AAK AB (publ.) (STO:AAK)

CMD 2024

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Nov 26, 2024

We'll today spend some time on a strategic update, going through our financials. We'll speak a lot about innovation, what we see ahead of us, and how we are taking those opportunity within AAK. There will be lunch, and then we'll have some breakout sessions back in the Karlshamn factory, where you will be able to meet colleagues of us and get your questions going in a more intimate session. After that, there will be some concluding remarks, and we'll head back to Malmö. For those that want to, there is a mingle dinner later tonight. Again, welcome here. Happy that so many of you took the opportunity to invest the time to get really some hands-on experience of what we are doing. Now we are starting the presentation for today. Myself, Johan Westman, the CEO of AAK, I have 1 part of the presentation. We will also see Tomas, our CFO, and Niall Sands, our head of Commercial Development and Innovation. The 3 of us will present during this session. After that, in the breakout sessions, you will also meet Susanne Jaspers, our head of Europe, as well as Tim Stevenson, our head of Sourcing and Trading and Sustainability, and David Smith, head of Global Operation. The 6 of us, we're also part of the executive management team of AAK. Thank you for being here today. All right, let's get into my presentation. AAK, we have a strong track record delivering as a double-digit earnings compounder. We have a CAGR of 12% EBIT growth since 2005. If you divide that into a bit of phases, you could say that we've been on a specialty journey. We have expanded globally. We are focusing on a Co-Development approach, which is working really closely together with our customers on incremental improvement of their products. We are optimizing our portfolio, and we're focusing on value creation and also having a positive impact. If we double-click 1 level down, we have been on a journey of EBIT per kilo growth. That's the way we measure our margin. We've had a decent return on capital employed, improving over the last couple of years, and we have been able to consistently increase our dividend to our shareholders. We're also more and more engaging in how to really enable sustainable supply of food, and we have chosen to show you here, one of the important things is to verify that there is no deforestation in the supply of palm. Palm is a very important raw material, but it has to be with no deforestation, and we're also making really good progress on that end. Speaking of the delivery that we have done, the earnings growth that we have had, what is it that we have that enables that? How can we deliver in that? Well, there is something around our speciality focus. We are a multi-oil ingredient house that is really focused on plant-based oils and fats and the chemistry behind that, and the solutions that we can bring with that. Really tailoring ingredients for our customers, for their products to work with the end consumer. We do that in something that we call the Co-Development approach. What is that? It is actually very simple. We are working hands-on together with customers in our Innovation Centers or at the customer site, with our employees working together with our customers' employees to develop better product. We do that by being experts in fats and oils chemistry, plant-based oils and fats. We are experts in that. We are also really, really good in end product applications. In essence, if we wanna make a chocolate bar better with a longer shelf life, we know how to formulate chocolate, or we know how to formulate an infant formula. We use our knowledge in oils and fats to create a better ingredient from ourselves, but with a really deep knowledge on the application of the end product. With that, we're also very close to our customers. That in combination with being flexible. We have customer innovation centers around the world. There are many players, especially in the food industry, there are local players in Uruguay, Colombia, China, India, Sweden, Denmark. We have the ability to have a local team working very closely to these customers, addressing the taste experience, the structure that that food needs in that local market, and being able to deliver that. We can also work with global players on global trends with global Center of Excellences, and Niall will talk more about that. In essence, we are very close, flexible, and agile together with our customers. We have the distribution footprint to back it up. We also have factories, production sites around the world. When we have the perfect chain here for us is when we engage with a customer, we address a problem, an opportunity, and we find a solution. We find a updated ingredient, a different mix of oils, perhaps. The customers like it. They have validated it in their production or in their product testing. They say, "Can you deliver?" Yes, we can. We can turn it in a delivery, whether that is locally or a global supply. When you combine these four things, that's when AAK becomes unique. We are a downstream multi-oil ingredient player that uses different raw materials to arrive into end product solutions. Sorry, one more thing. The way we can do this is, of course, together with our employees. If there's one thing that I've learned traveling through AAK, is the one thing that we have in common across the world, it's the passion. The passion for what we do and the passion for our customers. I have the luxury to travel the whole world. Some of the colleagues I meet, they have never met the other colleagues around the world, but they are equally passionate about the solutions we bring to customers. We're also now investing in a more interdependent culture to leverage the skill set. AAK is a decentralized company. That means that we sometimes operate, you know, completely on our own. When we tap into the knowledge totally in AAK, in an interdependent culture, we have more to give, and we're gonna talk a bit more about that today. Two years ago, we launched what we called the 2030 Aspiration. Today, we're speaking about an update, to be clear. What have we done so far? We have delivered on doubling our value creation, our EBIT per kilo, now above 2 SEK per kilo. We have built an increasingly aligned organization. Being decentralized, the real opportunity comes when we get the strong alignment. We have built a better alignment. We have also improved the mix between volume and value. We have strengthened the recognition. The third pillar in the 2030 Aspiration is about making positive impact but also getting recognition for it. We have invested time in doing the right thing, driving sustainability, but also making sure that we own the message, that we can really deliver the message about what we are doing and why we're doing it, and ideally getting the recognition from investors, from stakeholders. I think we have started that journey in a nice way. Having said that, to be crystal clear, we believe that there is a lot more to give. On the valuation or the value creation, EBIT per kilo, we think that we can do a lot more in terms of aligning our organization, continue to optimize the way that we deliver without taking away the decentralized structure, but rather focusing on being aligned on the strategy, doing more of best practices, et cetera. Tomas will guide you through what we have done and what we are still to be done. With regards to volumes, if you look at the last five years, we have had pretty much a flat volume development. Better this year with a 4% volume growth. We're not satisfied with the volume growth that we have had. However, we do recognize that we have focused on the value creation. We have also closed down non-profitable plants. We have exited Russia and so forth. There is some active decisions that have kinda limit part of the volume growth, but we do believe that we have more to give. We need to be able to you know, drive growth with the market and then some in the areas where we focus. We are gonna continue to strengthen the way we deliver positive impact and get recognition for it. We are engaging in the World Economic Forum, taking part in the debate about how to deliver a sustainable food supply chain for the future, feeding a growing population. We're engaging with stakeholders, with ingredient peers. AAK is stepping really out there, outside AAK, if you will, and being part of a transformation, and I think we have a role to play there. There is more to be done there as well. In essence, we have delivered a lot, but we also see a great opportunity to do more. If we look at that from our strategic, you know, portfolio-based strategy that we launched in 2019, the value creation in terms of EBIT growth has come a lot from the invest in continued growth for the future, especially with regards to the chocolate and confectionery opportunities that we have had and still have going forward. We have done a lot in optimizing our value creation. In bakery, dairy, and food service, we have really looked into that box and said, "How do we produce? What is the product portfolio? Where do we see the real value? These are huge segments with lots of different ingredients. We have done a really systematic work here to optimize what we deliver, to whom, to what prices, and in what way. That has also generated a lot of value. Less so in the bet for the future. Let's recognize that bets for the future also takes a bit of time to develop. There is a positive trend. We see the opportunities in plant-based food. We see them in Technical Products. We see it in personal care. We have some really strong offerings, but we're coming from a low base, right? The trend line is positive. We still have a few segments where we see opportunities as we go forward, but more to give. When we look at this, part of today is not just about saying what we have done and why we believe that we can reach our 2030 Aspiration. It is also to take you on a journey to lift our sight a bit on the longer-term horizon. Clear message is that we have delivered a lot over the last five years or even 15 years, if you will. We believe by launching the 2030 Aspiration, we believe that we have ammunition already in the activities that we have on the table today and the things we have launched. We have the ability to reach the 2030 Aspiration. We also see opportunities beyond that, and that's why we focus on developing AAK and also discovering new opportunities in new markets and with new technologies. Throughout the day, I have Tomas digging a bit deeper into how we deliver and how we will deliver and Niall taking you on a journey on how we develop and discover beyond 2030. To update the 2030 Aspiration, as we also press released yesterday, we keep the main structure of the 2030 Aspiration that we launched 2 years ago. We keep the ambition of growing faster than the market, getting positive or rather recognition for our positive impact, but we are updating the EBIT per kilo target. We are now lifting that to reaching above 3 SEK per kilo. We do that after having delivered faster than we thought on the doubling our value creation per kilo above 2 SEK. We have already reached that, and we have now, after some time, also stabilized ourself on that level. We see the opportunity to grow further, to deliver a stronger EBIT per kilo, and that's why we have lifted it, and we'll talk more about that. I also wanna be clear on us keeping the financial target that we have, which is about growing our EBIT by 10% year-on-year on average. Last but not least, the future that we have and the journey that we have been on is a lot anchored around sustainability. We are doubling down on verifying no deforestation. We've come far, as I showed you, and we are committed to no deforestation in palm, for example. We're also investing in our employees, in our culture, our people agenda. That's an ongoing activity that we have today, creating AAK, becoming a better place to work with a more interdependent culture, a high-performing culture that will enable this journey going forward. We're also approved now for our science-based targets, one of the first companies also with the FLAG science-based targets. We are committed to reducing our greenhouse gas footprint, and with that, we're also aligning with our customers and suppliers. Many of the customers in our space have also applied and been approved for science-based targets, and I think that's a great way to align across an industry, and we remain committed to deliver on that journey. Speaking a bit more about this alignment that I talk about, and Thomas will talk even more about it. As a matter of fact, Thomas was one of the employees that came in and looked at this and said, "Hey, Johan, isn't it so that we are decentralized, but we're not really aligned?" He was so right. What we have done over the last two to four years, we have created better alignment, better alignment on the strategy, better alignment about the opportunities that we see, better alignment about realizing that, you know what. There are things we do in the U.S. that we can learn from in Europe. There are things we do in India that we can actually implement in Latin America. We haven't done a lot of that in the past in AAK. By starting on that journey to better alignment, we are already seeing positive impact in terms of better ways of doing operations, better ways of developing products to customers. We also wanna be clear about we have just started that journey. We are very decentralized, and sometimes even if you want it unstructured, huge opportunity to do even better. Many of you follow the food sector and the chemistry sectors and so forth, so I'm sure you know a lot about the end consumer trends. Let's just fast-forward into, what does that mean to AAK? What we have seen over the last 5 years in our sector is a steady demand for palm oil. There has been turbulence, there have been disruption in the world, there's been debates about what's good and bad, reality is that there is a stable demand of palm oil because palm oil is a multifaceted oil ingredient. Our focus is, again, on making sure it's a fully sustainable supply with no deforestation, it's a clear need, we do believe that it's needed to feed the world going forward. We also see some acceleration among trends like new solutions, new technologies, precision fermentation, lab-grown, different ways of producing food ingredients, and also new food, like plant-based alternatives to meat and dairy. Quite some interesting opportunities. Even like we have invested in the Power-to-X, being able to do fatty, edible fatty acids out of CO2. Pretty cool. These are new trends emerging, but it's accelerating. We see also the local and regional markets having some new customers or new players, so new CPG companies popping up with a different approach, kind of a niche approach, and that's where our local setup works really well. We kind of enable AAK to be serving some local niche players while we also serve the bigger companies. What we see among the bigger companies that they get increasingly professional. Professional how they source, professional how they do product development. That's why we as AAK also need to be more professional as we go forward. We'll talk a bit about that today. When we look at what's really accelerating, it's the requirements on sustainability and health. You can't read the news over the last two years without reading about sustainability with health, also about affordable food and feeding the world. There's also a lot of volatility. Volatility in prices, disruption in supply. What we have seen in AAK is that our passionate workforce being decentralized has really helped us well to navigate, so we feel quite confident that whatever the world throws at us, we are at least very capable of navigating. It's not easy, it's not a guarantee, but we have shown that we are able to navigate, uncertain or troubled waters, if you will. That's a bit what we see around us in the oils and fats, industry. Now, if you now kind of say, "Okay, so that's what we have seen so far, and that's a little bit the here and now." If we now look ahead, if we look at that from how we also report, we report in Food Ingredients, Chocolate and Confectionery, and Technical Products and Feed. There is no doubt that we have to feed a growing population. The population of the world is growing. We need to feed the population of the world. We need to feed our population in a sustainable way. We see great opportunities for plant-based oils and fats to play an important role in not only feeding the world, but also help transforming the food supply chain to a sustainable supply of food. Huge opportunities as we look ahead. When we look into chocolate and confectionery, there's no doubt that we as human beings, we kind of love to indulge ourselves. There is something there. We just want to do that. Whether we have a health profile that requires us to do X, Y, Z, we might change the way we eat. Maybe Monday to Friday is a bit one thing, and in the weekends we do something else. I might exercise a bit more, even though today I'm a bit limited in order to indulge myself, right? We see that as a trend in general. When you look at how we consume chocolate in the world, Europe and U.S. consume a lot of chocolate. Latin America. In Asia, it's a fraction of what we consume in the rest of the world per capita. What if that penetration started to move a bit faster? It's already moving, but it could move faster. Huge opportunity for a company like AAK. If we start looking at policymaking, there is a limit in some markets for how much cocoa you can replace with, for example, solutions like we have. We've already seen India starting to look at maybe changing that limit of 5%. What if that changes across the world? Huge opportunity for solutions like we have in our portfolio. With those opportunities, it's all about how we take them. We are now building an organization that is much more focused on the end consumer trends, making sure we translate that into insights in AAK, and with that, tailor our innovation towards those opportunities and insights. That's what Niall is gonna talk about a bit later today, how we have a 5-pillar approach to innovation. If we sum it up in terms of market expectations, we do believe that there is an underlying trend in oils and fats as it looks today, with about 3% market growth for plant-based oils and fats. All right? When we tap into these more disruptive or evolutionary trends about what we eat and what we can replace with plant-based oils and fats, we see an opportunity for market expansions. That could be for continued replacement of fossil-based ingredients in, like, candles, replacing paraffin. We already have solutions into that space. We sell to candles. We do skincare product, replacing chemicals in cosmetics. When you look at that, look around you with all the companies in different industries that have signed up to science-based targets, that has to deliver on a lower greenhouse gas footprint going forward. We see a huge opportunity in continuing replacing paraffin, mineral oil, or in essence, you know, fossil-based components in products outside food. We have already identified a few segments, and we are now investing time and resources to see where AAK can play a role with our deep knowledge in plant-based oils and fats chemistry. That sums up my part of this presentation. We have been on a very strong delivery journey, strong track record of earnings growth. We see an opportunity to continue develop AAK towards the future with our customers, and there is more to be discovered. Throughout the day, together with Tomas, who is now next on stage, we'll dig a bit deeper in the delivery part in how we do things today, how we will deliver our trend on our 2030 Aspiration, and we'll continue with Niall, who will take us on a journey on how we develop, innovate towards the future opportunities. We will wait with questions to me until we have heard Tomas, and then we'll take the questions to me and Tomas together. Thank you so much, and over to you, Tomas. Good morning, everyone, and also a warm welcome from me to all of you to our Capital Markets Day here in Karlshamn. My name is Tomas Bergendahl, CFO here at AAK. I will go through some of the financial aspects of this update that we do today. First, let me take you on a journey. Covering the last five years. We've had a business environment that's been very challenging, both from a geopolitical, macroeconomic perspective. We've experienced a pandemic. We've seen war, conflict. We've also seen inflation and export bans, great volatility and uncertainty. Now, let's take a look to see how AAK has performed during this period. If we look at our volume to start with, as Johan mentioned as well, we've had some challenges here. Volume has been flat over the last five years. Good to see that we have a 4% increase year-over-year, year-to-date, 2024. Very promising. We've seen raw material prices fluctuate quite significantly. From 2020 to 2022, we saw doubling and tripling of raw mat prices, depending upon what raw mat you're looking at. In Q3 2022, prices collapsed down to almost half, still higher than they were in the beginning of the period, as you can see, and then fairly flat from there on, with a slight increase here at the end. Great volatility here as well. Next, we saw general inflation come through, highs we haven't seen in a long, long time. This affected us, of course, when it comes to transportation, energy, utility, packaging costs, and other secondary input to our production. How did AAK perform? With all these challenges, uncertainty, and volatility, this is what we've done in terms of EBIT per kilo, our margin. As you can see, even before this period, we had a significant track record of almost 10% year-over-year. Johan went back even further with 12% year-over-year. In 2022, we were up over 20%. 2023, above 40%, and this year to date, we're above 20% again. Really good performance, and it shows the resilience, I would like to say, of the AAK business model, and also prove the success of our alignment and optimization work that we've put in over the last couple of years. With a flat volume and good EBIT generation, we've seen, as I showed before, very strong EBIT per kilo development, our margin. It's actually surpassing our 2030 Aspiration of 2 SEK per kilo already in 2024. It's also resulted in a very good development of our return on capital employed, now at 22%, as you've seen in Q3. A solid track record. It shows that AAK can deliver on its promises. We have some challenges as well, and some opportunity, I would like to say. If you look at our net working capital, it hasn't developed quite as we've expected it to over the last couple of years. There is a good potential for future cash flow generation going forward. With this potential, together with further margin improvement, we see our return on capital continuing its upward way. How have we done this? What's the key to success? Johan showed part of this picture before. Go into a little bit of the sort of setup of AAK. We've talked about this quite a bit, the ones of you who've sort of listened to us before have heard this. AAK is a highly decentralized organization. Has always been, is today, and will be in the future. This is a big part of our success, the agility, the passion of the employees, and so forth. The downside, at least in AAK, of a decentralized organization, is that silos have been created. If everyone performs really well, maybe it doesn't matter. It inhibits us from taking the best practices around the organization and utilizing them. It inhibits us from optimizing and put efficiency into the group as a whole. Whenever we started talking about this, everyone in the organization said, "Okay, so we're centralizing now." That's not the case. We ended up with the wrong discussion. We talked a bit and said, "We are very clearly decentralized, but maybe there is a different term that we can use." The one we ended up with was the unalignment and alignment, saying that we are decentralized, but we need to align on a few things. It doesn't mean that we will come out from headquarter and talk about how we meet our customers, what type of products we sell. It may involve something around how we view our culture, how we share things, that it's okay to be sharing challenges, opportunities, successes, and also failures, because we can learn from that. This has been the cultural journey of AAK over the past 2 or 3 years, and it's enabled the introduction of things like production and process optimization, the deep dives. We have David here, who's been driving much of that work. We've also spent a lot of time on portfolio and price management, looking at the tail end of the portfolio, looking to see what we can actually put efficiency to increase prices or move into different types of volume, more specialty. Also price management. That's a journey that AAK has been on for a while and will continue going forward as well. As Johan mentioned, our customers are getting more professional. We have to be more professional as well, particularly how we put our prices together and how we sell our products. The functionality of the product, and how our product interacts with the end product and how it can benefit the end product. We've also initiated additional activities such as the Procurement Excellence Program, also David running that. This has been initiated here in 2024, not to centralize procurement, and this is on secondary input products, not to centralize it, but to coordinate it and share some of the experiences, and also figure out if we have the same supplier around in AAK, shouldn't we have at least a framework agreement in place? You can look at this and say, "Well, this is not rocket science. Haven't you done this before?" The answer is, we've tried. In islands and pockets here and there, we've succeeded. With the cultural journey that we're on, we've made it group wide. I think that's the success over the last couple of years and the EBIT performance improvement that you've seen as well. We also have a renewed focus on our balance sheet. That's not something that is sort of discussed a lot in AAK if you go back 3 to 5 years. We also see that cash generation is extremely important. It needs to follow the profitability of the organization, of course, and also to create additional shareholder values. We've initiated a program there called Cash to Grow, similar to our deep dives in the factories, looking to see how we can improve the things that the individuals and the organizations locally can affect, like our net working capital. The journey here is not finished, but you see how the different activities has contributed to the improvement of our EBIT per kilo. The aspiration, the aspiration of 2030, it's not a statement alone. It's a roadmap for the organization of how to develop the company over the next couple of years. It's built on 3 pillars, deliver, develop, and discover. I will mainly focus on the delivery part, to some extent develop, and then Niall will talk more about discover. When we talk about deliver, the alignment and optimization, to me, that's the key driver of the improvement that we've seen so far. It's got more to give, but that is the main driver. Focus on specialties, continuing that work, enable us to differentiate towards our customer and create customer value is a big focus as well. Co-development is the key to innovation, which Niall will get back to, it's also volume growth. How do we differentiate ourselves, specialty, co-development to grow our volumes faster than the market? Last but not least, and at very close to our heart, sustainability. A hygiene factor, also responsibility for AAK. Develop. This is how we, together with deliver, take the road to the 2030 Aspiration. This is the ability to adapt to changing customer trends. It could be clean label, it's plant-based solution, functional solutions, and also to deliver outcomes that exceed our customers' expectations, that deepens our relationship with them, creates loyalty. That's the next 5 to 6 years. Our target is clear. Profitability, EBIT per kilo to exceed SEK 3, grow our volumes faster than the market, and remain the double-digit earnings growth compounder. As part of the 2030 Aspiration, including SEK 3 per kilo increase that we put on our 2030 Aspiration, we also introduce long-term value by adding model assumptions to make it a little bit easier to understand how we think when we drive towards the 2030 Aspiration. We maintain our 10% year-over-year profitability target. The assumptions are there to create a little bit more detail and granularity. Some of them we've talked about before, the income tax rate, for example, the net debt to EBITDA range. The dividend policy has been in place. There are some new things, like our cash conversion, focusing again on reducing our balance sheet, generating more cash flow for the organization and to increase shareholder value. We have a target there after tax of 60%-70% of EBITDA, before tax of 80%-90%. We're a bit below that now, so there is an achievement that needs to be made there and a journey that needs to be made. We've also indicated now that CapEx as a range of EBITDA should be between 20%-30%. If you look at 2024, we're gonna be at the lower end of that range. If you look before that, we're probably towards mid to the higher end of that. We're also saying that our return on capital employed, as I mentioned before, will continue to gradually improve over time. Last but not least, we say also that distribution of potential excess of cash will be made through dividend. Going back to the previous picture of our journey and the cultural journey and how we're moving from being decentralized, unaligned to decentralized and aligned, we're continuing with the efforts that we already have in place and that I've mentioned before. We're also adding to these with new existing programs. Commercial Excellence is one thing. This is how we improve the way we approach our markets and our customers. We work smarter. We use the data that we have, more analytics, we build stronger relationships, and we continue our price management journey. An example of this is the introduction of our first global CRM system. We've had islands of this before and different solutions, but never interconnected. We now do that, and that'll create a lot of good data to share, to build, and look regionally but also globally of how we meet and approach our customer base. Innovation excellence. This is how we drive innovation, of course, and how we build the future products of AAK to grow our volume. From my perspective, this is to ensure that innovation delivers measurable values, that there is a balance between being creative, with some accountability and return on investment requirements. We're also starting to look into our cost base, and this shouldn't be sort of perceived as a cost-cutting program. This is more to take a look to see where do we spend costs today. Should we realign this based on our aspiration, the demands of the customers? We think that there's great potential here as well. Could be that there are some reductions, and that's a great additional benefit, but that's not the first priority of the program. All this remaining decentralized and aligned. You can also see to the right-hand side there how far we've gotten in the different programs. More to give to deliver the 2030 Aspiration. Here's another interesting picture that shows the current activities that we have in place are delivering. These are the 20 sites of AAK. It shows the EBIT per kilo performance of each site in 2021 and in 2024. As you can see, the journey from 1 to 2 SEK per kilo has been driven very broad-based by almost all sites. They all start from different points. It's also important to remember that each site has their own local conditions, they have their own abilities and capabilities, and it differs. It should also be said that going now from SEK 2 to SEK 3 and above per kilo, we expect that to be driven by all sites, even the ones that are on the left-hand side at a very sort of high level comparably today because they have different preconditions than some of the others. When we then go into the next step here, which is capital allocation, we divide it into three categories: investing for growth, M&A and acquisitions, and return to shareholders. Let's start with the first one. The first pillar, capital of capital allocation, investing for growth. This is mainly the CapEx spend that we do. The focus here is on innovation, capacity, capability, and we've guided now with the assumption that we will range somewhere between 20%-30% of EBITA as an annual spend. As you can see as well, if you look back 2015 to 2021, the average was about SEK 800 million a year. The last 3 years, we've upped that significantly, just north of SEK 1,200 million or SEK 1.2 billion, up 50%. This is also our commitment to continue to grow the business, more specialty, better products to our customers with higher margins. The second pillar, M&A and acquisitions. This has historically been a growth engine for AAK. If you look at the past 5 years, probably not so much, but there is still a great ability for AAK to make acquisitions. We have a very strong balance sheet. There are opportunities out there, but it takes time. We've put down 4 selection criteria to make acquisitions, to make it clearer for the company and the stakeholders of what we're looking for. The first 2, geography and capacity expansion, mainly focused on bolt-on acquisitions as well as transformative acquisitions. The bolt-on acquisitions are often single plants, family-owned. We buy them with a lower EBIT per kilo rate, usually simpler products. We invest over the next 2, 3 years. We also bring in our global and regional customers into play. That's how we build the bolt-on acquisitions into something that looks more like AAK today. When we talk about technology and capabilities, technology platforms, we have them to future-proof AAK. Niall will come back to more on this. We've also discussed a lot how far out do we wanna go from the core. We have a criteria, the adjacency product portfolio. The conclusion is we wanna stay very, very close to our core. We will look for acquisitions outside of where we are exactly today, but it has to be connected. One example could be non-food products, but based on plant-based input and so forth. We've also put some limitations on here to say what we don't wanna do. When it comes to backwards vertical integration, we don't wanna go further back than the crude oil, if you will. We don't go into plantations, we don't go into crushing more than what we have today here in Karlshamn and in Aarhus. Forward integration is also limited the way we've set it up. We don't go into end consumer products. We wanna stay very close to where we are. Very focused on high value-add oils and fats products, in other words. The third pillar is to return to shareholders. As you can see here, we've delivered significant returns, above 10% annual growth of dividend over this period. We have a very strong balance sheet to continue to invest in the business of AAK and continue to gradually improve our return on capital employed and our cash conversion. This will enable us to continue to provide strong returns to our shareholders with the dividend policy of 30%-40% of net income and also when excess cash is available to do additional dividends. In conclusion, we're raising the profitability of our 2030 Aspiration. We're maintaining the criteria to outpace market growth and also to be increasingly recognized for our positive impact by stakeholders. Our financial target is maintained, 10% EBIT growth year-over-year over time, and we're also adding the model assumptions that I went through before to ensure long-term value creation. To summarize, with the updated aspiration, raising the bar on profitability, we look and we see that we have the programs and the activities in place to get us to the 2030 Aspiration. Beyond that, we're looking to discover new opportunities and continue our sustainable growth, and I will hand over to Niall to do that. First, I wanna invite Johan back on stage for a quick Q&A. Thank you, Tomas. Any questions to us? Yes. We have some mics here. Essentially just following up, you presented a nice waterfall chart with sort of the historic breakdown on profitability since 2021. Could you provide us with something similar if you look to your 2030 Aspiration? What would be the main drivers and sort of maybe contextualize that a bit? I saw that you presented 2 in the slide in terms of where you are currently, but any color on that? Yeah, I think the way we looked at when we set the 2030 Aspiration two years ago, we didn't put numbers on that split between the different programs. I think the key for us is not to put the exact numbers there, but it's to energize the organization around the potential that we have in the programs. As the programs develop, we also then, you know, find what the level of improvement there is. If you look at procurement, for example, right? It's been ongoing since the beginning of this year, and it's first now that we start to see the potential of it. It's not something we go out and share program by program, but we try to build up the roadmap of how to get there and what those activities include rather. Maybe one way to put it, we've said it, but worth repeating. We think that we have a lot of ammunition still in the activities around optimizing operations, procurement, call it inside, if you will. We have more to give. Takes a bit longer time, coming back to what Niall will present. There needs to be a shift over the 2030 horizon towards more innovation, new product to also drive the EBIT per kilo growth, right? We won't solve it all, but we have a lot of ammunition where we stand, how we deliver today by optimizing, getting more alignment in the organization. You would see if when we, if we deliver to the 2030 Aspiration and we sit there 2030 and say, "Okay, now let's look at those bucket," I think there it's fair to say that it will be optimization. It will be some cost efficiencies. There will be some procurement savings. There will be EBIT per kilo growth driven by innovations, incremental product development with customers, right? We are not guiding on it. Thank you. In the back, there is a mic if you want to. Yes. Thank you. I wonder how you practically work with your alignment vision and how the organization as such is responding to it, so to speak. You heard us talk about culture and a culture journey. We haven't been press releasing that we're working on a culture journey, but we are. That started 3 years ago with me, call it opened up Pandora's box a bit with the executive committee and said, "Hey, there is a better way to lead AAK." We were quite dependent, if you will, and a bit kind of siloed type thing where you, everyone delivers your number, but not necessarily driving AAK as a team. It started there. It quickly evolved to say, "You know what? There is a huge opportunity to improve the culture in AAK." We're quite dependent and separated, if you will, as Tomas said. Huge opportunity. We started a real culture program. That is now being deployed, so that's everything from what I talk about. We are engaging the leaders in AAK. We have been running 48-hour workshops with some 400 employees and leaders about what we want, how we wanna work together, the respect that we wanna show each other, the high-performing team that we wanna become, that it's okay to speak up. It's okay to stand up and speak up for what you believe in without being afraid of what that is doing to you in a hierarchical kind of organization. There's a lot ongoing underneath the surface that you don't see in a quarterly report. That's one element about, you know, really driving the change in terms of culture. The other piece of it is practically exercising that, you have a chance to also interact with David here on the deep dives. What is it? Well, that is actually a combination of a global team that comes to a production site where we typically have, as you've seen in the decentralized structure and what I talked about being local, it's a production site, yes. It's a production site that typically serves a regional market, which means that you have customers there. Typically, we have an innovation center there. When you come to a site like that, you have a business, it sells to customers in that region, it's procurement of the oils and so forth, the distribution, and the input that comes into that site, and then you produce. What we are doing practically is that we bring a team together with go-to-market, production, supply chain, procurement, et cetera, and we look at that plant from every angle. What's the pricing of the least profitable product? Can we run it differently? Can we change the way we operate the factory to reduce setup times, do debottlenecking, invest in new capacity? That's very hands-on, and it's kind of combining global knowledge with local knowledge and passion, and then we leave that with a local plan. That's very hands-on, if you will. That also helps drive culture because we didn't do that in the past. Now we'd say, "Hey, you know what?" When we had the success story in one plant, all of a sudden, you know, in the beginning, honestly, in the first plant we made this, the first reaction was like, "No." Even in the leadership team reporting to me like, "Why are you coming here?" You know, "We, we know how to operate." After it's like, "Hey, I want you to the next plant, then the next plant," right? Because you see the benefit, and that spreads and so forth. I'm trying to make it really practical because that's your question, and that's the journey, and there is more, more to be done. We should also be clear, the cultural journey is not to rip out the culture of AAK and replacing it with a new model. It's basically saying that we wanna keep the good stuff, the 85%, 90% of the culture that we think is working really, really well, and it's been part of the success for AAK for so long, and we wanna nudge the other 10%, 15% for better behavior, and that's done through these programs and also through the activities that we do with the leaders and employees of AAK. Was that answering your question? Thank you. Again, take the opportunity on the breakout sessions, then we'll have that on some of this, and we can talk more about it. Okay? Oskar Lindström from Danske. Two questions for you, Tomas, I guess. First one, you mentioned price management, that's been an important part of what you've done in the past couple of years to drive the EBIT per kilo improvement that we've seen. Do you feel that maybe that has been made easier in the inflationary environment that we've had, and that it would have been much more difficult to do that if it hadn't been for all the inflation and the sort of volatility that we've had? That's my first question. The second question is on net debt to EBITDA. Now, you reiterate that ceiling. What about the floor? Okay. you know, how low can you go? Yeah. Before it starts burning in your pockets. Yeah. Yeah. Let's start with the first one. I think that's an interesting one and a very good question. I think to me it's somewhat simple just to look at the inflationary and say, you know, inflation's up, you can increase your prices, and your margin is up. As you saw from the picture, inflation for us mostly is to do with the raw mats. Makes up 75%, 80% of our cost base. That's been going up, come down, been flat, and we're still improving our EBIT per kilo, our margin, right? From time to time, yes, it probably plays a part. We also see that when we manage our facilities better, we get the utilization up to where we wanna be versus capacity, we can also make portfolio management saying that certain products or certain customers, if the price doesn't come up, we exchange it for something else. Additional specialties. That also moves our pricing power up, if you will, right? There are a lot of these activities that come into play, I would say. Also from our end, I mean, you go back five, 10 years, it's much of a sort of a cost plus mentality around pricing. Not strange because the all our customers see exactly where the cost of our raw mats are on a daily, hourly, minute basis for most of the raw mats, right? There is a transparency there. We can't go out and just raise the prices and say, "You know what? We need to earn more money now." Because competition is fierce, and everyone knows where the price of the input is more or less, right? We have to improve ourselves. We have to do things internally to get the margin up. We're also adding other things into the discussion with the customers. A lot of functionality. It's been there, but we haven't really talked about it. We don't really put a price on what that contributes to the customer's end product or their product. A lot of functionality that we can price as well. It's a gradual journey, if you will, of all those components. If I may add one perspective though from real life and where I think that we have shown the resilience of AAK, as we heard about. Imagine this. Tomas said it well, but imagine this period of rapid disruption, inflation. It gives you could argue, reason to talk to a customer. That's an enabler, call it, but nothing is a given, right? What I think when I look back, what we really did, and this is also realizing a bit after the fact, the strengths of the organization, because I remember so well having what we often call global leadership community, call it like the 100 plus leaders of AAK. We talk to them often, sometimes over Teams and sometimes when we meet together. Typically that would have been in a stable environment, okay, here's the last quarterly earnings and a bit of update, right? When this happened, we utilized the opportunity of the decentralized organization. We called everyone together and say, "Hey, we have rapid inflation, things are hitting us," and we came from maybe updating our standard costing once a year, once a quarter. We were able to rally the troops, if you will, by a bit of verbal communication combined with systematic updating our system to say, "Hey, we gotta look at utilities weekly. We gotta look at that, that." It worked. Through this, we've also been faster. That is not just janking up the price to a customer, but it's being more agile and adapting quickly, whether that is up or down. We have also learned a lot. I think it's more of that, honestly, than it is like leveraging the situation because we are under competition all the time. I do think it helps, and I've seen it before. If you have a very, very stable industry and nothing happens, then it's always difficult to take up a conversation. When things are dynamic, you have a better opportunity to take the right conversation, but also show that you can differentiate. Then the second question, come back to that as well. As you point out, yes, the net debt to EBITDA is very low compared to where it was just a year and a half ago. We're not debt-free, though. We should point that out as well, right? The ratio has improved quite a bit also because of our earnings going up dramatically over the past 2 years. That said, our focus is to continue to invest the money in AAK either through CapEx spend for capacity, capability, greenfields, if necessary, in areas where we don't find good acquisition opportunities, but also acquisitions. If you look at these pieces, even if you look at a single plant, the ones that we would be looking at and are looking at, you're talking quite significant money. There is an active pipeline. We wanna have some dry powder for that as well. We may be talking about $200 million, $300 million, $400 million, $500 million for an acquisition. There's also the fact, and this is what we saw when prices were really going up. If you remember, it wasn't too long ago that we were at 2 of net debt versus EBITDA. That wasn't because of an acquisition. That was because raw mats were going up. There's great volatility there, and we, of course, don't wanna end up in a bind because raw mats are going up. We can price that through to our customers. As Johan has described, we show the picture, we get the margins out of it. One thing that we can't change is the fact that net working capital is going up. Every time we buy something, it's more expensive, even if we make a margin on that. We wanna keep some headroom for that. That said, when the board decides that there is excess capital liquidity there, the determination has been that that will then be distributed to shareholders, in terms of dividend. Thank you. Thank you. There was quite a few hands. Do you know who was first? Yep. Okay. Then we had one there and one here. Hello. This is Joan from BNP Paribas Exane. Just one question. You said AAK wants to grow volumes ahead of the market after a period of flat volumes growth. Could you help us understand the drivers behind what will drive volumes growth at AAK going forward? Thank you. Do you want to? Yeah. I can do that. Well, first of all, there is an underlying market growth as we see it for oils and fats, right? This is about growing faster. What we believe is that in the segments where we target, the speciality segments, we have an opportunity to outpace that. There is also an opportunity to penetrate. We're seeing it in chocolate and confectionery at the moment with most likely supported by high cocoa prices. There are more customers out there that challenge their own recipes to be able to see if they can address costs. While a total oils and fats in chocolate and confectionery could be at, let's say, X%, if you're able to now penetrate that market better with replacing more cocoa butter with our alternatives, there is an opportunity to grow faster. There is that type of opportunity. We have new markets that also come into play. Plant-based food is now established, but the growth is yet to come. We see the opportunity outside of food, as we said, technical product, replacing paraffin in candles, replacing in cosmetics, finding new opportunities. We're looking at it from a market to market, and we're specializing a lot. When we say that, we don't say that we will outgrow bakery oils and fats as a whole. We're saying we're gonna outgrow the specialty space of bakery oils and fats. It's gonna be done with what we said today, focusing on where we are differentiating with being really, really downstream focused, and that's where we see growth opportunities. We're back to our innovation. We're back to our Co-Development. I think we have a stronger track there than most of our competitors. We've organized ourselves differently around that with Niall's new responsibility here, 1.5 years or so back. I think AAK is more prepared today to apply that than we have in the past. All right. We had over there, and 1, I think it was you. Okay. Thanks. Erik Sandstedt with Kepler Cheuvreux. Two questions. Firstly, what would you say are the biggest risks to the updated 2030 Aspiration? What needs to happen for it not to materialize? I'm thinking specifically about the EBIT per kilo target. That's a great question. I mean, there's, you can shoot a lot of risks out there, but I think one is, of course, what are, you know, competitors doing, right? We're not alone, right? There are, in our industry, we have competitors that have a different setup than we have. Some of them are more vertically integrated. They could have, and have, and we've seen it, using a different business model where you might not care as much about the downstream as you do about the upstream crushing and so forth. If you have a different view of how to move volumes, you can end up in a situation where competitors really wants to undershoot and just get volumes going. The medicine to that is to differentiate with innovation and make ingredients that are unique and special, and that's why we focus on being downstream and specialty. That is something we fight today and that could be worse tomorrow, if you will. It could also be if we saw, and we see, you know, some of that risk today, I don't think it will take away it, but if you really let go of the sustainability targets out there, right? If you're loosening a bit from a policymaking point of view, the need for the food supply chain to deliver on sustainability, that wouldn't necessarily help oils and fats, and it wouldn't help specialty. We have called out the opportunity. I think we really need to start and continue to double down on the food ingredient space and food space on sustainability. What if we back down? That would challenge a bit. Then you have the availability of raw materials. Again, we have been through disruption. I think we have a clear message on AAK being able to navigate. Should there be a lack of rapeseed, palm, shea, sunflower, you know, we're dependent on the supply of raw materials. That could have a heavy impact. I think that would have a huge impact on the supply of food, it could, of course, have an impact on AAK per se as well. Those are the three that I've come to think of. Yep, thanks. In terms of the updated aspiration, you said it's not a cost-cutting program as such, but is it fair to assume that cost reduction still will play a material part to reaching above 3 SEK? I wouldn't say so much the cost reduction of it. Maybe then limiting the continued increase, if you will, and the inflationary pressure on cost. The key for us here is to sort of be more clear about where we wanna spend the money and how we spend the money today. To be fair, as most of the other programs that we've initiated, take procurement, for example, done in very much an isolation island type of way within AAK. It's the same here. I think by not centralizing, but coordinating the analysis of how do we spend our money today, looking at the preconditions regionally, locally, and also centrally, I think we can make some other choices and get more out of what we spend today. We're not looking at a headcount reduction program or anything like that. More how do we reallocate what we use today. There's no doubt. If there was- call a spade a cost efficiency. Yeah. We have a model, we have an ambition, which includes volume growth and cost efficiency. With that, it works just like Thomas said. Should we see a weaker volume growth, we need to attack the cost. That's what we're saying. There might be cost reduction programs, but that will come from if volumes are too flat and we still wanna deliver, then we have to reduce the cost base. We don't exclude anything, and we have a conversation with our teams in the decentralized structure. If we don't deliver on the EBIT per kilo with the help of volume, you gotta attack the cost. With the growth of volume today, the EBIT per kilo growth, the primary focus initially is the allocation. Then as Johan said, there might be times and events that demand something else from us, and we're prepared to do that as well. Yep. All right. We have there and there. Thanks. Alex Jones, Bank of America. 2 questions. The first on M&A. I guess if I look at your margin target and your volume target outgrowing the market, it looks like you can do 10% earnings growth pretty much organically, which would be a change of message from prior. To confirm whether that's your belief as well, that you can do that without M&A. And same for the margin ambition, the 3 kilos, SEK 3 per kilo can be done without that. The second question on cash conversion, Tomas, you talked about how that's a little bit of an improvement versus history. Yeah. If you could talk about some of the levers. Yeah for that improvement going forward. Thanks. I'll take the first one, you take the second one? Yeah. To be crystal clear, yes, we think we can do the 3 SEK per kilo organically. Our target is what it is, meaning that just a bit like the question before, we're not saying that it has to be exactly 3 plus percent on volume and then exactly X percent on EBIT per kilo, and then no M&A, or saying that it should be 3 plus and then some and then M&A. We're not telling you that ingredient list, if you will. We're leaving it a bit open for us to have the lever. Should volume be a bit more flat organically, and should it be a bit tougher on the EBIT per kilo, we might have a bolt-on acquisition that helps us do that. We're kind of maintaining that M&A is included, but you're asking if we believe we can do it. Honestly, yes, we do believe that we can do it organically. Also, like we said, we don't need all the new product innovations to come into force to deliver either. There's more to give on the things we're doing today. There could be tougher challenges out there. If you look at it from an opportunity point of view, the internal optimization together with some of the products that we have on the way, we can do it in the 2030 Aspiration, and we see that we have more opportunities beyond that. If you look at how we make the calculation exactly then on M&A and volume, M&A is not included in the organic- No growth target, right? As soon as we've acquired it, as it continues to grow, that's part of the growth as well. When we acquire something and you look at EBIT per kilo, usually we do like the bolt-ons. It usually has a lower than average AAK margin because of simpler product, sort of deliveries. That takes us 2, 3 years to run that up. We usually just include it, but if we have something that's really big, maybe that's something we're looking at. Then, you know, it's in there. We need to improve it and get on with our work to get to 3 SEK per kilo, yeah. Also to be clear, if we have an opportunity to drive EBIT growth, should we be there in 2028, 2029, we have a great bolt-on acquisition there with a lower EBIT per kilo, but we see an opportunity to grow it. We wouldn't be afraid of buying that and be a bit dilutive in the short term because the opportunity is, of course, to drive EBIT growth, we'll come back to you and talk about that when that happens, right. Just want to be clear on that. It's not like we are holding on to that. It's about generating cash flow, shareholder returns, in that case, an M&A can be really good even if that factory, let's say, would have a low EBIT per kilo to start with. With a really long answer from us, can you repeat the second question, please? Sorry, on cash conversion. Yeah. You talked about- What are the levers? Yeah, yeah. Yeah. I mean, what we're looking at primarily is, of course, something that the organization can do something about. The main focus of our cash-to-grow program is, of course, our net working capital. Going into that, it's a fairly simple program in itself. We also put some standards into play that we haven't had before. If you again go back to the old AAK, it was profit, profit, and then some more profit. No one ever talked about the balance sheet, at least not widely through the organization. I think making everyone aware of how it actually works to begin with is one lever. I think there is a real interest to become more efficient on this. If you look back, our cash conversion hasn't been the best, and that's what we want to improve, of course. When you look at it, you're talking about receivables, payables, primarily inventory. Every time that we come out, we spend 3 or 4 days, so it's much quicker than the operational deep dives. We spend that time looking at what does the individual plant look like? What are the KPIs looking like? What's the parameters? We sit the whole team down and work with brainstorming ideas of how we can do things better. One thing that happens there is that everyone realized that they don't know how everything works because this is the first time they heard that we're doing this and this with the inventory before it gets here and here. There's a general sort of, you know, better understanding in the organization locally of what actually is going on. Then brainstorming ideas, being very structured, putting numbers to it, action plans, and so forth. What we see is that we usually find something around sort of 10, 12+ days when we do these. Then of course, you have to put them into action and get them done. We also did a. I think we stop there to get the other question. Yeah. That enough as an example? Yeah. Thank you. We've got one there and two more. One there and one there. Thank you. Here first. I think at least, if I remember correctly. Thanks, Johan. if you look at the portfolio Yeah different plants. Yes There's very broad range. Yeah 7, down to 0. Are any of the ones that are close to the 0 just structurally not able to improve? Or do you think that all of them can get to the, to the 3, say, or at least the 2? I would like- Would you expect to dispose of any of the. I wouldn't say that I expect to dispose the ones we have today because the ambition is to turn around. You've also seen that not long time ago, we did close a factory in Europe because it was not profitable, and we didn't see the opportunity to turn it, and we could allocate the volumes that we wanted to keep to other factories. We're not excluding anything. Do we need to close a plant? We're doing it. In that, you also had Hillside that we have now sold, waiting for closing on that. Yes, we are looking at that. If we can't see it working, then we're looking at options. I think that's the answer to it. Can they all go to 2? I would like to think that we can go to 2 and 3 with everyone. There's always going to be a, you know, a distribution, right? But there are different setups, like, we have a plant focused on, you know, high value added infant formula fats, which has a different setup than bakery fats, right? There is some of that structurally, but there is an opportunity to lift the whole curve. All right. Is that okay? That was exactly my question. Okay. Do you have any minimum acceptable level with the new aspirations? That's a great question. I and you could come with me on the next leadership call and how we roll out the culture because this is one of the things actually where we went wrong a bit. Honestly, when we launched the 2030 Aspiration, even though I tried as hard as I could to say that it's all about how to If you take this curve, now you put all our products there. You could imagine that we have some with quite high, you will have some with quite low. Now, part of the organization thought that I cannot sell something if I don't get 2 SEK per kilo, right? If you were at 0.5 and you said, "I can't sell it if it's not 2," then you left the opportunity to sell what you had on 0.5 to 1 or 1.5. That could have been an SEK 0.51 per kilo delta on that point, if you will. That's something we talk about. It's not like everyone has to do it exactly the same thing. It's about everyone lifting the curve. Even the culture journey is about that. The culture is about the sum of everyone, right? If everyone gets a little bit better, you lift the whole curve. Great question. We don't have a limit, but we are focusing on how we can improve every single plant, every single product line, and really try to optimize. That's the nitty-gritty work we're doing. Now, there will come a time where you might have a cutoff, like selling a factory if you see a better opportunity or killing a product line if it doesn't deliver to free it up for something else. It's rather that. The way we use the limit is, "Hey, we need a new deodorizer," which is quite an expensive investment. We then say, "Have you done your optimization? Have you looked at your product portfolio? Can you free up capacity? If you've done that, you can get a new one. If you haven't done that, do the work first." That's rather the limitation, if that makes sense. It's all about local preconditions, so we don't set an average target. If you look at some of this, I expect plant 1 to continue its journey. Plant 7 probably has a lot more to give, I would say, right? Plant 14 has done a really good job. It's not a comparison and it's not a competition. It's all local conditions, and what do we think we can do with that going forward. I know there is one more question. What is the question about? It's just about your Procurement Savings Initiative. You know what? Hold that one to the breakout session together with David. Is that okay? Sure. Yeah, yeah. Happy to. You have a great opportunity there. Could you do the same? All right. Thank you. Good afternoon, everyone, and welcome to call. My name is Niall Sands, and I'm the President of Commercial Development and Innovation. I have been in role since January 2023, and I look forward to this presentation over the next 30 minutes or so to take you all through what we're doing in innovation to fuel our future growth. With that, it is linked to developing solutions today for the near term, but also with regards to how we're creating new pathways to discover science and technology for an innovative new future and the opportunities that presents us to grow. With that, the team that I lead of Commercial Development Innovation, we are very much driven by the fact that we will contribute to this revised aspiration in terms of volume outperformance in the specialty category, as well as improved profitability. That is the barometer by which we measure our success. With that, we develop solutions today that are very much anchored in fat chemistry, with specific functionality and nutritional performance. We're developing those solutions today for our customers in the near term. With that, we are also on a pathway, as I said, to discover what are the new futures that are open to AAK as we strive to grow into new segment areas. By that, I mean nutrition beyond infant. Infant nutrition has been our heartland, along with some areas of medical for many, many years. If we look at nutrition beyond infant, by that we mean deeper into medical, exploring pet nutrition and care, as well as pharma. We're also looking at the defossilization and removal of paraffins, as Johan had mentioned, in our core business of personal care, which is effectively a skin health and skincare business, as well as candles. On top of that, we have a program called New Naturals. Our New Naturals, as Johan alluded to, is where we're really deep diving into the market attractiveness and sizing of non-food categories, which are anchored in the use of paraffins and fossils today, where we believe there's a cleaner, greener future for those application areas in non-food. That piece of work is ongoing, and we expect to complete that by the end of Q1 next year. We also recognize that as a key player within the ingredient supply chain, it is fundamental that we provide safe food to customers. Many of our customers and consumers are the most vulnerable in society. Those are those that have medical conditions or newborn babies. With that, the quest to drive higher purification of our oils and fats to provide even safer food is fundamental. In terms of how we fuel our funnel in innovation, over this past 15 months, we've been building the team of Commercial Development and Innovation, and we fuel our funnel anchored on insight. This is new muscle. This is new competency within AAK, which we have been recruiting heavily on over this past 12 to 15 months, especially from peer ingredients, but in particular from the flavor industry where this is standard practice. It's now starting to bear fruit. By that, I mean today we do not rely on market data and insights. We are conducting our own proprietary primary research to fuel that funnel to better understand consumers and customers in key markets around the world in the technology areas and application areas within which we partake. Three examples. Nutrition with purpose, exploring the role of medical nutrition in North America. North America has an obesity crisis, and therefore we recognize the essential role that lipidomics plays in nutritional health on the gut microbiota. We'll talk a bit more about this in our breakout. The second one we identify is a global phenomenon that we love to dunk our cookies and biscuits into a hot or cold beverage. Therefore, from a functionality perspective, the role that oils and fats plays with regards to that cultural norm and behavior that we have in so many countries across the world. The third one, which we'll bring to market now on the 2nd of December, is chocolate motivations. Earlier this year, we spoke to 3,500 consumers in 14 countries as to what inspires them to make those purchase decisions in chocolate and confectionery. With that, we have identified 12 domains that influence chocolate buying behavior and confectionery buying behavior. If you're interested, 2nd of December, with FoodIngredientsFirst, my head of innovation or my head of insight on marketing will be rolling out the insights that we have derived from that piece of work. With regards to delivering on our 2030 Aspiration, it starts next year. What do I mean by that? We have been working on our innovation pipeline for a number of months, long before the Commercial Development and Innovation organization was created in January 2023. Therefore, 2025 will be the launch of new product introductions by AAK into the market, into Chocolate & Confectionery, into special nutrition and health, into plant-based dairy, and into plant-based meat. We will introduce those 6 innovations through the course of 2025. We expect then commercial impact on contracts in the years following. On top of that, in terms of understanding the world that we live in today, consumers are changing. We see 3 major trends. 1, we're getting older and we're living longer. Therefore, especially in the East, we recognize that for those customers who want to, and consumers who want to remain healthy, with the same vitality and reverence for life, they need nutritional supplements in order to prolong a healthy, sustainable life, also through our skincare and health program under personal care, the hydration and the skin protection that we offer through our emollient technology. We see millennials and Generation Z. They are now the dominant consumer class. They're more discerning. They're much more deliberate. They're much more tailored in terms of the experiences they're looking for from the goods and services that they procure. How does that impact how we formulate products and technologies for our customers, recognizing that our customers see that they are the future shopper going forward. Again, to reiterate the third phenomenon, which is obesity. It's a Northern Hemisphere, Western world phenomenon. We have got in excess of 50% of the Northern Hemisphere and some geographies of Western Europe and the U.S. which is obese. Again, we believe that through traditional science and lipidomics, we have a role to play that'll help us deliver new volumes and profit towards our Aspiration. We do all that across three time horizons. The near term, 1-2 year, midterm, 2-5 year, and longer term in terms of that, let's say, exploratory research and science, which is 5 years and beyond. This world we live in is changing, and the pace with which it's changing is really ramping up. That presents itself not just with challenges but opportunities for growth as to how do we adapt to be that essential ingredient partner for our customers. To pull these 5 streams together, I see consumer expectations as well as technology being hand in glove. We do recognize that consumers are changing. They're much more aware of the health nutritional impact, labels, et cetera, et cetera, so cleaner, clearer labels is necessary. We also see that new solutions can be developed through technology to produce the food. We also recognize the influence and maybe the poor influence technology has on influencing new behaviors. By that I mean we are living in a world and a culture of instant gratification, on-demand goods and services, and the fact that we are time hungry. Our attention span with TikTok is no longer than 15 seconds. To that end, how do we adjust to these new norms, these new behaviors? The buying behaviors of our customers change as a consequence of that as well. They are looking for agile, nimble suppliers that can react to this fast food, fast fashion world that we are now living in today. We also see that consumers are heavily focused not just on affordability, but on sustainability as well. We recognize these as being foundational. I've been working in the Food Ingredients and food sector for more than 20 years, and the first 7 years I spent working with British retailers in a B2C supplier. What I see in today's world is that the percentage of our monthly pay packet going towards the grocery shop is probably higher than ever. There is an absolute focus on value and affordability, and again, that drives our mindset as to how do we create affordable value through our technology for our customers, anchored with a strong, sustainable value proposition. Lastly, policy. Policy derived by the mega corporations in the food industry that we supply through their policies and standards, those brand owners with their brand policies and standards that are constantly being revamped to the changing world that we operate in. Supermarkets and private label, massive area consumption, and again, how those private label policies are changing, what we need to do to react to that. Lastly, in terms of government and government regulation. We have seen it with high salt, high sugar, high fat regulations, the need for reformulation as a consequence of that, as well as EUDR. Therefore, through science, through technology, through reformulation, and ultimately by working with AAK, we help our customers become compliant. With that, we are no longer living in a product economy, but an experience economy in the food industry. We see the billion-dollar brands which we supply, where we are plugged into, are turning up at experience events. This has long been a phenomenon within the food industry, where we have seen cooperation in the food service industry response to the likes of the World Cup and the Olympics. Nothing new there, around for many decades. In terms of the post-COVID world, where we all crave better experiences and life experiences and memories, we see the billion-dollar brands in the food industry partaking in experience events, in particular rock festivals and music festivals. Therefore, it is that experience of the brand, how that brand represents the millennials and the Generation Z today that they are tapping into. Much more than that, AAK and our technology as Thomas alluded to, contributes to the experience that consumer ultimately has when eating that product or using that skincare product. I suppose it's with that insight, we have developed our five themes that drive innovation in AAK. Because we recognize the benefit and experience our technology brings to formulating great products and service, be it in food or non-food. The first one being better planet. Our customers can tell us how much carbon is being emitted from their footprint. They can tell us how much carbon is emitted from their food ingredient supply chain, and the question is, "AAK, how can you help?" We can help because as you've seen through the commitments we've made to SBTi, investments in bio boilers, a verified deforestation free, et cetera, et cetera, we are on the path to helping customers decarbonize their supply chains. In terms of better performance, this is linked to the affordability of food and the inflation within the food segment. Therefore, quite simply, you could say, "Weak in negotiation, you give away your margins." That's not what we do in AAK. We see this as an opportunity to develop technologies that helps our customers run their operations quicker, better or faster. By that, I mean greater throughput on their production line or less downtime as a consequence of buildup of fats in the production line. These are technologies and innovations that we are currently working on for our customers to help them reduce their cost of goods and manufacture better health. Within better health, as I alluded to, we see many areas to this, but in particular, it's brain development, gut, and joints. These are focus areas for us beyond infant nutrition. We recognize, again, looking at the science of lipids in the body, lipidomics, that the essential role and the positive impacts particular fatty acids can have on anxiety, blood pressure, diabetes, obesity control, as well as joint health. These are all active work streams that we have in our pipeline as we diversify and release our dependence on infant. We are doing the same in skincare as well, in our personal care business. Looking for other areas of cosmetics beyond skin that we can penetrate, and that's still in development. In terms of better experience, we as consumers love and enjoy tasty food and beverage products. Whether it's in-home or the out-of-home spend, that indulgent treat, the aroma of that buttery croissant, the velvetiness of a smooth chocolate bar, the creaminess of a frozen dessert, the frothiness of your preferred oat-based cappuccino, that is AAK technology that creates those memorable experiences and that functionality. Therefore, that's the realization where we need to valorize better the functionality that oils and fats brings to product applications in food and non-food. To that end, if you look at those 2 pillars of health and experience, quite boldly, yes, we are AAK, the multi-house, oils and fats ingredient house, but we're much more than that. AAK is a taste company. AAK is a texture company. AAK is a nutrition company. AAK has a solid foundation in sustainability with bold goals and initiatives, and it's absolutely anchored in science and technology. That's what we bring to our customers. We always have an eye to the future in terms of what does the future look like through biotechnology, fermentation, AI, upcycling, et cetera, et cetera. Again, Sorry, just to go back. We have 68 projects in our pipeline, and this is our AAK-inspired pipeline, so this is not the Co-Development process. In the Co-Development process, through our 3 regions, we have hundreds, maybe thousands of projects ongoing on a daily basis. We have 68 projects in our pipeline anchored to these 5 themes, be it new technology development, new product development, PhD-sponsored projects. With that, we are on the discovery phase. We're doing clinical trials, we're doing application trials, and we're seeing the outcomes of those tests. That will mean that by the time we get to Christmas this year, we will have filed 25 patents to protect our future through the discovery that we have as a consequence of the 68 projects. What does that mean? Like, does customers see that? Yes, they do. This has spawned recent customer conversations. 2 examples. 1, in relation to nutrition. We published a paper in a science journal with a breakthrough in particular area of medical nutrition. Global customer reaches out to us, says, "Really inspired by what you're doing here. We see a potential another application area. Do you fancy working on that project with us?" The answer is, "Thank you for the feedback, and of course, we do." The second example would be through the filings that we're submitting for a patent technology and a patent landscape to protect our future. Again, chief R&D officer of a billion-dollar food company schedules a meeting, opens up the meeting by saying, "We see the IP that you're filing. We read your patents. We like your thinking. It tells us we need you in our supply chain." Again, that gives us encouragement to do more. With that, we have some projects outlined here, 17 of which what we would call our hero projects, and they are segmented based on the five pillars. They also are highly private and confidential as you expect. They are coded here. You will see by design that they're very much anchored into nutrition beyond infant. It's into chocolate and confectionery, where we're trying to drive greater efficiencies to improve the affordability of chocolate for our customers. It's into plant-based, but it's also in new technology areas of mineral oil replacement, as well as how we can run leaner and greener operations through producing safer, higher purity oils and fats. This is enabled by people. It's all about the people in the team that makes this happen. We are lucky in AAK to have fantastic science and technology community, as well as application colleagues, managers, and technologists in our Centers of Excellence. We have up to 20 PhDs qualified in everything from nutritional science, dairy science, enzyme development, biotechnology, organic chemistry, pharmacology. That is muscle in AAK that we're now starting to flex in a much more coherent manner. That is driven by an innovation process, which is much faster and much more iterative, much more empowered. We fail fast, but we learn even faster. It's empowered by three Centers of Excellence. Our center of gravity for chocolate, Aarhus. It's the capital of chocolate in AAK. With that, we have not only great fat chemists, but we have chocolate chemists. Chocolate is chemistry. Therefore, we have the backbone in that team and a passionate team, as well as assets and infrastructure within that CoE center to produce any chocolate technology any customer wants. We have the same in Zaandijk, which produces great taste in plant-based foods, but also dairy. We opened that up in 2023, March 2023. New to AAK, where it's a one-stop shop for innovation. Pilot plant, sensory, culinary application. With a well-defined brief, a customer can leave us at the end of the day going from ideation to prototype in hand, accelerating innovation timelines. Our newest in Antwerp for bakery. A new center opened up this year, but the beauty for Antwerp is that we blend our Antwerp competency with our Aarhus competency, and together we can attack the choco-bakery category that's emerging, and many of our strategic customers are growing in this space. External engagements continue. We use these as vehicles to horizon scan and scout new technology. Big Idea Ventures, MISTA, the European Institute of Innovation and Technology, as well as associations with peer ingredient companies and universities. Lastly, internal and external communication about innovation. Being more aligned about what we're doing internally, but broadcasting to the world our voice and our opinion on innovation and the insights that fuel that. We also have a lens to the future. Again, I think it's credible for us in AAK as protagonists of change and innovation, that we look to potential disruption in this space and ask the what ifs that Johan alluded to earlier from a financial perspective. What if biotechnology becomes scalable? What if cultivation becomes cost-effective? What if this becomes truly more sustainable than agriculture? These are the questions we're asking ourselves in fermentation, in cultivation, and in Power-to-X. We're involved in all these areas with the main protagonists and players in this space, a scenario that we follow closely. To summarize and to wrap up innovation at AAK, I'm really proud of the team that we've developed in commercial development and innovation. My leadership team come from the world of B2B, B2C, and food service, but they've also that experience which is fundamental as a global function within AAK, where we have worked in Asia, in Latin America, and in North America for substantive numbers of years. Therefore, we bring that regionally relevant understanding to our regions. Suzanne representing BA Europe here today, as well as Octavio, as well as Stine, we have the experience within my team. On top of that, we have our scientific backbone. Up to 20 PhDs, and of the diverse areas of academia that is helping us develop emerging breakthrough science and technology. Therefore, then, to enable that, we need those Centers of Excellence, those application technologists, those, customer innovation managers to translate the science and technology into the product application that consumers will love and want to re-pick up time and time again from the shelf. Our North Star, how we package all this up, when we look at innovation through the lens of our customers and our consumers, the five pillars of our innovation that is aligned to the benefit and experience, that our technology brings to deliver consumer customer-centric innovation, better health, better performance, better planet, better experience, and better futures. With that, everyone, this is innovation at AAK, and I hope, that was enlightening for you, and I will happily take any questions that you may have. Yep. Yes. I mean, great presentation. These innovations, I realize there's many different kinds, but do they typically require you to redesign your production process, for example, the one that we saw today? Is it more a question of developing something in a laboratory off the main process line and then sort of adding that as an ingredient to your existing product? Yeah. The solutions that we develop typically anchor on the process and technology that we currently have today. More often than not, it's using existing processing technologies. Within that, new technology development is also part of our repertoire within innovation, and therefore, we're asking ourselves whether we can develop new technologies that'll help us improve, in particular, the purity of our oils. We actually do both. On the processing side and the new technology side, it's much more around new ways, new processes, new engineering practices. When it comes to product development, largely speaking, we are using fat chemistry, modification, chemistry changes to the triglyceride anchored in typical manufacturing processes. From a non-engineer's perspective here. Yeah Do they typically require you to, you know, if you launch a product innovation or want to launch a product innovation, do they require you to redesign the entire, you know, production process? No You know, set up a new mini process alongside the one that you already have, or? You know, we use the existing footprint. Yeah. Therefore, these are plug and play to the existing footprint of our factories. Wonderful. Thank you. Hello. Just a quick one. I thought it was a very good presentation and very interesting innovations, but some of these things are not new. If you've talked, I mean, AAK has talked about medical nutrition, about plant-based for a while now. What's changed? What's different now? Yeah. Plant-based as a category continues to see a dichotomy within the overall plant-based foods category. Within that, I mean plant-based meat and plant-based dairy. Plant-based meat, consumer pickup at the point of purchase continues to stagnate, it hasn't had the penetration that we're all hoping for. That doesn't stop us developing new technologies in this space. Plant-based dairy continues to grow, we do very well in that. What gives me more encouragement than anything, having done a business review quite recently in plant-based foods, is the sheer penetration that we have had in this market. I would safely say there is no key player in the plant-based foods world in Europe and in North America in particular, where we are not the supplier of choice. With plant-based, I would say the challenge is more consumer pickup and penetration and frequency of purchase, that'll drive that. Within medical, we have a medical business, in addition to our infant. Where we're at now in terms of our vision for medical has been much more specific, much more clear, much more focused on exactly what we can deliver through our science and technology. Therefore, we've talked about quite simply brain, gut, and joint health. With that, we have restructured, reorganized, recruited in order to drive greater penetration in the development of those technologies. I would also say that when it comes to plant-based meat, for example, the products aren't good enough today. That's my take on it, right? That's where Niall, his innovation team, and our technologies come into play as we have with dairy, which is a completely different, more mature market, right? This is the way forward to actually get to what you're asking for it. We have someone here. Hi there. Thanks for the presentation. Just going back to the product launches that you talked about for next year in 2025, could you maybe just give a bit of color in terms of the sort of go-to-market strategy for these new products, I guess maybe provide a bit more detail as to pricing strategy for these AAK innovations would differ to those of a co-development with some of your customers? Yeah, great question. These are AAK-inspired technologies. When we go to market, you want to be bold, you want to be creative, you want to do things differently. Hence, my direction to the team is that whenever you look at our customers and how they launch new products into the market, we should be equally proud and have a similar mechanism that's appropriate for the B2B world. You can expect that we'll be investing in marketing communications, in webinars, in events like Fi Europe, where we were present last week in Germany, showcasing these new technologies. The go-to-market approach, which will be driven again by our insights and marketing team, and they're actually the start and end of the funnel. They fuel the funnel from the insight, but they are actually the drivers that create those marketing programs that bring the product to market. They will be professional product launches that you would expect to see of a specialty player in the ingredient space. In terms of pricing strategy, these are differentiator products. These are products that we've invested time in over many months, in some cases years, to develop. In terms of the margins that we expect, it will be incremental to a product that we would typically do with a customer through the Co-Development process. We have one over here, I think. Just wondering, in the 67 projects, is there anything in there that you could actually just license to clients, or is the idea that AAK would make absolutely everything? In these examples, we would make absolutely everything because it is fat chemistry. Licensing would be maybe, which we could have done years ago with a technology where it's incumbent upon having a particular piece of equipment to make the technology work. That does happen in the ingredient industry and that's where we would partner up with an equipment manufacturer in order to realize the technology because it brings something different that traditional equipment doesn't do. In the models and in the, sorry, in the products that we are launching next year, this is based on in fat chemistry, and the design of fat chemistry and triglycerides to provide specific functionality, again, in chocolate, in nutrition, plant-based meat and plant-based dairy. I think just to add on that, this is here and now, if you will, even though it's future sales in terms of launches. What we're calling for a bit in the sustainability arena, we're calling for more collaboration between ingredient players, CP, but also policymakers, right? How do we really work together? So we are open to and we are engaging in more of a collaborative innovation together with other ingredient players and customers. I could foresee in the future that the, that we might enable solutions where we could offer that. We might, together with another ingredient player, come with a solution, but it makes more sense for a customer to work on it, or to produce it themselves. Not today, but we are quite open. We wanna be that player. We are moving from a bit, back to your question up here before. We're moving from a bit reactive, if you will, to more proactive, forward-leaning, AAK taking charge, and that could include also different types of innovation solution. And that- I think with that, there's 1 or 2 questions more, and then we wrap it up here because there's plenty of time to actually deep dive with Niall, with other colleagues from the executive committee on these certain topics. 1 or 2 questions more. Sorry, you wanted to add something? No. Okay. If there is one or more. All right. Everyone is kind of hungry, eager to get to lunch or a technical break, so we respect that. Niall, thank you. Thank you. Thomas, thank you.

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