT margin of 6% the last five years. And in this quarter, we have a 4.1% EBIT margin, which shows the potential going on forward. And that combined with low capital employed compared to ready to cook makes this as an interesting investment. And as you remember, we lost some continental contract in 2023, but as soon as you can see, we're almost on par with our 2022 high numbers. So next slide, please. And we are expecting a healthy market growth in Europe over the coming years. And the market players divided into tiers, European players, regional players, and local players. And Scandi Standard has been a large regional player with 36,000 ton project weight in 2024 and about 5% European market share. production platform has not been competitive in the top tier. But we saw in the COVID-19 inflation some stagnation and some European overcapacity. But we still see 100,000 tons market growth expected to 2030. And that is the reason why we did the acquisition in Osterwalder. Next slide, please. And the Osterwalder plant were acquired in Q1 2025 in an idle state. They've been firing factory B under previous ownership. The startup of factory A in Q3 2025 after refurbishment, and that increased our capacity for our profitable and popular kebab products. Factory C is being prepared for the second half trial runs. and Factory C has two of Europe's largest and most efficient breaded lines that can produce 50,000 tonne annual capacity. And it's one of the few with advanced form product capability, tailored to meet the criteria of the largest clients. So we have bought a significant growth platform for Scandi Standard. Next slide, please. And here you can see our main processing plant in Scandi Standard. And with that, I hand over to Fredrik Sulvan of CFO. Thank you, Jonas, and good morning, everyone.

Next slide, please. And next slide, please. Q2 was another strong quarter with continued growth in both sales and profitability. Net sales increased by 4%, driven by continued strong demand across both RTC and RTE. EBIT increased by 30% to 179 million SEK corresponding to margin improvement of approximately 1 percentage point. The EBIT improvement was primarily driven by a favorable mix and price and also continued operational improvements as well as higher production efficiency. Ready2eat continued its positive development, with profitability improving further during the quarter. Net finance expenses decreased by 18% versus last year, driven by 5 million SEK one-off reversal of accrued leasing costs related to the Valla transaction. The effective tax rate is higher than last year, as we continue not to recognize deferred tax assets on tax losses in the Netherlands. Earnings per share increased 39%, reflecting the strong operational performance together with lower financing costs. Fee deficiency remained at a stable and strong level, while long-term injury rate increased compared with last year, but below rolling 12 months. This is of course an important area that gets a lot of focus, and we expect positive development already in Q3. This quarter, we continue to improve our returns while at the same time increasing the capital employed in the business. Average capital employed increased by 12%, primarily reflecting our acquisition strategy and continued investments to support future growth. Despite the higher capital base, return on capital employed improved by 2 percentage points to 13.1 as a result of good returns from our recent investments. Our average equity also increased, with the return on equity significantly improved to 15.9% from 11.1, reflecting higher profitability and improved earnings generation. Despite acquisitions and the dividend payment, we maintain the solid equity ratio of 34.2%. So overall, we continue to balance growth investments with capital discipline while maintaining financial flexibility. Next slide, please. Cash flow in the quarter reflects continued investments to support our long-term growth strategy, while our underlying financial position remains strong. Operating cash flow was impacted by the seasonal build-up of inventory and we also completed the Valla buyback with a cash impact of 270 million SEK over which 143 million relates to CAPEX and 128 million is a reduction of lease liabilities and captured under other items. During the quarter, we also completed the acquisition of Dan Broiler, as well as we continued investments in our value chain improvements and integration activities. The one-time effect from the Valle acquisition impacts paid finance items, and adjusted for that, it's close to on par with previous year. As said, we also paid the first dividend installment of SEK 108 million, and the dividend is in line with our dividend policy. As a result of the above, net interest bearing depth increased during the quarter, but leverage remains at 2.2, which is below our internal ambition of staying below 2.5. So overall, we continue to invest for future growth while maintaining a strong and flexible balance sheet. Next slide, please. Working capital increased during the quarter, primarily reflecting the seasonal build-up of inventory to support high demand and customer activity. Inventory increased by 10% versus year-end and 29% versus the same period last year, mainly driven by the planned inventory build-up and the inclusion of the Lithuania operations as well as Dan Broiler that was recently acquired. Despite continuous sales growth, trade receivables remained below last year, and trade payables and other working capital items remain broadly stable. Overall, working capital continues to be a focus area. Adjusted for financing items, working capital represents 5% of our rolling 12 sales, which is below our internal target of 6%. Next slide, please. For 2026, we expect Capex to amount to approximately 680 million, which includes about 140 million for the Valla buyback. In the second half of this year, we will continue to invest in farming capacity in Lithuania, de-bottlenecking and increased capabilities in the factories, and finalize the Netherlands for the startup of Factory C. And as we ramp up Factory C, we expect increased working capital, which will start in the middle of the second half of this year, which will be partly offset by inventory release linked to the seasonal build-up. We expect finance cost to be about 7% of our net interest-bearing debt, which includes cost for leasing, factoring and vendor financing. Next slide, please. I'm also very happy to announce that during the quarter we agreed the new five-year financing package with our existing relationship banks. We are pleased to continue working with the same strong banking syndicate, reflecting the confidence in our strategy, business model and financial performance. The total committed facilities have increased from about 288 million euros to 450 million euros, providing a significant additional financial flexibility to support future growth. At the same time, we have improved the commercial terms of the facilities while maintaining a prudent covenant structure. The agreement extends our depth maturity profile with a five-year tenor and preserves a substantial headroom under our financial covenants. We also have maintained our ambitious sustainability-linked financing framework, which remains an important part of our financing strategy. Overall, the refinancing further strengthens our financial platform and positions us well for both organic growth and future acquisition opportunities. Next slide, please, and back to you, Jonas.

Thank you, Fredrik. Next, I would like to talk about one of our cornerstones and a license for us to operate. And there are three key areas when it comes to creating trust for what we do. It is about responsible animal welfare. It is safety for consumers and employees. And it is nutritious products. And this is closely linked to our strategic pillars. And you've seen this slide before. There are four strategic pillars that will support us in achieving our goals. So it's increasing the value of our protein. Next slide, please. It is increasing the value of our protein. It is ramp up our efficiency and with integrated sustainability. And doing this in every step along the way as one company making us constantly better together. And the thing I mentioned about in the Ready to Cook, it is about increase the value of a protein or climb the value ladder. But you also see us investing in ramping up the efficiency because that starts and that is a part of the whole value chain. And our acquisitions in the value chain is a part of that. And we know that it emphasized that collective effort and shared goals and team cooperation lead to improve performance and outcomes. So these four strategic pillars are super important for us reaching our 2027 goals. And so if we move into next slide, please. And here you can see our 2027 goals. And here at the right-hand side, you can see the targets. So we're expecting strong growth over the coming years. And we have set the target for 2027 of a 5% to 7% net sales growth. We have an EBIT margin in excess of 6% by 27. But we're also measuring the progress in terms of EBIT per kilo, for which we have a supporting target of 3 SEC per kilo that we have shown before and will show later in the presentation. And we are progressing as planned. Next slide, please. And also, as a reminder, on this slide, you can see that our structured efforts is resulted in a recognition in forms of improved ESG ratings. We have an A in the CDP rating for climate, and there's only a few company that has achieved A-, and an even smaller group that actually have achieved A rating. And the high scores reflect our standards and sustainable nature of our business. So next slide, please. And coming back again to our EBIT per kilo measure, and that is a good measurement for our value creation for our business. And it is mainly these two headlines that drives the EBIT per kilo. It is about climbing the value ladder. And that has, of course, a big impact of what we do in terms of S&OP, in terms of utilization, in terms of yield and so on. But that's also a large efficiency potential in our value chain. And that's why we are acquiring something in backwards in our value chain, investing in our storehouses and also investing in the market to actually take out that efficiency. And that is the building blocks for actually reaching the three sec per kilo. So next slide, please. So the summary and outlook. We see a strength and demand trend. We take another material step in our margin journey in ready to cook, it's climbing the value ladder, ready to eat, it's growth and our positive outlook after a low period. And our improvement program continue with full force and it's supported by significant investments in 2026. So we are well positioned for further consolidation. And to summarize all this, we have a strong outlook for the rest of 2026 and going forward. So with that, I say thank you and open up for Q&A. So next slide, please.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by 2. Again, to ask the question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. Again, if you would like to ask a question, please press star followed by one on your telephone keypad. There are no questions waiting at this time, so I'll turn the conference back over to Jonas Tonnesel for any further remarks.

Thank you very much. Thank you very much. Enjoy the summer.