Earnings Call: Q1 2020

Apr 24, 2020

And gentlemen, welcome to the 8AK Q1 Reports 2020. Today, I am pleased to present Johan Vessmann, President and CEO. The first part of this call, all participants will be in a listen only mode. And afterwards, there will be a question and answer session. Johan, please begin. Thank you. Good day, and welcome to the AK Quarter 1 2020 Earnings Call. Together with me today, as usual, I have our CFO, Fredrik Nilsson, and we will present the quarter one results and maybe more importantly, comments on the outlook going forward given the unprecedented time that we are in. We will have we have an agenda for today covering a few updates from myself, covering also a corona virus update specifically for the company as well as some business area information. Fredrik will go through a few things on the financials in a CFO update, and then we'll make a few concluding remarks. And we will leave plenty of time for questions, and I think that will be important in times like this. So with that, follow me into Page 3. First, a few highlights. Quarter 1 was another good quarter for AAK. Our good momentum from quarter 4 continued into quarter 1, and the quarter closed nicely in spite of the very volatile situation we had towards the very end of the quarter, specifically end of March. We have an operating profit per kilo. Our margin continues to develop very nicely. And this is really driven by chocolate and confectionery fats, where we have seen a turnaround situation during the end of last year on the back of the efforts we have put into that segment or to that industry. We also have a good development continuing in bakery as well as plant based food where we did see a doubling of both volumes and our operating profit, although from small volumes but adding to the top or from a smaller base, I should say, and adding to the top. Towards the end of the quarter, we did see a sharp drop in demand with regards to the solutions that we have for what we call food service, literally into restaurants, hotel chains, airline catering, and that is a direct supply as well as an indirect supply. This includes the sectors like fast food chains around the world. That segment saw a dramatic drop towards the end of the quarter, as you can imagine, on the back of different countries' way of locking down and putting in restrictions and so forth. We continue to report also a good development in our financial structure, and we now have a reported tax cost of 24% compared to 25% last year. So with that, our earnings per share grew even more than our operating profit. Earnings per share grew by 11% and our operating profit or adjusted operating profit was up 7% year over year. With that, we're continuing to Page 4. And now we turn into a more specific update on the coronavirus situation for AK. First of all, I think we all experience at the moment from a professional perspective and from a private perspective how this corona situation is really impacting our day to day life as well as our business. Our first priority and it will remain a first priority in this unprecedented situation, is the health and safety of our employees. This has been managed well throughout the company, and it will continue to be like that. At the same time, we're also in a balanced act where we, as a key supplier of key ingredients to the food industry, we need to continue to operate, we need to continue to supply across the globe. We are an integrated part of the food supply chain, and we have very important ingredients to supply. So we have also focused heavily on our contingency plans, making sure that our inbound logistics, our operations and our outbound logistics works. So a lot of effort has also been put into place in order to secure that secure business continuity. And I want to take this opportunity to thank our employees, our partners, suppliers as well as customers for all the hard work, the only hours that have been put in during that these last 7, 6, 7 weeks to really make sure that we continue to operate and it has worked very well. When looking into the business impact and more focusing on earnings and what is the situation with regards to that, I mentioned before foodservice, and I'd like to lift this more to the total spectrum of supply into anything normally being consumed in restaurant, fast food chains, hotels, airline catering. That sector across the world has been impacted a lot. We, as human beings, we continue to eat, but we are now shifting more into retail, of course, with regards to the different lockdowns around the world. But we are an integrated part of that supply chain, meaning that supply that we originally supply to direct customers in foodservice or indirectly customers of ours selling into fast food chains, for example, that demand has been dramatically impacted towards the end of March, and that continued into quarter 2 and forward until restrictions are lifted. Specifically in quarter 1, we also had it started really in China with a longer shutdown linked to the Chinese New Year. So we had a planned shutdown and we extended that, but we are now back up and running in China. Towards the end of March and continuing into Q2, we started to see customers shutting down a week or 2, either because of not being able to operate and or to adjust demand and a bit of destocking potentially. In the helicopter view, I think we could summarize it as significantly increased volatility, significantly increased uncertainty. On the helicopter view, we are the majority of what we supply, they are food ingredients into the total food supply chain. That keeps on moving on and will continue because we will have to continue to eat and consume during this situation. But at the same time, we're not immune. We do have supply into the foodservice sector, including indirect supply into fast food chains, and that is heavily impacted. With lockdowns and restrictions around the world, the uncertainty and the risks going forward is, of course, higher than normal. This can have an impact on our other segments as well. That goes without saying. With that, heading into Page 5. We have continued to move on in our M and A efforts. We managed to sign the agreement for acquiring Margarone in Russia. We're very pleased with that. Russia is an important market for AK, specifically with regards to chocolate and confectionery fats, but also with very good potential in special nutrition, bakery and dairy. With this acquisition, we are now taking a further step into Russia. Margarone is already a trusted partner to us, a toll manufacturing partner, so we know them well. But with this, we are now moving forward together. So very pleased with being able to announce that. And also, we do see a continued good momentum with regards to our M and A pipeline. There is an activity even in this unprecedented situation that we have with regards to the COVID-nineteen pandemic. And as stated before, strategically, M and A is an important ingredient in what we do strategically going forward. With that, heading into Page 6. And now I'm giving a few more comments with regards to the business areas that we have, starting off with Food Ingredients. So all in all, in quarter 1, continued a nice trend with regards to our margin improvements. We are up 9% year over year with regards to operating profit per kilo. Good momentum in Europe, good momentum in plant based food, as earlier mentioned, and really good traction also for high end solutions within infant nutrition where we have added more local Chinese customers. So that is pleasing to see. At the same time, this business area also includes the foodservice segment that I just spoke about. So in part of Food Ingredients, towards the end of March, we did see a dramatic drop in demand with regards to restaurants, fast food chains, hotels and so forth. And we do expect that to remain in quarter 2 and forward until restrictions are lifted. It is clear that we will see a return of demand. It will, however, be gradually. It is only when we start going out and eat in restaurants where this volume will start to pick up again, but it will. But it will take some time. I think it's also worth to mention that when we speak about these segments, let's take, for example, the restaurant chains, the larger restaurant chains in the world and as well as the fast food chains. When we speak about food service, we talk about the direct supply that we have with sauces, mayonnaises and so forth, bottled products into restaurants. But we also have an indirect exposure to that when we sell to, for example, a bakery customer that is selling to retail but also selling part of the volume into a fast food chain, there we also see a continued demand but a reduction in demand due to the volumes that earlier was sold into foodservice. So there's a bit of a scattered picture, but all in all, also the main volume, the base volume of our business continue to move on well. With that, turning into Page 7, shocket and confectionery facts. For those of you that have been with us over the last few years, you know that we have worked hard in order to improve our production, increasing our capacity, focusing on getting a better yield, getting the raw material in that we need going forward. That has worked out well. We communicated that in Q4. And we started to see in Q4 a pickup in operating profit per kilo. This trend continued. So in quarter 1 this year, we did see a year over year improvement of our EBIT per kilo or operating profit per kilo by 8% year over year. So with that, we are in shape in good shape to continue to grow in chocolate and confectionery fats. That is, in this situation, a more mid- to long term statement because we also see in chocolate and confectionery fats increased uncertainty at the moment. When we look at the volume in Q1, it's flat. But then let's keep in mind that we have we had a really strong volume improvement last year of 13% year over year. So that was an exceptional growth we had in Q1 last year. So all in all, trending nicely with an improvement of margin. Looking into the future a little bit, the volatility within the CCF or chocolate and confectionery fats segment has increased. This is a sector where we see a, again, a main demand that is still there also in times of uncertainty. What we also see, the government lockdowns have forced customers in Latin America, in Asia to close down temporarily either because of their own ability to operate and or a reduction or adjustment of volume. This includes also that we, in times like this, see some markets opting for more low end solutions versus high end solutions, and we are more geared towards the high end solutions. So we do expect to see an impact on our earnings, or we can have a direct or indirect impact, negative impact on our earnings in the coming quarters. But we are still optimistic, prudently optimistic about the long term trends for the CCF sector. Moving on to Page 8. And with that, we're into technical products and feed. We have, in the quarter, seen a nice volume development, and with that, also an operating profit increase year over year by 6%, but this was really driven by a volume increase and a stable margin operating profit per kilo. Within this segment, we're talking about predominantly nonfood solutions. This is where we offset some of our side streams and have good business opportunities, but really for non food solutions. These segments or industries are typically non prioritized sectors at the moment within the current situation we have with regards to the COVID-nineteen pandemic. So in this sector, we also see an increased uncertainty, volatility. We do expect this demand to come back, but it is really impacted by restrictions country by country and lockdowns country by country where we operate. Right. With that leaving the comments by business area and a few comments on our efforts and achievement with regards to sustainability. We just released our reports on sustainability. We continue to see within we have developed and highlighted in this presentation three areas: customers, suppliers and our planet. Starting with our customers. During the year, we launched a product range, a portfolio of products that we call Aqua Planet, made with love for people, plants and the planet. This is an umbrella brand that we launched in order to have solutions ready for plant based food, really using raw materials, sourced responsibility with responsibility and with traceable raw materials. It is a platform where we co develop oils and fat solutions for plant based food, meat, dairy or meat and dairy alternative, I should say. So really happy to see this product launch or umbrella launch that we made during last year. Looking at our suppliers. We have continued to invest and grow our Colona Fossa program. The colonophasa program is a women's program supporting a sustainable development in West Africa, where we achieve our focus on equal rights to economic resources, increasing agriculture productivity, ensuring the women's full and effective participation and equal opportunities for leadership. We are engaging in women groups that help us in our supply chain, and we help them and pre finance them so that they can also improve the quality of living. And this program, during the year, we have increased by 72%, now having 230,000 women in West Africa included in this Colum and Fassa program of AEK. Looking at our planet and focusing in on resource efficiency. We continue to reduce our energy consumption as well as our water consumption and also our greenhouse gases. And with this, just highlighting some of the efforts we are doing within the sustainability arena. With that, I'd like to hand it over to Fredrik Nielsen for some further comments on the financials. Thank you, Johan. Looking at the cash flow on Page 10. We had a good EBITDA increase in the quarter of 8% or 56,000,000 dollars Operating cash flow, including changes in working capital, amounted to €71,000,000 in the quarter. We have a negative working capital impact from in the cash flow of $252,000,000 in the quarter. This was related to accounts receivables where we saw normal seasonality between the quarters. Normally, the sales in December is lower. And also the price impact from higher raw material prices, We had a rally in the raw material prices last autumn. Good inventory control, combined with increased accounts payables, have partly offset the increased accounts receivables. Looking at paid tax, as Johan mentioned, we have been able to reduce the tax rate from 25% to 24%. Cash outflow from investments amounted to $158,000,000 in the quarter. It was $296,000,000 last year. But please remember, dollars 169,000,000 last year was related to acquisitions. The CapEx this year is mainly related to regular maintenance investments and capacity increases. If we look at Page 11 and the raw material price development, We saw significantly increased raw material prices during the last month of 2019. That will continue to have a negative impact on our cash flow during the Q2 as well. However, we have also seen now during the Q1 that the price on the main raw materials has more or less returned to the price levels we saw before the rally in 2019. That implies that we should expect to see a positive inflow during the second half of twenty twenty. As we have communicated earlier, there is normally a time like 6 to 9 months before we start to see the impact of changes in raw material prices in our cash flow. Let's move to Page 12, a look at the return on capital employed. We have a return on capital employed in the quarter of 14.5, slightly down since year end, and that's mainly related to the increased working capital we have seen in the quarter. Looking at Page 13, net debt. I think I will, 1st of all, say AK has a very strong balance sheet. Looking into the equity assets ratio, we have 46% currently, up 1% comparing to year end. Current debt level is €3,300,000,000 or €3,000,000,000 to be exact, and we have a net debt or EBITDA of $1,130,000,000 So that is also clearly below the average we have seen over the last 4 years. Let's move to Page 14 and look at the loan and duration profile. As you can see here, the majority of our loans have a duration more than 12 months, which is, of course, is a strength in this volatile world. We have 2 top facilities of €8,800,000,000 where around €7,000,000,000 is committed facilities. Let's move to Page 15 and look at the FX exposure. In the quarter, we had a positive currency translation impact of SEK 17,000,000, dollars 7 of those was related to food ingredients and $10,000,000 was related to chocolate confectionery effects. Based on the spot rates end of March, there should be a very small positive translation impact in the next quarter. By that, I would like to hand back the microphone to Johan. Thank you, Fredrik. We move on with a few concluding remarks from myself on Page 16. In times like this, what we do know is uncertainty. And with that, there is a lot of things we can all speculate in going forward. I'll try to give a picture of our what we expect going forward. So when we look at AK and our position, we can conclude that we have a global footprint. We are integrated in the in a global network. So our customers that we serve within the food industry as well as outside the food industry, most often these are it's a global network. We are very well integrated in the total world's food supply chain. We have a broad product range. We are focused on plant based oils and fats. But within that, we cover most sectors and industries. So with that, we have a broad product portfolio, portfolio of solutions, and we tap into many of the industries. That gives us the strength, that gives us stability in the current situation. But it also means that in some sectors, we do see a dramatic shift in demand like I've just commented earlier with foodservice and also the non food applications that we have like candles, like personal care products and so forth. So we are not immune. We will be impacted. But the base business is really founded within the food supply chain of the world. So short to midterm, there will be negative impacts to our earnings. But at the same time, when we look into the longer term perspective, AK, we have a robust foundation. Fredrik just commented a bit on our balance sheet. We have a robust foundation, a strong track record, a strong financial track record and a solid balance sheet. With that and being a key supplier into the food industry and sharper than confectionery products, these are segments with robust demand also in times of uncertainty. With that, we also remain calm and we will continue to act according to our strategy. Our strategic direction stands. And with that, moving on, we continue to offer our plant based healthy, high value adding oils and fats solutions. We use our customer co development approach. And when looking at things with a bit new perspectives as we are in times like this, We see no reason to adjust our view on the strong favorable underlying long term trends in our markets. Thus, we do remain prudently optimistic about the future in spite of the short to mid term impact. And with that, the guidance that we are giving is really that Q2 and the coming quarters, high degree of volatility, high degree of uncertainty, we are not immune. We have sectors where we get hit with dramatic volume reductions until restrictions are lifted. But at the same time, these are volumes that will gradually come back and our position is strong. So the long term future is a future that we look at with a prudent, optimistic approach. Thank you. With that, we would love to take questions, and I do expect some. And our first question comes from Karl Mabry from SEB. Please go ahead. Your line is now open. Yes. Hello, and thank you for taking my questions. I have 2, please. With the first one related to food services, I understand that's difficult to estimate. But is it possible to give some type of indication of the expected volume drop that you foresee in Q2, but also for the full year 2020? And then secondly, is it possible to quantify the effects of the cost optimization programs that you have initiated within your foodservice operations? Thank you. Thank you for your questions, and I do respect them. At the same time, it is a time of unprecedented uncertainty. So a forecast is just a short picture as of today. So what I will try to give you as a guidance is that when we speak about foodservice, look at the total world and food consumption. Predominantly in the U. S. And focused on the New York area, we have a food service business supplying directly into restaurants and restaurant chains. The same in the U. K, the same in Sweden, reaching the part of the European and more so the North European markets with regards to restaurants and so forth. That demand has been hit dramatically. And I think you can see by looking at other chains what those effects are. Then we have that indirect impact as well, where we are not directly selling to what's called foodservice, but we're selling to a bakery customer or a chocolate and confectionery customer, who in turn has the chocolate and confectionery customer, who in turn has the customer within the food service sector, and that is also impacted. The rest of the business is consumed through retail, where it seems like the world is really protecting this supply chain in a nice way. So the demand at the moment has dropped dramatically in those sectors. And your second question was about the cost optimization. What we are doing is that we are, at the moment, using the opportunities that are out there. We have operations in foodservice within Sweden, U. K. And the U. S. And it looks a bit different with regards to what you can do in the short termid term perspective. We are using these government supports that are out there, but we're also looking at the outlook. And as I mentioned before, we don't see restaurant demand bouncing back in a sharp, weak curve. It will take some time, but it will come back gradually. So we are also adjusting our costume more to the midterm perspective rather than only the short term perspective, and that includes in the midterm perspective also. So first of all, looking at the variable costs and labor costs and so forth, but in the midterm perspective, that would include also productivity improvements and other things we can do, including also delaying CapEx investments. But we're not giving any further guidance on that. We are focusing on managing this situation and keeping our operations going at the same time that we are optimizing the structure for certain parts of the business. Business. Our next question comes from Kenneth Towle from Carnegie. So one question to follow-up on that. Do you have any sense of how much in bakery, for example, that could go through, say, grocery stores and how much that could go through small cafes and restaurants and bakery shops and so on? In that part, it's we are a bit in the dark, but there are ways to estimate. As I said, we are globally in a helicopter view, AAK is integrated in the total supply of food or supply to food, whether that is consumed in the retail or through retail or it's consumed through restaurants. To give you a bit of the dynamics that we do have, I mentioned that our direct supply into food service is predominantly the U. S, U. K. And out of Sweden. And then we have, for those of you who know our business in a country like Turkey, we have a very strong position in Turkey in general. A part of the business we supply and reaching out to all the thousands of artisanal bakeries. And there also lockdown has closed down that part with a hit short term, but where the rest of the business is going really nicely. And we literally don't know when that will come back. So in certain countries, we are more exposed to the direct impact. And in the rest of the world, it is more the indirect impact. But where this is consumed, Kennen, is really think about the fast food chains in the U. S, in the U. K, in Europe and other parts of the world. Biscuits, cookies, etcetera, that's where we see that indirectly with regards to bakery and shop. Yes. Also, you mentioned that you gained some new customers on infant nutrition products in China being more of the domestic customers. I would have thought that it takes some time before you got into those customers. But you have been successful already now, so to say. So how would you say that you say anything about the split between sort of international companies making infant nutrition products, selling them in China and the domestic ones? Or how much more market share is there to gain from domestic ones? Or yes, please address this issue, please. I will address it. So you're right, over time, yes. So it's we don't see it as a direct impact. It is probably slightly boosted with regards to the corona impact. But really, we have a long term commitment to infant nutrition. We are focusing really on our high end solutions, and China is really the main receiver of high end solutions with regards to that, whether that is then coming from a multinational or a local customer in China. And I should say that when we speak about local customers in China, they are big companies, but we call them local because it is really producing in China for China. We already have and continue to have a very strong position with multinationals as well as with China, the big local customers in China. What we have seen and which is positive is that we continue to add new customers. So the volume increases that we're staying and we're staying relevant with our current customers, international as well as local, and then we're adding additional ones. And I think it's a result of the continued effort that we have, the solutions that we have, and that's how we should see. It. It's not a dramatic shift of market share. It's not a dramatic shift of split in the quarter, but it is a good receipt of what we are focusing on. Okay. And then 2 smaller questions. One is that I think you refurbished or had some maintenance in the Danish account for Chia Nap this quarter. And still, you managed to increase the EBIT per kilo quite nicely in the quarter. So did you have a significant negative impact from those maintenance works in Q1 in Shoplifting? We had. But this gives you now it will not be a normal year, but if it would have been, you would have been having an easier time going forward to see that effect. We you know from the earlier years how we have been challenged by our situation and the cost that we have had due to lower yielding kernels and due to investing and increasing the capacity. So of course, the maintenance stop has a negative impact. But at the moment, we are also said we are done with investments. We do have now normal yielding kernels. So we have a better cost position, a better cost base today when we operate as normal. Then we are, of course, dependent on having volume and so forth to process. So we did have a negative impact of the maintenance stop. But at the same time, we have the positive year over year impact of the improvements we have been putting in. I think that is what you're seeing. And then in order that to continue, of course, we are dependent on volumes to continue to come. And short to mid term, corona will have an impact. Longer term, we should see the impact of these cost improvements. And Ken, it's also as it was a planned maintenance. We are also secure that we have some inventory at hand so we could ship to the customers during the Q1. Okay. And then the final small one. I was thinking about your plants. I mean, when we have been visiting them and so on, there aren't that many people around, so to say, as there often isn't in large process industries. Are you how is it around redundancies on key personnel? I'm thinking if there is, I mean, if you happen to get this coronavirus and develop the disease, you could be gone for a couple of weeks. And if it happens to sort of the wrong employees, yes, is that something you are scared about that key employees will be turn sick, several of them at the same time, so to say? It's a good example of one of the first priorities that we attended to put attention to. So 1, health and safety of our employees and 2, knowing that we are an important part of the world's food supply chain, exactly those things are what we have in our continuous plans together with the total supply of incoming materials and outbound logistics. So we have put a lot of actions in place in order to secure that our personnel is first not getting the coronavirus, but that is hard to avoid at the end of the day. So we've also put contingency plans and actions into place in educating additional employees, but also reaching out to former employees, etcetera, etcetera, to have a backup and a backup. So of course, risks are higher today, but we also have very strong contingency plans. And so far, the execution of these have been very successful. So it's not like we have been surfing and nothing has happened. There's been a real significant effort out there and managed really nicely with our employees so that we do keep running all our plants at the moment. Our next question comes from Per Jorgensen from INT Asset Management. Yes. Thank you, gentlemen, and thank you for taking my questions. Just coming back to the foodservice business. And if one make a rough assumption that it's about 10% of the volume in the business area that would actually be freed up, so to say, due to lack of volume from the foodservice business. Will you be able to use that volume to our applications to some maybe some interesting spot deals that could come up due to these volatile markets? Or is it still so specialized that you will actually just have to wait for the foodservice business to come back? That's my first question. Thank you, Per. Yes, it is unfortunately, I'll come back to you. I think there's a lot of opportunity on the back of this, but not the way it was laid out. So it's rather the latter part of your comment there. We have to wait. But in that waiting, there is, of course, opportunities in how to redirect and so forth. But this is really where we are producing for our customer. Like we're producing a barbecue sauce using all the ingredients that is needed to do a barbecue sauce and do that for a private label or for a restaurant chain, etcetera, etcetera. So that is separate from our oil refining business. A part of our oils obviously go into that and we can we could potentially offset that oil a little bit in the other sector. But really with regards to the end product that we're selling to our customers, it's not possible to shift and these production lines are set up for bottling and mixing and blending ingredients into the finished products. But at the same time, with our position and Endurance, there might be opportunities around the corner. But in the short term perspective, it is really managing a sharp drop in demand and stop in demand. Okay. Fair enough. If we take all these customer code development projects that you have been doing for some time with great success and we can see that in the results, Can you are there any delays in companies wanting to do some business with you due to this special situation? And are you able to you comment about the plant based business. Is it possible to actually accelerate that business due to everybody's talking about health and focus on own health and due to this most unfortunate situation. Yes. Very relevant question, Per. And I think this is where we need to take the time perspective into account. So with a time perspective, yes, there is a chance that the plant based food segment and other segments, so we have a focus in our strategy on sustainability, sustainable solutions, health, nutrition. There is a great chance that coming out of this that there will be an increased focus on health nutrition. We don't know yet, but that is, of course, a chance that, that will be accelerated and plant based food can be a carrier of that. It has been a carrier through sustainability a lot, but we all know that health and nutrition is playing into that sector and needs to play into that sector quite a bit. So in the longer term perspective, I think, yes. In the short term perspective, there is 2 challenges. 1 is that part of this demand in plant based food is also consumed in the restaurants, right, or quite a lot of it is fast food chains and so forth. And then we have the restriction on travel and everything. So some of the co development actions are a bit more difficult to do today. But we see that we have been increasing our dialogue with customers and being creative about it, staying relevant with customers. But of course, there is a little bit of difficulties to meet in a lab or so, but there are other ways to do things. So we haven't seen a dramatic stop. And we are, again, positive about the long term because with our position and the chance of coming out of this with increased need for co development projects and reformulations, there is an opportunity there. But at the moment, we have to accept a little bit of pausing in the interaction. Yes. Okay. Fair enough. And then just briefly, Johan, your comment on M and A and how you have done this in Russia. Should one not expect that it could be maybe also paused due to all these different markets? Or do you see it possible actually to accelerate your M and A agenda due to maybe sellers being more inclined to sell their confidence? Or how should we read that in your business? I think the only how to read it is basically with our financial position and our current view on the future, we see that we have a strong position, we have a strong balance sheet. And even with a bump on the road, even a slightly bigger bump on the road than we might have thought, we would still be, as we see it, profitable. We still have a strong P and L and balance sheet. So with that, we would be able to continue to do M and A, and there might be opportunities around the corner. Of course, we are cautious about our CapEx spend. We're cautious about our cash flow in times like this, but we do have a strong position and we are prepared to act on opportunities. And we continue to we continue our M and A portfolio management through this, but it's a bit up to also the opportunities to come through, right? Okay. So you should note that we are ready to act. But whether the targets will be out there or not, that's a difficult one to see at the moment. Yes. Okay. Fair enough. Great. Thank you. Thank you. Thank you. Our next question comes from Oscar Lindstrom from Danske Bank. Please go ahead. Your line is now open. All right. Hi, guys. A couple of questions for me. First of all, I mean, could you given the sort of impact this is having on foodservice, Is there any possibility you could share with us sort of the size of your foodservice business as part of your sales? We have decided and we actively don't micro guide on specific subsegments and we need to stand by that. And in times like this, the most important thing we have in front of us is to manage the business and manage the actions and get out stronger. So we'll stay with that. There are some historic numbers that one could look at and there are also the total if you look at the total world and how much is consumed in restaurants, how much is normally consumed through retail, you can get a good picture because that we are operating, we're selling to the in the world of food. And that includes the direct or indirect sales to foodservice, but it includes also the direct sales that go into retail. And that's where we are. But we do see, as we said, a dramatic drop in the foodservice direct. But also keep in mind that there is an indirect impact on bakery products, on chocolate and confectionery products. So also these segments, we expect, get a hit in the short to midterm. So the base business, the refining business is also impacted. And specific countries where it is more pressing is, it's Turkey, as I mentioned. It is U. S, Sweden, the U. K. And then we have, apart from foodservice, because it's not only foodservice, I think it's important to keep in mind that we have a situation with lockdowns, with restrictions. The sum of a customer stopping for a week, another customer stopping for a week, a short disruption in India and so forth and so. Some of this adds up to a impact, negative impact on our earnings. But at the same time, in a longer perspective, it's more like a bump on the road. But it is important to keep in mind that we are not immune. It's not like everything is going to retail and everything is just a sunny ride. That's not how it is. But we stand strong, but we do expect Q2, Q3 to be challenged on our earnings due to these things. Yes. All right. Another question. I mean, in the chocolate confectionery segment, you talked about down trading, as I understood it, among your customers, but I guess it's the end users. Could you explain a little bit, first of all, how that would look? I mean, is it you selling less or you selling less profitable products? And then the second part of that question is, how much of this have you seen already? Or is it more something that you're expecting? And then the final part of that question, To what extent is this connected to currency devaluations or weaker currencies currencies in a number of emerging markets that people sort of no longer can afford more expensive products. So quite a wide question there, but You actually you covered the elements. Let's not take them in that order. We can even start backwards from currency, yes, because somehow part of our volume and also profitable volume is going through countries like Turkey, like Russia. Russia is one of the biggest, short lived and confectionery markets out there. So in countries like Russia and Turkey, yes, currency has an impact and staying with that. So as we go to demand through Eastern Europe, Western Asia, call it Russia and neighboring countries, that's where we see and expect. So yes, we haven't seen a lot of it, but we do expect going forward that down trading there is a risk for the down trading to happen. And that is when you have countries where consumers start seeing an impact, you see our customers down trading using others. So you're right, not that much less volume maybe, but less high end solutions and in that less profitable product for us to sell. So downgrading a little bit, adjusting what they are using and selling. And we also have some of these volumes going from Eastern Europe, Western Asia into China and other countries, and we have seen some impact from the corona and the demand there. So some of the large chocolate markets, we do see an FX effect. We do see a we expect an FX effect, and we expect a down trading effect. In many other cases, we are still as strong as before. Chocolates is also in the part of the world where we even in a time like this, when you still have money to spend, chocolate is also part of comfort food and comfort snacking. So there is a bit of a balancing trend as well. But net net, we do see more downside risk than upside risk, but that's typically what we see in other downturns. This one is a bit unique, unprecedented. So need to be cognizant of the risk. But typically, you see it as a comfort food, but also you can see it down trading. And then just a final question, if I may, coming back to the infant nutrition question, which figured quite a lot in your Q3 and Q4 conference calls. I mean, do you now feel that you're I mean, is the situation improving or more coasting along and you're managing with this shift? How should we interpret the comments that you made about gaining some local customers taking back market share basically? Yes. Call it going from a slight downward trend to plateauing coasting a bit, if to use your word, is probably a good representation of the current situation. So we have seen with the dramatic drop in birth rates in China, the total end consumer demand was really hit. We have still, through this, have a strong we have maintained a strong position with our customer, but really the demand has been reduced. But now with adding a few customers and being in a strong position being able to supply, we have also been one of the go to players where customers really trust us to be able to supply through the corona pandemic and so forth. So a combination of maybe plateauing in a bit with regards to end demand with the birth rates and then us taking a bit of market share. And do you think there's been a lot of inventory building on your customers or perhaps net users of infant formula and that we can see some kind of big backlash in volumes later in the year? Or Or The information we have at hand and we keep a tight dialogue is that it's not massive. I think we should be cognizant, we are at least, and I'm guiding a bit on this. I think in times like this, there is a risk for both stocking and destocking. Specifically to infant nutrition, these products typically don't have a long shelf life in the hands of the mothers and fathers for end consumer usage, but a bit longer shelf life for our customers. So there is a bit of dynamic there. But so far, we haven't seen a dramatic stocking impact. But there's a bit of risk that is in some of that. But also, given the last 6 weeks, I also think that in general for the whole demand, I also think that there is a risk that every person buying something and managing an MRP system is some will do some stocking to safeguard and some other will do destocking to save cash and balance sheet. So there is a the volatility is probably the right word to use. Right. Yes, I realize it. I appreciate it. Okay. So those were my questions. Thank you. Thank you. We have a question from James Targett from Berenberg. A couple of sort of clarification questions from me. Just firstly on Foodservice, you commented in the release that the volumes had halved in Foodservice. I just wanted to check, was that the exit rate in March? And if so, kind of how long had how long for the quarter had volumes been down by that amount? And then in India, you mentioned there's some temporary production stoppages, but it's still affecting Q2. So I just wondered if you could clarify with India, are you back up and running there? And how big India is again for the AEK Group? Thank you. So with regards to the latter part of Q1 or we should actually say the latter part of March, that is when it really happened. So it's literally a couple of weeks in Q1 where we saw dramatic foodservice drop. So it's not a lot. It's more important the total impact that we have from customers. So the way India locked down and the way restrictions are put in India, we have seen more so in India and Latin America that we have a 1 week difficulties getting operators in and operating and then we are so yes, we are up and running. But then we see customers shutting down or reducing volume and a bit different dynamics in terms of demand patterns. So call it a bit more chaotic and more disruptions compared to Europe Europe sorry, Europe and U. S. And the same thing a little bit in Southern Latin America where countries like Brazil, Argentina and so forth, we are up and running. We have a good contingency plan, but we do see customers for different reasons shutting down a week, shutting down 2 weeks, so more uncertainty and volatility in these markets. Thank you. And as there appears to be no further questions, I return the conference to you. All right. Thank you very much, and thank you for listening. I'll repeat that unprecedented an unprecedented situation is what we're in as a company, a bit grateful to be part of the global food supply chain, a prioritized sector. So AK, we stand strong. We stand strong financially, but we are not immune. We're also impacted short to midterm. There will be bumps on the road. There will be an impact on our earnings. But at the same time, in a long term perspective, we do see still favorable underlying trends with regards to plant based oils and fats going forward. With that, I'd like to thank everyone for calling in. Stay safe. Thank you.