Ladies and gentlemen, welcome to the Scandi Standard Interim Report for Q1 2025. My name is Jerry, and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. I will now hand over to Jonas Tunestål, CEO of Scandi Standard, to begin. Please go ahead.
Good morning, everyone, and welcome to this presentation of Scandi Standard's Result for Q1 2025. My name is Jonas Tunestål, and I'm the CEO and Managing Director of Scandi Standard. By my side, I have Fredrik Sylwan, our CFO, and I'm pleased to have him by my side today. I'm also glad to report a strong growth in the quarter. Next slide, please. We have solid growth and improved performance. We see a 7% growth in net sales and increase in volumes, and that is supported by a strong consumer trend and driven by substitution from red meat. It is also supported by strengthened convenience offering. We can see that the chicken is a convenient product where we are deboning more and more and get the products more convenient.
We also have the startup of a Lithuanian low-cost platform according to plan, and that has an EBIT impact of minus EUR 7 million in the quarter. We have also done the acquisition of Farm, and that will accelerate the backward integration. Without that, we see a strong improvement in underlying EBIT and making continual steps toward our financial targets. As communicated before, we are also preparing our newly acquired ready-to-eat plant in the Netherlands, in Oosterwolde, for startup in Q4 , 2025. We also see improved performance in our key sustainability KPIs, and the dividend proposal for us is SEK 2.50 compared to SEK 2.30 last year per share. Next slide, please. This slide shows why we have this growth and our value drivers for this, and that is because it is responsible, safe, and nutritious.
Chicken is convenient, versatile, and tasteful, and it is affordable because it's sustainable. Next slide, please. We see a strong consumer trend that is in favor of chicken products. We have seen strong poultry growth in the Nordics and Ireland, and it is a 44% poultry growth from 2010 to 2023, and we're expecting a 30% poultry growth from 2023 to 2030, and that is 1.7% annual growth. Chicken is benefiting from consumers switching over from other proteins, and that is mainly from red meat. Scandi Standard has increased our harvest volume by 4% in 2024. Next slide, please. One of the major reasons why it's benefiting from other proteins is because it's sustainable and affordable. Price has always been important for our consumers, and the focus has increased even more in the current environment of high food prices.
Beef prices are increasing, and they're becoming more expensive, which chicken is benefiting from, but also from the long-term trend of switching proteins from red meat to poultry. Chicken is affordable in all segments, and that gives us further opportunities to drive long-term volume and value creation. We see future opportunities to drive more value out of the chicken due to its affordability. Next slide, please. On this slide, we want to present our EBIT per kilo measure, which is a good measurement of our value creation for our business. Q1 2025 EBIT per kilo is SEK 1.73 compared to SEK 1.74 in Q1 2024. It's slightly lower, but if we exclude the startup cost in Lithuania, EBIT per kilo is SEK 2.05, and that's an increase of 18% versus Q1 2024.
Lithuania and Oosterwolde in the Netherlands will be good contributors for us reaching our 2027 goals, and we are expecting to make material EBIT per kilo steps in 2025. In the different colors in the diagram, you can see development in the different segments, and the RTC color includes the ramp-up cost in Lithuania. In spite of that, the startup cost in Lithuania, EBIT per kilo is higher than last year. Next slide, please. This slide is to remind you of our strong market position in all our five whole markets, and the countries are highly consolidated. These markets have large hurdles for new entrants. They can individually be regarded as semi-closed markets due to the strong consumer preference for domestic produce.
Due to our strong market positions, our own supply decisions have a meaningful impact on the market balance, which has helped us recover the process from inflation. Note that each market, however, also includes consumer segments less sensitive for provenance. Next slide, please. Here we are talking about Lithuania, and to fully utilize the potential of our existing markets and clients, it is important to integrate a low-cost and high-quality hub into Scandi Standard. We are now in the startup process and the ramp-up process of our Lithuanian platform, and it will reach 20,000-25,000 ton grill weights, and it will be a state-of-the-art processing plant and best-in-class cost position. Our intention is to build a fully integrated hub, and that allows us cost control, animal welfare, and food safety. We have also done recent acquisitions of farm, and that will accelerate the process.
For the long-term being, we're planning to build additional farm capacity from 2026 and onwards. With that, we're well positioned to serve high-quality products to segments of existing markets less sensitive for provenance and also into our ready-to-eat plant and export clients. We are targeting medium-term EBIT per kilo, well above SEK 3 per kilo. Next slide, please. If we're looking into our total picture of our ready-to-cook plants, you can see them here, all our plants, and note that down in the right corner, 11 million chickens in Lithuania is just one shift. If the market has a positive momentum, we have the possibility to scale up with another shift and double the production. Next slide, please. Now we're moving into ready-to-eat, and chicken is becoming the preferred convenience choice.
This slide is a reminder of the strong historic growth in our ready-to-eat business, and I'm confident that it will continue the trend. There are two main types of businesses. There are three-quarters of breaded products, European market, that is 75%, and 25% of the market is integrated local business in Sweden, Norway, and Finland. We see a high return on capital employed and an average EBIT margin of 6% the last five years, and it's also low capital employed compared to ready-to-cook. As you can see in this graph, the last two years, we have declined a little bit, and the growth is coming on an even step, and that is the loss of a European breaded contract in the second half of 2023. We have a positive momentum on replacing those orders and getting growth again in our ready-to-eat, and it looks promising.
Next slide, please. If we look at the market in total, we see healthy market growth expected in the European breaded market, and there are three different types of players. There are the European players, the regional players, and the local players. Scandi Standard has been a large regional player with 36,000-ton product weight in 2024, and that is about 5% of the European market. The market has been stagnant after COVID-19, and there is also some European overcapacity. We expect growth, and that growth is about 60,000 tons until 2029. Next slide, please. This is why we do the acquisition in Oosterwolde, and that is to take Scandi Standard breaded activities to the top tier.
There are two of Europe's most efficient breaded product lines in the factory C that you can see in the top right corner of the picture, and it will give us 48,000 tons of annual capacity. It is one of the few with advanced form production capability. As explained and talked about before, the total investment is about EUR 28 million, and that will replace a planned investment of EUR 30 million in Denmark. It is tailored to meet the criteria of the large client. The operation is planned to start in Q4 2025. Next slide, please. If we look at that, the more holistic perspective, our Lithuanian business is a low-cost, high-quality end-to-end hub in combination with the state-of-the-art breaded capability in the Netherlands of Farre. That gives us feed efficiency, low labor cost, and efficient logistics with a scalable platform.
With this together, with our strong position in our whole market, it gives us a very competitive combined offer to our clients. That gives us competitive strength to take market shares. It has typically long lead time in supplier switchovers, so we need to be patient to onboard a full value chain business with customers. Meanwhile, Lithuania has secured strong customers' orders for fresh meat. Next slide, please. Now we're moving over to our segment, and the table shows the reconciliation of our segments. Just at the start of Kaunas, Lithuania, we see a strong positive contribution in both ready-to-cook and ready-to-eat. We also want to remind you the category other includes our ingredients business and our corporate cost. Next slide, please.
If we look into ready-to-cook specific, we see a strong growth and improved performance, 6% increase in net sales, 2% increase in process grill weight, and a positive mix effect. The adjusted EBIT is SEK 93 million compared to SEK 96 million last year, but that includes the Lithuanian startup cost of EUR 70 million. We have lower LTIs injury frequency rate. It is 13.3 compared to 23 last year, and that is a reduction of 42%. That has an effect on the focus efforts during the last quarters. The animal welfare indicator is 8.5, which is well below target and in line with quarter one last year. Next slide, please. We move into the feed prices. After a long period of increase in feed prices, we have now seen a normalized market for a while. There are still uncertainties, and we need to be prepared for future volatility.
Our model had most of the input cost linked to our top line. We have no or limited trade with the U.S. and China. We also want to highlight that feed cost is one-third of our cost base. The short production cycle compared to other proteins enables us to be more agile in our supply chain. Next slide, please. Now we are moving into export prices. As you can see, they are down 3% compared to Q4 2024, but increased prices are more than offset by FX and mix. We see a strong development in export prices, and we are also seeing a strong increase in the coming quarter. That is also due to our effort to improve our market performance. We are looking into more strategic client relationships, improved sales and operation planning have increased flexibility between export and ready-to-eat, and we have also reduced exposure to spot markets.
Next slide, please. On this slide, you can see the channel development more in detail. Through these details, you can notice the increase in retail in the quarter. We see a slight decrease in net sales in food service, though. In general, we have been seeing strong demand growth in several of our whole markets in the quarter. Next slide, please. In ready-to-eat, we have strong growth and improved EBIT. We have net sales that are up 9%, and that is driven by, as you saw in the last slide, strong retail demand. EBIT is SEK 31 million compared to SEK 25 million last year, and it has a slightly negative impact from our Stockholm expansion startup.
The QSR market is flat, but we're expecting it to improve later in 2025. We see really good progress in our preparation of our Oosterwolde plant. We have really positive market feedback, and we are preparing and investing for the Q4 startup. Also in this segment, we see a reduced number of injuries. If we're looking into the segment in ready-to-eat, we see strong retail growth also in ready-to-eat, and the food service is still slow. Ready-to-eat will be an important long-term tool on developing EBIT per kilo, i.e., increasing the value of our protein. With that, I will hand over to Fredrik for a more deep dive in the financials.
Great. Next slide, please. Thank you, Jonas, and good morning, everyone. Next slide, please. As Jonas mentioned, Q1 was strong. In fact, it was our strongest Q1 ever with a top-line growth of 7% and at fixed FX, 8% top-line growth. EBIT grew 2%, which includes the impact from the Lithuanian ramp-up cost of SEK 17 million that has been mentioned earlier. Very positive was to see that the top line was driven by both RTC and RTE. Our finance net is higher due to less favorable impact from interest rate swaps and higher net interest-bearing debt due to the acquisitions during last year and beginning of this year. Tax is in line with previous year, and feed efficiency remains at a stable and strong level, and we also see a significant reduction of injuries. Next slide, please. Our return on capital employed is continuous.
Its positive trajectory, showing improvement compared to the previous year. Meanwhile, return on equity is slightly below last year, primarily due to higher finance net and the ramp-up cost for Lithuania. At the same time, our equity ratio remains relatively stable despite the acquisitions, which reflects a balanced capital structure and continued financial resilience. Next slide, please. We delivered strong operating cash in the quarter, supported by higher EBITDA, but also improved accounts receivables and inventory. CapEx is up, mainly driven by the acquisition of the RTE factory in Oosterwolde in the Netherlands. Paid taxes is up, primarily due to Sweden's tax refund last year, which created a comparative impact. Paid tax is now on a more normal level. Other items are positively impacted by FX on interest-bearing debt, and our net interest-bearing debt increased by SEK 13 million in the quarter, driven by the above.
As you can see, the reported leverage is well below our internal threshold of 2.5 times EBITDA. Next slide, please. Our working capital remains exceptionally low in the quarter. Inventory decreased 5% year over year, driven by a lower level of finished goods, partly offset by live animals. Receivables were well below last year, despite increased top line, and accounts receivable are expected to come up to more historic levels during the Q2 . Payables and other liabilities increased marginally, primarily due to timing effects. Our target for working capital as a percentage of rolling 12 sales, adjusted for financing, remains at 6%. In Q1, this metric stood at 4.7%, including the financing adjustments. Next slide, please. During 2025, we have large investments. The acquisition of Oosterwolde was closed and paid during the Q1 .
The Lithuanian farms is expected to be fully paid during the Q2 . We have capital investments amounting to SEK 550 million, which includes the preparation of Oosterwolde for the Q4 production start, and the efficiency and capacity investments in our existing factories, as well as the rollout of the BPE system. We are expecting an increase of working capital due to the ramp-up in Lithuania and Oosterwolde. We also expect the effective tax rate to be at roughly 20%. The proposed dividend of SEK 2.5 per share amounts to SEK 163 million, will be paid in two installments during the second and Q3 . This is an increase of 9% versus the 2024 payout. Next slide, please, and back to you, Jonas.
Thank you, Fredrik. Next, I would like to talk about one of our cornerstones and license for us to operate. There are three key areas when it comes to creating trust to what we do. That is responsible animal welfare, it is safety for the consumers and employees, and it is nutritious products. This is closely linked to our sustainability scorecard. If we move to next slide, please. Here you can see the really positive traction in our LTI performance on the top left corner. We have a really good Q1, and we have a focus to reduce our lost time injuries. We can see that it's starting to perform well. When it comes to the antibiotic and food pad scores, we are at well below target at a good level.
There are some seasonal increases in Q1 2024, but we see a stable and good progress. When we are entering new countries, we are putting in our standards and ways of working. That is an important thing for us and one important cornerstone for Scandi Standard. If we move into next slide, please. The ones of you that have followed us for a while have seen these pillars before. These are the four strategic pillars that will support us achieving our goals. That is increase the value of our protein, ramp up our efficiency, integrate to sustainability, and better together. All of these emphasize the collective effort, shared goals, and team cooperation, and that will lead to improved performance and outcomes.
If we move into next slide, please. With these four strategic pillars, we have also, as you know, our 2027 targets. This slide shows them, and on the right-hand side, you can see the targets. We are expecting strong growth over the coming years. We have set a target for 2027 of 5-7% net sales growth. We target an EBIT margin in excess of 6% by 2027. We are also measuring the progress in terms of EBIT per kilo, for which we have supporting targets of SEK 3, and that has been presented in the former slides. That is an important target for us to 2027 and our aim to achieve the SEK 3 per kilo. If we move into next slide, I also want to show you this, our structured approach of achieving better ESG targets.
We can see, and I told you that last quarter as well, that we have achieved an A in the CDP rating, and there are only a few companies that have achieved an A rating. We are really proud of that. We are working in a structural way to improve our ESG rating and our total work with ESG. If we move into next slide, please. This is in order to reach our target for our EBIT margin. We need to increase our EBIT per kilo. As you can see, target for 2027 is to reach above SEK 3. We are at SEK 1.82 now in 2024, and our underlying EBIT per kilo, if we take away the Lithuanian startup cost, is SEK 2.05 in quarter one. We are seeing a stronger quarter in the future. Next slide, please.
To summarize all this, we see a strong quarterly growth and performance. We're moving steadily towards our financial targets, and we are expecting another significant step in 2025 in terms of EBITs. We are well positioned in a turbulent macro environment, and our focus now is to start above our acquired entities, and those acquired entities will perform later in 2025. Our dividend proposal is SEK 2.5 compared to SEK 2.3 per share. We are really confident in the way that we are progressing this business. With that, I want to open up for Q&A. Next slide, please. Any Q&A? If there's no question.
Please stand by.
Thank you, ladies and gentlemen. If you would like to ask a question, please press Star 1 on your telephone keypad. If you change your mind, please press star two to withdraw your question. When preparing to ask your question, please ensure your phone is unmuted locally. Thank you. We will now take our first question from Eric Sandstedt from Kepler . Please go ahead.
Hi, thanks. Eric Sandstedt here with Kepler Cheuvreux. A couple of detailed financial questions to start off with, and I actually joined the call a bit later. Sorry if you have covered this already, but I'm wondering firstly how we should think about startup costs for the Lithuanian operations in the coming quarters.
We have stated out that we will ramp up Lithuania, and we have said that there will be ramp-up costs within 6-12 months. We see that we are progressing well. We're not guiding for the future, but the progress in Lithuania startup is progressing well. We have said 6-12 months. We still expect that we will succeed to get break-even in the early part of the 6-12 months.
Okay, thanks. In terms of currency movements, we've seen some pretty volatile currency fluctuations here lately, particularly the strengthening of the Swedish krona. What kind of impacts do you foresee on your business in the coming quarters?
We see a fairly limited impact when it comes to the P&L effect since we have most of the cost in local currency as well as the income. We are naturally hedged there.
Okay. No sort of translational impacts when you convert your P&L back into SEK?
Y es, we do see that if the SEK remains at this level, there is a negative effect since we have sales in other currencies, mainly euros. As said, the majority of the effect is naturally hedged. Yeah.
Perfect, thanks. Then coming back to this EBIT per kilo target of 3 by 2027, I know you've elaborated on it already, but I'm wondering, other than the Lithuanian operations, could you maybe just share some thoughts again on what will be the sort of key drivers to that target? Is it fair to assume that it will be back-end loaded, although we saw a pretty good underlying development here in Q1, but you're still some way below the 3?
Yeah. Yeah, as you say, we see a good underlying improvement in this quarter. What will drive the two main drivers of EBIT per kilo is, of course, leverage of our RT, because then we are not adding more kilos; we're adding more value into the business. That will be one key, and that is back again to the growth in our QSR market and our RT and the ramp-up in Oosterwolde. That is why we are preparing for having good expansion capacity in that segment. We also see a long-term growth in that. The other part will be the efficiency part in ready-to-cook, but also the convenience part in ready-to-cook that I talked about on the first slide. The more we can de-bone, the easier we can do it for consumers, the more margin we can take out in the ready-to-cook segment.
On top of that, now when we are investing and using our, for example, SEK 550 million this year, and part of that is efficiency investment. We are reducing costs and actually adding more value also into ready-to-cook. Those will be the two main things. Back again, utilize more of the protein. Ramping up the value, both in ready-to-cook, but also by growing ready-to-eat. Never forget our ingredients part that is really important for us to utilize more of the whole bird. There we are also looking into strategies to take out more value in the ingredients business.
There is an ongoing positive effect month by month on harvesting more and utilizing more ingredients. Two main ready-to-eat and ready-to-cook, and then utilize our ingredients business even more. We will see a big step during this year. You have also seen it in quarter one, underlying, but we are investing in ramping up new businesses.
Perfect. Thank you very much. That is all I had for now.
Great. Thank you.
Thank you.
Thank you. We will now next take Florent from TP ICAP. Please go ahead.
Hi, good morning. Just one question on my side regarding the price effect. The feed prices are quite stable. Can you elaborate more why the price effect is still high? We have plus 4-5%. Do we have to expect the same effect in the coming quarters?
Are you talking about the feed prices? Why are the feed prices still high?
No, no. I mean, the feed prices are quite stable, but it seems that the price effect on your revenues is quite high, 4-5%. Can you elaborate a little bit on that?
The main drivers for top line are actually both favorable mix as well as price. Volumes were up in the quarter as well. It is a price mix effect if that answers your question.
In general, we see a strong demand in poultry. That is no doubt about it. We are increasing our convenience part. That, of course, drives top line and takes out, as I said on the last question, more value on the protein. Convenience is not only in terms of increasing our ready-to-eat. It is also about taking out more value and de-boning more and getting it more convenient in the ready-to-cook. That is driving top line. We also see a strong demand for poultry, both in this quarter and when we are looking in the coming quarters.
Okay. Maybe just a follow-up regarding the startup cost in Lithuania. Do we have to expect the same amount, SEK 17 million in Q2?
As we have said, we are saying that we will have startup cost when we acquire at 6-12 months, but we are expecting to get break-even in the earlier part of this 6-12 months. We started up in the mid Q4. We have a strong and good improvement in our startup in Lithuania. What needs to be mentioned is that we have a strong European market, and there has, of course, been linked to the live bird prices in the first quarter. We will see improvement in Q2, and we're aiming for getting the startup as planned. We are pretty confident in that we are holding the plan that we set from the beginning.
Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, to ask any further questions, you can press Star followed by 1 on your telephone keypad. We will next have Simon Brun from ABG. Please go ahead.
Yes. Thank you, guys. Well done, another quarter. Just starting with a question on ready-to-cook. Sweden continues to grow very well. Any comments on this and the sustainability of this strong growth level just relative to other regions where we see maybe more stable or even negative growth? Any comments on the sort of different dynamics per market would be useful.
Yeah. If I'm going to comment Sweden in specific, we have the former quarters in our presentations, we have talked about that we took down the volumes in Sweden and securing the level. When the growth comes back in the market, we are increasing the levels. Now we're actually seeing a good improvement in Sweden. Therefore, we are having this positive progress. Of course, we're expecting a further positive progress as a part of our reaching our 2027 goals. We see a strong demand in several of our markets and underlying demand.
Of course, we see a good performance in Sweden and a good demand in this quarter. Yes, we're expecting strong demand going forward. That's a part of our 2027 goals.
Yep. Thank you. On ready-to-eat, can you say something about the magnitude of the financial impact from the sort of the ramp-up, not issues, but sort of the ramp-up in Stockholm? Should we expect margins fairly quickly coming back to the levels we see in the second half of 2024, around 6%? Is that the level we should expect until volumes pick up either from new contracts at Farre or the ramp-up in the Netherlands? Thank you.
Yeah. When we're talking Stockholm specific, we are now up and running in Stockholm. Of course, we expect that to be normalized. We also said that we have a stable QSR market that we're expecting to be stronger in the later part in 2025. In Q4, we will start up Oosterwolde. That will, of course, have an impact. In general, we see a ready-to-eat market where we actually are investing a lot and see really good progress. Of course, it's an expectation for us to have those kinds of margins. That is what we see going forward. There will, of course, be quarters when we are ramping up things or when we see this uneven growth that we've talked about before. It's hard to say quarter- by- quarter, but we see a really strong long-term, medium-term trend and margins in ready-to-eat.
Okay. Thank you, guys. Appreciate it.
Thank you.
Thank you. We will now next have Daniel Schmidt from Danske . Please go ahead. Yes.
Good morning, Jonas and Fredrik. Just maybe following up on your latest comment, Jonas, when you say that you will have sort of quarters with uneven growth, and you write a little bit about some weakness in QSR in the report, but you do expect that demand to pick up later this year. What is the reason for that belief?
That we see the long-term convenience trend. If you be specific, at some of our customers in QSR, they have had some challenges. That has, of course, short-term effect. We've also seen in latest years an increased price from a lot of QSR customers that has had a little bit setback on the growth. We see the long-term trend of the QSR. We also see that the QSR customers are getting back in some segments. That's why we have the belief.
What do you refer those sort of difficulties to when it comes to QSR customers in Q1? What does that relate to?
Without talking about specific customers, there has been some media attention to different customers in different countries. There has been also this, as I said, this historical price increases that has set back the growth a little bit and a perception that it has been a little bit expensive. We see it is getting back again. That is why we do not see any break in the long-term growth. We also see some interesting signals going on forward. It is hard to say.
You are not seeing sort of the,
Yeah.
You are not seeing sort of adverse behavior towards US food retail chains getting worse in Q2 than it was in Q1, basically?
No. We do not see that.
The second question, when it comes to FX, does that have any impact, the strength of the Swedish krona when it comes to export prices and the translation effect of what is being exported?
Yeah. That is a little bit what you are seeing in that graph because we see strong demand for European volumes. Most of it refers to what Fredrik is talking about. Most of the export is out of Denmark, and it is out of Lithuania. Of course, we have export out of the other countries of products that are not preferred by the local customers. Most of the export is out from Denmark and Lithuania. Therefore, there is no direct impact of the strength of krona. Of course, when we translate that back to the net sales in Swedish crowns, it has an effect.
That is what we see in that graph. You also see a little bit delay in strong market in export. Actually, that is not shown in Q1. It is translation effect, not market.
Okay. Good. Speaking about delays, when you announced the acquisition in the Netherlands, you said that you aim to start operations in Q3. Now you are saying Q4. Has something changed dramatically, or is this just a couple of weeks of delay, or?
Yeah. Nothing has changed dramatically. Actually, when we say Q3, it has been in the borderline between Q3 and Q4. We are saying Q4 now for being secure of our startup. There is no major change.
Okay. Okay. Okay. Thank you, guys. That is all from me.
Okay. Great. Many thanks. Thank you, Daniel.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask any further questions, please press tar followed by one on your telephone keypad. We currently have no further questions. I will now hand back to Jonas for any closing remarks. Thank you.
Thank you very much. I really want to say thank you to everyone listening in to our presentation of Q1. With that, we close the meeting. Thank you.
Thank you.