Interim Report Third quarter 2019 The Co-Development Company - - PowerPoint PPT Presentation

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Interim Report Third quarter 2019 The Co-Development Company - - PowerPoint PPT Presentation

Nov 01, 2023 347 likes •628 views

Johan Westman, CEO Fredrik Nilsson, CFO Interim Report Third quarter 2019 The Co-Development Company Agenda Third quarter 2019 1 Key strategic activities 2 Business area information 3 Q&A 4 2 23/10/2019 The Co-Development

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SLIDE 1 The Co-Development Company

Interim Report Third quarter 2019

Johan Westman, CEO Fredrik Nilsson, CFO
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SLIDE 2 The Co-Development Company 23/10/2019 2

Agenda

1 2 3 4 Third quarter 2019 Business area information Key strategic activities Q&A

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SLIDE 3 The Co-Development Company

Highlights Q3 Continued profit growth on the back of a strong Food Ingredients performance

3 Limited organic volume growth All-time high operating profit for a third quarter Reported tax costs reduced to 25 percent (27) Earnings per share increased by 10 percent Cash flow impacted by sourcing of strategic raw materials Strong trend and improved mix in Food Ingredients As expected, the lower yield in our CCF business continued with higher than normal production costs Acquisition of 80 percent of Soya International (Europe)
  • Ltd. expands ingredient
portfolio GROWTH & RETURNS HIGHLIGHTS

Q3 19

23/10/2019

Volume 571,000 MT

(up 1% y/y)

Adjusted

  • perating profit

SEK 569 million

(up 8% y/y, up 4% y/y*)

ROCE 15.1%**

Adjusted

  • perating profit

per kilo SEK 1.00

(up 8% y/y, up 2% y/y*) * Fixed FX ** Rolling 12 months incl. IFRS 16 effect
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SLIDE 4 The Co-Development Company 23/10/2019 4

Operating profit for Q3 2019 – the trend continued

178 164 231 251 204 196 246 265 220 211 273 242 244 303 328 331 343 321 326 376 368 431 435 431 409 475 471 460 454 526 516 509 518 569 100 200 300 400 500 600 381 Q2 Q1 Q3 Q4 287 281 292 388 2019 2010–2018
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SLIDE 5 The Co-Development Company

Soya International, our latest acquisition, is a true global lecithin player with a scalable platform which AAK can leverage

Processing partner in Rotterdam Operates out
  • f Hale

Comprehensive lecithin product range sourced from a broad supplier base

  • Est. in 1996, headquartered in

the UK with ~10 employees Global presence with ~€15 million

  • f sales to more than 40 markets
Focus on non-GMO speciality lecithin
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SLIDE 6

Soya International – strategic rationale

Increase customer proximity within key segments One of the closest adjacent ingredients to O&Fs Scalable platform with a solid track record

  

Lecithin is a critical ingredient with key functionalities for customers within most of AAK’s core segments – in particular Chocolate & Confectionery Fats. Similar industry dynamics will increase synergy potential and simplify integration with AAK’s existing operations, including sourcing and go-to-market approach There is a clear segment for speciality/semi-speciality lecithin.

Strong market growth on the back of global trends

The speciality/semi-speciality lecithin market is benefiting from strong underlying trends such as non-GMO, clean label, organic, sustainability/traceability, and health Soya International has been active in the market for 20+ years and has experienced strong financial development with an asset light approach set for further scaling
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SLIDE 7 The Co-Development Company 23/10/2019 7

FX exposure – translation impact positive in the quarter

Average rate 2018 Average rate YTD 2019 Movement vs SEK

Spot rate Sep

USD 8.71 9.40 9.83 EUR 10.26 10.55 10.72 GBP 11.58 11.95 12.10 MXN 0.45 0.48 0.50

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SLIDE 8 The Co-Development Company 23/10/2019 8

Working capital days up four days since year-end

Inventory +1 Receivables +1 Payables

  • 3
Working capital days, rolling 12 months Development YTD

Other WC Flat

30 35 40 45 50 55 60 65 70 75 Q2 2019 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2019 Q4 2018 Q1 2019
  • Acc. Pay
Inventory
  • Acc. Rec
Tot Net WC
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SLIDE 9 The Co-Development Company 23/10/2019 9

Good EBITDA improvement but Q3 cash flow was impacted by sourcing of strategic raw materials

Cash flow Q3 2019 Comments 664 735
  • 303
552 161 Paid interest and taxes 225 208 EBITDA 2018 EBITDA Changes WC CAPEX and acquisitions 108 Other non- cash items FCF
  • 433
+11% 156 102
  • 705
  • 105
  • 552
Other Working Capital Inventory AR AP (-37) (-118) (-159) (15) (364) (LY) Acquisitions Cash flow from inventory driven by sourcing
  • f strategic raw materials. Effects of lower
raw material prices have diminished. CAPEX related to regular maintenance investments and capacity increases amounted to SEK 208 million.
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SLIDE 10 The Co-Development Company 23/10/2019 10

Return on Capital Employed (ROCE)

We target a gradual and continuous improvement

ROCE end Q3 2019* 15.1% EBIT LTM SEK 2,097 million Capital employed* SEK 13,872 million

Growth and operating leverage to drive increase in ROCE

* ROCE: Return on Capital Employed calculated on rolling 12 months 14,8 15,0 15,2 15,4 15,6 15,8 16,0 Q1 18 % Q3 16 Q4 16 Q4 17 Q1 17 Q3 17 Q2 17 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ROCE R12M excl. IFRS 16 ROCE R12M incl. IFRS 16
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SLIDE 11 The Co-Development Company 23/10/2019 11

Loan and duration profile

SEK million Duration

Mortgage 547 13 years MTN bond 500 5 years MTN bond 1,100 3 years Bilateral 300 2 years Clubloan 550 2 years

SEK million Duration

Bilateral 618 6 months Bank loans 548 6 months

72% Long term 28% Short term

Total loans 4,163 Cash

  • 731

Net 3,432

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SLIDE 12 The Co-Development Company 23/10/2019 12

Food Ingredients

Strong profit growth driven by Plant-based, Dairy, and Bakery segments Special Nutrition had a mixed performance Growth for high-end solutions continued, although at a slower pace Lower volumes for our semi-speciality solutions We have an impact from lower birth rates in China as well as destocking by some customers Our business for plant-based solutions has generated strong volume and profit growth, although from a small base. Our pipeline of customer co-development projects has more than doubled between the second and the third quarter Foodservice improved profitability with small volume growth 320 900 200 300 600 1.200 1.500 340 20 220 360 240 260 280 300 380 Q1 18 Q1 17 Q4 17 MSEK MSEK Q1 16 Q4 16 Q3 19 Q4 15 Q4 18 Q3 15 Q2 16 Q2 19 Q3 18 Q3 16 Q2 17 Q2 18 Q3 17 Q1 19 321 364 Rolling 12 months Quarter 0,90 0,00 0,05 0,65 0,70 0,75 0,85 0,80 0,85 0,75 0,95 0,95 0,00 0,70 0,05 0,65 0,80 0,90 1,00 1,00 SEK Q3 17 Q4 18 0,95 Q2 17 Q1 16 Q2 19 Q3 16 Q3 18 Q4 17 Q3 15 Q2 18 Q4 15 Q4 16 Q1 18 Q1 19 Q3 19 Q1 17 SEK Q2 16 0,85 Quarter Rolling 12 months Business area development Operating profit Operating profit per kilo Organic volume growth +2% Operating profit +13% Operating profit per kilo +12%
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SLIDE 13 The Co-Development Company 23/10/2019 13

Chocolate & Confectionery Fats

A quarter with limited volume growth The lower operating profit per kilo was caused by higher production costs due to low-yielding shea kernels We expect to use the last batches during Q4 Slightly positive price development on high-end solutions in the quarter Capacity expansion investments progress according to plan There is a planned extended maintenance stop scheduled for
  • ur production plant in Aarhus, Denmark during the first
quarter next year With new kernels in place and additional capacity, we expect to reach normal cost levels within the business area by the middle of the first quarter next year 200 400 600 800 180 190 10 140 210 160 200 120 130 150 170 Q3 18 Q4 15 Q1 16 Q3 19 Q4 17 Q4 18 206 MSEK MSEK Q3 15 Q2 16 Q2 17 Q4 16 Q1 17 Q3 17 206 Q3 16 Q2 18 Q1 19 Q2 19 Q1 18 Rolling 12 months Quarter 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 1,60 1,80 2,00 2,20 1,80 0,10 1,90 2,00 0,00 0,20 1,60 1,40 1,50 1,70 2,10 Q2 19 Q1 18 Q3 19 Q2 18 Q4 16 Q1 16 SEK 1,79 SEK Q3 16 Q4 15 Q3 15 Q1 19 Q1 17 Q4 18 Q2 17 Q2 16 Q4 17 Q3 18 1,78 Q3 17 Rolling 12 months Quarter Business area development Operating profit Operating profit per kilo Organic volume growth +1% Operating profit +0% Operating profit per kilo
  • 1%
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SLIDE 14 The Co-Development Company 23/10/2019 14 33 20 40 60 80 100 120 140 160 180 5 10 15 20 25 30 35 40 45 50 MSEK MSEK Q3 17 Q3 16 37 Q2 17 Q3 15 Q4 15 Q1 16 Q2 16 Q4 16 Q1 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Rolling 12 months Quarter 0,51 0,47 0,00 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 0,65 0,70 0,00 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 0,65 0,70 Q3 16 SEK SEK Q3 15 Q2 16 Q2 17 Q4 15 Q1 16 Q4 17 Q4 16 Q1 17 Q3 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Rolling 12 months Quarter

Technical Products & Feed

Operating profit Operating profit per kilo Both our fatty acids business and our feed business declined compared to the very strong corresponding quarter last year Last year, our feed business was favorably impacted by the dry weather in Scandinavia which resulted in farmers purchasing more feed products than during a normal year Compared to historical performances, we continue to
  • perate on a significantly higher operating profit level
due to our successful implementation of our customer co-development within the business area Business area development Organic volume growth
  • 4%
Operating profit
  • 11%
Operating profit per kilo
  • 8%
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SLIDE 15 The Co-Development Company 23/10/2019 15

Q3 summary

AkoPlanet™ Strong growth Strong pipeline development Dairy, Bakery, and Foodservice Good EBIT/kilo improvement M&A Step into adjacency Good progress of earlier acquisitions Special Nutrition

Mixed performance, affected by:

Lower birth rates in China Destocking by some customers Chocolate & Confectionery Fats Rolling of contracts High production costs due to low-yielding shea kernels

HIGHLIGHTS CHALLENGES
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SLIDE 16 The Co-Development Company

Progress and good results for The AAK Way – strong foundation for our next company program

Continuous training on Creating Customer Value Follow up on global customer survey – We listen, We care, We act Training on oils & fats and customers’ industries Senior and Medical Nutrition business growing Launch of AkoPlanet™ – AAK portfolio with solutions for plant-based foods Cross-regional collaboration for strengthened INNOBO-Product offerings Further progressing with multi-oil sustainability Global networks enabling best practice sharing on key production capabilities Continuous Improvement and Lean practices enabled by a strengthened toolbox

Go To Market Operational Excellence Special Focus Areas Innovation People

Market-driven innovation process Leadership development Preparing the organization for the future 23/10/2019 16
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SLIDE 17 The Co-Development Company 23/10/2019 17

Almost on target for our management ambition after 33 months

Average 10% year-over-year EBIT improvement* *Excluding acquisitions and at fixed FX

+9%

300 67 54
  • 17
404 Food Ingredients Technical Products & Feed Chocolate & Confectionery Fats Group Functions AAK Group

+4% +17% +4% +10%

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SLIDE 18 The Co-Development Company 23/10/2019 18

Concluding remarks

We are well positioned with our offer of plant-based, healthy, high value-adding

  • ils and fats solutions, using our

customer co-development approach. We continue to see favorable underlying trends in our markets and we remain prudently optimistic about the future.

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SLIDE 19

November 20 Aarhus, Denmark

CAPITAL MARKET DAY 2019

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SLIDE 20 The Co-Development Company 23/10/2019 20

Q&A

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SLIDE 21 The Co-Development Company 23/10/2019 21

Financial calendar

Financial calendar 2019 November 20, 2019 Capital Market Day, Aarhus January 30, 2020 Fourth quarter and year-end report 2019 April 24, 2020 Interim report first quarter 2020 May 13, 2020 Annual General Meeting, Malmö
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SLIDE 22 The Co-Development Company 23/10/2019 22 Investor Relations contact:

Fredrik Nilsson

Chief Financial Officer Mobile: +46 708 95 22 21 E-mail: fredrik.nilsson@aak.com Further Investor Relations material can be found at aak.com/investors
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SLIDE 23 The Co-Development Company

Supplementary information

Q3 presentation
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SLIDE 24 The Co-Development Company 23/10/2019 24

IFRS 16 effect

703 735 Q3 IFRS 16 Q3 557 563 Q3 Q3 IFRS 16 2.000 YTD YTD IFRS 16 2.089 YTD YTD IFRS 16 1.567 1.581 Q3 YTD EBITDA EBITDA EBIT EBIT
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SLIDE 25 The Co-Development Company 23/10/2019 25

Cocoa butter price

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SLIDE 26 The Co-Development Company 23/10/2019 26

Rapeseed and palm oil prices

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SLIDE 27 The Co-Development Company 23/10/2019 27

YTD cash flow impacted by sourcing of strategic raw materials

  • 77
720 464 521 488 Changes WC EBITDA 2018 2.089 27 EBITDA Paid interest and taxes CAPEX Other non- cash items FCF 1.854
  • 1.009
+13% Cash flow YTD 2019 Comments Continued volume growth impacted cash flow from accounts receivables negatively. Sourcing of strategic raw materials have a large impact on cash flow from inventory. CAPEX related to regular maintenance investments and capacity increases amounted to SEK 521 million. Cash flow from acquisitions (MaasRefinery B.V., BD Foods Ltd., Soya International, and an increased ownership in AAK Kamani) amounted to SEK 488 million. 76
  • 585
  • 202
  • 9
Other Working Capital Inventory AR AP
  • 720
(-615) (-411) (-463) (-304) (61) (LY)