AAK AB (publ.) (AAK) Earnings Call Transcript & Summary

Thank you so much, Lidia. And once again, welcome to the AAK Capital Markets Day 2022. All of you in the room, every stakeholder and those of you online and of course, colleagues of mine and Lidia helping us run this day. I will start off by introducing AAK. For some of you, that will be something new. For some of you, that will be a bit of repetition, right? Some of you have followed the AAK for a long time. I know that but there is also new investors or potential investors here in the room and online. So let's do that first. AAK, we are a multi-oil ingredient house. We refine, blend, produce oils and fats, speciality oils and fats based on plant-based sources. To create functionality for our customers' products. In essence, products that you typically eat because a lot of what we do go to the food industry, so in essence, we supply to producers of food. But we also supply to producers of technical products and feed. So various applications where oils and fats, plant-based oils and fats make a difference. That as an example, goes into chocolate and confectionery, infant nutrition, both where a lot of oil fats are needed in the product as well as into bakery, dairy, personal care, food service, plant-based food as an industry, new applications and technical products. One example being candles replacing paraffin into a more natural ingredient for [ cans. ] So a broad base of, call it, customer industries or consumer industries that we serve. We can do this because we have a multi-oil sourcing and multi-oil knowledge, and more important than anything else, we have a deep understanding of the chemistry around oils and fats. We have a deep understanding of how to apply these ingredients into consumer products. So in essence, we understand chocolate. We understand the breakdown of the modest breast milk in a way that we can help mimic as far as we can, that composition of the fat in that product, in this case, Infant Nutrition, just to give you a flavor of what we do. We source from around the world. So really a global sourcing, and we also produce and deliver around the world. Where do we act? Where are we? Who are we? We are a downstream player in our industry. So we typically source a refined oil and then we refine it further to the right specifications. We can also blend it. So we take a fraction, could be enough in itself, but we can also blend that with another oil, another type of specification into a property, a functionality that delivers what our customer wants in order to make their product be as good as it should be for you when you eat it, taste it or use it for other applications. So call it a downstream position where we sell to food producers as that example is, and we sell -- and they sell to retailers and then we as consumers go and buy something in the retail store, all right? So a downstream position but in a biz to business context, selling to producers of food or other products that you would buy. You just heard in the movie a little bit about our purpose. We are a purpose-led company. The beauty of the purpose making better happen is that it really speaks to all of us in the company. It speaks to how we operate. And it's applicable every day of the week. You can always wake up in the morning and ask yourself, what can I do better, right? And that drives the culture that we have. That drives the behaviors that we want to nurture and that certainly applies to make better food happen, also better returns happen for shareholders. Also to become a better company for our employees or future employees, a very -- and very inclusive purpose you might say. So what is AAK today? We are a global company, serving customers across the globe, be that global customers or be that local customers in a country in a region. We are about 4,000 employees. We operate with about 20 factories around the world, and we have customer innovation centers around the world where we do exactly what that movie showed, customer co-development, meaning that we invite customers to come to us to try to make their product better. Do product development together with the customer, playing with their products and our ingredient in a way that it will make it better. And that is how we also become a long-term partner to our customers. We are typically a go-to partner when they need help with something, and that's where we focus. Well, if that is what we are, in essence, let's bring us down to or to the present. We are certainly operating in an environment today with high uncertainty, volatility, inflation and war. The last couple of years has been nothing else but a dramatic, you could say, amount of disturbances or things to deal with, in essence. It makes me proud to be part of AAK and our organization. When I look back on the last 3 years, being able to navigate COVID, navigate uncertainty in raw material supply chains, running through an exit out of Russia, dealing with inflation on many items that we source and utilities and many other things, right? So clearly, we are, as many other companies in other industries, we are impacted, but what makes me proud is the way we have navigated, the way we deal with it. Our organization is an organization with passion and drive agility and we're also decentralized. And that's been very helpful in times like this, where we can trust passionate-driven colleagues around the world to do the right thing. Obviously, we are very connected as well. So when I would just look back at AAK, how we have navigated the financial results that we present, while we can do so much better because we have to live our purpose, we can do better. I'm at the same time, very proud of what we have delivered and navigated so far, and we continue to navigate. Because looking forward, of course, we see a world of continued uncertainty. But again, AAK has shown that we can deliver. Coming back a bit to sustainability. You heard in the movie that we look at this from plant to brand, right? Making better happen works really well in sustainability, ESG because it is all about what we can do tomorrow to make things better, not try to shoot for the best all the time, focus on how can we get better? How can we solve this problem and then move on. It works really well in our sourcing. We engage to transform. We can't do it on our own. These are not our companies, but we can engage to transform. We focus a lot internally, how can we reduce the usage of water, for example? Or how can we increase the usage of green electricity? How can we improve our company for our employees, et cetera? And of course, looking forward, how can we be part of a solution together with customers that makes a product better but also make a product more sustainable or rather the total supply chain of arriving to something that we eat, which is better tomorrow than it was before. That is how we try to focus our efforts. And to give you a bit of flavor of that, looking at it from an ESG lens. We are increasing the usage of green electricity. We are reducing the usage of water. We are putting strong targets on increasing, reaching 100% verified deforestation-free in our supply chains. We're also looking at biodiversity, planting trees, trying to put trees back again as well as focusing internally. We have projects on inclusion diversity, how to make AAK a better place to work. Including empowerment, some of you know about our Kolo Nafaso engagement with women in West Africa. A program where we microfinance, help women to get a better livelihood, including more than 300,000 women in West Africa, 300,000. That's a huge number that we access with cars, mopeds, bikes, visiting 4,000 villages in West Africa, a region -- very tough region with high risks, and we're still there. To get an important source for us, but at the same time, empowering these womens. And we are also making a step-up in governance. How can we comply, but also how can we really make sure that we drive for the better and that we can also report a document. Other examples of what we have done. We have invested in bio boilers in Aarhus, Denmark where we are about 2%. It's a project that is ongoing, targeting a 90% CO2 reduction in that plant alone even to the extent that it impacts Aarhus as a city and it is reducing our cost. And it's linked actually to the supply chain of Shea Kernels from West Africa with the women that we just talked about picking these Kernels and sell them to AAK, and we use them, we produce food solutions, and we now use the residual, the last residual to burn that for our own energy. And the last piece of the ashes can also be used as fertilizers. So really trying to get as close to a circular economy as possible in this case. We've also committed to science-based targets. Scope 1, Scope 2 and Scope 3, EU is changing regulation a bit with regards to Scope 3, including flag and non-flag and we'll come back to this a bit more on the fireside chat. But we are as, AAK, we need to report both nonflag and flag and we have committed to that. So we're just about to file our targets for approval. And when we have that, we will report back on our actual targets, but full commitment on this. And we also work together with customers, WISH project in West Africa is an interesting one where we, together with Mars, large customer of ours, a large player in the world. We together have a project for increasing the livelihood of women in West Africa in our supply chain. These are just a few to give you some hints about what we are doing. We have also, as you know, those of you that were with us before COVID in the Capital Markets Day in '19, I think it was, we said that we had made a major strategic review to put a detailed strategy and plan in play. We have now 3 years later, reviewed that. So what has worked well for us? Where are we performing? Where can we do better? And we have added an aspiration to this. I will not run through that now, but when I come back, that is what I will present. But before we do that, we will also have more financial comments and details from our CFO, Tomas. So that was a bit of an update on who is AAK and how do we navigate current times and a bit of a tease of what's coming next. Thank you.

Thank you, Johan.

Good afternoon, everyone, and again, welcome to the Capital Market Day of AAK. I will continue the description of AAK through a financial lens, if you will. And we will then have a Q&A, as Johan mentioned, after my session here. As we announced in October, we have generated a very strong performance in Q3 and for the full year of 2022 so far. And just to give you a hint [indiscernible] despite, of course, great volatility, macroeconomic challenges, and also a very positive effect through currency that we've seen. But if we clean our results out for that, it's still a very good performance. And as you can see, if we start looking at the third quarter, our volumes remained stable. They're down 4%. But when we exclude our exit from Russia, they're at minus 1%. This is then driven also by our optimization efforts in bakery. And we've also seen some reduction in volumes in terms of our technical products and feed business, primarily a little bit slower output on feed itself. But we've also used some of the biofuels that we generate for internal use as utility prices have increased dramatically as you've seen -- sorry. And when we look at our adjusted operating profit per kilo, this is our margin measurement at fixed rates were up 10% in the quarter and that generated SEK 822 million of EBIT during Q3, up 5% at fixed rates. When we look at the year so far, year-to-date, volumes are still stable. And even if you exclude Russia, we're up 1%, in a challenging market, I would say, and still performing when we talk about our optimization efforts and a little bit less volumes in our TPF business, as I mentioned before. Our operating profit per kilo is up 7% at fixed rates to SEK 1.25 and that generated an operating profit of SEK 2.1 billion so far for the year. This also includes about SEK 60 million or SEK 70 million of reduced EBIT due to our exit out of Russia. So that needs to be included on top of that to make a like-for-like picture. Our return on capital employed is at 14.8%, which is down slightly from 15.5% if you compare it to last year. Looking a little bit more at volumes. And this is a picture to describe a little bit what's happening below the surface. If you exclude Russia, the volumes are fairly stable, as I mentioned. But what we see is within our food ingredients, our optimization efforts, candle waxes are down to some extent, and this is from a high peak during the pandemic. So we're back to pre-pandemic levels in terms of candles. Chocolate and confectionery were actually up 11%. So very, very strong growth. This is then year-to-date, but that's also the number for Q3. And as I mentioned before, Technical Products & Feed, slightly -- a slight reduction, but we see positive trends going forward. And that leaves us with the 1% year-over-year. Another way to show our volume development is by region. And here, you can actually see that the volume growth is driven mainly by Latin America and also by Asia. We also see a small contribution from North America. The one that sticks out is Europe. And of course, when we -- this is where we see our exit from Russia, of course, and also our optimization efforts in our bakery and dairy business. But that's part of the challenge going forward. When we look at the result, you see it in the same way. The volume decrease that we have experienced hasn't really impacted our earnings to any great extent. The big driver, the positive driver is price and mix. And here, we see our optimization efforts paying off. We're making choices in terms of what products we sell, what customers we engage in to the extent that we can to move up the value chain. Our Special Nutrition is also improving, which is really nice to see after a few years where we've had difficulties with the earnings, and we've seen some reduction, but this is now coming back. And this is also, of course, showing our ability to offset inflation, price increases, and I'll come back to that later on. But inflation in general has been going up for about a year. We've seen inflation in our raw materials for the past 2 years and significant ones. And we've been able to offset these as well as non-oil input to our production, utilities and logistics, still increasing our EBIT per kilo or margin. And then you see the FX effect, which is, of course, a very nice addition translationally when we move it into [ SEK ]. Last year, we had a negative effect; this year, it's been significantly positive. But even with that 7% up year-over-year. SG&A is increasing, and this comes from a pandemic level, I would say, where we now spend more money on customer interaction and product development. This is another picture showing the combination that generates our margin. You have volume in blue and EBIT in green. And for a long time, EBIT has been trailing volume in this type of graph where the indexes are the same on both sides. The 2 of them in combination gives our EBIT per kilo. We saw this up until Q3 of 2020 when we saw a shift. We actually surpassed SEK 1 per kilo. And that development has continued during 2022, as you can see in a very nice way, with volumes being more stable than they have in the past, driven by our exit out of Russia, we haven't seen any major M&A or acquisition in the last couple of years and also the optimization efforts that I mentioned before. This is then broken down a little bit further where we then look at volume growth and EBIT per kilo. How do we generate our EBIT? And if you look at the period as a whole, we can see that volume has been the lesser contributor with 4%. EBIT per kilo has grown about 7%. If you divide it up in 2 periods here from 2015 to 2018, volume was the big driver. And then in the last couple of years from '19 to '22, EBIT per kilo has actually grown 11%, volume has grown 1%. So there's been a bit of a shift here, still generating the 10% year-over-year increase of EBIT that we are committed to. I spoke before about inflation. And this is a graph that shows some of our raw materials. You can look at palm oil, for example, during the period between 2015 and 2020, we saw an average around USD 600 to USD 800 per metric ton. And then in the beginning of 2020, we saw a huge increase, almost tripling up to $1,800. And this, of course, puts a lot of pressure on a company such as AAK, 80% of our cost base is raw materials. We then saw by mid-2022, the price is topping out and then reducing very, very quickly over about 6 weeks down to about USD 1,000 per metric ton. This is, of course, challenging, the volatility in itself but what it also means to us is that, of course, very important that we make sure that we don't absorb this cost increase. Our EBIT per kilo would collapse very quickly. And as you can see from our results, we've been able to do this very well. In addition to this, we also have as I mentioned utilities, logistic cost increases and so forth that we've seen over the past year. One factor that's difficult to offset, and you've seen that in our cash flows is the increase of our working capital because every time we introduce a new batch into our inventory to cover for something we've sold it's at a higher price. And that then continues to increase our working capital, putting pressure on our net debt and cash flow. So when looking at this before the price increases, we had a working capital of about SEK 5 billion to SEK 6 billion that has doubled in the past 2 years to SEK 12 billion. This year alone, we've seen an increase of SEK 4.5 billion on our working capital. And I'll come back to how we manage that. What we do and what we can affect the prices on raw materials are difficult. But we focus on the areas where we can do something to try to at least to some extent, offset this. So we focus on our working capital days. And as you can see, we've worked very well with the DSOs and the DPOs, focus going forward is the inventory days. But as you can see as well, we're back to the working capital days that we had before the pandemic in the low 70s. When it comes to investing activities, this includes CapEx and M&A. You can see the development here since 2015. We've averaged our CapEx around SEK 800 million a year, just north of that. We had some difficulties last year due to delays in material for CapEx investments and some delays in engineering services that we bought externally. This year, we're back again, and we expect to have an investment of just north of SEK 1 billion. The money we invest goes to, as we've communicated before, safety, sustainable initiatives in our factories, capacity expansion, efficiency and maintenance. And I would say sort of just less than half of it goes to maintenance and the rest is new investments, if you will. And as I mentioned, the increase in raw material prices are putting pressure on us, and you see this in our cash flow. Despite increased earnings in terms of the EBITDA, we do see a highly negative or highly increasing working capital, putting a negative effect on our cash flows. And this is the increase that I showed you before, 2, 3x, this is what we see. There is also a delay in this because as you saw as well, the raw material prices have topped out and are now declining, coming down almost 50% since the summer. We have a 6- to 9-month delay in that effect into our working capital. So we still expect to see Q4 be highly impacted by the price increases that we're still experiencing 6 to 9 months back. And then in the beginning of 2023, we expect to see the decline in the relief in our working capital as well. But Q4, expect a continued negative effect. When we look at our capital employed, as I mentioned, we're at 14.8% coming down slightly from 15.5%, and this is, again, despite an increased profitability, it's difficult to offset the large increases in our capital employed and working capital. We expect this to continue to drop slightly in Q4, given the lagging effect that I mentioned before. Same thing with net debt-to-EBITDA ratio. It's increased from sort of an average level of 1.25 to 1.5. We're now slightly below 2, and this might increase slightly as well coming into Q4 but still at a healthy level, I would say, despite the huge volatility that we've seen. Our loans and duration profiles. In total, we have SEK 12 billion of loans and finance debt. 83% is classified as long term, 17% is short. We have unutilized funding of about SEK 5 billion in here. So we still have a good platform for continued growth and continued volatility should that happen. And as you've seen through our press releases, we've also increased our debt over the last couple of quarters to meet this volatility and future growth. When it comes to our capital allocation principles, these remain the same, but the focus is on our core business investments. And here, of course, we talk about capacity and efficiency increases. We talk about expansion either in existing assets or greenfield and potentially brownfields going forward and also in our efforts within innovation. Mergers and acquisition, very high on the agenda, and you saw a release here last week on the acquisition of a new facility in India, which Dheeraj will speak more about. The first 2 bullets there, geographical expansion and capacity expansion is what we call bolt-ons. Geographic expansion is when we go into a new area and establish ourselves. Capacity is more when as we did now in India when we buy something where we're already present. We also invest in technology and capabilities, and you've seen our investment in, for example, Green-On a few months ago and also in adjacent product portfolios such as lecithin that we bought 2 small entities in. So we try to expand around our core, not to deviate too much. And then there is a fifth one, of course, and that's the sort of game changer. Some of the larger acquisitions that we might be able to do in the future, consolidating the industry, something we keep our eye on. But of course, it's very few and far between. When it comes to dividend, our policy still remains 30% to 50% of net profit to be dividend every year. And we have a growth of about -- above 10% annually in our dividend historically. So to sum it up, AAK is delivering on our long-term promise. We have an operating profit that's grown more than 10% over the last couple of years, and you can even draw this out down to a 10-year stretch and you see the same performance. Most of that is coming from the operating profit per kilo, adding about 7% of those 11%. We also have our earnings per share and dividend per share, up both 12% year-over-year. That's it for me. Thank you very much.

Thank you for that, Tomas. And while Johan is making his way up to Tomas, I really would like to update the password. It's Nobel 1901, sorry for that. And the first question is actually to you, Tomas. With this I know that you talked about it before, but you can elaborate more on that as well with this extreme volatility in the raw material market, how do you manage this? And what is the impact on AAK?

Well, as I mentioned, the impact is mainly on the working capital side, but the risk also lies in the P&L, of course. What we tried to do, we've done over time even before the increases is to, as much as possible, hedge our raw material purchases back-to-back with customer sales. So when we have a customer sale, we also make sure that on that day, we also commit the raw material needed for that product to that customer. So we avoid effective prices going up and down during delivery period. It's not a perfect system and it has its challenges and particularly when you see the volatility that we've seen. But that's what we try to do to avoid speculating in a market, if you will, and show our true performance through our operations instead. And of course, that's also a challenge when prices goes down. Customers come back and contract management becomes vital, us making sure that we -- the contracts that we've entered with our customers that they stick to them. And it's sort of a first in, first out of deliveries. So we don't get stuck with high-value inventory. And I think if you look at Q2 and Q3, we've been able to perform very well in that area as well. So volatility is there, but I think we've done a good job so far.

Thank you for describing that for us. I will actually start by asking the people here in the hall. If you have any questions, hand up. Yes. Thank you, [ Stina. ]

Does it work? Yes, okay.

Yes.

Perfect. Daniel Ovin from Nordea Markets. And I have one question here, and that is on the standard for infant formula in China. And I read some news the last few days here that there will be a change to require milk powder to keep a higher percentage of fat and that, that will go through from February 2023. So I just wonder, is there something that will impact you? Could you perhaps share a bit around how you think about if that's a potential or a risk perhaps?

Thank you. Well, maybe bring it into a bit of a longer time period. China is a big market for infant formula. Some of you know this that you use infant formula a lot from a culture perspective and parents also pay a lot, meaning that there is a premiumization trend even from, call it, the consumer or parent perspective. But there is also a high focus on this in China. This is an example. So there has been talks about, and there has been over time and asking how do you really make it better et cetera, right? So I think this is a step on that journey. In essence, I don't see there's a risk for AAK, it's an opportunity because the trend is towards better products, and that's an opportunity for AAK. Some legislation, some impact, of course, in general terms, can be negative in a short period of time or so. But I think the overarching positive here is that you put focus on high-quality product and that's where we typically deliver well and already today in that market. Anything to add there, Tomas?

No, no, good answer.

Happy with that answer? Yes, we have another one over there. Yes, please.

My name is Oskar Lindstrom from Danske Bank. Tomas, you mentioned M&A and consolidating the industry. Do you have any sort of blank spots, which either in terms of geographic footprint or market presence that you are thinking of in particular? And is market share an important factor for you?

Well, when you look at M&A, I think there are opportunities in all regions we're in, even in Europe, where we're fairly well established. So we are very active. We have a very solid pipeline that we continue to follow and work with. But I would say that the majority of the acquisitions that we've done in the past, and I would say from a size perspective, that would be the sort of majority going forward as well unless you look at some of the game changes will be these bolt-on acquisitions. And those are focused on geographical coverage or capacity. So I think to your question, yes, we do see great opportunities in all regions where we are, and we follow a pipeline in each region. And I think that the opportunities are there. But it's a very [ stochastic ] process, of course, right? And it's not something where you can see an even result every year, and you've seen that if you've followed us as well, right? It goes a bit up and down.

The market is not that fragmented. So there is no refinery standing in every corner of the world waiting for to be acquired, right? So that's why we work systematically, region-by-region, country-by-country to evaluate the opportunities that we see. So opportunities are there, but we need to be patient in order to make them happen.

And also make sure we do the right acquisitions. So that's a very important key that it fits AAK the way the company looks today.

If I may follow up with your -- with regard to your mentioning sort of game changers without mentioning any companies but -- or specifics, what kind of directions are you seeing that would be game changers for you to move into when you say something like that?

Well, I think what we're referring to here, are we able to convert something that is bigger than a bolt-on in one plant in a country, right? That is a bit more game changing. And when we come to that, we can just look at the fact in the industry, there is not that many, and I'm not going to comment it further than that. But we are interested in being able to continue consolidation to make AAK stronger and to deliver stronger value and the other piece of, call it, game changing could be if we decide to go a bit more aggressive, bolder, bigger on an adjacency where we've said today, our strategy is about the core, the oils and fats expertise, but expanding it to adjacent portfolios, which makes a lot of sense to the core. There are opportunities to go maybe a bit bolder and more aggressive there, but that has to come, and we're not going to take too much risk in such an adventure, but that could be game changing at some point in time.

Yes, please.

Yes, So Kenneth Toll from Carnegie. Two questions. I take them all at once. The first, you mentioned down trading. So as a risk, have you seen your customers choosing simpler solutions yet?

Well, maybe a slight correction. I'm not sure I mentioned down trading as a risk, but maybe as a behavior and a consequence of the current climate. So speaking of down-trading conceptually, one, down trading is a consumer buying a product, right? So you go to the store and you're going to go home with a product of a kind. You might choose a lower cost brand or it might go to a lower cost type retail store. Right? You still come home with the product, right? That's a bit of down-trading as a consumer. You can, as a producer, of course, say that I need this ingredient, I used to pay -- used to buy the highest quality with the best spec, et cetera, but I'm prepared to go with a slightly lower quality, lower spec, cheaper. That's also down trading in a business context. When you look at that from an AAK perspective, yes, we're a high value-added solution provider. So is there a risk in it, yes. But at the same time, in some of the industry where we serve, our product is actually a product that helps our customer to reduce their cost of goods, they're bill of material. So you can, in essence, say that when there may be down [ trading ] from cocoa butter is a good example. If you want to buy our cocoa butter equivalent, it's cheaper than cocoa butter. If you look at that as down trading, that's an opportunity for AAK. So I think that's a bit of the beauty with our business model, many legs to stand on, that there are shifts in patterns but we can actually say with regard to down trading, it is opportunity and a bit of risk. And we have a portfolio that is wide enough to be able to serve also the down-traded options. So we're not necessarily concerned. I was more articulating what is happening. And I know that many investors have been asking about down trading. So I think that's where we stand today.

Great. The second question is on inventories. You mentioned your own inventories, but also when prices of raw materials goes up and down a lot, there could be big swings in inventories, either in the whole supply chains. I mean before you and your customers and so on and maybe it has to do with harvests, if harvests are good or bad. So can you describe a little bit how you see the inventory in the whole supply chain right now. Is it crowded with inventories? Or is it running very low or...

We don't see -- as you see, and I will present a bit more during the strategy session that we serve many different industries, right, meaning many different customers, many different applications and end consumer products. So there's a widespread. So there's not kind of one answer for everything. But if you take an average of where we operate, you don't see a big issue with huge stock and destocking risk or vice versa, low stock levels and now we have to fill up. We have since COVID been on a quite continuous basis back in business again and it wasn't that impacted compared to other industries where you saw a dramatic increase of volume and then maybe a shift to the other side and vice versa. So in general, I wouldn't say that there is a major impact of that, but I concur with your comment that in fluctuating times, in volatile times, of course, there is a bit of that because everyone tries to operate the company in the best way. So you might be a bit careful and then you hold back or you might say that I accelerate a bit more because there is a scarcity of products. And we've had a bit on that where we sourced early when the war came and got stuck with a little bit, and in other cases, it's been the opposite, right? So of course, it's a bit fluctuating, but not dramatically. I don't know if you have...

We have seen in certain segments like candles, for example, after the pandemic. We saw a little bit of destocking, but what we've seen has been temporary. We also saw in the beginning of '21 when prices were on the rise that some customers pulled back a bit on the length of the contracts that they wanted to go into thinking that prices might come down. That's one of the views at least that we took on it. And I think when they saw prices continue up, they came back very quickly because they needed to cover the volume. So it's more of those type of behaviors, I think, that we've seen rather than a big trend towards destocking or changes in inventory levels.

So much more dynamic dialogues with customers for sure. But again, the underlying demand, the pull by consumers are still there.

Yes, please.

It's Alex Sloane form Barclays. A question just on chocolate and confectionery facts. You guys have really grown very well there over the last couple of years, well ahead of the underlying market. I wonder if you could help us maybe break out how much of that has been you guys winning new business and new customers versus maybe referring slightly to the last question, any inventory build at the customer level there that's helped growth. I guess this was an area back in '08, '09, where there was some destocking. So just thinking about CC&F, how you're thinking about destocking risks into '23 would be helpful.

Do you want to go for it?

Yes. I would say we -- I concur with your view that we've had a very good development within our chocolate and confectionery fats. The way we see -- we take market share today and driven by our sort of approach with co-development, co-creation, functional solutions to our customers. That would be the primary driver as I see it. We haven't seen any other big trends in terms of as you mentioned, inventory levels and so forth. It's us taking market share. That's our conclusion on it.

And I think another thing to add to that is -- and now again, forward-looking anything can happen. But if you have looked over the last few years, one important ingredient in the chocolate market as a whole is, of course, cocoa butter. Cocoa butter has been quite stable or even declining a bit. So you can say that the cost of chocolates to produce chocolate hasn't increased as much as some of the other ingredients even though utilities has gone up and a few other items has gone up. One important thing in that sector hasn't gone up that much, meaning that I would assume that our customers have been able to produce to a fairly okay price deal. And with that, the actual price increase needed in retail hasn't been that dramatic as it could have been. And that is, of course, helping. So in essence, you could argue that it's chocolate now compared to other things you could eat somewhat less impacted and I guess part of the answer is yes. And then you have the element of comfort food. You can -- premiumization and indulgence, I'll come back to that. There are a few things impacting the chocolate industry where you have a bit of competing trends, right? You want to maybe down trade the way you buy it. But at the same time, it's a bit of comfort food. And -- but there is, of course, the element of if -- it gets really tough, then of course, you can always skip chocolate. So everything is there. It's valid. There is a risk that, that will go down, but at the same time, we've seen a very strong trend even through COVID and this last year, which has been very dynamic.

And I think the strength of our business, you've seen the volumes go up in the last couple of quarters. And as Johan mentioned, over the past 2 years, you've seen almost a decline in cocoa butter prices and a steep incline in prices that goes into our product. And we still see the volume coming, right? Back to our solutions, functionality that we provide not only a competitive product from a cost point of view, but also from functionality into chocolate.

Just discussing with the gentleman here. We're a little bit over time, but I promised him the microphone, so here comes the last question before the strategy update. Yes, please.

Thank you, Karri Rinta, Handelsbanken. Quick question on inflation and the costs sort of the non-oil costs, energy and logistics. How do you feel about your outlook for the coming 6 to 12 months?

I think when you look back on the previous year, you've seen tremendous increases, and we have been able to manage that both utility-wise, non-oil input -- secondary input into our production as well as logistics. As you might remember from our last Capital Markets Day, we did outline the split of these costs. So 80% relates to raw materials. You see 2% on utility, 5% on logistics and about 7% on other input. So keeping that in mind, raw material is the biggest one. But so far, we've been able to deal with it, but we are, of course, very cognizant about continuous increases and always look to see how we can make our operations more efficient. Some of the CapEX that is related to energy efficiency, of course, is much better business cases today than they were in the past. So we always look to make it better and more efficient. And there are risks with this going forward. There's no question about that. But I think the good thing in our business, as we see it, is that raw materials has always been a basis for discussion with the customer, and they understand that if the price goes up 3x, our product will go up price-wise as well. So I think that just the fact that there is that structure on raw materials, I think, makes it a little bit easier to discuss also other increases with the customer, and that's what we've been successful with. But the risk is there and we keep a very close eye on it, of course.

Final comments you want.

No, I very well laid out. And I think no doubt there is massive increases for us and others. Shipping is one of them, utilities. And those are cost items that, of course, we get a significant share of. But as you said, there is that dialogue. And we, of course, keep a tight eye on this in our contract management, in our buildup of costs so that we try to be really early in understanding of what is coming our way and how can we deal with it and be having a transparent and professional dialogue with our industry and customers.

Yes. Thank you very much for that. Tomas, thank you for now. You are coming back definitely for other Q&As, time for strategy update, and we will have a specific Q&A after that as well.

Strategy update, this I had in my last presentation. So what I will do now is I'll comment a bit about our strategy as it is. I will try to reflect a bit to give you a flavor of after we launched the portfolio-based strategy, what has been working well and where can we do better? And given our new and added aspiration that I will go through, what elements are we now adding or changing in order to execute our strategy going forward. And then afterwards, obviously, happy to take questions. So just to recap, we are a multi-oil ingredient house based on plant-based oils and fats, on a journey towards higher value and impact, all right? We're going to go through trends, market outlook, our strength, how we can utilize the opportunities and manage risks that we see as well as the updated strategy. Some of you have seen this picture before. Why do I bring an old picture when we talk about trends. Trends are here and now, right? Yes, they are. And we just talked about in the Q&A about some of the short-term trends. What about stocking, destocking? What about down trading or something like that. That's the short term. That can come, that can go -- that can be in the next cycle as well. But if we raise above a bit in the helicopter view and we look at consumer trends, we still see health and well-being being really there, right? Sustainability, more sustainable supply chain of food or other products. Premiumization, so what is premiumization. It's when I go and buy something, I buy something that is slightly better than what I could have bought, right? Works a bit against down trading, right? So what is short term, what is long term? What we can say that nothing through COVID, nothing in the current environment is taking away the long-term trend on the health, nutrition, well-being, I would argue that nothing and what we see now is taking away the need and the focus on sustainability. I think it is fair to say that in the short term, and also looking at what came out of the last COP meeting. I think it's fair to say that as a world with consumers having to live with energy prices, interest rates going up, inflation. Is there a risk that we take a step back or slow down a bit of the consumer-driven behavior in this -- I think it's fair to say, yes. But I don't think that we will ever as policymakers or companies, banks, investors and consumers, I don't believe that we will say that, hey, sustainability is not important. I think we can all understand and we're educated enough to understand, it is key we've just got to find the right levers, right? So long term, we see sustainability being very, very there now as well with regards to how we look at the future. And then premiumization, convenience, all plays into how consumers consume food or personal care products, et cetera, right? So I'll bring this in a bit of context as we go forward. So what does that mean for the plant-based oils and fat market that we are part of. We see that the market continues to grow as a whole, low single-digit, 3% plus/minus. But we do see and we have seen that before, that the speciality part of that market, where we strategically want to play an even more important role in. We see that, that is growing slightly more. Difficult to say if it's 4, 5 or 6, but we see clear evidence of that being the case. There are opportunities to grow slightly faster than that. When we bring it down to when we take these trends and we look at that from an AAK perspective. Maybe not remarkably, but still, sustainability, use of more natural health cuts across almost all customer segments or industries that we deliver to in a slightly different manner, but certainly, sustainability and health is present in chocolate and confectionery. Special Nutrition, the plant-based food sector or bakery dairy food service, personal care or candles, replacing fossil-based ingredients with something better, more sustainable. When you come to indulgence of premiumization, it's not across the board, right? That is a bit more selectively with the CCF, with bakery, Special Nutrition. We spoke a bit about China before. There's a clear premiumization trend you want to buy something better for your baby. It is there. You're spending more money. Even with declining birth rates, the market has been increasing in infant formula in terms of value spent in China. So this is what we then have to use as insights for us, when we navigate, when we focus on innovation, when we focus on how to co-develop together with our customers, how do we bring value given the trends that we see. But I do think with our position being a multi-oil ingredient house, having access to different types of raw materials, being able to, with fat chemistry knowledge, knowledge about our customers' product, being able to take what's needed and bring that to our customer, a strong value proposition, a strong solution. Be that for something that is healthier or be that for something that becomes more premium or be that with the same product but with a more sustainable supply chain as a whole when it arrives to the consumer. So what are some of the strengths that we have. Tomas has articulated this a bit, so I will not dwell too much, but we have a strong performance. We have a solid profit growth driven by 2 important elements: volume being one of them, and our margin, operating profit per kilo. So we have had and we will continue to have, and we will even strengthen the focus on the margins, making sure that we deliver high value to our customers. But the formula has served us well over time, and we clearly have the ambition to continue this path. Coming back a bit to our position. So why do we have a strong position. Being a multi-oil ingredient house with expertise in what we do, having access to a lot of different oils with different characteristics, we are able to be a go-to partner for our customers. We are able to formulate and blend to achieve functionality, sensor experiences or a more sustainable solution than what used to be. If we look at that a little bit, so what am I talking about when we speak about -- what is fat chemistry, what is it that you do, right? And there is a lot of different needs in products. Some products needs to be crisp like a chocolate. Something needs to be spreadable on your sandwich. Something else needs to deliver nutritional value or even a high fat content for babies that we just talked about. So when you look at that, there are different types of fats There are different types of fractionate produce oils and fats, blend them together to arrive to specifications, functionality that delivers sensory. Or can be efficient in our process or more efficient in our customers' processes. So there's many levers that we can help a customer with and that is, of course, where we focus. I think and I sometimes joke about this internally. I think that some consumers or maybe investors, analysts speak about fat as one ingredient, but it isn't. There are thousands of different ways of arriving to an ingredient that makes a difference in the product. And that's why we call ourselves a multi-oil ingredient house. We have also linked to this, being able to serve different industries, different needs. We also have a large customer portfolio. So this is just to show that with this base, we're not limited to 1 or 2, 3 dominant customers that we live and die with, it's quite a big spread for AAK. And with that, let's move into the segments. And I know this is something that is appreciated to talk a bit more specifically about volumes. So clearly, CCF is a big market. There is a lot of oils and fats in a chocolate solution. Baker is another big market. Industrial and food service, this is a bit of mix because there's a lot of food service volume in this one. And then you have dairy, feed, special nutrition, et cetera. This is how the volume is distributed within AAK, but the real message is that we have a lot of legs to stand on because clearly, there is a difference here in profitability also. And the opportunity to deliver high value-added products. So just because there is low volume, I think you all know that within Special Nutrition with slightly lower volume, the high-quality need of oils and fats is higher and the pricing point and the opportunity to capture that is higher. But how has this developed over the last year? What are the consequences of trends and behaviors and consumption? We can clearly see that Chocolate & Confectionery has continued to grow, 4%, yes, but that includes Russia, which is a big chocolate market. And as you know, if you followed us, we have decided to exit Russia. If you look at that on a comparable way like-for-like, then it's growing by 12%, right? We have seen in Food Service and Industrial, this is more of a post-COVID rebound effect more than anything else. And then you see a slight decline in Special Nutrition, falling birth rates in China and so forth. But we saw in the last quarter, if you followed us, that we were increasing our profit still, so kind of a bit of a pickup there. You can also see candles. Tomas comment that if you were here with us last year, you saw the [ candles ] was up, if I remember correctly, 75% year-on-year. So real boost in candles, driven by, one, replacing fossil-based ingredients, but two, the COVID effect of people being more at home. I think in Sweden, we use candles a lot, but we saw in other regions like the U.S., you started to use more candles. So it was a real COVID boost also into candles. A slight set back, but we still believe in the trend, replacing fossil-based ingredients for more sustainable ingredients, and I'll come back to that. So I promised to comment a little bit about our portfolio-based strategy that we launched 3 years ago. So in order for us to be able to articulate and be specific, selective, instead of serving one for all, we said that let's break down our strategy in the portfolio so that we make sure that we target the right actions by industry and with that become relevant and being able to prioritize. We have done really well in chocolate & confectionery with a strong underlying market growth well positioned. We haven't necessarily done so bad in Special Nutrition. We're very relevant in the market. We have a strong position, but it's been a declining birth rate in China an important market and has been higher competitive intensity in the market. So putting a bit pressure on the prices. So we're not satisfied with the earnings contribution and focused on improving that. We have optimized a lot in bakery. You've heard a lot about that. That is really living this strategy, looking at the product portfolio, contract management. We are closing 1 plant, consolidating 3 bakery plants in Europe into 2. So taking internal decisions and optimizing what we deliver, including targeting the high value-added segments within Bakery. So we're not leaving bakery at all. It might have been a misperception. We're optimizing how we go to market in bakery, how we focus on the right type of fats where we can make a difference. And we have real step forward in plant-based food. We're about to open up a Center of Excellence in the Netherlands as the market plant-based food is now somewhat in a slowdown in penetration, but we expect it to really pick up if we take a 5- to 10-year perspective, we, as a company, has really stepped into this. We're more active than ever in the market and in new projects. So it's all about the penetration and the growth of the market as such. In essence, you could say that in all quadrants of the portfolio-based strategy, we have delivered increased earnings. But as expected, in some of the -- when you click one level down in every quadrant, there is areas where we perform better, and there are areas where we have performed worse or we can do better living our purpose. And that's, of course, how we focus going forward. So with that, let's move into what we then do going forward, updated strategy. First of all, as a company, as a management team, Executive Committee of AAK and with the support of our Board of Directors, we have set now a -- we have set a 2030 aspiration. Targeting a doubling of our value creation per kilo. So we want to go from where we have been to a much higher margin, right? But we're not leaving growth behind. We need volume, right? And we articulate that we also need to be recognized for an increasingly positive impact by our stakeholders, be that from a sustainability lens, be that from a shareholder value creation lens or be that from an employee lens, right? If you do the math, Increased earnings, operating profit per kilo and volume leads to absolute increase of earnings. So yes, we are targeting to continue to grow our earnings going forward. But we want to do it in a way where we put a focus on higher margin, higher value-added solutions, more value creation to our customers because it is important to have good margins to support continued investments to support continued M&A activity, et cetera, right? I am not satisfied with the absolute EBIT margins that we have today. We can do better. And now we have set an aspiration targeting that. So we are on a journey towards higher margin going forward. Recognition. That's not just about results, right? So that speaks into shareholders. That speaks into customers. Our planet and society and last but not least, our people. And why do I speak about recognition? We talked about a little bit before. How can we make AAK come across to customers, to potential new employees, to more stakeholders, to more investors and with that, create the right and relevant recognition for AAK? That's an important journey. We have -- we have been a bit unknown, and we're going to tackle that one. Let's make sure we get recognized, not story telling, recognized for what we do, recognized for what we do well and of course, recognize for areas where we can do better, a true reflection of AAK going forward. We have also updated our portfolio strategy in order to articulate what does it take? What do we need to change to better deliver on an aspiration towards higher margins and a continued volume growth? One is that we put health much more articulated in invest for future growth, not just Special Nutrition, but health as a whole. So we're going to invest further in that segment. We're also targeting new food solutions in a more explicit manner. I think you can all agree that if you're a plant-based oils and fat company, of course, we are focusing on plant-based opportunities, meat and dairy alternatives, and we have invested in that. And we have [indiscernible] heading up that and will be part of the fireside chat. But there's so much more in this. I think some of you have heard about precision fermentation. What's that? Cultivation or power to food, there are possibilities already today. There are technologies today that can produce fatty acid fat that you could use in food. The question is, what's sustainable? What's commercially viable? What's going to be affordable to use and to consume by consumers. Our promise is that we are going to be in it, we're going to be close to it in a way that we can monitor and decide for AAK when we invest in a technology in-house or when we partner up with someone or when we maybe buy a different source of oil fat in order for us to continue to use it in a downstream position. And that is what that is all about. We're also moving technical products and feed and personal care into a bet for the future. Now we have been in Personal Care for a long time. It's been a nice business. It is a nice business, but we clearly see a common theme about replacing fossil-based ingredients or mineral oils, where we see that clearly in the personal care, we see it clearly in candles, but we think that there is an opportunity in other applications where you today use a fossil-based oil. Is there a possibility for us to help that industry replace it with something more sustainable. And that's a bet that we're taking. We're going to invest resources, capacity and capability to target that. We need to do our homework. We need to do our research, but we do believe that there is a strong trend that will not go away for other industries to continue to replace. So those are some of the changes we're doing. We're not changing the optimized for future value creation. We're going to continue to do that bakery dairy food service, but we are investing a bit more in some of these trends that we see around new technology around replacing fossil-based ingredients and the focus on nutrition and health as we go forward. To click one level down on personal care candles and other applications. It's a bet on the shift. It's a bet on a reformulating opportunity, maybe for the exact one-to-one replacement or something that just makes it slightly better or more -- slightly more sustainable. What that will lead we'll see, but we're going to target that. Speaking of technology, I mentioned plant-based fermentation, cultivation, power to food. When we speak about plant-based as an industry, we speak about the industry about replacing meat or alternatives to meet alternatives to dairy, but we also include new food, a mix of something that is just more and better -- more sustainable, better. When it comes to fermentation, cultivation and power to food, what we do today is that we invest, for example, in Big Idea Venture who, in turn, as an accelerator, a venture capital company, invest in new technology. So through them, we are close to new technology. And through that, we also invested directly into power to the Power [ Trek ] technology through an investment in Green-On. Why did we do that? Because Green-On has a way of producing fatty acids based on CO2, energy and water, a small amount of water, quite interesting. Is that an opportunity to produce edible oils in a more sustainable manner going forward? Yes, maybe it is. And the same thing with cultivation. Is it possible today? Yes, it is. We want to stay close because we want to monitor what happens. We want to stay close in order to see what we can use as AAK, either internally or something we buy in. And that leads us to the next page. So what is the option that we have? What is the position that we can take. With new technology, we can enter into innovation partnerships, and we have a few activities ongoing on that arena so that we stay close to technology partner up with other companies that leads the way. And together, we make better solutions or we actually invest internally, we might acquire a new tech company if we see that, that fits our strategy going forward or and/or, we stay downstream, and we source from large-scale producers with new technology. So again, we are not locked into one single plant-based oil or one single plant, we source oils and fats for applications. And if this enables a new technology to be there like Power [ Trek ], then we can source these edible fatty acids and then formulate products to our customers. When you look at the strategy going forward, what runs across all these quadrants or the 4 quadrants is that we are investing in higher value opportunities. We are trying to really truly differentiate AAK from competition, put innovations to market that helps us stand out from the crowd. We are optimizing our core, a smarter and better core, more efficient, lower cost, better sustainability throughout, and we really want to drive impact. So trying to combine this is what our strategy is all about. Tomas mentioned M&A. I'm not going to repeat that. You said it very clearly. But of course, M&A is an opportunity for us to accelerate our growth, to enable acquiring technology in-house or expanding our product portfolio by investing in adjacent product portfolios. So M&A clearly on the agenda going forward. So with that said, why should you either stay as an investor in AAK, may be consider increasing your share in AAK or why would you enter in as a new investor into AAK? Well, some of the things that we've talked about today is strong underlying growth drivers. Nothing is a given. We all know that, but there are some quite interesting drivers where our opportunities are great with our plant-based oils and fats focus. We have a strong balance sheet for continued growth. Call it, we have a few levers at hand that we can use. We are certainly targeting above-market growth certainly when it comes to earnings growth, but of course, also with volume. And with that, we are keeping our target about increasing our earnings by 10% year-on-year. Given that ingredient list that I talked about, right, focus on value-added, really being relevant in the markets, topping it up with M&A, technology, adjacent product portfolios. And last but not least, we have a purpose of making better happen, which has the potential or it's more ambitious than best. If you set out to be best, you can always or you have to compare yourself to someone. But if you set out to do something better, you can even when your best do something that is clearly better tomorrow than it is today. And that is something that we really try to focus on with our team to always stretch everything that we do in every business review, it's easy to say, yes, but is it better? It might be realistic, but is it better? Is it better than last year? How is it changing AAK? And that's something we really try to live with, and that's the beauty in our purpose, making a better happen, a quite simple one liner, but it is so much underneath that helps drive and operate a business, better employer, better sustainability, better solution for the customers. And hopefully, if we play this right, there will be better returns for our shareholders. Thank you.

Thank you, Johan. A lot of things going on here. Let me see if I get it right. First of all, a question to you directly about components. What are the components that will make you reach the aspiration of doubling the EBIT per kilo, is there a plan in place?

Yes, there is. And to be honest, it's a plan in making, right? Everything is not one and done. So what's really clear now, I hope, is that we have put a clear aspiration. I think that we as AAK have been if anything, slightly more short term than long term in some of our decision-making and some of our processes, so we have said we really need to make sure that we make investments today that can enable something going forward, right? So when we build our updated strategic plans, our 3-year business plan, our next year's budget, it needs to include elements that will help us target higher value, right? So when asking for the ingredient, I think it is actually a combination of what I talked about before. It is combining a focus on margins and contract management, bringing value to our customers so that we can price our products and with that, also focus on product portfolio management, selective in the segments that we serve. So bakery good example. If you just serve the whole bakery industry, there's a lot of commodity volumes. Do we need to compete for all of that? Or can we stay focused on the ones with more value added and then topping it up with M&A?

We'll see if the people here are happy with that answer, Johan, any questions from the hall? Yes. And we will mix, of course, between the ones who are online and from the -- yes, please.

Oskar Lindstrom from Danske Bank. Thank you Johan for the presentation here of the updated growth strategy. There were a lot of very interesting sort of different growth legs in here. I wanted to ask to what extent you see efficiency and cost reductions as an important factor in achieving this sort of doubling of EBIT per kilo in the coming years? I mean, we saw quite a big impact from that in the third quarter. Is this going to be an element also going forward?

Yes. And I think I'll -- for the benefit of that, I think going back to this one because, of course, sometimes when you document something like this, you wanted to work in many ways, right? So what do you -- so Johan, what do you really mean by optimized to create a smarter and better core. Well, that is a bit what that is all about, right? So what we have said clearly now, without spelling it out here that across the sectors that we serve, which we actually serve with a footprint of production facilities around the world. We've said it's extremely important that we work on productivity across the board in our factories, but also on our SG&A, in how we go to market, in how we codevelop it with customers, right? We need to be very competitive just because we target higher value-added segments doesn't mean that we can be complacent and allow a higher cost base because our industry doesn't allow that, right? So thank you for the question. Yes, we have a clear focus on productivity and optimize, in the core meaning that mature industries that we serve with our assets like bakery, dairy, chocolate & confectionery, we need to be very productive. We need to be very efficient, even if the, call it, market opportunity is higher, for example, in chocolate & confectionery or Special Nutrition. We need to work on productivity and cost performance also in Special Nutrition, even if margins are higher. So that actually runs across, and it's an element going forward.

If I may, a follow-up question on this. Given that you're aim here is to double EBIT per kilo, considerably grow overall EBIT and you're talking about the sort of efficiency opportunities, should we expect return on capital employed to increase in the coming -- until 2030, for example, from where it is now sort of in line with these earnings growth targets? Or are there reasons why EBIT per kilo should remain sort of in the 14%, 15% range where we are at the moment?

So I think a very relevant question. It's a little bit how we -- how we choose to together with, of course, decisions from Board of Directors, how do we choose to play this going forward? If we are able to increase -- squeeze out a bit more volume, increase our margins and drive with that EBIT per kilo an absolute EBIT. Of course, if we keep the asset base slightly fixed in that context, our return on capital employed will go on, right? But that is not our main target. This -- we also need to continue to grow it. We will make acquisitions. We will make investments in capacity, greenfield or brownfield that when you start, it's a drag to your return on capital inflow. So I think you should really look at it as let's stay where we are and then hopefully being able to improve it, but rather in a journey of continuous growth, our focus is going to be on driving margin and volume, and of course, be very, very careful and drive cash flow. So ambition to increase it, yes, but the main target is to drive earnings growth and margin.

Okay. Submitted question here. This one is for both you and Tomas. How should we think about volumes going forward? It's been declining for the past few years.

Well, declining for the past few years, I'm not so sure if it is, but certainly, we can say that it has been declining this year partly due to us exiting Russia, as we said before. So if you adjust for that, I would say it's flat to slightly reduced. But keep in mind that in Europe, we are closing 1 bakery plant consolidating to 2. We worked heavily bakers you saw is a high volume segment where we're optimizing meaning, we're prepared to leave certain product segments or customers if the profitability isn't right. So not overly concerned with that. But of course, we cannot execute on this strategy without volume growth. It is important. We are -- we have big assets, big factories, refining operations, we need volume. We cannot be without it. So we need to be careful. We can just not step away from everything that is below par in profitability. We need to see it as a journey where we optimize margins over time.

Okay. Yes.

Yes. Dan Ovin, Nordea Market. So I'm thinking about your plan here to reach a doubling in EBIT per kilo to 2030. And then also you talked about growing faster than the market and premium side was growing 4% to 6%, something like that. If I do a quick calculation there, it seems like your EBIT growth is been targeting to be a bit above 10%. So is that really what you target up to 2030.

Yes, we haven't put it like that because it's not a new financial target, not broken down like that. It is an indication of where we're heading. And it's clear that we see an opportunity to strengthen earnings per kilo, and we see a need. So back to what I said before. We -- in order to facilitate new investments, facilitate growth, you need to have strong margins because your business cases will be better. It's easier to accelerate that. So if we are able to execute higher than that growth of earnings per kilo, we would deploy that every day of the week, right? So extremely important that we increase our margins, but of course to deliver on that absolute target, you need some volume as well.

Okay. Great. Then one question again on going more into details on how you see that doubling in EBIT per kilo between the different divisions. So looking at year-to-date development, the technical products, EBIT per kilo has been growing the absolute fastest all that. So I mean, maybe you can talk about in terms of those 3, where do you see the biggest moves when you reach that target? Is that going to continue to be a technical product? Or perhaps you think about the lifting it also in the other divisions?

Absolutely a great question. And I guess my answer is being slightly political almost, but I'll try to be precise in this. So some of the drivers in Technical Products field recently will continue, meaning the trend on replacing fossil-based ingredients that's an opportunity for value creation. At the same time, we have a bit of crushing in Sweden, where crushing margin has been great. So that has been a bit supportive typically in the market dynamic that we had in the past. That might not be repeatable one-to-one going forward. There's been a few other movements. So some of the increase in Technical Product field, you cannot just expect that to continue. On the other hand, we have had a weaker Special Nutrition market with a high-margin business, lower birth rates, et cetera, where now raw material prices has come down a bit or competitive -- opportunity to be more competitive is better and who knows in a '23 to 2030 time frame when also birth rate starts coming up again. So clearly, ambition-wise, is to grow margins in CCF Special Nutrition as well as continue to optimize bakery dairy food service done a good job so for, especially in bakery, but more to do. So I expect earnings per kilo to grow in all the quadrants that we have. But I think over this 7-year period, it was a little bit what you saw last year. So now the -- one of the drivers were Technical Product field, maybe that will slow down and other one take over. And if you look at AAK a bit historically, that's been the case. Sometimes we have Special Nutrition driving and then CCF plateauing a bit, now CCF helping again over the last year. So I'm not overly afraid of that. I think it's just we have to be a bit realistic. There will be a bit dynamic playing in different industry. But again, we stand on many legs. If we have the same focus and drive internally, we will be in a position where we can capture it best way possible. I think that's how you should see.

We have a submitted question here from Per Jorgensen, I&T Asset Management. Two questions. If you have already answered some you will have to repeat yourself, maybe doubling the margin and volume at plus 4% means above 10% EBIT growth per year. So you are raising the bar, but you need more volume or resourcing enough? Is the base 2022?

Great question from Per and I hope that you listen out there, I know you will. So let's try to break it down. Is there enough volume out there? Yes, I think it is. So there are capabilities to source more volume, right? It's not a given, as you know, we're a multi-oil company. But in essence, there are opportunities to work with the yield per hectare in many of the supply chains that we have. And so volume is there, right? Is '22 the base, well, let's call it, when we said doubling our EBIT per kilo, it's been a journey over a year, it was not including a low or weak Swedish kroner. So see it more as a start of 2022 and 2021 type of time frame. And purposely, we were not explicit to say [ 2.x ] or something like that per kilo because we don't want it to be a new financial target, but we want to be crystal clear about our direction. We do see an opportunity to grow faster than our 10%, but again, 10% year-on-year EBIT growth is a ball target. It doesn't come for free, but our ambition is to outperform that. But when you look at it as a realistic financial target, then we stick with the 10% earnings growth per year.

And he has another question here. Is a transformational M&A transaction needed to reach 10%?

Not necessarily, but I also think if you ask me what's realistic. If you look at the next 7 years, and we stand here 7 years from now on a Capital Markets Day, and we look back and say, did we deliver, and let's say we concluded that, yes, we delivered. And we then looked at what has happened I would be surprised if we did not do any M&A, right? You can turn around and say, would it be difficult to reach this if you cannot materialize any of the M&A opportunities out there? Any transformative type of action. And I think it will be very difficult only to driving this by organic growth and pushing your innovation and your price management, that's going to be difficult. So we need that kind of ingredient list to make it happen.

Anyone else? Okay. Last question before the break. We mixed the questions that we also received before we started. So this one is what does the competitive landscape look like? Also, what do you see as your peers?

Who I see as peers, right? So the competitive landscape is -- hasn't changed dramatically, honestly, over time. So if you have followed us -- it's the usual suspects. And by purpose, I don't like to speak about competitors by name. I know them well and try to have a tight dialogue with them. But if you follow us, you know who they are, right? So there are -- if I describe the industry instead, you can say that AAK is still a unique player. We are a downstream player focused on high value-added oils and fats. There are no one that looks exactly like AAK. And that's one of our strengths. And of course, you could argue, could there be weaknesses. Some of our competitors are more vertically integrated, meaning that if you look at the supply chain I described, you have more upstream refining, even crushing, and some of them have their own plantation, be that in soya or palm or something else. So we look a bit different, and that is something we have to deal with. So in some instances, a competitor can have a bit of an upper hand on something. But in other situations, we have the upper hand. And that's pretty much what it looks like, I think, and we are going to continue to compete, and we know that some of them are chasing us. And that just reminds me about us having to live our purpose. We need to make it better happen. Otherwise, they will catch up.

Thank you for that, Johan. Well, thank you also for your questions and online. Coffee break coming up. So far, so good. You want your inflections?

I think so. I am happy that we have questions, and I hope that you in the room and the audience that we have online is still there with us. There will be more to come. I'm looking forward to have Dheeraj on stage afterwards addressing India a growth opportunity for us as well as a new acquisition. And after that, we'll have a fireside chat on a sustainable future.

Yes. And I remind you again, you can always submit questions even if we're not on stage because we sort them out and bring them to the stage. I just want to say something before we leave the hall. During the break, we encourage you, of course, to visit the 3 boots in the foyer. There's plenty of goodies. So do not miss out. And Rebecca said, especially the chocolates from the AAK customer innovation center in Aarhus, Denmark.

Yes. So you have the 3 boots out there with their colleagues of ours dying to present what we can do and display that to you. We also have team members here with Dheeraj from India, Niall and Susanne and Tim and Tomas, Carl, are the representatives from AAK. Don't hesitate to grab us. Have a chat on anything, our financial performance or a sustainable future.

Yes. And we will be back firmly 2:50.

2:50.

Okay. Thank you for now. [Break]

Very good afternoon. I'm Dheeraj Talreja. I'm President for AAK, India. I and my team are accountable for business in the Indian subcontinent, which includes India and other southeastern countries, which is Bangladesh, Sri Lanka, Bhutan, Nepal, et cetera. As we know that India is a large economy, and it's growing at the rate of 6% to 7%, and most of the growth is coming via consumption growth. What I'll be doing, I'll be sharing with you about AAK India and its transformation journey. I'll be spending some time to share with you about from where we are coming as an organization and how we see way forward and our aspiration for future. So as you can see that we started our journey in India in 2015 with a joint venture company with 51% shareholding over there, which gradually moved to 100% shareholding in 2020. The transformation journey for us in India started in 2020 with a clear focus and execution of our strategy of shaping our future. And the strategy was and is focused on 3 execution pillars on people, performance and culture, which I will talk in my subsequent slides. If you really see that today, AAK India contributes 35% of Asia volumes, and have close to 500 talented employees working in the company. We supply to 100 key national and global accounts. And we work with 90 distributors, which help us to serve the rest of the market. As you can see that 80% of AAK India's business is coming from 7 to 8 states, which is highlighted in gray and which are in close proximity to our manufacturing plants. And as I mentioned that we started our transformation journey in 2020, as you can see over there. We started -- first step that we did was that to have the right organization in place to drive the strategy execution. The customer strategy and product strategy was reviewed and we really looked at what products will support our journey of shaping our future. Key account management concept was rolled out with a clear focus that we wanted to provide a differentiated services to our national accounts and global accounts. And this helped us to really, really move the needle in the right direction with that. And these differentiated services included update on co-development projects, update on raw materials, update on consumer trends, update on food safety aspects of it because we, as AAK have all those expertise in-house in our company. And that really helped us to improve the quality of our business. The product portfolio optimization that we started as a part of this journey we decided to cut the long tail in our business or product portfolio. This -- what it helped actually, this helped us to drive focus on specialty products and make the life easier for a go-to-market organization with that. Overall, 37% of SKUs we withdrew as a part of this process, actually. And the result, as we can see that from 2020 onwards, we started seeing the improvement in the quality of our business in terms of EBIT and EBIT per kg. Overall, 15% for volumes are coming from the new products, which we launched in the last 24 months. That's -- we did actually. Now having said that, let me take a deep dive into value creation journey for India. Johan shared with 4 quadrants of the business, the portfolio strategy over there. We were able to move fast in CCF chocolate confectionary and Special Nutrition & Health segment. And they are the key focus or key driver for us to drive the growth was around co-development. And what did we do in that? We focused on reducing the conversion time in co-development from ideation to product launch. And we were successful in reducing the conversion time close to around 50%. And what it helped -- this helped us faster introduction of new solutions, faster introduction of specialty products in these accounts with that. Additional driver in this particular segment of health portfolio. We started -- we introduced a pharma compliant of lipid-based pharmaceutical solutions to vigorous pharma companies. AAK India is an approved site to supply pharma-compliant oils and fat to various global and national pharmaceutical companies with that. And this really moved the needle for us in the case of specialty journey. Bakery and dairy and food service, these are very large segments with very small customers and very scattered actually. So the focus for us in that segment was primarily to look for market-driven solutions so that we can drive scalability in that particular piece of the business, at the same time, driving optimization of the product portfolio. We decided to take 2 steps -- 2-speed approach actually or different speed was taken up for invest in continued growth and optimize for value creation while we wanted to keep an eye for the evolving segments in India market, which is on [ bed ] for future and maintain and cultivate. So what we did was that in -- that for future segment, we started exploring plant-based food, personal care and technical products and the key lever that we used was around collaboration. So these segments are new. The investors and the manufacturers were looking for a go-to partner, which can help them to have faster launch of the product. And that's where we sit in the mid of the value chain. We were in the best position to support this journey to accelerate this journey or from ideation to launch. And we did formal collaboration with good Food Institute of India and also with key co-manufacturers, which is Vista Foods as well as [ Beveg ] to really support to drive the plant-based food segment. The fourth quadrant, which is maintained and cultivate for us. This is still on a discovery phase. We are trying to map the industry, trying to map what are the value drivers over there, how the demands are over there and so that we can prepare ourselves for future in terms of bringing the right offerings over there. So the focused actions on all these 4 quadrants or the portfolio actually portfolio strategy, really helped us to drive margin expansion as we saw in the previous slide and at the same time, continue preparing us for future opportunities and growth actually. As we see as AAK India, I think we all saw in Johan's slide that as AAK, we have multiple legs, AAK India also we operate in various industry segments, right from chocolate confectionery to Special Nutrition to bakery, to dairy, to personal care across with that. And what it does is, for us, the broad product offerings as well as serving to customers in various segments derisk us from any demand destruction that we see in one segment. Just to share an example with that during COVID actually scenario, while chocolate & confectionary industry was considered not as an essential, so the chocolate confectionary manufacturer was not able to produce chocolates because -- but especially Nutrition segment was growing faster. And that really is a demonstration of an example that while the demand was destroyed because the manufacturer were not able to produce, but we could see that the other Specialty Nutrition business started growing with that. As I shared that additional focus that you mentioned was around key account management focus or key account management approach, which was primarily to drive growth strategy with national accounts and global accounts, the focus for us is to be a partner of choice for their current needs and the future needs. And the key account management approach, where we worked on differentiated service offerings really helped us to improve our quality of business and a share of wallet over there. The business contribution, as we can see clearly from national accounts and global accounts increased from 45% to 75%. This helped in reducing our dependence on distributors also and which in turn, really helps us to have a better quality of the business, better productivity of the business and better control of the business with that. So until now, I shared about our transformation journey, starting with strategy execution and focus on the critical enablers. But I think the question comes out, okay, what we did to really make it happen? What's kind of how we created the right environment to execute the strategy with that. As I mentioned in my previous slide, that we have 3 execution pillars under people, performance and culture. So first step that we did, as I shared that we started with having the right organization in place to drive the strategy execution. And we moved to a segment-focused organization to focus execution of the strategies with that. At the same time, we are in B2B business and a specialty business with that. It is very important that we should focus on capability building. So the second step for us was to drive the capability of building of our go-to-market organization and the complete organization. Year-to-date, if I share with that, close to 2,000 hours have been spent on training for the people in India -- Indian organization. At the same time, making better communities happen under Pragati. Pragati is a name for our corporate social impact program. Pragati in English means progress. And our corporate social program progress is based on fundamentals of UNDP sustainable development goals. AAK India or AAK as a group. We are proud to support a few initiatives, which is around health, which is around women empowerment, which is around sanitation, which is around availability of clean drinking water, which is around green energy as a key focus area. So that's what we make it better communities happen around us. The pillar of performance, if I talk about it is around focus on execution of strategy and focus on critical enablers. One of the examples that I shared in a portfolio -- product portfolio rationalization or optimization where we will do 37% of our SKUs, that really brought a clear focus on what products we need to sell and a very tangible value drivers, which really helped us to move the needle in the right direction. If I talk about the culture of this one, which is a third pillar, I mean the journey started with alignment and agreement on better behavior of passionate, accountability, collaboration and agility. And we moved at the same time, after we acquired 100% shareholding we moved to a new workplace, which was a great step towards driving collaboration. We also got recognized as a great Place to Work organization with that, and we are looking forward for entering into the next round in 2023. Quarterly town halls sharing an update to all the associates in the organization really helped people to develop a sense of accountability and belongingness over there. The new customer innovation center is supporting close to 800 co-development projects. And these projects are focused on data-driven so that we are able to provide a tangible benefit to the customers and addressing the key value proposition for our customers over there. Having talked about from where we are coming and what we did with that. Now let me give you a little bit perspective about India's market. So that's what India's market looks like and why it is an attractive market and why it is important. So the total market size for India for specialty oils and fat, is 1.7 million metric tons. And there is a high room of growth in per capita consumption in all the categories where we as AAK operate. Let me give us a couple of examples of that chocolate and confectionary. The average per capita consumption in India is 200 grams. And with a population of 1.4 billion versus the consumption in Europe and America 6 to 7 kilogram. Think about it if for -- from 200 grams every Indian start and we have a sweet tooth actually, a lot of -- many of you or if you have been to India, you know that we eat a lot of one state from where the Prime Minister comes actually, everything -- sugar is added in everything. You have main course. You have sugar in that, you have bread, you have sugar in that. Think about it if India changes the consumption, which is going on from 200 grams to 400 grams per capita, we are talking about 280,000 metric tons of chocolate to be produced more and that's an opportunity for AAK with the chocolate fats and the offerings that we do. Bakery actually, 2.1-kilogram is a per capita consumption of bakery products versus 8 to 10-kilogram in Europe and Americas. From 2 kilogram, if I say we switch to 4 kilograms, which is just double of that, we are talking about 2.8 million metric tons of bakery production need to be done, which means some massive production which will have to do it. And if you know of any bakery, industrial baker who want to put a plant in India, please pass on this message. That's something another one could be there. So at the same time, the population growth, India is the fastest growing in terms of population. Close to 25 million babies are getting born on an annual basis, which is -- which will continue supporting growth in the Special Nutrition segment for us. So while you can say, okay, is it the size in the India market, which makes it attractive. No, not at all. It's not the size which only makes India as an attractive market. The key consumer trends, which Johan shared in his previous slides in the strategy update, we see these trends in India market, very visible over there. The key consumer trends that we see in India around health, indulgence, premiumization, differentiation at the same time, natural and sustainability. So these are the trends that are visible in the India market also. And with our access to various industry segments across the industries, we are well positioned to leverage these emerging consumer trends. And all these consumer trends position AAK as go-to partner when it comes to multi-oil ingredient solutions. Now as I shared about the past, about the market with that, how do we see way forward. As we see way forward for 2030 we see AAK India to be a bigger part of a AAK global business, and we aspire to grow our EBIT by 3x to 5x by 2030. And you can ask where the growth is going to come. The growth is going to come by growing faster than the market growth rate, which is our updated strategy and our aspiration. At the same time, focus on specialty solutions, which impacts our price mix bucket over there, at the same time, expanding our portfolio in health actually. As I shared that we supply to pharmaceutical companies to continue adding more portfolio as a part of that business. And additionally, is on export actually to continue expanding our offerings and sales to other South Asian countries from India. As Tomas and Johan has shared that and I talked in my previous slide also that 80% of AAK's India business before this acquisition was announced for was coming from 6 to 7 or 8 states around our plant actually. To support continued growth, we announced acquisition of Arani Agro oil just last week. The acquisition will strengthen our position in Southeast of India and the potential for this particular geography is close to 500,000 to 600,000 metric tons. And this is a high concentration of strategic customers in that location with that. And this is what AAK India 2.0 looks like in terms of our geographical coverage as we talk about it. We'll invest close to SEK 200 million to SEK 300 million, which includes acquisition considerations in this value, and we'll start introducing multi-oil specialty ingredients from this particular location. Additional advantage is that this region is also developing as a raw material hub so which gives an opportunity for us to drive better community impact and on an overall operation basis. And we expect this transaction to be closed in this quarter. To conclude my remarks for India business or the Indian subcontinent business, we, as AAK India is committed to make it happen. The robust economic outlook provides attractive business opportunities for us in the segments that we operate. The key consumer trends around health, premiumization, differentiation, nutrition and sustainability will continue supporting our specialty journey in India. And with our laser sharp focus on customers, we expect to maintain our position as a preferred partner of choice for various key accounts. And with a detailed business plan for 2030 and committed and talented team, we aim to be the first choice for Indian food, health and nutrition industry. Thank you.

Thank you, Dheeraj. And earlier on, you told me that every Indian name has a meaning. And you can change your position here. And your name is Dheeraj, as we heard. And that means.

Patience.

Patience.

Yes. Yes. So you've been patient listening to me. Thanks for that.

No, this is a very good word because this was what I was going to ask you about. There are so many things that are happening fast in India, but there are so many things that you have to be patient with as well.

Absolutely. We have multiple legs actually. So some legs are moving faster, actually, some legs are moving slower. So we need to be patient on the segments which are which I think is the plant-based food actually, which is one which we are seeing evolving here.

And there are so many opportunities. It's amazing. Is there anything else that you want to mention that can happen in the near future that we didn't hear in your presentation?

I'll say a couple of things. If I put the lens as a consumer over there. India is the developing economy with the youngest population. And as I talked about 25 million babies actually, I mean, just another statistic just to put that out of the 1,000 babies getting born in the world, 172 are Indians. And that creates an opportunity for premium products when it comes to infant formulas with that. At the same time, middle class is growing, which in turn, impacts all the food categories where we, as AAK operate. So that's on the consumer landscape per se with that. Now let's look at the regulator's perspective or from the government perspective. So Food Safety Regulators of India, they have started looking at upgrading the food safety standards. At the same time, also open for approving the multi-oil specialty ingredients. And when this happens, this creates an opportunity for a company like AAK with us. We talked about infant formulas in China, so OPO, which is one of our product for infant formula. This is under approval process as of now. And this will be one of the offering that we'll be able to serve to Indian consumers, the Indian babies in terms of health and nutrition as we go ahead. So these are a couple of things that I see that are going to come on top of that.

Exciting. Let's start with the people here in the whole. Any questions? Yes. [ Petronella ] please -- and anyone is here as well. Welcome back.

Thanks for the very interesting presentation. I had a question on the competitive landscape in India. I think if I got the number right, it was a 1.7 million tonne specialty oil and fat market. Obviously, I think your volumes are quite a bit lower than maybe your share of the global specialty oil impact market in India. Who are the other competitors? Is it still very fragmented. And when we think back to the comments on M&A from the earlier presentation, is there potentially a lot more to go for here in terms of bolt-on M&A.

As I mentioned, the market offers a lot of opportunities with that. So definitely, we'll be -- we'll continue looking for new opportunities in India market. I think the current focus for us is to really integrate Arani Agro oil and move faster on that particular leg. So that's the thing. But in short, yes, as we said that M&A is one of our part of the strategy. We'll continue looking for right opportunities with that. Because the game for us is not about volumes, actually. While we said 1.7 million metric tons, it's value over volume for us. But yes, if something interesting comes up, might be that we'll share about that, yes.

Okay. Let's continue with the submitted question and then to you. [indiscernible] -- do we know him, Johan?

Yes, we do.

PYes, we do from I&T Asset Management. His question is, how much capacity do Arani give to AAK? Can AAK India with Kamani and Arani we've seen as big enough platform to grow or how much capacity do you need expansion to other states?

Well, I can start, I think, first of all, you could picture it as a doubling of the footprint. Well, a number it is in factories, it is a double, right, or insights. And that is how we intend to invest as well to bring this new plant up to the standard of AAK to the capability of AAK and to a volume that is representative as they call it, average plant in AAK. And with that, we can, of course, serve that market. But I think, as Dheeraj said, obviously, an opportunity to grow further. And maybe if you add on to what I just said, do we intend to be able to deliver to the Northern states as well. That's what I at least heard in, I think, Per's question.

Yes, I think we -- at this point of a time, we supply to Northern states actually, but definitely, as we see that more and more investment coming up in the northern state for the global accounts and the national accounts, I think we'll have to prepare ourselves on that, and that's what we continue looking for.

And I think also just to add to it, you said it right in the presentation, just to underline it, there are opportunities to also export from India. So the stronger we become, the more of a critical mass and hub we have, we have the opportunity to serve neighboring countries and potentially reach into Southeast Asia. We obviously have other plants in the region. But I think this strengthens the opportunity for AAK to optimize how we serve these markets.

Thank you. And to the gentleman over there, yes.

Oskar Lindstrom with Danske Bank. A question a little bit about how integrated AAK India is with the rest of AAK, I mean, to what extent are you selling product lines that have been co-developed outside of India to multinational customers in India? And to what extent are you co-developing specialized or solutions produced specifically for your Indian customers?

So as I shared, that around global accounts and national accounts. So we have a strong -- so we have a customer innovation. So first question you asked about how much we are integrated to AAK Global, 1 team. So we are 1 team. Yes, that is the legacy of the company, the history of the companies that we started with a joint venture, and we took 100% shareholding in 2020, and that's where the transmission journey started in terms of culture also. So few -- if I click the button on the culture piece with that, it was also around the better behaviors, which I talked about collaboration because we have the global knowledge -- we have a history of 150 years of doing co-development in various parts of the world, addressing different challenges with the different customers. So that was a starting point for us. So that's one piece. So we are definitely integrated as 1 team over there. Few other pieces. So we started with a modern customer innovation center. So we have the same technology or the same equipment as we have in Aarhus, our chocolate innovation center in India also. So we have the same equipment when it comes to chocolate lab actually and similarly in the other industry segments with that. And then the magic happens in the co-development cycle where we understand that customer needs better and go through the cycle of ideation, development with that. We have -- in our customer CI, we have close to 35 people working in customer innovation team, working closely with the global industry teams to do development with that. And what you saw is actually, the global accounts, where our business increased, that's the co-development which has happened locally in the Indian market. And why it is local Indian market because the climate conditions are very different, actually. India is a tropical country with that -- so a solution in Europe. Actually, I can pick up from that as a starting point or a empirical formula for me, but I need to tweak it from Indian conditions. So that's from a climate perspective. Second, in terms of food ingredients, the raw material landscape, like -- [ Shia ] actually is not allowed in India. So we have another solution for CBEs for chocolate customers, which is our local supply chain, which is SAL, actually. So that's where I think truly, we are taking learnings from a global organization, but translating into the local needs with that.

I think it's fair to say what you just saw was a good example of a global organization in a decentralized structure. So a lot of the strategic execution is really done by Dheeraj and our team, applying it locally, but at the same time, I think you saw the elements of the global strategy of AAK that you articulated, but certainly deployed given the local trends, the local needs. So very much driven by this team. In the decentralized structure, little interference but at the same time, leveraging global capabilities.

Following up on that, is that similar to how you run other geographies as well, essentially that -- they are sort of independent in their execution of the strategy to a large extent and have very sort of localized product offerings as well?

Yes and no. So yes, it is representative very much. And at the same time, I want to build on that to say, can we do better? Yes, I think we can. Are there times where we miss an opportunity or we reinvent the wheel working on the same thing in India as well as in Brazil, let's say. Yes, there is. I mean we are far from perfect. We can learn more, we can leverage more. But at the same time, we are indeed doing that. So there's always a balance in the decentralized structure, how much is decentralized, how much is a line, how much is standardized processes versus complete freedom. And we are always trying to calibrate that not to slow down, but at the same time, to really leverage that. So I think it's representative. And at the same time, we can do better in optimizing that balance

I think we have a gentleman over here as well, Petronella thank you.

Thank you, Karri Rinta, Handelsbanken. Thanks. I wasn't aware that India has so many babies or childbirths more than twice the amount of China. So how should we think about the infant nutrition opportunity in India given the -- so could you help us size the -- for example, the size of the middle class that can afford these products going forward? And if there's any major cultural differences compared to China. So I guess the question is that how patient should we be with the attrition opportunity in India before it as well is larger than what it is in China?

Yes. I think the first milestone for us is regulatory approvals for OPO actually, that's what we are -- [ the dose ] we submitted, and we expect the approval to be coming to us in 2023 expected with that. So after that -- so that's one hurdle with that. Then comes the second is around comparison between mother feeding as well as this one. But in India, what we have seen that with the lifestyle changes and with both the parent working nowadays in India, both in the middle class, both wife and husband are working with that. We see a great opportunity with that. We did some primary and secondary survey in a way, just to check on that, and we found that there is an acceptance for this. It's all about getting the regulatory approval done, and that's what we expect that this will be offering from AAK basket actually for India actually going forward.

Is it an existing market in India today of any meaningful size.

Yes. There is -- as I mentioned about the Nutrition business that we do is primarily coming from infant formulas, but it is not OpO-based. These are infant formulas, which are made with the oil mixes that we supply.

Yes. Okay. We have one question here submitted. India is promoting a vision of Made in India to encourage local and international companies to develop and manufacture products in India, how does that impact AAK?

Make in India is an opportunity for us for AAK? So now we have 2 manufacturing sites in India. And I see that the -- okay, so starting with Make in India concept with that. So most of the multinationals are looking for localized specialty ingredient solution. What makes us -- this as an opportunity for AAK with our co-development approach, as we talked about with a global organization, a global knowledge and having all the process technologies at our manufacturing sites, we are able to develop the solution, which are currently getting imported into India. And I can share an example also during COVID time, it came to us an opportunity. So one of the biggest iconic international chocolate brand, they were importing a specialty ingredient from some country actually. And they reached out to us that they were looking, okay, we were looking for a local solution. Can you develop that? And we had the technology, we had the knowledge as a part of the global organization. We translated into a product actually and that product got sold actually. So with our -- I will say that with our co-development approach, with a global reach and understanding of our customer, we -- it's an opportunity for a company like AAK in India.

Thank you. Seems that it's crystal clear and Dheeraj you will be back when we do our wrap-up Q&A. So don't go far. Please welcome Tim, Susanne, and Niall to be seated on stage. So how does it sound so far? Are you proud of us. Please tell us who you are and what you represent in the company? Tim let's start with you.

I'm Tim Stephenson. I'm President of Global Sourcing and Trading. So I'm responsible for the purchase of 2 million-plus tons of vegetable oil each year. I've been with the AAK for 27 years, which is I think more than everybody else put together.

Is it good or bad?

That's normal. It's really good to have an anchor.

And I'm also representing AAK for the last 20 years on the Board of the Roundtable for Sustainable Palm oil.

Thank you. Niall?

I'm Niall Sands. I'm the President of plant-based Foods in AAK. I essentially run our business unit that's creating and driving our plant-based business globally, working with our regions with Susanne's organization with Dheeraj's organization in a classic matrix organization structure. I've been in role for 3 years in this current role. I'm proud to be at an AAK. I've commercial leadership roles in our Special Nutrition business as well as commercial leadership in South America, Brazil based [indiscernible].

Thank you. Last but not least, Susanne, tell me...

Thank you, Lydia. Susanne Jaspers, I'm the newest kid on the block, I would say. I started with AAK on the first of March this year as the President for Europe, also on the Executive Committee of AAK. My background is a business background. I studied in Germany and the U.S., spent 15-plus years at McKinsey & Company, where work mainly in specialty chemicals, then move to DSM in Food Specialties in Delft, Netherlands. And then from there, went on to be leading globally the business for Cultures & Enzymes at DuPont, which then with a Reverse Morris Trust deal also integrating the culture business of IFF before joining then here.

Susanne, I'm a bit curious about Germany actually. What is the awareness there? I mean, about the -- the things we're going to discuss here and about the company, is something you can -- is there a difference between Germany and other countries.

Well, I would say, looking at AAK and if I tell people I have changed, they said, where did you go? I'm working for AAK. Unless they are in the ingredients business or one of our customers in the food business, the awareness is very little still. So I think we do have quite a job to be done here on the visibility side of our company. Also, if you compare it to other European companies like [ Chr. Hansen ] for example, or DSM in comparison to that. So I think there's quite a way to go. The topics that we talk about today, I think, are highly relevant as well. Because at the end of the day, I think a lot also what Johan said earlier, consumers and customers are confused to some degree. Also, they don't know. So the people who don't know AAK, I tell them don't worry, you eat something from me most likely every day, right? But that's the gap in understanding where we are sitting and what that means.

There are things to be done. But to kick off this discussion, let's a little bit touch upon the growth again. As we heard, AAK has been delivering a very solid mix of volume growth and improving profitability, resulting in compounding absolute earnings of around 10% per year. Well, what have been the drivers for this? And how sustainable is it, would you say Johan?

Thank you, Lydia. And I think you've heard a bit about the formula, right? So leading up to today, we have had acquisitions during years behind us that you make an acquisition, you add that, bring capability, get access to a local market and you grow from there. I think a very good example by Dheeraj. That has been part of the formula. It has also been part of the formula, a continuous growth of use in the applications, the customer industries that we serve, there's been an increased use of plant based oils and fats, where we, with our strong position and a focus of co-development together with our customers, we've been able to capture that. So I think part of it, you've heard along the way, and it's sustainable. Yes, we do believe that we can continue. When you look at these trends out there, we think that there is an accelerated need of high value-added solutions with plant-based oils, and we are an expert in that field. So I certainly think it's sustainable, but I'm also transparent saying, it's not easy. It's not a given. You don't get it for free, you're going to need a hard work, but I think it was really well described by Dheeraj, how to focus, how to drive the internal organization and with that, you deliver the value.

But anyway, lately, volumes have leveled out somewhat. So what is your take on this? And how do you think about this going forward?

Yes, they have leveled somewhat. And part of that, we know is external impact, call it, when we decided to exit Russia. Part of that is linked to also an internal decision on optimizing our Bakery performance, partly by closing a plant and consolidating 3 into 2, and partly into the business climate that we're operating. So we're not concerned today. And as Tomas showed, today, we are driving operating profit per kilo to a higher extent. So we're able to deliver absolute earnings growth. But going forward, as I articulated in my presentation, it's a given that we need to grow at least with the market in terms of volumes. And in that, then focusing on the high value-added solutions. So clearly, we need to bring that element, but I'm not only concerned where we are today, it's kind of understandable.

No, but you still said that your ambition is to double EBIT per kilo by 2030. How?

Yes, that is coming back to a stronger focus, and this is something we really drive. You might think that we were better than we were, but really working with product management, portfolio management. And what is that, right? That is looking at the number of products we have. What's the profitability by product, by segment, by customer, what can we learn from across the various sites. Can we price the product in a better way? Or should we leave something that is less profitable or even negative profitability that you find when you really dissect. So there's a lot of opportunity to continue along that path to do better, and then again, topping it up with strategic M&A...

I just want to hear some comments from -- because you're all into this...

Yes. If I look at it also from a maximization of value perspective, right, there is also a value in driving the overall value with the fractions, the side fractions, the blends, right? I think there is a lot to be done on that front for us to grow, plus there are new markets that will be growing. And we need to make sure that the new naturals are actually going to be performing also for the sustainability of the planet.

But when it comes to food ingredients, the Swedish or European market isn't that big? So my question is, are you all sure that investors and analysts understand your business model? Susanne again?

No, like I said before, I think the ones who know us probably know us. That's more a better job to be done on letting people know and be more visible around those who don't know us, but are certainly stakeholders. And there is something to be done there. And as I said, yes, our market is much bigger than Sweden, right? We are a global company. And from that perspective, the value proposition still holds absolutely.

I think it's fair to say that when we get feedback from sometimes people in this room and other stakeholders, be that investors, analysts, there is comments around how can you make your business model a bit more tangible, visible, right? And also the misperception, to some extent, around some of the oils that we're using about the sustainability promise, you could also find among investors. I think that's our job, elite stakeholders, but at the same time drive the right behavior internally.

I would also add to that having work for AAK in South America. Whenever we built our first plant just outside Sao Paulo, it was quite interesting there whenever we were ultimately there to fill the new plant, and customers in Brazil, in particular, knew of the reputation of AAK. And we're glad to see someone of Swedish origin of European heritage coming down with, I think, the integrity with which we operate our business and bringing it into a very key developing market as another option. And again, someone who's anchored in innovation on strong sustainability sort of drivers as such within the business that, that was very, very well received in Brazil, in particular. So I think the reputation that AAK has is a recognized worldwide, much more beyond the shores of just Sweden.

That's true. I think particularly within our space, where people who know us, know that we've got a great reputation within that space. It's more a sort of outside it, and that's part of the function of today's session, I guess, in order to try and explain to investors in particular, where -- what our business model is and how we going to operate in the future.

That's why we're here. But let's look at it from a more sustainable angle. I understand that you have a lot of opportunities and challenges, of course. But what are your customers and consumers asking for? And how is AAK responding? And also, again, is it more important that the customers or consumers understand this.

Let me jump in, yes, ladies first. And then I will hand it to you, Tim, for the -- so when I look at it from the customer and the consumer side, I think there is clearly the trend around sustainability that we are seeing as well as the whole transparency topic, right? People want to know what is in their products, specifically if they want to eat them then even more. But they are also confused, especially the consumers because there is so much ongoing out there around deforestation, regulation, palm oil and people don't see the whole picture and the whole chain. As Johan also you said you had a conversation at the break, I think, that is exactly the point. And I see it's AAK's role almost to calibrate that, that we do it in a way that we actually -- that it's actually good for the world and it makes sense, and that we enable our consumers foremost to make the right choices and decisions and informed one and not just what they heard yesterday or read as a title in the newspaper today, right? And I think that's the challenge.

Yes, I think that's right. I think that there's a sort of a big -- it's a big question, all of the challenges and opportunities within sustainability, and it comes down to what Johan was talking about earlier between better sourcing, better operations and better solutions. Better sourcing is the area that I'm particularly responsible for. And then within that, the ESG and the environmental aspects in terms of climate change, in terms of greenhouse gas emissions and biodiversity and so on. Social aspects, which -- this is a big area. So there's a social aspects as all, human rights issues around that, and we've got to be very much aware of that. I think that without doubt, the biggest challenge and opportunity for us is around palm oil. So we inevitably come back to that. It's not the only oil, of course, which we source, but it's the one which in the past, at least, has been the one which has been most controversial in many people's eyes. The biggest challenge around that, I think, might surprise you, I don't think it's the issue of deforestation or the negative side of palm oil. And palm, just to give some perspective there, palm is 32% of total veg oil production in the world is palm oil. It's doubled every year for the last 30 years. So from 1990 to 2000, it went from 10 million tonnes to 20 million tonnes, then to 40 million tonnes in 2010. Now it's nearly 80 million tonnes despite a little bit of flatlining over the last 2 or 3 years because of COVID and so on. So that's a huge growth, and it's needed in the future. We need continuing growth in palm oil in order to feed a population...

Just to make it clear here, is it possible to replace palm oil with something else?

Well, it is. Let me just continue a minute, please, because I've just got a point out, I'd really like to make and the issue, I think, is about the perception of palm oil. It's not -- and the perception out there, particularly in Europe, is that either it's particularly for consumers as well. So I refer back to what you're saying, Susanne is that it's either -- it's good or bad. And most people think it's bad. Actually, that's the biggest issue that we've got. If you look at the levels of deforestation arising from palm oil in the last 5 years, Indonesia has come down enormously, and Indonesia is one of the biggest producers of palm oil in the world together with Malaysia, it's 85% of the total production in the world. They've come down from 1 million hectares to 200,000 hectares last year of total deforestation. That's not good, of course, 200,000, but that's out of a total global number of 3.75 million. And out of that, that related to palm plantations is just 20,000 to 40,000. 20,000 is reported, went to 40,000. So that's less than 0.5% of total deforestation in the world relating to palm oil and on the right track. These countries need to get credit for that, and palm oil has to be part of the solution in the future. Yields are another big issue. You get 4 to 10x more volume of vegetable oil from 1 hectare of palm as you from rapeseed, sunflower seed oil or soybean oil. That's a huge difference when we've got to feed the world going forward. It means we need 4 to 10x more hectarage or more area if we use other than palm oil. So there's a big message there within palm oil.

And Lydia, just to build on your question as well around the consumer end, customer perception and sustainability. A lot of this has been driven ultimately by our customers and their ambitions, not just with regards to their corporate policies or their brand standard. But what we have seen in one case here in Europe, is a coalescing of customers around putting an eco-label front of pack. So one customer of ours had this idea to give the consumer up the shelf in supermarkets, the choice whether they should pick up that product based on a traffic laid system as to the environmental impact that product had in production. That's now spawned itself into an NGO called Foundation Earth which will have the same color coding system as to how you choose foods based on its environmental impact and credentials as you would do run a health, traffic late system, which we're well accustomed to these days. So if you look how that one customer has coalesced the [indiscernible] of retail in Europe as well as CPGs who are endorsing this approach. I think this is hugely inspiring because this has come about as a consequence of business recognizing the need for consumers to make these choices are not necessarily being an initiative coming out of London or Brussels.

just to add to your tweak there on the question. Is it possible to replace. You've heard about AAK's capabilities. We and others in the industry, we are capable of replacing to some extent. There are ways of producing similar fat in many cases, not in all cases, tweaking with other oils I'm looking so, and we're a multi company. We can help customers and we do. Some customers want to move out of certain oil, taking another oil and we can do that. But I think what we're talking about here is what about the sustainable future of feeding the world. And then you're asking is it a choice that you should try to make, in this case, replacing palm oil. We have to ask ourselves what is then the replacement? What is the option? And that's where we say there is no option today. There are technology maybe in the future that can help us get more sustainable sources of edible oils for example, and that's where we are investing. But it's not a simple choice of just replacing for something else. It is about making it sustainable.

Yes. And just to make it clear, I think we discussed this before. If you want to do that peak that you want to EBIT in your vision and everything, can you do that by having the land you have? Or do you need to increase it when it comes to palm oil?

Well, we don't have any land to be clear. But in terms of plantations, yes, I think I know I mean what do -- we do -- do we need more? Well, there's a lot of scope for increasing yields, which is a big part of the sustainability push. So yields of palm oil are around 4 tonnes per hectare, but the best yields are more like 8 tonnes. And 40% is produced by smallholders, who average much less than 4 tonnes per hectare. So I think there's a lot of scope for increasing production through yield increase, but there will be more land needed, but it doesn't have to be on primary forest by any means.

Okay. Do we have any questions here to the panel now.

It's Alex Sloane from Barclays. Question for Tim. I imagine sort of earlier this year, you maybe had a few sort of nervous days when there was the prospect of whether it was the palm oil ban in Indonesia, turned out to be obviously a quite short in duration. But has that episode maybe had any impact on how you think about AAK's sourcing longer term?

Thanks, Alex. That's a good question. And I certainly had a few nervous moments -- it lasted a little bit longer. They banned by the Indonesian government on the export of palm oil. And Indonesia producing 48 million tonnes out of that 76 million that they're an important supplier to AAK. I think it means that we have to be wary about government intervention generally, not only from Indonesia, but governments around the world and what they're doing in terms of perhaps well intentioned, interference in markets, but not being fully aware of the consequences and those consequences are pretty severe. For the global veg oil market, we saw a huge spike, as Tomas talked about earlier in palm prices and/or the veg oil prices as a result of that. We saw a huge disruption on the logistics of shipping because they just couldn't know ships waiting to fill up. They all ended up in the wrong places. We managed to work our way through it, which is great actually and still come up with good results. So it made me feel good that we could do that for sure, but also a little bit wary about what might -- how governments might thought in the future for sure.

Okay -- yes, sorry. [Foreign Language] We have a gentleman in front row here. Yes.

Your target of reaching 100% traceability of the plantation. So now you're at 70% and of course, it gets tougher and tougher the closer you get to 100%. So what is the plan B in a case that you see that it's -- with your existing supplier base, it's very difficult. Are you just going to throw a lot of money into it? Or are you going to shift your sourcing to larger players so that you can be sure that you reach the 100%.

Good question as well. And I'm sure I thought we'd come to that. But it's 100% verified deforestation free to start with that we're aiming for. The traceability to plantation is really just a means to an end. If you have a traceability plantation, it doesn't do any good unless you've got the verified deforestatian-free as well. And it -- and the verified deforestation-free is now at 70%. Traceability of plantation is actually about 84%, I think, now. So yes, we -- it's a challenge going forward. We're hitting our targets so far. It's 2025. We're aiming to be 100%. And we have to find some innovative ways to do that. It's not just a question of throwing money at it by any means. It's a question of working with those Tier 1 suppliers and their suppliers because a lot of our Tier 1 suppliers are refiners as well. They don't entirely have their own plantations to source for their own refineries. So it's one of the most important challenge we've got from a sustainability perspective. It also impacts on science-based targets and how we achieve those for Scope 3. So we've got some way to go, but we're quietly confident that we can -- or prudently optimistic, I guess, is supposed that we can get there...

I think just to build on that and to picture a little bit driving the right agenda, traceability was and still is an important way because that's a way to show transparency. Now if we can show the satellite monitoring that we are investing in and using. If we can show that these 10 plantations, there is no more deforestation, and that's one of the primary thing. Does it really matter if something came from plantation A or B back to your point, right? So -- and with that, let's include small holders. Now we have an area where there are a lot of small holders. So instead of being forced to leave the sourcing of small holders, if we can still prove there's no deforestation and we can argue where at least tracing it to this photograph showing no defostration. I think those are some of the debates we'll have going forward with investors, policymakers, consumers educated to say, well, maybe that is good enough. Let's not force policy to the -- to something that is negative. But what -- again, transparency is important. So in this case, transparent about the photograph might be good enough. So things like that would come.

And maybe just to add to that. I mean the 3 main ways that we have now verified deforestation-free. And VDF, verified deforestation-free is not something which is a standard across the industry at the moment. So we need to be clear about how we calculate that. But there's certification. So the RSPO certification is one thing, there's a satellite monitoring that Johan has mentioned, and then is working with those Tier 1 suppliers so that they do -- making sure that they do the right thing, and we can audit them so that we get the right products out and we can verify through that and progress is quite good at the moment.

Yes. Just a quick follow-up. In 2025, when you reach that 100%. So do you think that at that point, you can convince customers like Orkla to stop bad mouthing palm oil, and you can convince them that it's okay to have palm oil from you in their product? Or is it more that those customers that are still using palm oil have less of a reason to stop using palm oil? Because we all know the facts, but we don't really have anyone really speaking for palm oil in...

Well, indeed, and thanks because that's what we're trying to do now here. I think -- change. Actually, narrative needs to change because even though it's -- we're only at 70% verified deforestation free. That doesn't mean the other 30% is from deforestation. It means it's just not verified, okay. So -- and given the low levels of deforestation currently in Indonesia and Malaysia and other areas where palm has grown, then it's a strong story actually. It's just difficult to change that tanker -- change tanker's direction where it's already heading in a certain direction.

And I think that's also going back to what Johan said. I mean, of course, our customers are also trying to extract value, right? And they have been a bit also riding on that palm free story or some of them. And it's really about customers, consumers in the end, understanding the whole picture, so that they are able to make the right choice for this planet, right? And then we go back to what Johan said earlier, alternatives. So if we look at converting more mineral oil to plant oil for very good reasons, some being sustainability and biodegradability, then the problem or the need for oil becomes bigger. And then it's the trade of the mineral oil. So that where does that leave us...

It's not even the consumers in some ways because this is too complicated for them to even get near to, it's either good or bad. And so we have to convince the influences people in civil society to say the right things, not just criticize palm and I think it's bad, but also to project when they think it's good. And then retail is actually very influential as well. If they've changed their mind. And so the U.K. is a good example of that, where a few retailers are very dominant, but they decided that they would only have certified sustainable and the whole country had to change. The manufacturers, everything that came in there is now honestly sustainable. So they can have -- they can make a big difference.

That's the tipping point. Whenever Johan shown a slide earlier, and he showed the value chain of AAK in the food industry. That ultimate box was the retailer, and I would add into that even the global food service operators, if they were to achieve their position and embrace sustainable palm, just the top 3 in retail globally and in food service globally, that would have a huge impact downstream in terms of how everyone else would fall into lane behind that. So I think they have a huge part to play in leading this and driving this.

So palm is part of the solution. That's the thing that we get across. It's not so much part of the problem anymore. It's part of the solution.

And the assumption, I think also, too, is packaging. Because whenever your consumer who's maybe not as well educated, who are very passionate about it, to see palm free, and the automatic assumption is palm free means palm [indiscernible] just conditions people in-depth understanding. And the fact that we're not a B2C brand as such, it's hard for us to influence that. So thus, for this conversation needs to be had amongst ourselves and others in this space to sort of drive that change and drive that perception around the realities and the facts of the situation.

And I think our -- I really would like you to touch upon who is responsible for this time. You say it's too complicated. -- consumer doesn't understand -- are you responsible to enlighten the world? Or are your customers or who?

Well, everybody is really everybody is involved in the industry, right? And -- but we have to convince those who customers -- consumers listen to and the ones that they trust the most, they're not necessarily as because they see us as part of the industry already. They're the civil society in particular. So they are the ones that we have to really try to change the mind.

And I think we're not trying to promote X, Y today. We're trying to lift a topic. And I think we can certainly understand while a retailer or a producer chooses certain things when perception is, whatever is, were in the need or they ask of consumers. So I think what we're trying to say is to make a real sustainable feeding of the world happening, we need to start seeing facts on the table. So what is really the supply chain of a certain product, what is the CO2 emission for meat versus a chicken or rapeseed based or palm-based or other sources. What are the facts on the table? What are the options we have? And I think what we are saying is let's use the available sources that are out there to make the most -- the best possible sustainable supply chain that we could.

And to come back to you, I think, indeed, AAK has a role to play here. We are multi oil. So for us, there is not everything in one basket, right? And if we don't do it, who's going to do it then.

And as an example, we are now investing in life cycle analysis, CO2 calculators, satellite monitoring. So call it analyzing, bringing facts to the table so that we can act. And at the same time, maybe educate like today and bring on the conversation, and let's not shy away from it.

Are you happy with that answer? Yes. Perfect. Okay. And the gentleman over the good. So Rebecca, did you replace Tina.

If I have understood right today, if you want to buy a certified palm oil. It's a little bit more expensive than just any palm oil. And if you go with a higher and higher share of traceability will you lose some customers that are only going for the very cheapest palm oil? How about emerging markets? Will you sort of lose some business there, where other areas are in focus.

I think there is a clear -- the balance is not that clear, right? Because it's Europe here on the forward front saying we want deforestation regulation to a level where you wonder if it's at the end, going to help the planet or make it even worse if they go with the latest proposals. And there will be a place, I think, for both, right? Because there will be parts of the world who will be slower in adapting that and putting that sustainability topics so high and being able to afford it, which is also a part of it.

I think just billing, it's crucial about affordability. We cannot expect by European standards, a U.S. standard that everything fits everyone, right? But I want to bring in this again, a holistic view. If we try to label certify too much and trace too much, then it becomes very expensive to produce. So I think it's about being smart about these things and for policymakers and us in the industry. So the example of traceability, if you take it to the far extreme, if you want something to be traceable to a rapeseed or -- a hectare in Swedish agriculture or a plantation on palm oil, it might be very difficult. Because how can you then process a large amount of seeds or palm fruit bunches in an effective manner. If you're going to trade them, then you need to have separate production runs, separate tanks, separate ships to be able to keep that traceable, right? So back to this maybe a satellite photo, if that is good enough, then you could then process what you have in that photo in an efficient manner. And then affordability in Southeast Asia, in India. So this is again where we need to look at it from how do we make the world better versus maybe say, hey, I'm not doing anything bad. So I'm off the hook. And that's where I think policymakers together with the industry has a challenge. We have a challenge together to find the right way of dealing with that.

And I think super-interesting question because there's one approach is what we are doing in terms of leading the customer to a better solution as we're talking about earlier here at the BRIC but also what maybe we'd like to do in terms of having a of coalition of partners that's driving this change. So one is what we're doing, plant-based foods and we anchored on AkoPlanet. And part of our AkoPlanet value proposition in order to get an AkoPlanet brand, name on the product, there needs to be a very strong sustainability story linked to those raw materials. Palm, it has to be segregated as a minimum for the AkoPlanet brand name, what we're doing on coconut with small holders to protect animal welfare malpractice. And then the low carbon assessment, rapeseed that we have come out of Sweden. Those supply chains warn the AkoPlanet name and therefore, our go-to-market teams, our customer innovation managers, our sales managers will go to customers leading out on that to show them that there's a better sustainable solution available and here it is. If the customer decides not to buy into that, we have an alternative option. But through everything what we're doing and plant based foods, we're leading out with the best sustainable option that we have. But I think in terms of the ideal world, goes back to my earlier point, that sort of pitch there about losing business because of the premium is somewhat taken off the table. Again, if the 3 big QSRs on the 3 big supermarkets, they say that they go, let's say, segregated or sustainable on all their private label items on their menu items. So again, I'm putting back on the retailers that through a correlation of all the stakeholders in the value chain, we need to have a sense of a conversation because just pushing this out will get us so far, but this is an upstream and downstream conversation needs to happen.

And the higher volume we get into the right bucket, the cost of it becomes lower. Then you have enough critical mass and enough runs, enough high volume.

And maybe just to come back to your question, not everything needs to be certified on this. So only 19%, 20% of global production is RSPO certified, and the rest of -- and that's where the premium is, that's why you pay the premium. You can still get to verified deforestation free. India is a great example actually where there is low, but increasing demand, as you heard already for sustainable palm oil. And they've got a great plan there to get to verified deforestation-free, which doesn't include necessarily a high proportion of certified. It may include some, but not everything for sure by using local sourcing and all sorts of other things. So it's not a given that you have to pay a premium for everything just to get the right answer.

Again, a submitted question from Per Jorgensen, I&T Asset Management. Question for Tim. I'm not sure if you've answered it, but I'll put it and will see what you say. How do you secure that even more sourced veg oil live up to your ESG standards? And a question for Susanne, do you see more optimization in the European production footprint?

Well, I think probably I have answered it actually in terms of the...

Yes, so let's continue to Susanne, then.

Optimization, the European production footprint, I'm not 100% sure where he's heading with the question. I mean, in general, of course, we can always work on getting out more with what we already have, at least the limits that are doable in optimizing production and portfolios. But maybe to also show it from a different angle and aspect because we -- it's not too long ago, just after I joined that we had a war starting and everybody, also some of our customers got really concerned that there would be no sunflower. Now they had gone to formulate palm out for the pressure. But now they were going coming back and saying, can you find -- can you develop for us a product? No, the other -- can go back to palm oil, please, and find the product with the same performance just that we have a backup, right? So it's not that easy to predict what's going to happen, right? And I think if we make ourselves too dependent, it's the whole basket we have out there, right? It's the mix between the oils.

Yes. From another perspective, AAK has sourced share from West Africa for more than 60 years. Is that correct? Can you explain the model a bit on how it ties into your business now and going forward. And I'm talking about -- you also have some projects over there. So who wants to shortly explain.

Well, I can try, not even I can remember 60 years ago. That's -- but I know we've been doing it for a long time, and we've had a -- and shea is as Johan explained earlier, is an important ingredient for us, particularly in chocolate & confectionery fats.

And also in personal care, skin products...

Yes. And it's -- for those of you who don't know and didn't see the video or the presentation last year, which was great and explained it in detail. Shea has grown in West Africa or it's not really grown. It does grow. It's not a plantation crop. It's a wild crop, around 2 million tonnes a year is the estimate of the total available crop. Around 1 million tonnes is harvested by women in the villages traditionally upcountry, and about 500,000 tonnes of that is then exported. The -- we have a project there which is directly involving 300,000 women kernels in Faso. And that means that we have a direct -- we have 300 people employed in West Africa, 6 different countries. And the kernels in Faso project operates particularly in Burkina Faso in Ghana and in Ivory Coast. And we support those women by giving them financing in advance of the season to help them through what is traditionally a low period for their income. And we give them training and we support them in terms of how they do the initial processing, which is drying, deshelling and boiling. And that's a fantastic scheme, which actually ties in very well with our customers as well. We don't do it because we're feeling particularly charitable even though it does make us feel good inside. There are commercial advantages as well. So we have, as you said earlier, Johan, the schemes with malls in particular, the wish project, which is women in shea which is a sort of kernels in Faso plus and other schemes out there with customers, which are tremendously successful. And it's a great scheme as well as giving us security of supply rather than relying on local traders.

So it's a -- it's used in chocolate & confectionery and personal care. Clearly, global industries. So this shea kernels picked or rather the shea fruits that fall down, picked up far out in the bush in West Africa is part of a sustainable use of chocolate and skin care products globally with global customers all over. So in that sense, it's also a sustainable source of, call it, demand needing something from us, we need something from them, and I think that adds to it. So it's not a short-term thing.

Shifting focus a bit. Still, you're welcome with any questions even if we do shift focus because talking about future is very exciting when it comes to food. What about your bets for the future? You mentioned something about that initially. Could you help us understand what new innovation solutions there are.

We will. Maybe start with like a bridge from what we discussed. In this conversation so far, we discussed a lot about different plant-based oils, right, and sustainability and so forth. And other piece is, of course, about the diets, right? What about animal-based food, the land use for that opportunity is to shift, extremely important in the total debate about sustainable food supply chain. I think -- and that's where we, of course, are tapped into plant-based food.

Indeed, and it's very much part and parcel of what we're doing day in, day out in plant-based foods as an industry team to support our global regions with specific focus on the 2 largest regions, which is North America and Europe in terms of consumption. And the innovation for us in this space is very dynamic, where we are using our thought chemistry and our knowledge of the application to bring functional specialty ingredients to our customers, ultimately make better plant based foods. I think we have all recognized, yes, there is a slowdown in the consumer market. One is the more macroeconomics of the cost of living crisis and there is a lot of price differential. But there's also a piece that the products aren't good enough. That's broadly accepted. And therefore, the investments that we're making in the center of excellence in Amsterdam, which is world-class, and I invite you all to come there, hopefully for the official opening on the 20th of March. But that's going to be a game changer. And I know that words used maybe too much too often these days, but how we revolutionize our customer inspiration and engagement to make better product through our what we would call our specialty fat delivery systems for plant-based meat and plant-based dairy. It's -- yes, it's super exciting.

And how do you know that this will fly.

Because we're selling these solutions today. So what I would say, Lydia, is that we're probably to use the iPhone analogy in version 3.0 of the iPhone, where the first very crude, I would say, formulations and plant-based meat from our perspective, use just coconut oil. But then when you look at the nutritional claims of that, the nutrition claim for the saturated fat wasn't too great. And therefore, there was a very -- again, version 2.0 was a crude reformulation to use rapeseed oil. So now my nutritionals are agreed, but leaves me with dry product. And this inhibits the taste experience that consumers feel so challenged about whenever they bang into effectively with more expensive products. So our sweet spot in AAK is where we have been developing fat systems that deliver on the sensory and eating experience that consumers are used to through real meat, for example. So with real meat, you expect to see the marbling of the fat. You expected the sizzle on cooking. You expect it to brown and then you're expecting that you see mouthfeel on eating. There's no one fat system or fat will do all of that. So going and formulating our product just with coconut or just with rapeseed is a recipe for failure. And what we do in AAK is we look at those attributes in terms of functionality and sensory that consumers are expecting, channel specific as well because our solutions for food service and retail are different, whereby we try to mimic that to fat. So believe it or not, in some of our best products out that our customers are buying into, we could have 2 or 3 different fats coming together as an overall fat system to deliver on the look, the sizzle, the brown and the eating experience. And that is what our customers see value in, and that's why we're growing EBIT successfully in plant-based foods over last couple of years.

Next time, I would like you to bring it here, so we could taste it. Yes, please?

Yes. I have a question for you, Susanne. Johan talked earlier and positioned AAK sort of in the vertical value chain here in the introductory presentation. You've worked in a number of other industries and then previously as a management consultant. What do you see as the sort of attractive possible horizontal adjacencies for AAK. Because obviously, you're sort of part of a wider food ingredient industry. What are some of those adjacent segments.

We have already moved on some like the lessitarian as an example, right? There are several of those. And some are in the food and some are outside the food space as well. When we look at the new naturals, but are very close to what we can be doing. Special Nutrition is an obvious one, right, where we do have a joint venture as well. What else can you add to it to sell complete packages that will deliver additional value to our customers. Because at the end of the day, that's what it is. And I think we need to make -- we are looking at some of them. Johan mentioned that already earlier as well, but it also needs to come at the right price, right? I don't think AAK is going to be a player that's -- and what we've seen in the last years, there were I had a short time in M&A at JPMorgan during my studies, and I decided not to join that because I've said it destroys too much value. So you need to be smart on where you put your money there. There are obvious pieces in the Special Nutrition when you look at microbiome topics like that looking forward. The traditional ones, you also see the big companies struggle, right? You see an IFF struggle with the breadth of the portfolio that they have and how do I still deliver value if I have commodities that are just plug and play versus highly specialized ones where it's all about the application, which is where we also see AAK, right? For us, we can add the value because we understand how is the product run at the customer. So what does it need from us to make their end products better.

And at the same time, just building on that, back to -- we're partly looking at what we can acquire, call it, the expanding of 2 adjacencies. But we also see, especially in the space of plant-based food and potentially new food solutions. And I mentioned that with strategic partnerships. So flavors and fragrances houses where we don't necessarily look for an M&A opportunity. But knowing how important fat is for the mouth feel, how can we work more closely together with others in the industry to strategically develop and accelerate some of these new solutions. That is certainly an area we're working with, and we're obviously not showing a list of our strategic partner options, but expect that to be part of it, and it already is. We already have joined projects.

Yes. So MISTA is a great example as well, [indiscernible] ecosystem in San Francisco. We're a partner in that, along with Ingredion, Chr. Hansen, Mars, Danone, Conagra. So we're all sitting around the same table, VP of Innovation, chief technology offers, brainstorming, war gaming, the future of food, and in particular with a heavy lands on plant based. So we're sitting around those tables as equal partners whereby given the specialty nature of Givaudan, of Chr. Hansen, of Ingredion, and given the fact also, which is hugely important that the value systems of those organizations are closely aligned with our respective specialty focuses, together, we're stronger and we're not competing, and it's been a hugely effective way forward for us, I would say, and expect more of that.

And I think there is a room, right, but you need to understand the application to be able to make 1 plus 1 more than 2.

Before -- yes, we have a lady over here. before we do that because time flies, and we need to clarify something. This is for you, Tim, on sustainability, again, so we go back a little bit a little bit. Earlier, you mentioned something about how much land is needed to grow different crops. Can you repeat those numbers? Did you say that it took 4 to 10x as much land to grow other crops that is not palm.

Yes, that's easy. I think that's what I said, and that's the big difference it makes.

Maybe they don't believe you.

Well I guess it's recorded. It's not just me that's making this up, for sure. Yes, for palm, it's about 3.8 tonnes per hectare. For rape it's about 0.8 tonnes of oil per hectare that you get out; and for soy, it's less than that, but you got some protein from soy as well, clearly.

And this was one of the first slides you showed me when we met the first time. And this is an important information for everybody, too.

It's really important because as I said, there's a -- world population grows, demand grows for vegetable oil, then we will need more land as well as increasing yields, but you need a lot more land for other oils than palm oil.

Okay. Now we've clarified that. We are still on, if innovations in the future. Yes, please.

This is Jon from BNP Paribas Exane. So I have 2 questions, 1 for Tim, which is kind of on the deforestation point, the new EU regulation, how does that impact AAK? And also for Susanne. IFF, they are divesting some of their business segments such as, I think, in emulsifier, would this be an area of interest for AAK?

Do you want to start?

My pleasure. We spoke in the break about this a little bit as well, so thanks for asking this question. The EU regulations on due diligence for deforestation, just to provide some context is something that is not agreed yet. It's in the trialogue at the moment between the council -- European Council, European Parliament and European Commission. The draft, it's exactly the sort of thing that we'd be encouraging. We need policymakers to get involved as they have done in Indonesia and Malaysia and other places. And it's the right sort of thing. We're all heading for no deforestation. We have some -- and of course, the implications for AAK is that we'll need to comply with it. It's likely to become lower probably in Q1 next year, maybe Q2. And then the implementation period will be probably between 12 and 18 months, but it's still under negotiation. However, it does seem to indicate that we will need to have traceability to -- geolocation of the origin of the oil that we bring into Europe. That's not just palm. That's also soy and it also covers cocoa, coffee and timber, beef I think, actually. Although the scope has not been finalized yet either. It may also be extended to rubber and maze, not that they are a particular issue for us. So we'll have to comply with that. And we're concerned and we've been lobbying actually that the -- as Susanne said earlier, the consequences of that may not be as intended. It may just be something that makes everybody in Europe feel better about the fact that they haven't got the deforestation free palm oil on their plate. But because of the way it's structured, it could be exclusive. So it excludes all those who don't comply and there is no incentive for them to comply. It's not, as Johan said earlier, we engaged to transform. So we engage with the supply chain and also get it changing and get it moving. This is the risk of this regulation as it stands at the moment that it would just exclude everybody that doesn't want to be part of it. And then there will be no incentive for them to continue to join partly because Europe is relatively small as a part of the palm oil -- total demand for palm oil for food, which is around 2 million tonnes in Europe and about 5 million tonnes for biodiesel, by the way, in Europe, compared with 76 million tonnes in total for -- globally. So we're -- we'll have to comply as will everybody else in Europe, there will be some -- likely be some costs in that, although it's not very clear because we don't know how the regulations are going to go yet. And it's going to be the same for competitors as well. So it's -- we're a little disappointed that consequently hasn't taken, but we don't think really they've taken enough time on this to pushing it through and they haven't thought through the consequences properly.

And maybe to add on that, also the concern around the small holders, we, as Europe said for years, we need to find a way to rebalance the wealth in the world. So with a lot of effort, we have these small holders who are growing, but they have no way to be compliant under what's there on the paper at the moment. That's pretty clear. So that means now after we first pushed them there. Now we say, again, no, thank you. So we are not being consistent here. So we do see quite a risk to add on that not inclusive right.

While at the same time, I think that's important. We really embrace policymakers to step in. I often take the example of the car industry, automotive industry, how many electric vehicles will be rolling in Europe, U.S. and so forth if it wasn't for a combined effort on legislation for carmakers, incentives, et cetera, et cetera, right? So we're certainly acknowledging that policymakers needs to step in together with retailers, to your point, together with our customers, the producers of food, us and everyone else. But again, you get what you ask for a little bit. So it's important that it drives the right incentives.

Yes, I just would like to do a -- sorry, yes, emulsifier.

No. The second question, on the emulsifier.

Oh yes, yes. Yes, absolutely, they are looking at divesting various parts of it. We have a natural emulsifier business with a lessitarian. Now if you thought that the graphs that Tomas showed earlier were a bit wild, look at the prices for lessitarian, you will think it's completely stable. What happened this year. So with regards to that, it's for us a choice, again, and I go back to the 1 and 1 more than 2, or do we choose to play where we think we really make a difference. And we are looking at these things, absolutely because those are the spaces where the question was also earlier, what adjacent spaces in the horizontal line are you looking at? We do that. all of them all that attractive. I think we have a lot of value to still extract from our business as we have it. And unless it's an obvious case, my preference would be, let's extract that value.

I would like to invite Dheeraj and Tomas. Just to mark that we now have a general Q&A, and you can ask anything. But so we will just change positions. Dheeraj, please welcome to the stage and Tomas as well. To round up these discussions, did we -- is there anything else we need to underline talking about growth, sustainability, innovations, anything you want to add?

I think maybe one thing to add is what we had in the presentation, maybe not so much in the fireside chat. But there are also alternatives, right, that -- or new technology that was said green on that we invested in just now in the family of power to there's power to fuel, power to food, in essence, pretty cool. And we just saw an example last week in an event with Green-On. Already an oil that chef in Sweden was making a [indiscernible] coming from this process using CO2, energy and water. That's pretty cool. Ability to -- now there's going to be a lot of work to make this technology scalable and commercially viable, et cetera, but it gives a hint about opportunities. I think what -- what we're saying is that we're a multi-oil company. We're working with applications, we're having a strong sustainability agenda. So we're quite optimistic that there are solutions for the world as we go forward, but it's a tricky landscape to navigate, right? And I think that's just 1 thing to mention. We're confident in opportunities going forward.

Let me add one thing also because there was earlier the questions around the volume concern, what will turn the volumes, right? That exactly also goes in the innovation space. We're looking at replacing mineral oils. We believe there's at least around 10 million metric tons of oil that could be transformed to plant based on the technology that we already know and are capable of doing as AAK, right? So that accesses a complete new branch of it, right?

Yes. And maybe to add on that, I made the point earlier, but I think I just reinforce it. Is there a real debate yet on the diet, sustainable diets and should we replace more? Could we find other ways? And we've been talking a lot about this, the plant-based food sector. I think it's trying to replace one-to-one. Here is a plant based burger. It's one-to-one -- it's 100% plant based. But take meat that we use in [indiscernible] or something. What if it is 20% meat and 80% plant-based solution. That is still an 80% reduction of meat usage, but it might solve the taste experience for us. I actually had in my dinner table when my wife said, we didn't have enough, so we blended it. And the whole family said, this was great mincemeat that we had. The taste was great. It was just the mix, I don't know what the percentage was. So I think there is so much opportunity to transform when we, as consumers start opening up our eyes. We're quite conservative in how we eat.

This hybrid approach that Johan outlining there, is very much applicable to this plant as food space today in meat. But also looking forward in terms of the cultivated meat space. There's obviously a lot of hurdles overcome in terms of production, in terms of affordability, in terms of the regulatory environment. But getting that down to a cost and use where it's affordable, it could come through a hybrid approach as Johan outlining. And also with that, this dam is starting to burst because whilst it was in terms of the cultivated meat area in the sense that Singapore was the first to approve it. The Netherlands has now approved for sampling. And now a couple of weeks ago, we've got the FDA give no questions asked to upside foods for the cultivated chicken. So again, as that becomes much more common around the world to drive affordability and accessibility of that technology in the future. That approach that Johan outlined here could be one of the routes to affordability for such technology in the future.

Yes. And I added it in the context. It's there future volume, right? If you think about this, if it does happen, that's huge volumes in transition.

Okay. Tesla in Stafford 36 1 is still in 2 figures here. So he has a question here. You mentioned that ND EBITDA is around 1.9 and likely to tick up in quarter 4, please comment on what is the long run target ND EBITDA for the group.

Could you repeat that question?

No, but you can read it by yourself.

Net debt, yes, it's likely -- okay. Fair enough Now I get it. Net debt to -- the question was about what is your net debt and it's expected. Maybe that's one for you, Tomas.

Yes. And as I mentioned, we -- with the delay that we see in the measurement, we expected to, given the raw material prices that we're still experiencing 6 to 9 months back with the delay, we expect that to continue slightly upwards. But as the raw material prices have dropped, and we're now in the beginning of 2023 and the first half of '23, we'll see everything else equal, reduction of our working capital, also affecting cash flows and so forth. The expectation then, all else equal, outside of M&As and everything else, that measurement will then come down somewhat.

So if you're just -- without making a forecast, and without making a formal estimation of the future, if you just see the build of our net working capital and the cash that took, of course, when things come down again, we expect that to come back. And that should have a positive impact on our net debt to EBITDA. And we used to be at 1.25 as you said, and let's see where we land. It's depending on how it develops. And if we continue to deliver strong earnings, of course, that also adds to our reduction in net debt. But at the same time, we have an M&A agenda, and that might push it up again.

Of course. Any final questions? Wow, everything is crystal clear. I'm happy to see. Actually, this means that we are going to wrap things up here. And I would like to thank the panel. I mean you will still be here. We can still mingle. We can still discuss. How do you wrap up this. Before you say anything, I really have to remind people that all the presentations will be on our website, and the recording will also be there later on. It's all yours.

Absolutely. First of all, thank you, Lydia, for guiding us through this afternoon. Thank you, everyone, in the room. Fantastic to have you here and love to get these questions that you pose to us. And also to everyone live, and we have gotten a few questions also from the broadcasting of this event in a hybrid context. So thanks a lot to you that have listened in. And last but not least, to colleagues helping us to run this day, helping us to organize this day, I hope that you, as stakeholders to AAK have gotten good information from us, have been lighted in a few areas and will continue to challenge us in many areas. And with that, thank you so much. It's been a great day.

Do you know what you're famous for?

No.

Your carry on gift packs.

All right.

There are brilliant...

So Important information coming out. Where are they?

They are outside. Before we go home, you will have one.

Great.

Yes. And with that said, thank you very much.

And we are here if you want to have more questions.

Thank you.