Scandi Standard AB (publ) ($SCST)

Good morning, everyone, and welcome to this presentation of Scandi Standard's result for Q1 2026. My name is Jonas Tunestål, I'm the CEO and Manager Director of Scandi Standard, by my side, I have Fredrik Sylwan, our CFO, and I'm pleased to have him by my side today. I'm also glad to report the strong growth and result in the quarter. The next slide, please. We report Q1 2026 with strong growth and in net sales and margin. We had a 9% growth in net sales and increasing volumes, supported by growth across all countries, channels and segments. Sales are supported by continued strong underlying demand EBIT is up 35%. Solid improvements in Ready-to-cook. We had low ready-to-eat margin but a positive outlook. Improvement program continued with full force supported by significant investments in 2026, and the integration of Lithuania and Netherlands are progressing well. So in general, we have a strong outlook for the business. Next slide, please. And now we'll move into the growth and value drivers and the reason why we see a strong demand. It's related to these 3 well drivers for chicken responsible, safe and nutritious, convenient, versatile and tasteful and affordable because it's sustainable. So next slide, please. And here, you can see the strong historical and ongoing consumer trend for chicken. On the graph on the right-hand side, you can see long-term growth in chicken benefiting from substitutions from other proteins like pork and beef. And as you can see in the top bullet, we are estimating 3% volume CAGR in the Nordics and Ireland. So next slide, please. And 1 of the 3 value drivers is the affordability, and it's benefiting from other proteins just because it's sustainable and affordable. Surprise has always been important for consumers, and the focus has increased even more in the current environment of high food prices beef prices are increasing and are becoming more and more expensive, which chicken is benefiting from, but also the long-term trend of switching proteins from red meat to poultry. So chicken is affordable in all segments, and that gives us further opportunities to drive long-term volume and value creation. So we see further opportunities to drive more values out of the chicken due to its affordability relative to PS. So that you can see on the right-hand side in the graph at the top. So next slide, please. And on this slide, we present our EBIT per kilo measure, and per kilo is a good measurement of value creation for our business. And in Q1 2026, EBIT for kilos was SEK 2.22 compared to SEK 1.73 last year. And that is an increase of 29%, and our home markets are contributing well and ostomate will be an addition for us reaching our 2027 goals. So we're expecting to take another material step in 2026. And in the different colors in the diagram, you can see the development in different segments. And as you can see, RT is a very small part of the earnings, which gives us fundamental for future growth when recovery prices and ramping up our new RPE capacity. So next slide, please. Now we're moving into the segments. And the table shows the reconciliation of our segments, strong net sales growth in all markets and strong EBIT contribution from ready-to-cook, whereas ready-to-eat still has low results in the quarter. And as always, we want to remind you of the category Other includes our ingredients business and our corporate costs. So next slide, please. And here, you can see the summary of our sustainability scorecard, and we are transparent on multiple parameters. Q1 shows mixed results partly driven by exceptional cold winter this year. You see slightly higher numbers in the quarter on antibiotic use lead to some challenges in our Irish and Lithuanian operations, but we expect to post a trend during 2026. So next slide, please. And if we look at the segment ready to cook, and that's another step forward with 10% increase in net sales. We have a 5% increase in chicken processed our grill weight, and we have a positive volume and mix effect. EBIT is SEK 151 million compared to last year's SEK 93 million, and the margin is 5.3% compared to 3.6% last year. And it is broad improvements across all markets and channels and glad to see that our structural improvement programs are yielding results. So if we move into next slide, please. Then we move to the feed prices. And we have now been seeing fairly stable field prices for some quarters. In quarter 1, the prices declined slightly versus previous year, but there are still uncertainties, and we need to be prepared for further volatility. We also want, as always, highlight that feed costs are 1/3 of our cost base and that the short production cycle compared to other proteins enable us to be more agile in the supply chain. Generally, we look at feed costs and other costs such as packaging and energy and transport we carefully follow the effect of the Middle East crisis with a view to pass on cost increases to our clients. Next slide, please. And then we're moving into the export crisis. And we see volatile export prices in 2025, volatility were driven by supply issues and that was mainly bird flu issues and Newcastle in Poland and bird flu in Brazil. Q1, also to mention is seasonally our weakest quarter. That's the effect of the Christmas season, where the chicken consumption of poultry consumption is low. Where we compare prices versus last year and prices are up 2%, and we also see that current prices is above Q1 2026 levels. And our aim is to reduce exposure to volatile markets as we're looking for long-term partnership, optimized S&OP and an integration benefits with our ready-to-eat business. So next slide, please. And on this slide, you can see the channel development more in detail. And through these details, you can notice the increase in both foodservice and retail in the quarter. So in general, we're seeing strong demand growth in all of our markets in the quarter. Next slide, please. And this slide is to remind you of our strong market position in all of our 5 home markets and the countries are highly consolidated. These markets have large hurdles for new entrants. They can individually be regarded semi-closed market due to the strong consumer preference for domestic producers. And due to our strong market position, our own supply decision has a meaningful impact on market balance, which has proven to be strong instrument in periods with volatile markets. And note that each market, however, also includes consumer segments less sensitive to Province. So next slide, please. And here, you can see already to cook plants. And as we always mentioned, we should note that [ SEK 11 million ] in Lithuania is just 1 shift. If the market have a positive momentum, we have the possibility to scale up another shift and double the production. So next slide, please. And then we move into ready-to-eat. And the headline is a low result and positive outlook. And we see gradual margin recovery underway, 10% growth in net sales, and that is driven by strong recovery of food service demand, but we see a significant drop in EBIT versus Q1 2025. Part of it is driven by planned maintenance stop in fare during the first quarter, but it's also structurally takes longer time to pass through increased raw material costs. But we're on track with our sequential start-up in Netherlands, successful kebab processing factory A, outperforming our internal targets. And we're also looking into capacity -- double capacity during the second half of 2026 on the kebab production. In the Factory C, we will do the trial runs as planned in the second half 2026. So next slide, please. And here, you can see the figures. It's, of course, very encouraging to see the growth in food studies after several periods of weak demand in ready-to-eat. Growth in the retail channel continued to be very strong. Ready-to-eat will be an important long-term tool in development EBIT per kilo. And more specifically, I will talk about that later in our strategic pillars. It is about increasing the value of our protein. So next slide, please. And this slide is a reminder of the strong historic organic growth in ready-to-eat business, the latest 10 years. I'm confident that it will continue that trend. And the 2 main type of businesses, 3/4 is breaded products on the European market and 1 quarter is integrated local business in Sweden, Norway and Finland. And it gives us a normalized high return on capital employed, an average EBIT margin of 6% the last 5 years. But in the quarter, we only had 2.7 for the reasons described earlier, which also shows the potential going forward, and it is low capital employed compared to ready-to-cook. And as you remember, we lost the Continental contract in 2023. But since December 2023, we have growth quarter-by-quarter. So next slide, please. And we're also expecting a healthy market growth in Europe over the coming years. The market players are divided into tears, European players, regional players and local players and Scandi Standard has been a large regional players with 36,000 tonnes of product weight in 2024, and that is about 5% of the European market share. But there's been a stagnant market after COVID-19 and inflation and some European overcapacity. But we see the expected growth to 2030 is about 120 tons. So next slide, please. Next slide, good. And this is the reason why we acquired the plant in Q1 2025, and we acquired that in either state and there has been a fire in the factory under previous ownership. And then the start-up of Factory A in Q3 2025 after refurbishment and that increased our capacity for popular and profitable kebab products that we're producing. And Factory C is being prepared for the second half 2026 or start-up of trial products. And Factory C has the 2 of Europe's largest and most efficient breaded products lines with a capacity of 50,000 tonnes annual capacity 1 of the few with advanced form product capability and it's tailored to meet criteria of the largest clients. So we are expecting significant -- this as a significant long-term growth platform for Scandi Standard. So if we move into the next slide, please. And here, we show our for main processing plants in Scandi Standard . And the 2 European plants is power plant in Denmark and our Ostwald plant in Netherlands and then stock in Norway and Hong Koin Finland are serving our local markets. So I hand over now to Fredrik Sylwan.

Thank you, Jonas, and good morning, everyone. Next slide, please. As Jonas mentioned Q1 was a very strong [Technical Difficulty] it is clear that the underlying performance is very strong. Finance net is down 14% versus previous year. And the cost for increased bank loan is more than offset by lower interest rates. On the back of the reduced positive impact from interest rate swaps have expired, so we don't see that positive effect during this quarter. The effective tax rate is higher than last year, and this is due to a correction of capitalized tax losses in the Netherlands and the effective tax rate is expected to return to previous level. Feed efficiency remains stable and at a strong level. And as Jonas mentioned earlier, lost time in years is up during the quarter. Next slide, please. Capital employed increased year-on-year from SEK 4.5 billion to SEK 4.9 billion, reflecting acquisition activity and integration ramp-up. Return on capital employed improved to 13.3%, which is almost 2 percentage points up despite capital employed -- higher capital employed, indicating that incremental capital is being deployed efficiently. Our return on equity also strengthened to 14.9% from 10.7%, driven by improved profitability and disciplined capital allocation. The equity ratio increased to 36.2% from 34.7%. And as said, the company remains well capitalized and within our targeted capital structure. And as always, we continue to monitor our leverage position to ensure financial stability and maintain flexibility for future investments. Next slide, please. Operating cash flow was SEK 69 million in the quarter, primarily driven by strong EBITDA together with reduced CapEx as the Ostwald acquisition last year was an asset deal. Other operating items are driven primarily by FX impact on personnel costs. Paid tax is below previous year due to less tax paid in both Norway and Sweden. And other items are impacted by FX on interest-bearing debt as well as the stock buyback linked to the 2025 year long-term incentive program. Our net interest-bearing debt is close to flat versus year-end. Reported leverage landed at 1.9x, which is below our internal aim of 2.5%. Next slide, please. Working capital remains low in the quarter despite unfavorable impact from stronger sales and a low level exiting 2025. We see 7% inventory decrease versus year-end and almost flat versus Q1 last year. And despite having a higher level of live birds was basically not in the base last year. Other working capital consists mainly of personnel-related costs, such as and VAT. Our target for working capital as a percentage of the sales, adjusted for financing remains at 6%, in Q1, this metric stood at 4.4%, including financing adjustments, meaning that we are at an efficient and low working capital level for the quarter. Next slide, please. For this year, we expect CapEx to increase to approximately SEK 650 million, which is driven by focus on the 3 main areas, which are the same as last time. Which the first 1 is increased chicken farming capacity in Letania, then debottlenecking and increased capabilities. And the third one, finalized the Netherlands for the start-up of Factory C. And as we ramp up Factory C, we expect an increase in working capital, which will start in the middle of the second half of this year. We also expect finance cost to be around 7% of our net interest-bearing debt, which includes cost for leasing, factoring venderfinancing. The blended effective tax rate is expected to be approximately 19%. Next slide, please, and back to you, Jonas.

Thank you, Fredrik. This slide, I want to talk about 1 of our cornerstones and license for us to operate -- there are 3 key areas when it comes to creating trust for what we do, it is responsible animal welfare, safety for consumers and employees and nutritious products. And this is closely linked to our strategic pillars. So if we move into next slide. And those of you who have followed us for a while have seen these pillars before. These are the 4 strategic pillars that will support us achieving our goals. And it is about increased the value of our protein, taking out more value out of the board and processing more and utilizing more of the board. Then it is about ramping up efficiency, and that is ramping up efficiency in the whole value chain end to end. There's a lot of gains to do with that focus. And that with integrated sustainability and doing this in every step along the way as 1 company making us constantly better together. And it emphasizes the collective effort of shared goals and team cooperation and that leads to improved performance and outcome. So if we move into next slide, we then will show the slide and remind you of our targets for 2027. And you can see them at the right-hand side, and we are expecting strong growth over the coming years. So we have set the targets 2027 to 5% -- to 7% net sales growth -- we have targeted an EBIT margin in excess of 6% by 2027, and we're also measuring the progress in terms of EBIT per kilo, for which we have support and targets of SEK 3 as presented in formal slides. So next slide, please. And we also want to remind you, this slide is reminded we are structurally working with our improved ESG work and improve ourselves in AHG ratings. So we have an A in the CDP rating for climate. There's only a few companies that has achieved A minus rating and even smaller group with an A rating. So the highest scores reflects our standards and the sustainability nature of our business. So if we move into next slide, and once again, we want to show you our measure Enable is an important measure for our value creation. And as you can see, the part ready-to-eat part of the EBIT per kilo is very small. Part of it today -- so the potential of growing our ready-to-eat business in the future is an important part for us to increase our EBIT per kilo. So if we move in next slide, please. And this is to summarize the outlook. So strengthen organic growth trend. It is another material step in our margin journey ready-to-cook that we have strong improvement momentum and ready to eat, we have a positive outlook after a low period, and our improvement program are continuing with full force supported by significant investments in 2026, and we are well positioned for further consolidation and expecting a strong outlook for 2026. So with that said, we are moving to next slide and open up for Q&A.

[Operator Instructions] Our first question comes from Daniel Schmidt with Danske Bank.

Yes. Okay. But a couple of questions from me. And you clearly performed well again on the group, but ready-to-eat is still sort of sluggish when it comes to margin performance and of course, we -- I do understand that you had that maintenance stop, but that also impacted. But you also talked about longer lead times to pass on raw material costs. And on that topic, we are, of course, in a situation now where the world is quite uncertain, and it has an impact on commodity in general and maybe also so fertilizer prices. And of course, that lead time is quite long. But what do you see there? And what do you expect in terms of eventually passing those extra costs on down the line? .

I would say if we take the -- on the cost side, that will reflect the ready to cook and the thing that you mentioned about fertilizers and so on, that is a long-term thing. Our most -- our focus is that we see at the moment, stable feed costs -- we see, of course, as everyone increasing oil prices and cost for transport and plastics and so on, but we have aand really close monitoring that and focus to pass those costs further to the customers. And I think we have a good model for that. If we're linking it to the ready-to-eat part. It has more been driven that we have such a strong demand for our ready-to-cook raw material, the sales out of them, there has been a lack of poultry. And that, of course, optimize the ready-to-cook business. But keep some short-term challenges with the ready-to-eat business because that's the raw material integrated. So what we have been focusing on is to increase the efficiency in our ready-to-eat part. And of course, past prices through, but they have a strong link to what the demand is in ready-to-cook. And there is a little bit longer lead time, as stated. But for us, it's more about the high demand for ready to cook. So they will come after a while. But the cost base, we are following that really close and expect to pass those costs through. But we don't see anything on our big cost parameter yet on the feed prices. But of course, it is, as you say, if forties prices are high, that can have an effect for the crops that will be harvested next year and so on. But -- but we are monitoring it.

Yes. But I'm just coming to understand that these 2 channels are sort of dependent on each other in terms of raw material costs and so on, the fertilizer prices and then, hence, the feed prices is, of course, something that could come later maybe this year or start of next year? And what makes you sort of confident that you won't see longer lead times to pass that cost on as well that you have seen it in RTE? .

Yes. Because the RTE sourcing of changing -- let me give an example to give it more practical. If we have a high demand for means to meat because of the meat and red meat is really high. Then we sell the ready-to-cook raw material off cuts as minced meat and drive value out of that. But that's also raw material into our ready-to-eat -- and then that product is not available, then you need to change that to another product due to the high demand of off-cuts to ready to mince meat. And then we need to change the recipes and push the prices through because we need to use another raw material. So the ready-to-eat business is more linked to the high demand in ready-to-cook. And those costs we need to pass through because the raw material is utilized better and ready to cook at the moment. That's 1 example, more than the cost base backwards in ready to in terms of higher feed costs. If that's what 1 practical example.

So basically, sort of the ready-to-eat input base is more complicated maybe? And maybe you'll feel that you have a stronger pricing power and ready-to-cook if you start to see feed prices going up. .

Exactly -- that's where it starts. .

And you also talked about, of course, high inflation, driving people to look for more affordable choices. And of course, that's been very true for some years now, but we actually have seen food inflation hitting in Sweden in March, and it might take off again given the talk that we just had on fertilizer prices, but that's going to be further down the line. Do you feel that with food price inflation hitting 0 in March and probably not a big change in the coming months. Is that something that could change the behavior of the Nordic consumer? .

I think that we -- if we take the Nordic consumer and including Ireland in that, we see a change to poultry, a structural change to poultry. Of course, that's a short-term effect because the mean meat prices, especially in before really high, but does a structural change from red meat into white meat even -- even if that's not high meat prices. So there's 2 effects that are driving in a positive way for us at the moment, but the structure has been for a while, and it seems to increase .

Okay. So no change in momentum despite food inflation coming down? .

Not what we can foresee now .

Okay. And maybe also back to the last question on input costs. Fuel costs have gone up quite a lot on the back of the situation in the Middle East. How big part of sort of your cost base is related to fuel prices?

I cannot specify the exact number of you because it's only a part of our fuel prices that actually they call the DMT Dream mailers tillage that are changing. So I don't -- I cannot say that exact percentage by heart. But it's a minor part compared to the other input costs. .

Thank you. There are no questions waiting at this time. [Operator Instructions] We have a follow-up question from Daniel Schmidt with the Danske Bank .

I might as well continue then. We did talk about the VAT cut coming through by the first of April in Sweden when you reported last time, and that was still ahead of us back then. And any real sort of reflections now? It's been basically close to a month since that happened? .

The lower VAT first in Sweden, have we seen...

Actually, we see a high demand from the market, but we have seen that before the VAT was lower, and we still see a high demand. Our challenge at the moment is actually to be able to provide the consumers with chicken due to some lower volumes -- so we see high demand for chicken even before. So no, we haven't seen any change in consumer behavior that we can see after change.

Yes. And maybe on the sort of political question, given that this has become such a hot potato in Sweden when it comes to food prices and the lowering of VAT and the special commission that's going to follow the pricing in Sweden. And it's election year on top of that. So politicians are trying to make a thing out of it -- do you feel in any way that sort of your counterparts, i.e. retailers in Sweden are more forcefully trying to push prices or if you need to come to price increases? Or any change to that dynamic? .

I think that, of course, does there's competitors in the retail that want to have the best offers as possible and our competitors around us that wants to create the best offer. Of course, there's always tough discussions when it comes to price negotiations and with the sensitivity for consumer, that is always a discussion. But I think -- and as I said before, I think we have a good model where we actually can present the costs, and I think it has also been improved in in media that the cost of -- when the cost comes, it's the cost that we are pushing forward. And I think that model is actually working pretty well. And of course, it's always a tough discussion when it comes to prices. That's the nature of it.

Thank you. No further questions. So I'll pass the conference back over to Jonas for closing remarks. .

Thank you very much, and I want to thank you all of you for listening in to our quarterly report. So I will wish you all a good day, and thank you very much for joining.

Thank you very much.