AAK Reports Volume Growth in Ingredients, Recovery in Confectionery Fats

30 Oct 2013 --- AAK has reported all time record high operating profit and all time record high operating profit in the third quarter 2013, driven by continued strong volume growth in Food Ingredients and an expected start of a significant recovery in Chocolate & Confectionery Fats. Operating profit was SEK 303 million (273), an improvement of 11 percent compared to the corresponding quarter in 2012.

Operating profit at fixed exchange rates improved by 12 percent. Operating profit, excluding acquisition costs of SEK 10 million, and adjusted for fixed currency exchange rates, improved 16 percent compared to last year.

Operating profit per kilo excluding acquisition costs amounted to SEK 0.75 (0.71), a continued improvement largely attributable to a higher proportion of speciality and semi-speciality products and mainly driven by improvements in Chocolate & Confectionery Fats.

Sales amounted to SEK 4,206 million (4,277). The decrease was mainly due to lower raw material prices and a negative currency translation impact.

Operational cash flow Operating cash flow including changes in working capital amounted to SEK 303 million (364). As expected working capital increased SEK 12 million (decrease 141). During the fourth quarter of 2013 working capital is expected to increase significantly related to the expected growth in Chocolate & Confectionery Fats.

Continued strong ROCE evolution Return on Capital Employed (ROCE), calculated on a rolling 12 months basis, was 16.0 percent compared to 14.2 percent at year-end and 13.6 percent at the corresponding quarter last year. The ROCE for the third quarter was 16.1 percent compared to 14.0 percent for the third quarter 2012.

Acquisition During the later part of the third quarter AAK acquired Unipro with annual sales of SEK 700 million and a volume of approximately 50,000 tons in Turkey. The acquisition will be predominantly reported in the Food Ingredients business area.

Arne Frank Chief Executive Officer and President said: “During the third quarter volumes increased by 8 percent, mainly due to Food Ingredients which increased by 12 percent driven by strong volume development in speciality and semi-speciality products. We have been particulary successful in some semi-specialities in certain segments. Worth mentioning are Bakery, Dairy and Food Service. Chocolate & Confectionery Fats volumes remained stable but with a significantly more profitable product mix. Technical Products & Feed improved as well.”

“Based on AAK’s customer value propositions for health and reduced costs, our customer product co-development and solutions approach, and the AAK Acceleration program, we continue to remain prudently optimistic for the future. The main drivers are expected to be the continued strong underlying development in Food Ingredients, however, with a slightly lower operating profit during the fourth quarter 2013 compared to last year, because of the exceptionally strong result in the fourth quarter 2012 for this business area. Further, Chocolate & Confectionery Fats is expected to continue its significant recovery.”
Volume increased by 8 percent compared to the third quarter 2012, mainly due to increased speciality and semi-speciality volumes in all segments. We have been particulary successful in semi-speciality in certain Food Ingredients segments. For comparable units, organic growth in volumes was 7 percent.

Net sales decreased by SEK 71 million mainly due to the negative impact of currency translation of SEK 52 million and more important, lower raw material prices.

The operating profit was a record high quarterly result and reached SEK 303 million (273), an improvement of 11 percent. The impact of currency translation was negative SEK 4 million following the strengthening of the Swedish krona. Operating profit at fixed exchange rates improved by 12 percent. The operation profit, excluding acquisition costs of SEK 10 million and adjusted for fixed currency exchange rates, improved by 16 percent compared to last year.

Operating profit per kilo excluding acquisition costs continued to improve and increased from SEK 0.71 to SEK 0.75 per kilo, an improvement by 6 percent. Operating profit per kilo in Food Ingredients remained stable at SEK 0.78 (0.78) per kilo, the lack of further improvement is because of mix changes. Operating profit per kilo in Chocolate & Confectionery Fats improved by 19 percent from SEK 1.14 to 1.36 per kilo, mainly as a result of a better product mix. Technical Products & Feed improved by 3 percent from SEK 0.34 to SEK 0.36 per kilo.

AAK strengthened its position in Turkey by acquiring Unipro from Unilever. Unipro is a leading supplier of oils and fats to the Industrial and Bakery markets in Turkey and the surrounding region. Founded in 1990 and located in Istanbul, Unipro employs approximately 37 people and had revenues of approximately SEK 700 million in 2012 and approximately 50,000 tons of annual deliveries.

The acquisition of Unipro includes ten established brands, a core managment and sales organization, all related know-how and the Unipro company name for Bakery and Industrial fats. In connection with the acquisition, AAK has entered a five year toll manufacturing agreement with Unilever relating to the supply of Unipro products. The impact of this acquisition on AAK’s 2013 operating profit is expected to be limited. Employees

The average number of employees at 30 September 2013 was 2,209 (2,211 on 31 December 2012). The reduction related to the ongoing restructuring of the UK operations was offset by addition of employees in growth markets as well as the acquisition of Unipro.