Food Ingredients Perform Well for AAK but Profits Dive in Q4

04 Feb 2016 --- AAK, the Swedish headquartered maker of vegetables oils and fats, has reported an 18 per cent fall in net profit to SEK 245m ($29m) in the quarter after it took a hit on a key acquisition in India but its food ingredients unit performed strongly.

Arne Frank, chief executive, hailed the latest results as a sign that its strategy was working. He said: “We are proud and happy but not satisfied. Our strategy is working.”

Food Ingredients reported a 17 per cent jump in operating profits to SEK 257m ($30m), helped by organic volume growth and a weak year-on-year comparison.

Chocolate & confectionery fats were up 5 per cent to SEK 135m ($16m) while technical products & feed were up 28 per cent to SEK 32m ($4m).

However, the bakery segment, the company said, had a “challenging quarter, particularly in Europe” but the US continued to show good organic volume growth.

Dairy, the company said, continued to “grow nicely.”

By Geographical breakdown, Frank said in the Nordics “we believe this market is not growing but we are gaining market share here.”

In the US, Frank said the business was “growing nicely” in food ingredients while also “growing a little bit” across Western Europe.

However, the war in Ukraine was flagged up as a concern, which had spilled over to affect AAK’s business in neighbouring countries.

Questioned about the impact of China’s move to end its one child policy and whether it could help AAK selling more infant nutrition products, Frank said: “We saw this dramatic news just yesterday I believe. I think it would be to go too far to have speculation what this means. No matter, the infant nutrition market in China is very exciting.”

Frank would also not be drawn on any impact of lawsuits in the US alleging that Mars, Nestle and Hershey have used to child labour to make chocolate could have on the AAK business.

Frank said: “I am unaware of any connection of child labour with the companies you mention.”

Updating the market on its acquisition of a 51 per cent stake in Kamani Oil Industries, one of the leading specialist oils and fats companies in India, last year, Frank said: “This marriage to us is a very, very important step in our evolution. India is a very important market.”

However, the Kamani Oil Industries business is not expected to drive a profit for AAK this year.