Scandi Standard AB

Good morning everyone and thank you for joining us on today's Scandi Standard interim report for the third quarter 2026. My name is Drew and I'll be the operator on the call today. Following the prepared remarks, we will hold a Q&A session. If you would like to ask a question during that time, please press star followed by one on your telephone keypad and to withdraw your question, it's star followed by two. With that, it's my pleasure to hand over to Jonas Tunstall, CEO to begin. Please go ahead when you're ready.

Thank you and good morning everyone and welcome to this presentation of Scandi Standard's result for Q3 2026. My name is Jonas Thunestad and I'm the CEO and Managing Director of Scandi Standard and I'm pleased to have Fredrik Sylvan, our CFO by my side today. I'm also glad to report a strong growth and a result in the quarter. So next slide please. In Q3 2026, we see a strong progress toward our financial targets. We see 8% growth in net sales and strong demand. We see an 18% increase in adjusted EBIT and that gives us a margin of 5.4%. and that is due to that we continue to climb the value ladder in ready to cook that is our main business but we also see a strong underlying improvement in our ready to eat business and it's a result of our improvement programs and that are continuing with full force but I also want to remind you all of that Q3 is the season's strongest quarter Then during the period we have made a ready-to-eat acquisition of Glenhaven Foods and we bought it for 1.4 billion SEK and that will strengthen our European position within breaded products. The Glenhaven Foods has a focus on the Irish and the UK retail clients, and it's partly financed by an oversubscribed capital increase of around 400 million SEK. So next slide, please. And before going further into the results of the quarter, I'd like to spend a minute on Glenhaven Foods. We completed the acquisition in the first half of October, so it's not in the Q3 figures. Glenhaven builds on a strong retail position of Scandi Standard in Ireland and provides some bridgehead into the UK retail market. We are the ready to cook market leader in Ireland today and this gives us the ready to eat leadership in Ireland as well. The acquisition also brings a strong management team with a track record of profitable growth and well invested sites with capacity headroom. And the capacity headroom is almost 50%. We bought it at around 8.2 times EBIT and we expect the deal to add more than 10% of EPS on a 2025 basis. And that including the impact of the capital increase and finance costs. So we are very pleased to welcome the Glenhaven team to Scandi Standard and we look forward to driving the business further. Next slide, please. So moving back to the quarterly results 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 graph on the right hand side, you can see the long term growth in chicken benefiting from substitutions from other proteins like pork and beef. And as you can see, we're estimating a 3% volume CAGR in the Nordics and Ireland. So next slide, please. And one of these three value drivers is affordability, and it is benefiting from other proteins just because it is 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. So beef prices are at a high level and are expensive, which chicken is benefiting from, but also the long-term trend of switching protein from red meat to poultry. So chicken is affordable in all segment and that gives us further opportunities to drive long term volume and value creation. So we see further opportunities to drive more value out of chicken due to its affordability relative to peers. And as you can see on the right hand side in the diagram. Next slide, please. And on this slide, we want to present our EBIT per kilo measure. And EBIT per kilo is a good measurement of value creation for our business. So Q3 2026 adjusted EBIT per kilo was 2.72 SEC compared to 2.36 last year, which is an increase of 15%. In Q3, as mentioned before, is seasonal our strongest quarter, but we have a positive momentum towards reaching our 2027 targets. And it is in the different colors you can see in the diagram. You can see development in the different segments and note the increase significance of ready to eat. Next slide, please. And this table shows the reconciliation of our segments, strong net sales growth in most of the markets, strong EBIT contribution from ready to cook and note improved results from ready to eat. And as always, we want to remind you of the category other includes our ingredients business and our corporate costs. Next slide, please. And here you can see a summary of our sustainability scorecard. And we are, as one of the few poultry producers, transparent on multiple parameters. So Q3 shows a mixed result with several areas showing improvement. The slightly higher CO2 emissions was impacted by the use of supplementary energy sources at some of our production sites, repairs of our most efficient equipment, as well as the ramp up of activity in some of our newer sites. And for LTI, this is an area with continued high focus. Next slide, please. Now we move into ready to cook. And we see a strong demand and improved profitability, 5% increase in net sales. And we see strong demand across geographies and channels. We have 3% increase in chicken produced, what we call the grill weight. 7% increased in EBIT. That gives us an EBIT of 170 million SEK compared to 159 last year. And an EBIT margin of 5.6 compared to 5.5 last year. And we're also well prepared to tackle the increased feed prices. So organization is on high alert. Regular price adjustment with retailers to adjust for changes in input cost is now something that we have good processes for. And we're also hedging our input costs in our internal feed production. So next slide, please. and this shows the development in feed. So we have been seeing a rising feed prices for some quarters. We're also seeing increased prices of feed raw material, which will gradually lead to further increased feed prices to our farmers. The expected volatility is driven by the Ukraine war. That's also uncertainty about fertilizer from components from the Middle East and also supply and the ongoing effects of the El Nino. But our organization is well prepared to tackle this for price increases to our customers. And we also, as always, want to highlight that feed cost is one third of our cost base and also that the short production cycle compared to other proteins enabled us to be more agile in our supply chain. And also important thing to remind you of is that poultry is the most efficient protein. You need one and a half kilo feed to one kilo chicken compared to pork that needs three and a half and beef that needs seven to one kilo. So next slide, please. And when we move over to export, we see strong performance in our export markets. We see fairly stable price achievement during 2026, despite this reduced chicken commodity prices. And they are reduced due to increased supply of poultry, especially in Poland, and that's putting the spot prices down. We also see on the other hand possible mitigation through the current EU import restrictions on Brazilian chicken. So the import is closed at the moment and let's see when it will be open again. But we also have an internal and this is our aim to further decommoditize our export sales. So that is having the long term partnership with customers. And it's about optimized SNOP sales operational planning, and also the acquisitions and the growth that we have in ready to eat that will integrate and make benefit of our raw material in ready to cook into our ready to eat plant. Next slide, please. And on this slide, you can see the shallow development in more detail. And through this detail, you can notice the increase in both retail and food service in the quarter. So in general, we are seeing a strong demand in most of our markets in the quarter. Next slide, please. This slide is to remind you on the 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 market due to the strong consumer preference for domestic produce. Due to our strong market position, our own supply decision have a meaningful impact on the market balance, which has proven to be a strong instrument in periods with volatile markets. So note that each market, however, also includes consumer segments less sensitive to provenance. So next slide, please. And on this slide, you can see our ready to cook plants. We want to set out the note that 11 million chickens in Lithuania is just one shift. If the market has a positive momentum, we have the possibility to scale up with another shift and double the production. Next slide please. So now we move over to ready to eat and we see further improvement and positive seasonal impact. We have 25% growth in net sales driven by demand in both food service and retail. We have an EBIT margin of 6.2 compared to 2.4 last year, and that is due to successful price increases, new product launches with accretive margins, and improved capacity planning that drives higher margin volumes. But it also has a seasonal impact. We have summer commercial initiatives that exceeded our expectations in food service. And now with acquisition of Glenhaven, we have a program to take advantage of the strong skill sets from Glenhaven into our total business. And we also have a cost efficient startup of Factory C in the Netherlands during Q4. I will get back to that later. So next slide, please. And here you can see it in figures. It's of course very encouraging to see the strong growth in food service after a period of weak demand in ready-to-eat in the previous years and the growth in the retail channel continue also to be very strong. So ready-to-eat will be an important long-term tool on developing EBIT per kilo, more specifically to increase the value of our protein. So next slide please. And this slide is a reminder of the strong historical organic growth in ready-to-eat business the last 10 years. And I'm confident that it will continue the trend. And there are two main types of businesses. Three-thirds is a breaded product, European market. And one-third is an integrated local business in Sweden, Norway, and Finland. And it gives us a high return on capital employed. And throughout the latest years, an average EBIT margin is about 6%. And now in the quarter, we have 6.2. And that shows the potential of actually getting the margins back and increase them from that. It has a low capital employed compared to ready to cook. And also important to note, as you all remember, we lost some continental contract in 2023. But as you can see in this graph, we are now above the historical peak of 2022 on a rolling 12 month basis. So next slide, please. And we are expecting a healthy market growth in Europe over the coming years. And there are market players divided into tiers. We have the European players, the regional players, and the local players. And Scandi Standard has been a large regional player with 36,000 ton product weight in 2024, about 5% European market share. But the production platform has not been competitive to the top tier. and we saw some stagnant market after COVID-19 and the inflation and we also saw some European overcapacity but we see now close to 100 tons market growth that is expected to 2030. Next slide please. And that's also the reason why we could get the possibility to buy the Osterwalder plant that was acquired in Q1 2025 in idle state. There were fire in factory B under previous ownership, but we started the production in factory A in Q3 2025 after refurbishment. and that increased our capacity for our kebab products that has a really good growth and where we have outgrown our previous capacity. And now Factory C, the big factory, are being prepared for Q4 2026 trial runs. And actually, to be pretty clear, we are doing our first commercial production this week on the first big line. It's small amount of volumes to get all the certificates, but we are going commercial now in Factory C. And Factory C, they have two of Euro's largest and most efficient breaded product lines with a capacity of 50,000 annual tons. And it is one of the few with advanced form product capability. And this factory is tailored to meet the criteria of the largest clients. So together, with a filled up Farre and now with production capacity in Östervolde and Glenhaven Foods with room for increased capacity, that represents a significant growth platform for Scandi Standard for the future. So next slide, please. And this slide shows our processing plants. And as you can see, they are divided into two different sections. We have the plants that are focused on European frozen breaded market, the big plants. And then we have the plants that are focused on convenient products for our whole markets, Norway, Sweden, and Finland. So next slide, please. And I will hand over to the CFO, Fredrik Sulvahn.

Thank you, Jonas. And good morning, everyone. Q3 was another strong quarter with continued growth in both sales and profitability. Q3 was actually our strongest quarter ever. Net sales increased by 8% just north of 4 billion SEK, supported by continued growth demand, as well as price and mix improvements. Adjusted EBIT increased by 18% to SEK 220 million, lifting the adjusted EBIT margin up 40 basis points to 5.4%. The improvement reflects operational efficiency and better capacity utilization, as well as clearer impact from customer price adjustments, especially in ready-to-eat. Non-comparable items amounted to 15 million SEK and relate to transaction costs for the Glenhaven Foods acquisition. So reported EBIT is therefore 205 million. Finance net was broadly stable at 38 million. Higher interest expense on increased debt was offset by FX. The effective tax rate increased to approximately 22% mainly because deferred tax assets on tax losses were not recognized and due to the country mix. Income for the period increased to 131 million SEK and adjusted earnings per share rose by 20% to 219. Fee deficiency remained stable at a strong 1.48. And the LTI rate was 24.6, so up 0.2 versus last year. And LTI remains an important focus area, particularly in RTI. Next slide, please. Our balance sheet was somewhat distorted at the end of the third quarter as we had received the settlement on our 400 million SEK capital increase but we had not yet settled the upfront payment for the acquisition of Glenhaven which was two thirds of the transaction value which took place on October 9th. Average capital employed increased to almost 5.6 billion SEK from 4.7 billion reflecting acquisitions and continued investments in capacity and efficiency. Even with this increase, adjusted return on capital employed improved by 130 basis points to 13.1. Average equity increased just north of 3 billion SEK from 2.6. The rights issue added almost 400 million SEK to equity of the transaction costs and supports the financing of Glenhaven Foods while preserving financial flexibility. Return on equity improved by 270 basis points to 14.7, supported by stronger earnings generation. The equity ratio strengthened to 37.3% from just shy of 34, mainly driven by the rights issue, partly offset by the second installment of the dividend distribution. Overall, the figures demonstrate the continued balance between growth investment, improved returns and capital discipline. Next slide, please. We have strong cash generation in the quarter. Net interest bearing debt was down almost 460 million SEK. Operating cash flow amounted to almost 220 million SEK, so up from 189 last year, supported by 66 million SEK working capital inflow. Net CAPEX at 170 million SEK focused on capacity and efficiency. Main drivers were linked to the hatchery in Lithuania, acquired earlier this year, and final investments in Factory C before startup. The right issue was successful and strengthened our financial flexibility with almost 400 million SEK, as said earlier. Leverage was reduced to 1.7, which is well below the 2.5 target. And dividend of 330 SEK per share is now fully paid. Next slide, please. The higher working capital versus end Q3 last year was primarily driven by our strong organic growth and acquisitions of farms. Inventory is up 20% versus year end and 35% year on year, driven by seasonality, increased activity and acquisitions. Receivables are up 5% year on year, which is below the sales growth of 8%, indicating continued discipline collections. Payables are up 8% year on year, providing a partial offset to higher inventory and receivables. The decrease in other comes mainly from VAT and other accrued expenses. Adjusted working capital landed at 5.4% of rolling 12-month sales, which is below the 6% target. As always, we have continued focus on inventory optimization and cash conversion.