Scandi Standard AB (publ) (SCST) Earnings Call Transcript & Summary

So hi, everyone, and welcome, everyone, to you that are present here and the ones that are following us broadcast on remote. I want to welcome you here to follow and listen in to Scandi Standard's first Capital Market Day. My name is Jonas Tunestål and I'm the CEO of Scandi Standard. Today, I will introduce our financial targets and introduce you to Scandi Standard and our road map and strategy to achieve them. And we have an eventful day ahead of us. So I will go direct to the agenda, and it will be divided into 6 chapters; the introduction; then we have convenient versatile and tasteful; then we will have the chapter, affordable because it's sustainable; then responsible, safe and nutritious; and then we will talk about climbing the value ladder. And at the end, we will sum up with objectives and investment priorities. And they will be presented by various members in the management team that are present here today. But let's jump into the first part, which is the introduction of Scandi Standard and its business logic. Scandi Standard is a business with around SEK 13 billion in sales, and we are proud to serve over 1 billion meals a year. We have a strong position in 5 markets with strong brands, both our own and private label. We're exclusively engaged in the production of commercialization of chicken and that is a protein source that has shown consistent growth over the last years, and it continues to hold a positive projection for the future. We are the only widely-held listed chicken player in Europe, and this unique market position provides us with significant opportunity to lead and innovate within the industry, setting the standards and responding adeptly to evolving demands of consumers across Europe. And we are really proud of being able to recover our margin after a tough period for Scandi Standard. And I really want to give credit to the organization for resolute handling of our challenges over the past years. With the recovered margins and a stronger balance sheet, we have a solid position and should take the next stage in our journey, and therefore, we are ready to take next steps towards growth and margin expansion. And this is our approach to take in Scandi Standard to the next level. And in this presentation, we will go through each of these points. And we want to increase the value of our protein. We have talked about that before. That is super important for us. We want to ramp up our efficiency, work with sustainability as an integrated part of our business, and at last, how we collaborate in Scandi Standard, and that's the pillar better together. And here, you can see our 5 home markets. And as you can see, we have leading positions in all of them, and we're #1 in 3 out of the 5 countries. And we have highly recognized brands in each of our home markets. And I think that many of you can recognize some of those brands. And in the presentation, we will show you that gravity is promoting brand recognition. With our ambition to grow, our brands will play a vital role. We have established brands in all our markets and our consumers are linking the brand to domestic produce. So we have a trend towards more convenience product, where brands will come and play an even more and bigger role and important, and we will show that 1 later in this presentation. And we have the knowledge that our home markets are not low-cost environments. We rely on that our consumers are willing to pay extra for local produce and the consumers have a strong confidence in the local agriculture industries and the local certified labels, as you can see down in the right corner, strengthened through consumers' trust of local produce. And on top of that, we have our well-known local brands in each market. And domestic produce supports the sale of fresh chicken and that contributes to better margins. And domestic produce that require local footprint, and here you can see the location of our plants. In Ready-to-cook, we are present in all countries, and in Ready-to-eat, we are present in 3 out of 5 countries, where the biggest factory is placed in Farre in Denmark. And it mainly produced cooked product and breaded product. And then in Ireland, we have a feed mill; and in Sweden, we're hatching. And here's an overview of our Ready-to-cook processing plants. And once again, we're producing over 1 billion meals in these plants. And we have plants in Valla, Jæren, Lieto, Aars and Shercock. And then we're moving into this. And now we have come to the slide that shows the essence of our industry logic. And it is somewhat reverse production. We purchase a whole piece that we take apart. And compared to most other industries, you can't choose what product and how many pieces you buy. The anatomy of a chicken is already given. And what do I mean with that? That means that you can be sold out on breast fillet at the same time as we have excess of legs. And chicken, it has its main part, and then it has the other part. And the other part is defined as Ingredients in the right table. And almost half of the volume of the chicken is Ingredients and only 16% of the value, and that means that every cent counts due to the big volumes. So it clearly shows that Ingredients also play a central part in creating profitability for Scandi Standard. And this is what we call anatomic balance or carcass balance. And later in the presentation under the chapter, climbing the value ladder, it will be shown more in detail. Anatomic balance plays a central role in creating profitability for Scandi Standard. But optimizing price requires integrated skills and capabilities, and fillet is by far the most valuable part of the chicken. And it almost everywhere holds a strong domestic premium. And the fillet demand is also what sets the bar for how much we produce domestically. So we generally have a higher export share of legs and wings, although we see domestic demand increasing rapidly, especially on deboned convenient products, as you saw in the video before. And that we'll come back to later in this presentation. And from our Ready-to-cook plant, we have 3 main routes for our products. The main part that can go directly to food service, retail or external industries. This route is symbolized with arrow in the middle. Another route our product can take is through our Ready-to-eat facility. That will be the 1 route that's upgrading our raw material. So to have a simplified explanation of the process, on 1 hand, you can sell the fillet direct to the retailer or you can sell it and produce it through our Ready-to-eat plant and transform the fillet into a nugget. Then we have the other half of our volume, and that is the Ingredients business, and this is mainly to pet food and rendering. And it's interesting thing with this total business is that everything is linked together. So as an example, breast fillet that do not have the right quality and then you can't take the SEK 90 per kilo value out of it, then it can be reduced and sold to rendering business for next to nothing. On the other hand, gizzards, that is normally an Ingredients product, can, if produced in the right way, sold to the right customer, be a valuable product. And this is back again to the part that will be presented later today, climbing the value ladder, and that is crucial for success in our industry. And as mentioned before, we're expecting strong growth. We have had 36% growth in poultry, and we are expecting 50% growth until 2030. And the drivers for the growth is these 3 things: responsible, safe and nutritious; convenience, versatile and tasteful; and affordable because it's sustainable. And with that said, I will give the word to my good colleague, Fredrik Strømmen. He's the Country Manager for Sweden and Norway. So welcome.

Thank you, Jonas. As Jonas said, I've been in Scandi and working with chicken for 10 years. And I must say that Scandi Standard can look back at a CAGR of 8% the last 8 years. And I'm confident that the growth will continue. I will tell you a lot about it today. We have a proven track record of innovation, moving into Ready-to-eat and a lot of convenience products. Versatility is also a key where chicken is and have become a more and more popular ingredient in a whole range of meals and food occasions like breakfast, lunch, dinner and snacking. And it's also about the absence of cultural and religious barriers that will be a very good growth driver for us moving ahead. Looking at this slide, we can see a lot of fantastic products. It's from Naapurin Maalaiskana in Finland, Kronfågel in Sweden, Stolte Hane in Norway, Danpo in Denmark, and not the least Manor Farm products from Ireland. And to the left side, we see commodity unprocessed frozen products. I'm moving towards right, it's more about breast fillet, sliced and diced and more premium products. And all the way to the right, it's convenience, Ready-to-eat products. And in recent years, a lot of the growth has come from the right hand side, convenience, Ready-to-eat products. 10 years ago -- and this has changed a lot. 10 years ago, 50% of all chicken was frozen. The offering in stores, coming from us, but also consumer habits has changed accordingly. So time, that's a crucial thing here. Time for families and time is scarcity. Example, quick meals before kids are running off to activities is more and more important. And the chilled, looking at this graph, it's about 80% today. And chilled is almost 100% domestic. The reason for that is its better shelf life, its high quality, relevant innovation. And it's also about the thing Jonas said about the local claims. So the consumer want local chicken. In Ireland, 40% of all families eat whole chickens during the weekends. But the preparation time for doing a whole chicken is long. So we see a clear shift towards convenience products year-on-year. And the convenience share, looking here, has increased 25% during the last 5 years from 26% to 33%. So convenience is important. Convenience products increase the versatility. And this is about consumers' repertoire, how many kind of meals do you actually prepare and make. And chicken is the ultimate and the preferred protein to use in a variety of different meals. Chicken is quite neutral in taste. So as a chef and cook, you can add all kind of flavors and the creativity is unlimited. You can use chickens in pasta, pizza, salad, soup, stews, wraps, whatever. So it's the development of more and more convenient products that open up the use for chicken in a whole lot of areas. And of course, the traditional whole chicken, the thigh meats and the fillet as a dinner is still big and this is still a huge share of the consumers' stomach. This slide is about occasions, quick and easy products and innovations on cold cuts, ready-to-eat, salad meat, et cetera, makes chicken an important and more relevant ingredient in breakfast, lunch and snacking. So it's much more than the traditional dinner. This is occasions that chicken are winning market shares. Yes, we are on a brand-building journey, innovation into new product categories like new raw material presentations like this sliced and diced, a new packaging like this new standing plastic reduced product. This is also about sustainability, but this is building the brand for Scandi. So our branded chicken products are a guarantee for high-quality, food safety and also a lot about inspiration. Yes, a few words about innovation and the innovation process. We aim for high success rates on our innovations. To succeed, we need to focus on 4 important areas with excellence. That's the 4 ones. The first 1 trends. We, for sure, need to understand the future and consumer food trends. With consumers, it's a lot about drivers and barriers. And perhaps the most important 1 is the customers. How do we actually cooperate with the customers, discuss with them, develop together, and do this business development together. This is growing the category. That's the key for the customers. And also, we need to innovate and do a lot of good things when it comes to balance of the bird. So if we have excess of thigh fillet, we need to do a lot of innovations on thigh fillet. We experienced that higher level of processing makes it easier to gain price and brand capitalization. The higher up in the pyramid, the higher price per kilo relative to processing cost. But there is also an improvement potential in each of these layers. So innovation and functional developments, for instance, on legs or wings. It's also important to increase the consumers' willingness to pay and to add value. But we also have a fair share of private label. And this is in the chilled category and the branded and the private label, who exists very well. Within the ready-to-eat category it's 36% brands and 64% private label. And we have actually found the zone balance together with our customers, brand versus private label. And it's the strong innovation and brands that creates value for both us as a supplier, customers and consumers. And a few words about the channels, retail and food service. We are present in both channels in all Scandi markets. And retail, yes, it's big. It's 5x the size of food service, but it's important to say that our market share in both channels is quite representative in all markets. So being present in both food service and retail is important, because it creates synergies. And there is an inherent hedge in case of disruptions like the COVID-19, when actually food service dropped and retail over performed. We are also seeing trends in restaurants and out-of-home that will emerge later in retail. So looking at food service, you see that it had a solid drop in 2020 and 2021, but it's back on track and the growth is phenomenal in food service. And a few words about growth, capita consumption. The capita consumption varies across markets due to historical aspects and traditions. The whole bird, for instance, is well established in Ireland. So there we see a high capita. In Norway, we eat a great deal of fish. And in Denmark, pork plays an important role. But chicken is fairly immature with regards to occasions and repertoire compared to red meat. And we expect the capita growth to continue. For instance, in the U.S., the capita is 45 to 50 kilo. So the potential is enormous. And the growth will also come from the fact that quick service restaurants put more and more chicken on the menu and the cultural and religious barriers are strongly benefiting our beloved chicken. So the word is back to you, Jonas.

Thank you. And now we will move into the chapter that is called affordable because it's sustainable. And price has always been important for customers, and the focus has increased even more in the present inflationary environment. And chicken is affordable in all segments, from high-end cuts to low-end segments, and fillet is even competitive in the low-end cuts. And we see future opportunities, therefore, to drive more value out of the chicken, and that is due to its affordability. And how come the chicken is so affordable? We have this short production cycle, and that's just over a month, and the resources required correspondingly low, mainly in feed, that gives lower emissions, lower water usage, and then we have an efficient infrastructure in our value chain. So we have this short production cycle. And on top of that, we also have high survivability due to our controlled production environment within the supply chain. And that gives a high edible output per kilo feed, and it's actually similar as salmon, but in 4% of the time and it's 50% more edible meat per kilo feed than pork and it's 400% more than cattle. And in this slide, we present cost per kilo delivered converted into edible meat. And as you can see, it's all linked together. An efficient feed conversion and the number of kilos delivered gives an efficient cost per kilo. And those 2 metrics are an important base for our cost efficiency in the chicken value chain. And here, we look into how the costs are structured. And to make it really simple, 1/3 is feed, another 1/3 is farmers' inputs cost and other costs, farmer costs. And lastly, 1/3 is our processing cost. And as you can see here, there has been a strong inflation last year, and it has resulted in price going up. So it's almost 50% since 2020. And then we look into cost cyclicality, and our business has typically a high exposure to cyclical raw material. And that's an example for price as feed prices. But due to our dynamic pricing model, with more than 80% of our sales linked, we have the ability to pass through feed costs. And this mechanics gives us low exposure to cost variations, but we're not fully protected and are still material lag to be closed in the implementation model. And if we look into our internal costs, there are structural differences, both in terms of size and our bargain power in the market or breed mix or the plant throughput. But in this chart, at right-hand side, you can see that there's difference in cost, and that shows the value change in efficiency. So we see a significant potential for improvement there. And on this slide, it gives you a glance of our EBIT sensitivities. And just to read them, 2% general cost efficiency, that's about SEK 80 million, and 2% in personnel cost, that's about SEK 20 million. And if reducing the feed conversion ratio from 150 to 149, that's about SEK 20 million. So just to have some glance of the EBIT sensitivities. And here, you can see our total value chain from grandparent flocks owned by the genetic companies, and that's on the left side, over to the right-hand side, where you can see our Ingredients business. And as you can see, there's a broad trade and coordination with external parties, the dark blue boxes, that is our own operations. The light blue boxes is our joint ventures, and the gray ones, they are third parties in the value chain. And in the bottom of this slide, it illustrates the relatively short production cycle from parents birds hatched on the left hand to the first broiler on the market. And the total time that is only this 25 plus 3 plus 6 that ends up to 34 weeks. And this is a structural benefit versus other proteins to adjust in changing market conditions. And here on this slide, and on the chart to the right, you can see that both cost and sustainability has a large reliance on third parties. So if you look at the CO2 emissions, that's a rather small part that's in our own operation. The big part is in the external part in the value chain. And of course, we're working together to get better output out of it. And then on this slide, it shows an example of feed composition for chicken feed. And it's mainly wheat, soy, and maize. And the composition differs between countries as well as different quality year-on-year and different cost parameters. But the main thing is wheat, soy and maize. And with that said, I will hand over to Ida Ljungkvist, Scandi Standard's Sustainability Director, that will present the key sustainability aspects for this chapter. Ida?

Great. Thank you, Jonas. If you compare chicken to other animal proteins, the climate impact is low. It's more than 90% lower than the carbon footprint of beef, but also significantly lower than the carbon footprint of pork and salmon. But we can do better. So Scandi Standard has set ambitious science-based climate targets, aiming to lower emissions with 50%, both in our own operations, but also in our value chain by 2030 from a 2021 baseline. To set the targets, we have done comprehensive work related to mapping emissions in the entire value chain, and this is important not only to be able to set correct targets, but also to be able to understand where reduction efforts will make the most impact. What we see from this is that 78% of the climate impact is coming from feed and feed conversion. And the main reason for this is the emissions that are linked to soy cultivation. At the same time, as Jonas mentioned, only around 4% of the emissions come from our own operations. So to meet our climate targets, we need to take action, both in our own operations and in our value chain. In our own operations, this is linked to developing energy and cost-efficient solutions that can help us to lower the use of fossil fuels such as replacing natural gas with district heating, switching to electrical heat pumps and to recover heat from wastewater. In addition, we focus on energy efficiency because the kilowatt hours that we don't use are always the best kilowatt hours, both from a cost and sustainability perspective. In the value chain on the other side, the key focus is to reduce the climate impact from feed through using less soy. So 1 example here is where we look at replacing soy with locally grown protein crops such as beans and peas, but also to use a better and certified soy in the cases where we still use the soy. In addition, we work with the growers to measure and reduce emissions at farm level. And we also work with other key procured goods and services, such as packaging and transportation, where we have several projects aiming at lowering both costs and emissions. Being a food producer, Scandi Standard relies on the natural ecosystems. And our operations can be heavily impacted by, for example, drought or flooding, but also changes in consumption patterns and regulatory changes. To address this and to ensure that Scandi Standard is successful also in the long term and well prepared to meet these challenges, sustainability is an integrated part of our strategy and a cornerstone of our business. Concretely, that means that we do not only have annual targets which are linked to incentive programs both on local and group level, but we also have sustainability-linked loans and comprehensive sustainability reporting to all stakeholders, including investor ratings. To be able to focus where it matters the most, we have developed a set of 2030 sustainability targets, which were approved by the Board end of 2022. These address key material topics related to Scandi Standard's ability to be successful in the long term. To ensure integration into the daily business, the targets have been broken down on country level with local targets and action plans. The 2030 sustainability goals tells us the what? These guiding principles tell us the how -- when it comes to how we do sustainability. So firstly, we have a value chain focus. As you saw previously, 96% of the emissions come from the value chain and are coming outside of our own operations. So working with a holistic value chain perspective is the only way that can make us successful. We do this through systematically improving data quality and methods, but also through relying on external recognized frameworks, such as the Greenhouse Gas Protocol and the Science-Based Target initiative. Secondly, we are working towards a stronger governance structure related to sustainability issues, meaning that we are developing processes around how we manage impacts, risks and opportunities related to sustainability factors. This is also done through widely known framework, such as the Task Force on Climate-related Financial Disclosures, the TCFD, but also through the new regulatory frameworks like the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards. Lastly, we believe in transparency and open dialogue with all our stakeholders, and this is done through a variety of channels, from the sustainability report to investor ratings and climate labeling targeted at customers and end consumers. Because of this, we have seen a big improvement in our investor ratings over the past years. In August, for example, the Morningstar Sustainalytics rated Scandi Standard as #10 out of 360 rated companies in the packaged food goods sub industry. As I said, we can always do better. And we have a full pipeline of exciting developments that we want to do to further strengthen our sustainability performance. These include, of course, implementation of the new EU regulatory frameworks, such as the CSRD, ESRS and also the Corporate Sustainability due diligence directive, but also detailing our climate transition plan, including CapEx and OpEx needed to meet our climate targets in 2030, as well as implementing environmental management systems at all our production sites by the end of 2025. In addition, we work on a number of important food sector specific initiatives related to biodiversity as well as emissions from land management and land use. Another question that we see will be a focus area during the next year is the continued discussions around animal welfare and chicken breeds. And I will now hand back to Jonas, who will take us through some of that.

Thank you. Yes. Then we have the breeds. And that is a well-discussed topic nowadays. And let's start with Ross 308. That is the most common breed in Europe, and it's developed over a long time to optimize overall performance, such as high feed conversion and edible yield. And there are political discussions about slow-growing breeds, and they are mainly driven by NGOs, but it's often a simplified discussion in media. And for us, we are supporting a more fact-based discussion about this. At Scandi Standard, we are focusing and we are welcoming an increased focus on animal welfare. And we need to remember that we are the market leader in Nordics, both on slow growing, and on Ross breed. And as Tommi later will talk on breed, that is just 1 of 8 important factors. So good husbandry and practices will always be the main welfare determinant. So breed aspect has so far overshadowed the increased resource requirement in the debate. But as you can see in this slide, the fillet needs to carry the cost differential, and that brings to a much higher retail price on a few products. And the yield is lower and you need to take out the production cost, the total production cost on less meat, and that will end up with a higher cost in retail. And we have lessons learned from a radical implementation in Denmark, where Scandi Standard moved into 100% slow-growing breed, and that has costed Scandi Standard SEK 200 million a year, and downgrading is a significant cost. And once again, the thing that we're talking about, anatomic balance. You can't take out a premium on rendering or something of a slow growing. That is the same cost. So the cost of this needs to be carried to a few products. But for us, it's important to follow the consumer and being forefront and finding the right solutions. So we are now expecting a more optimal breed in Denmark. And today, the optimal breed in Denmark is 50%. So it's 50% slow growing, 50% Ross, and that differs from country to country and from time to time. But regardless of breed, chicken is an environmental and affordable choice. So in this chart, you can -- we present the CO2 emissions per kilo edible meat, and the price relative to peers, as you can see, is low on chicken, even if it's Ross or it's a more slow growing race. And with that, we go over to responsible, safe and nutritious. Hand over to you, Ida.

Thank you. Rightly, the consumer has high expectations on the meat they eat and how it's produced. And we see negative media attention when these expectations are not met. This can be linked to animal welfare or to food safety deviations, for example. In Scandi Standard home markets, we have some of the highest standards in the world when it comes to animal welfare and food safety. One example is that there is always a veterinarian from the authorities present at slaughter that checks every single bird that we slaughter at our production plants, but we can still do better and improve further. To improve, we are focusing on improving quality throughout the value chain through culture, common processes and transparent reporting. This includes having the right resources and procedures to mitigate and rectify wrong behavior. No one wins if a chicken is not treated well or is unhealthy, and we believe in driving continuous improvements through transparency and open dialogue. There are 3 key areas when it comes to creating trust for what we do, responsible animal welfare, safety for consumers and employees and nutritious products. And in the next section, our Live Operations Director, Tommi Saksala, will take you through how we work with animal welfare at Scandi Standard.

Thank you, Ida. Let us first define what makes animal welfare actually. The most important drivers are these 8 factors presented in this picture. And the most important 1 is at the top, the grower skills and his commitments. How well the grower knows what to do and when to do it. Reading the signals from the birds and acting accordingly. What is happening in the daily lives of the birds in the chicken house. The second and third is the quality of the day old chicks and the feed. The cornerstone is a healthy day old chick from day 1. Right feed is building the bird correctly every single day. The fourth important factor is the actual housing conditions 24/7. In our Nordic supply chain, the houses are well built, catering for all weather conditions with a concrete floor. These are not given outside our markets. The fifth element is the handling of the birds when the time for market comes. How the birds are caged, transported, how long they are transported and then handled in the processing plant. The breed question, as said, is discussed a lot in the media, but it is only 1 of the 8 factors. At Scandi Standard, we are outcome focused irrespective of the breed. Animal welfare is not only good from ethical point of view. It's highly linked to productivity, quality and profitability. Only animals, which are treated well, grow well with high weight predictability, use feed to grow instead of healing a stressed body. For example, feed conversion ratio is only optimized when the birds are growing in optimal temperature, humidity, and optimal litter quality, as in this picture. Optimal conditions with the right feed make the chickens to grow in a uniform way with low weight variation, creating good basis for good meat yield, lower unit costs and uniform muscle, and consequently, product size. Optimal litter quality makes it possible to be able to sell the feet. Roughly 60 grams to 70 grams of the chicken is feet with a premium price to Asia. We see animal welfare at the core of building a competitive advantage, and it's not easy to copy. These matters, as said, also explain much of the company name, Scandi Standard. Next, some KPIs from our value chain. Chicken in general is positioned well when looking at the mortality, for example, across the species. In our value chain, we have an average mortality of 3.7%. This is achieved with very low antibiotic usage, making this performance internationally competitive. However, we do know that best practice within our own value chain is about 3%. And we are, of course, striving towards that. Again, day old chick quality is the key in achieving this. Foot pad condition of the bird is a very good indicator of the conditions in the bird's living environment. This KPI is also internationally recognized and most importantly, it's possible to measure this. Sweden was the country which introduced this measure to the chicken world decades ago. The lower the score, the better the feed quality is. Our performance is at 12 points on average, whilst the European level is at the range of 40 to 60 points. This is a significant difference. In the Nordics alone, our performance is at 6 points. Many farmers are performing at 0 points on a constant basis. On this KPI, our focus is on activities in Ireland, and we know exactly what needs to be done to improve. On the lower graph here, we see transport mortality. And we have good performance on this KPI as well, driven by focusing on this process, but also that we have kept the transport distances short, not the case outside of our markets many times. Then how much and how often antibiotics is used in the value chain is another good welfare indicator. It is also important from the antibiotic-resistant bacteria point of view, highly important for us humans and our health. Healthy birds don't need treatment, but sick birds should and must be treated. At Scandi, a veterinarian is always deciding whether the birds need the treatment or not. In Nordics, antibiotics are hardly used thanks to decades long focus on the described 8 real animal welfare drivers, working with the root causes. In Ireland, we have managed to cut down the use of antibiotics by more than 50%. We are confident we will reach our target of less than 1% treated birds by working with the same root cause analysis as we have done in the Nordics. At this very moment, some weeks, we are already down to 10%, and that's roughly 1 million birds a week. Regarding responsible, safe food, and poultry, 2 things are to be mentioned, salmonella and campylobacter. Both bacteria are widespread in nature and most animals can carry them in their intestinal systems. Chicken can carry these and not get sick. For humans, campylobacter is causing the most food-borne illnesses in the European Union. And salmonella is the number 2. For decades, especially Sweden, Finland and Norway have been successful in practically eradicating salmonella from the poultry value chain. Today, the prevalence in our value chain is below 0.5%, as you can see. This is a result of rigorous preventative work and analysis all the way from purchasing the feed raw materials into the processing plant. What also must be said is that in the Nordics, we have 0 tolerance for any serotype of salmonella. This is special. Regarding campylobacter, it's more difficult to get to 0. It's more seasonal bacteria prevalent in the summer and autumn periods. Here, our strategy is to fight it with strict biosecurity on the farms with entrance control, cleaning the houses with water, disinfection, drying the houses between the cycles. Internationally seen, our performance level of 10% campylobacter-positive flocks in the houses is world-class. This is another good example where good animal welfare helps in reducing the bacteria entering the food chain. By growing uniform birds, the risk for cross-contamination in our plants is significantly reduced. Although many KPIs show good performance on average, we can certainly improve our performance across the value chain by better integration and focusing on quality. I'm referring to the many external partners we have illustrated by the mostly light colors in this table. Reducing variation in the processes across our value chain is the key here, achieved by best practice sharing standardization, transparently sharing the outcomes, and rigorous quality measurement and quality pricing. An example of standardization is specification of broiler house, how it should be set up. We have those 330 farmers. Another area we need to improve upon is better, more standardized service level agreements, where quality and mutually beneficial terms are emphasized. These 2 combined are not so common in agricultural supply chains. And with this, I leave the word back to you, Ida.

Thank you, Tommi. Together with climate and environment, and animal welfare, the health and safety of our employees is a key priority, and the lost time injury frequency rates, so meaning the number of accidents that leads to absence at least the next day per million hours worked is 1 of the key KPIs that is also linked to our executive incentive schemes. Over the past 2 years, Scandi Standard has been running a comprehensive improvement program to get the frequency of accidents in the workplace down. This has included analysis and categorizations of accidents as well as root cause analysis and development of improvement plans at each production site. But we have also focused on changing the culture and the tone from the top. Now we discuss the LTIs as the first point on the agenda of every group management meeting, and accidents are also discussed every morning in group operations daily check-ins. And this has led to significant results, as you can see. Last year, we improved the LTIs with 30%. And this year-to-date, we have improved with another 13%. And with that, we have covered responsible and safe. And next step is nutritious. Similar to other animal proteins, chicken has a very high protein content, but chicken also comes with a significantly lower share of fat than pork and beef, but also then salmon. In addition, chicken is rich in vitamins. And when the Nordic nutritional recommendations were released earlier this year, white meat was presented in a much more favorable way than red meat, mainly driven by its nutritional profile. I will round off this section of the presentation with coming back to our 2030 sustainability goals, which not only covers the climate and environmental aspects that I spoke about earlier, but also, of course, important KPIs and targets that are related to food safety, animal welfare, nutrition and employee health and safety. And I want to highlight that this is not something that we are working on in a silo in Stockholm, but these are areas that matter for Scandi Standard's long-term success every day and at every production site. We, as a company, can only be successful if our chickens, the ecosystems that we rely on for feed and agricultural production, and our employees are healthy and thriving. And while we're proud of being both transparent and in the forefront in many areas, we also know that there is always a way to do it better.

Thank you. And before we will enter the last half of our presentation and go into climbing the value ladder, I think that we are ready for a pause and take a couple of coffee upstairs. And so we will take a pause for 20 minutes. So if we can be back here again 10 minutes to 11:00. And then we will start with Kasper Lenbroch, standing up there, and he will talk about climbing the value ladder. Thank you for listening so far and see you in 20 minutes. [Break]

Welcome back, and I will directly hand over to Kasper Lenbroch, and he's our Head of our Danish Operations. So welcome, Kasper. And he will talk about climbing the value ladder.

Thank you, Jonas. Yes, selling chicken is all about value creation and climbing the value ladder. As Jonas mentioned earlier on, this chicken industry is somewhat different from a lot of our businesses. We take in a full chicken and then we cut it into pieces, and then we need to find the right potential value for each piece. The task is to take the steps from the bottom of the ladder to the top, going for the direction of more value creation all the way from Ingredients up to Ready-to-eat snacks. To do so, we need to utilize the full carcass by selling the whole bird. If not, we will have a negative impact on our value creation. Lately, there is a big potential to step up on the ladder from Ingredients all the way to the top. To understand the whole bird, let us look at the anatomy of the chicken. The main cuts, the 1 we have down here in left corner accounts for 49% of the volume, but 89% of the revenue. Fillet on its own accounts for 21% of the volume, but 60% of the revenue. So this is by far the highest value-creating part of the chicken, followed by the legs and the wings. I'll get back to that later on. But there is a huge potential towards value creation in other parts, what we also define as Ingredients. They account for roughly 50% of the volume, but today, only 11% of the revenue. That is why the carcass balance plays a central role in the profitability. Every cent counts due to the big volume we have in Scandi Standard. In our domestic markets, the demand is very strong for local produced chicken, where we have a clear leading position in Sweden, Norway and Ireland, while in Denmark and Finland, we are aiming for the cool position, too. Let us look again at the fillet. It accounts for 21% of the volume and 60% of the revenue and is the most valuable part of the chicken and sets the cornerstone of the value creation. But in our domestic market, we are also left with a surplus of wings and legs, and not least, Ingredients. And that's why we have built out a strong export share for those cuts. We have a strong relationship with our customers across the globe. An example, value of wings is much higher in Spain or South Korea, where we should get with our customers to create a higher value instead of accepting just commodity levels. By doing so, we find them the best destination for each part of the chicken. Today, roughly 15% of our net sales have high exposure towards global commodity pricing. This 15% consists mainly of what we call Ingredients with a take it or leave it price. That means that we have a low risk due to 80% of the net sales being based in our very strong home market with a local preference, strong relationships, commercial strength and strong brands. As such, we are less exposed to global commodity movements, minimizing our risk compared to many competitors or other food suppliers. But we still find a potential in making more out of the 15% commodity exposure towards more strategically based export by climbing the value ladder. So it is smart to find the right balance between the supply of birds and the domestic demand of fresh chicken fillet. And we'll now look into that. In 4 out of our 5 home markets, we are trying to balance supply of chicken fillet, that means meeting the demands of each domestic market with preference for domestic products and a well-dimensioned capacity. As you can see, Denmark stands out with over-dimensioned production with 2 almost similar size players. To optimize profit, we have built a strategic export for the group out of Denmark. And to further mitigate the unbalanced conventional chicken in Denmark, we've worked our way into a clear leading position in the slow grow category now with a balanced supply of slow grow to meet the demand in the segments. In our home market, we find we had a strong commercial team, each country with excellent relationship to box and brands. Combined with strong preference for domestic fillet, we have a unique position of maintaining and developing our position. Through our sales and operation planning system, we optimize our sales of the different cuts with increased collaboration across the Scandi Standard Group, find relevant export channel market customers of our unique solutions such as best-in-class food safety, nonuser of antibiotic, and free from salmonella. Adding a problem-free logistics and excellent service, we are able to reach higher earnings than standard commodity price levels. However, we still have a lot of potential for improvement. But now we have the team and the management in place, and now we need to accelerate and scale fast. The food sector and the consumer behavior is rapidly changing. And we see new movements and fast pace than ever. But chicken holds a great position as the preferred meat protein of the future. And due to a very short production cycle, we are able to adjust supply quickly to match the changing demands. That's lowering our exposure to excess meat, while enhancing our ability to tap into growth opportunities in the future. Another aspect of today's consumer is that we see much higher focus on convenience. Everybody likes time and wants convenient solution for the dinner table, and we can provide that. A powerful example of climbing the value ladder is deboned chicken leg, where the cooking time is 3x shorter than the bone remains in the leg, and the price per kilo is tripled. This shows that the leg category still has a lot of potential in both our home market and beyond, and we are working hard to provide the solution and tap into the value uplift. The deboned legs is just 1 out of many examples how we can take steps in the value creation. If we increase the deboning of chicken legs by 10% across our 5 home markets, we're looking to upside of SEK 100 million in Scandi Standard. Another example is that if we switch 10% of our volume from commodity export to strategic export, we look around SEK 10 million. We have organized the combined group export division to support this, and we are well on the way. Each step on the ladder means an uplift, and the more steps we take, the higher profitability. Our Ready-to-cook go directly to food service retailer Ingredients, but the far most profitable route forward is Ready-to-eat where we climb up to the upper part of the ladder. I'll now switch to talk about the Ready-to-eat part. In our Ready-to-eat category, there is a huge potential. The precooked and fried product in Stokke and Valla is based on internal raw materials, while in Farre, we have an external sourcing of raw materials of 47% today. There is a big potential in this, and we are looking closely into increased internal sourcing to Farre. We have a strong product portfolio and a high demand across markets. In Scandi Standard, we have 3 processing sites in Ready-to-eat. Stokke in Norway and Valla in Sweden are producing precooked and fried products for the home markets. In Farre, we produce breaded products, both for domestic and especially international markets. We focus on fewer, bigger, better concept, where we streamline and scale the production with a sharply defined product assortment and customer base. It's all about providing the right products for the right customers based on strong insights. We have managed to do so and delivered a strong growth in 6 out of 7 years and made a 6x organic growth in 7 years. And from '21 to '22, we grew the ready-to-eat business with 40%. We foresee a continued growth in this area. All trend drivers are especially strong for convenience products. Our Ready-to-eat business yields a significantly higher return on capital employed compared to Ready-to-cook. New capacity in Norway is expected to come effective mid '24. And in Farre, we prepare our planned expansion, which can be set up on a short notice when required. As some of you probably know, we lost some Ready-to-eat business lately. EBIT is likely to bottom out in Q4 '23, somewhat below Q3 '23 level. The lost business was high volume and low margin, but the lost business also has made room for new opportunities with more profitable customers. That is why I'm very -- I'm not very concerned about recovering the recent lost volume over the coming periods. We have historically seen a strong but uneven demand, and we expect continuous growth over time. Growth in this segment comes in sequences, and we have a lot of potential customers in the pipeline. We will recover and come back strong and the ready-to-eat journey is a cornerstone in our strategy. And then Jonas will explain more about Ingredients. Jonas?

Yes. Now we have talked about climbing the value ladder and Ready-to-cook. And lately, last presentation or last slides were about Ready-to-eat. And now we move into the Ingredients part. And as mentioned several times before, it's 50% of the raw material volume from our Ready-to-cook that is handled through our Ingredients business. And even within the Ingredients business, there is a value ladder. At the low end, you see the rendering part. And the more we can harvest and process, the higher it gets on the ladder. It goes from rendering business into pet food and from pet food up to human consumption. And an example of ingredients that is for human consumption that can be feet to Asia, gizzards to retail, mainly southern parts of Europe or Asia. It can be liver mousse served in a restaurant or liver that is sold in retail. And all this, we can see it's about climbing the ladder, and we have a huge potential of climbing that ladder in the future. And to climb that ladder, we have a lot of initiatives within our strategy period to utilize a larger part of the potential in the Ingredients business. And quality, that is 1 important aspect. Investing in equipment to harvest more is another important thing. Finding the right premium markets for specific product and searching for new applications of raw material. All of those different things are important to be able to climb up from the rendering part of the Ingredients business. But as presented in the former slide, a vast part is in the rendering business. And in Sweden, Norway and Denmark, we upgrade this through our joint venture that is called Farmfood, and Farmfood's plant is in Northern Denmark, and it produces typical product that you can see down here in the right corner. And that is for pet food, feed, or to biogas, and you have that meal, the chicken pulp and the chicken fat. And now when we have talked through the value ladder, I think that we have shown that it's critical to our success that we ensure selling the different parts of the chicken to the highest paying customers and market segment. And a key tool to do this is strong integrated value chain and especially strong sales and operational planning and anatomic balance focus. So where we ensure that the right allocations goes to the right customer. At the same time, we ensure to tap into every opportunity to value up and push forward integration in the value chain. And that will take new steps up the ladder. And to do so, we decide on the right products and propositions to the customers, having a strong branding and product development and ensure that we tap into all major consumer trends and convenience, aided by a full forward integration in Ready-to-eat or simply by increasing our a Ready-to-cook processing capabilities. And that enables us to make more convenient product, but also more cost-efficient products, keeping chicken affordable. So finally, none of this is possible without strong collaboration and buying from our customers, ensuring joint value creation by having the right products at the right locations. And with that, we end the value ladder part and move into objectives and investment priorities. And a better and much more structured Scandi Standard is ramping up investments for the future. In 2016 to 2019, we have had a strong organic growth. But during 2022, we ran into market disruptions as an unsuccessful diversification in Denmark, which resulted in challenging in profitability. We have now recovered the margins and delivered the highest absolute EBIT in Q3 in Scandi Standard's history. And there is a strong volume growth. Chicken consumption has grown significantly at the expense of other proteins, and chicken will take share of the total meat consumption and the total chicken volume is expected to grow 15% until 2030. And once again, as we have presented the reasons for that in this presentation, I will say it once again, chicken is delicious, convenient and versatile; affordable because it's sustainable; nutritious, safe and responsible. And therefore, we will now present our financial targets and our strategy to achieve them. And we want to create the Scandi Standard to be proud of, to be trusted by everyone, and where people can develop. And with this comes earnings, and with earnings, you earn the right to grow. And at the right-hand side, we present our financial targets for 2027 and our sustainability targets for 2030. And if we look at the growth targets, we are expecting growth over the coming years. And we set the target for '27, annual growth of 5% to 7% net sales growth, but we need to be aware of that we are coming from high inflation with high feed costs that will affect the net sales in 2024. As I mentioned before, our business has typically a high exposure to cyclical raw material prices as feed. But due to our dynamic pricing model with more than 80% of our sales linked, we have the ability to pass through feed costs. So in 2024, we expect fee to come down, which will affect our 2024 net sales numbers, but that will not affect our volume growth and our EBIT per kilo expansion in 2024. Then we have the target, an EBIT target above 6%. We are setting a target to have arose above 15%. And when we look into the sustainability targets, we have the ambition to reduce our CO2 emissions with 50%, have an antibiotic use that is below 1%, and the lost time injury frequency below 15, and we want to keep and maintain our employee satisfaction to be above 75%. And in addition to that, we have an important supporting target that is SEK 3 EBIT per kilo grill weight. And this target, I will walk you through in a separate slide, because it is a super important target for us to be able to achieve growth and our EBIT percent. Our policy for dividend and leverage ratio will remain unchanged where the dividend is around 60% of the net income. The leverage ratio is lower than 2.5x EBITDA. And these are the 4 strategic pillars that will support us in achieving our goal, increase the value of our protein, ramp up the efficiency, and all of this, we need to do with sustainable means in every step of the way as 1 company making us constantly better together. And better together is the belief and practice we strive for to make us more effective, successful and impactful when we collaborate, work as a team, and leverage each other's strength. It's emphasized, the collective effort, shared goals and team cooperation lead to improved performance and outcome. And that is our belief. And to demonstrate activities we're doing and what targets we would like to achieve, I'll walk you through a couple of important activities from each strategic pillar. And it is really important for us that it's not just talk, that we're actually measuring what we're doing. And in the first part, to increase the value of our protein, we are focusing on improving utilization of the entire bird, driving growth in our Ready-to-eat business, product innovation and investment in our production technology, monitoring of consumer trends and behavior, all of that you've seen in the presentation before, and the integration and collaboration with customers. And the target we aim for this is to double our EBIT per kilo from 2023. To ramp up, our efficiency and quality end-to-end, we are focusing on upholding efficiently without ever compromising with safety, quality and sustainability; standardization, collaboration and synchronization; system integration and development; as well as increasing automation. And the targets for that will be measured by cost per kilo. We will have 1 common ERP system implemented in all Scandi Standard countries and 1 core value chain BI platform. For the integrated sustainability, we have target setting standardization and management. So I'll have Ida talk about that. We have local road maps with sustainability as part of all day-to-day operations and proactive regulatory compliance and development. And our target for that is to reduce the CO2 emission by 50% from '21 to 2030, and have antibiotic use below 1% in 2030. And to further promote as being better together, employees are given the opportunity to develop with us in a safe and healthy workplace. We align targets and KPIs across countries and functions and put focus on leadership, teamwork, employee communication, as well as brand culture and vision development. And our targets here are the lost time injury frequency from 27.4 in 2022 to below 15 in 2030, maintain satisfaction and motivation above 75, and have a new operating model implemented. And on this, slide, you can see the essence of our clear road map to achieve our SEK 3 EBIT per kilo. And as I mentioned before, our SEK 3 per kilo is important target. And we see a large potential to climb the value ladder, as talked about, and a large potential to set up better efficiency in our value chain. And in this chart to the right, you can see our performance, recent years, and that we have set a bold goal in our strategy plan. So we come from, in 2019, SEK 1.62, we had a dip, we have recovered in 2023 year-to-date at SEK 1.75, and now we're aiming for a SEK 1 per kilo target above SEK 3 per kilo within the strategy period. And to achieve our goals, we are building a robust vehicle to serve our home markets and beyond. And we are launching this SEK 2 billion investment program in the period. And the investment program is to support our Ready-to-cook growth. And you can see that on the tonnes in our Ready-to-cook business. So we want to increase the volume 12%, but we also want to move us from our state of SEK 1.75 up to a target above SEK 3 per kilo. So it's both volume and margin expansion. And we want the investment to support us to ramping up our ingredients business, and we want it to be preparing for a significant growth in ready-to-eat. And that 1 you can see down at the chart down in the right corner, a 30% growth within Ready-to-eat. And then we have earmarked investment for meeting our sustainability goal. But as you all know, sustainability and efficiency is linked together. It's only different measures in how you can use resources in a more efficient way. But on this journey, it's important to develop strong risk management framework, which is designed to protect our business goals. And we have the infrastructure part, then the business strategy part, then it's about managed external strategic risk and opportunities, and manage the internal operational risks and opportunities. And all this together links up to support our business targets. And that is important for us to have a strong risk management, and it's also important for us to be agile in the market. We are talking about our investment program, but we will never compromise with our profitability. So where we put money, we're calculating and securing a strong payback in what we do and that can support our growth and our journey to reach our margin of SEK 3 per kilo, 6% EBIT margin, 15% rose, and the growth of 5% to 7% annually. And this is the management team within Scandi Standard. Most of them are here today, and some of them have presented. But please stand up when I say your name, so everyone have seen you here. So we'll start with 1, the guy that we already have heard, Fredrik Strømmen. And then we have our Danish colleague that also had been presenting, Kasper Lenbroch. And we have Göran Matzn, our CIO. And then we have Janneke Wackerberg, Group Communication Director. Tommi Saksala, Group Live Operations Director. Then we have Samir Törnblad, Group HR Director. Ida Ljungkvist, Group Sustainability Director. Then we have Jean Gallen, Country Manager for Finland. And last but not least, Magnus Lagergren, Group Business Development Director. And that is the team that have been able or going to achieve these goals that we have set up. And with that said, I open up for Q&A. And I think that we'll try to have 2 questions each from the 1 that wants to ask question, and you have the microphone just beside your chair that you can use. So then we open up for Q&A. Daniel?

Yes. Okay. I'm sorry. Just a couple of questions for you Jonas, then sort of looking at these financial targets, the EBIT margin is probably for me the 1 that sticks out the most compared to your history and where you're currently at. I think you're at 3.5% on a rolling 12-month basis. And it's obvious that you mentioned sort of climbing the ladder and also efficiencies as sort of key parts to get to that 6% or above 6%. But would you dare to sort of quantify, are they equally important to get there? Or is there any sort of any pillar that's more important than the other?

You can see, in this business, the most important thing, and that's why we mentioned this climbing the value ladder, because it is about, in our Ready-to-cook business, finding the right balance and refine as much as possible to get the right yield and get the right value out of that will be the most valuable. Then in terms of growth potential, we see the Ready-to-eat as super important to drive even more value out of our Ready-to-cook business. So that growth will support us to utilize even more in our ready-to-cook business. That linked together is the strongest part in us aiming for achieving our target. Then when it comes to the efficiency part, we see, and as presented, there are a lot of inefficiencies in our value chain. We have a lot to do internally, but also to be able to take out the full value out of the value chain by harmonizing getting the right quality from the farmer, so we can get the right yield in the factory, so we can get the right quality out to the customer. That is also significant. But the major part will always sit in how much value we can create out of it.

And just looking at that sort of '27 target and given what you're saying in terms of climbing that value ladder. Do you feel that you have all instruments in place together with efficiencies to have a linear development? Or is that going to be back-end heavy, you think?

I think that we will see not a super linear, because it will go like this. Because our ability to move together with customers and move that upwards and our investment. So it will not be an even linear, but it will not be back-end heavy on the other way as well. But of course, the more we put in on our initiatives, there will be some form of hockey stick in this plan. But it's not that we are waiting for the last year to achieve. There will be a growth throughout the year.

And on that topic, you mentioned SEK 2 billion in investment. Is that even in spread? Or is that sort of weighted towards any part of the period?

No, it's evenly spread. But it's also -- you need to look in, for example, what we talked about is putting more capacity in our Ready-to-eat plant in Farre. That one, we have started, so we easily can set up when we see that the market is there. And that, of course, can be moved a year forward or backward due to what the growth pace will be. But we will see more line a little bit stronger in the back end.

So [ Wolff ] [indiscernible] from DNB. I recall you said earlier 1 thing, finding the markets that pays the highest price. Does that mean you could consider geographical expansion?

I think what we mentioned there is the importance back again to that we can't decide what we buy. So for us, it's important that, that feet will never be a big product in Sweden. We can sell it out to a trader that can sell it to the right customer. But instead, we are focusing on finding the right market where the real value is for feet. And that can be for wings, or that can be for legs, and that can be for other things. When it comes to market expansion, I'm just commenting on that, that we have now recovered and I think that when we have a stronger balance sheet now, we have recovered our margins and our earnings, now we are lifting and looking what is the next step for Scandi Standard. And within this strategy period, we know what we will achieve, but we are not looking into the specific thing that we can comment on today. More questions?

Kasper from [indiscernible]. So maybe on inorganic growth. Can you elaborate a bit more on your strategy?

Of organic growth?

Inorganic.

Inorganic. Yes, it is -- we have said like this, we're not -- in terms of acquisitions and mergers and so on, we are not looking into that part. What we're presenting here today is our organic growth in terms of how we grow the volume. Then we are presenting how we will grow the margins within that. But in terms of acquired things, we are not presenting that. If I understood the question right. We see opportunities appearing all around in Europe. We also see that there will be differences between the ones that are performing and not. And I'm really glad that we have been able to get back on track and actually have the balance sheet to be able to look what's next step for Scandi Standard. And I think that this strategy is supporting us to take an even further step both in terms of value chain or control. More questions? Otherwise, I want to thank you all present in this room or watching us remote. And I think that this concludes the presentation for today and the broadcast. So thank you very much. And now I would like to warmly welcome us to join us for lunch.