Hello everyone and welcome to Scandi Standard's Interim Report for the Second Quarter 2025. My name is [Lydia] and I'll be your operator today. After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to participate in the Q&A, you can do so by pressing star one on your telephone keypad. I'll now hand you over to Jonas Tunestål, CEO of Scandi Standard , to begin. Please go ahead.
Thank you very much and good morning everyone, and welcome to this presentation of Scandi Standard's results for Q2 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 really pleased to have him by my side. I'm also glad to report a strong growth result in the quarter. Next slide, please. We see solid growth and improved performance in the quarter. We have a 6% growth in net sales and increase in volumes, and it's supported by business across country channels and segments. The sales are supported by continued strong underlying demand. There is some strong European demand for chicken, both long term and especially now. We see a strong improvement in our EBIT performance. We're delivering continuous steps toward our financial targets that were set in 2027.
When we look into the RTE in specific, we're in the process of passing through the price increases. I will come back to that later. Our Lithuanian operations are underway with a positive EBIT impact, and that is our first milestone achieved, an EBIT positive within 6 months to 12 months. As we previously communicated, and as you can see, we are in the early part of those 6 months to 12 months. The farms are ongoing, and that is important for us to have this backward integration in Lithuania. At the same time, we're preparing for the newly acquired RTE plant for the startup in Q4. At last, our first dividend installment was paid of SEK 1.27 per share, and the final installment due in September to the same amount of SEK 1.25 per share. Next slide, please. This is the reason why we see this strong demand.
These are repetitive slides that we show in every quarter presentation, but it's important for us to show the drivers behind the long-term strong momentum in chicken. It is convenient, versatile, and tasteful. It is responsible, safe, and nutritious. At last, it's affordable because it's sustainable. I will get back to that later in the presentation. These three drivers are important for the growth and the long-term growth in chicken. Next slide, please. Here you can see the strong historical and ongoing consumer trend for chicken. On top of the increased consumption, chicken is benefiting from a long-term inflow from other proteins. We see a change, a long-term change where we see growth in poultry and the take loss from other proteins, especially pork. Now we see high prices on beef as well. That makes the trend move over to more poultry from beef as well.
We can move into the next slide, please. One of the major reasons why it's benefiting from other proteins is because it's sustainable and affordable. I mentioned before, price has always been important for consumers, and the focus has increased even more in the current environment of high food prices. Beef prices are increasing and becoming more and more expensive, which chicken is benefiting from. There is also the long-term trend of switching protein from red to white meat. Moving to the next slide, please. On this slide, we want to present our EBIT per kilo measure. EBIT per kilo is a good measurement of value creation for our business. In Q2 2025, EBIT per kilo is 1.88 compared to 1.83 in Q2 2024. Even though I mentioned before that Lithuania is EBIT positive, it's still contributing negatively to our EBIT per kilo measurement.
If we exclude the startup cost in Lithuania, EBIT per kilo is 1.92. Lithuania and Osterwolder will be good contributors for us reaching our 2027 goals. We are expecting to make material EBIT per kilo steps between 2025 and onwards. In the different colors in the diagram on the right-hand side, you can see the development in the different segments. The RTC color includes the ramp-up cost in Lithuania. In spite of the startup cost in Lithuania, also Q2 EBIT per kilo was higher than last year and the focus to climb the ladder is progressing. This is also a slide that we have shown before. This slide is to remind you of the strong market position in all our five home markets and that the countries are highly consolidated. These markets have large hurdles for new interests.
They can individually be regarded as semi-closed markets due to the strong consumer preference for domestic produce. Due to our strong market position, our own supply decisions have a meaningful impact on the market balance, which has helped us in the recovery process in the inflation before, but also now when we see that the strong demand for chicken is increasing the prices on both. Note that each market, however, also includes consumer segments less sensitive for profits. Next slide, please. This is to show our new startup in Lithuania. It will be a 20,000 tons- 25,000 tons grill weight, state-of-the-art processing plant. It will be best-in-class cost position. That's why it's important for us to be in and make the setup in Northern Lithuania. Our intention is to build a fully integrated hub. That will allow us control of both costs, animal welfare, and food safety.
The recent acquisition of farms is accelerating that process. We're also planning to see how we can continually build capacity within this market. With that, we're well positioned to serve high-quality products to segments less sensitive for provenance, and also to our own Ready-to-eat plant and our strategic export customers. For Lithuania, we're targeting a medium-term EBIT per kilo well above SEK 3 per kilo. If we move into the next slide. Next slide. Here you can see our different plants. The three big plants that we have are Valla in Sweden, a Shercock in Ireland, and Aars in Denmark. We have a medium-sized plant in Norway and two smaller plants in Lithuania, in Joniskis and Lieto in Finland. If we move to the next slide. This slide is a reminder of the strong historic organic growth in the Ready-to-eat business. I'm confident that trend will continue.
It's divided into two different types of business. Three-fourth is breaded products and the European market. One third of this is an integrated local business that we have in Sweden, Norway, and Finland. In the Ready-to-eat, we have a high return on capital. Our average EBIT margin is above 6%. There is low capital employed compared to our Ready-to-cook segment. If we move into the next slide, please. The market is divided into tiers. We have the European players, then we have the regional players, and we have the local players. We have been a regional player with 36,000 tons product weight in 2024. That is about 5% of the European market. Now with the new production platform, we will move into being a European player. With that, we move into the next slide, please. This is the acquisition in Oosterwolde that we're ramping up.
That will give us 48,000 tons annual capacity in this plant. It is a 90% increase in production capacity. It's also one of the few with this advanced way of highly efficient producing formed products and whole muscle products. As we said before, it was impacted by fire, and our total investment down here will be EUR 28 million. That will replace an investment in Faro of EUR 30 million. The operations are planned to start in Q4 2025. It looks promising, keeping that plan. The startup cost will, of course, affect with low utilization in the startup in the beginning. That we have communicated before. We will grow in volumes. If we move into the next slide, if we take a look at it from a holistic value chain view, we are well positioned to gain market share because we have this low cost and high quality end-to-end.
When it starts with a low feed, labor, and slaughtering costs, we have quality control of Ready-to-cook in value chain, efficient logistics, and then we have a state-of-the-art breaded capabilities in Holland. We start with the farms in Lithuania, the process in Lithuania, and then the breaded production in the Netherlands. That combination will be a very competitive offering to our customers. If we move to the next slide. Now we're moving over to our segments. This table shows the reconciliation of our segments. We have strong net sales growth in Sweden and Denmark. Lower net sales in Finland due to that we have exited the loss-making contract. It will affect the top line here, but not the EBIT level. When you read these charts, it's important to remind you that the category Other includes the ingredients business and our corporate costs put together.
We'll move into the next slide, please. Here we see our Ready-to-cook where we have strong growth and improved performance. We have a 6% increase in net sales. We have a 6% increase in chicken process, so both in net sales and volume. We have the EBIT of SEK 150 million compared to SEK 1,998 million last year. That is an improved margin from 3.8% to 4.2%. We're also proud that we have really low LTIs this month. I think that's an effect of our long-term focus and structural work to reduce our injuries in the factories. We have stable animal welfare indicators, and we have antibiotics below our short-term target. Next slide, please. Here we take a look at the feed prices. We see stable feed prices after a long period of increasing feed prices. However, we need to be prepared for further volatility.
We don't know where it will end, but what we can foresee now is stable, slightly decreasing prices. Our model has most of the input costs linked to the top line. We have no limited trade with the U.S. and China. We are really much a pure European player. We also want to highlight, and that is important, that the feed cost is one third of our cost base. The short production cycle that we have compared to other proteins enables us to take more agile decisions in our supply chain. When we look at other costs such as packaging, energy, and so on, we see costs on a more stable level, and we are hedging the majority part of our electricity exposure. If we move into the next slide, please, and take a look at our export prices, we see that realized export prices approach historical heights.
We have a 3% increase compared to Q1 2025. Our expectation is that, and our forecast is that, the export prices will continue to rise in the coming periods. That is due to two things. It is a strong market that we are talking about, but it's also our structural approach to find the right export customers. Long-term partnership, we prioritize customers. We're optimizing the sales and operation planning, so the S&OP planning. We have announced the flexibility between export and our Ready-to-eat. It is super important that we can move volumes between those segments due to the cost of raw material prices. We have also reduced our exposure to the volatile spot markets. If we move into the next slide, please. On this slide, you can see the channel development in more detail.
Here you can notice an increase in our retail sales and a slight decrease in the food service. That is mainly due to the prioritization that we need to do and where we are prioritizing big customers that we need to provide with raw material and Ready-to-eat when there is such a high demand. Moving to the next slide, please. Now we're moving to Ready-to-eat. As explained earlier in this presentation, we are in the process of passing through high prices. We see a growth in net sales of 4%. We have growth in both net sales and volumes. We see that this segment is recovering. Of course, that is driven by increased export and retail performance. However, we see a weaker EBIT performance of $23 million compared to $38 million last year. That is the negative impact from the rise in chicken prices.
We're recapturing the margins in the coming quarters. That is a natural step when we see that the price goes up from daily chicks to chickens to our Ready-to-cook segment where we sell fresh products. Then we're putting through the prices in Ready-to-eat. They have a little bit more structured lead times that we need to pass, that we need to respect. We are in the middle of passing those prices through at the moment. If we move into the next slide, please. Here you can see the figures. We see a solid growth. We see a growth in our retail segment. We're also really glad that the food service is flattening out here in Ready-to-eat. We are linking back to the loss of contract that we had last year and the recovery that we have communicated since then to get back growth in Ready-to-eat.
We can see that we are growing this quarter compared to last quarter, and the food service is flattening out. Overall, we have a positive view on our Ready-to-eat business and see the growth. Now it's just a push through the price increases. That's a natural step with these raw material price increases. With that, I hand over to Fredrik Sylwan, the CFO company.
Great. Many thanks, Jonas, and good morning everyone. Next slide, please. As Jonas mentioned, the second quarter was a strong one. In fact, it was our strongest second quarter ever. We see a positive development where the top line was driven by both RTC and RTE, supported by strong underlying EBIT growth in RTC, partly offset by RTE, which, as Jonas said, is normal when bird or raw material prices are increasing.
The RTE profitability is expected to be built back and recovered during the coming quarters. In total, EBIT is up 9% in the quarter with a 10 basis points margin improvement. The ramp-up of Lithuania is going well, and it showed positive EBIT in the quarter, which is ahead of plan. Finance net is reduced, and the cost for increased bank loans is close to offset by lower EBIT rates. We also have a positive currency impact, and partly offset by a reduction of the positive impact from the interest rate swaps that we have talked earlier. Tax is in line with previous year. Feed efficiency remains stable and strong. We also see a significant reduction in injuries. Next slide, please. Our return on capital employed continues its positive trajectory, showing improvement compared to the previous year.
Meanwhile, return on equity is slightly below last year, which is primarily due to the ramp-up cost for Lithuania. The equity ratio decreased from 36%- 34%, primarily driven by increased investment activity. While the decline is modest, the company remains well capitalized and within our targeted capital structure. We continue to monitor our leverage position to ensure financial stability and maintain flexibility for future investments. Next slide, please. Our operating cash flow was -SEK 150 million in the quarter, primarily due to the timing of trade receivables and increased CapEx linked to the acquisition of Baltic Farms in Lithuania that amounted to SEK 200 million. Other operating items are driven by exchange gains on accounts receivable and accounts payable, as well as revaluation of the provision for pension. Pay tax is in line with previous year.
As mentioned earlier, the first installment of the dividend was paid in May, and the second one will be paid in September. Other items are negatively impacted by FX on interest-bearing debt in the quarter. In total, the change of net interest-bearing debt was SEK 341 million, mainly driven by the Baltic Farms acquisition and dividend. Reported leverage landed at 2.4, which is below our internal aim of 2.5. Next slide, please. Working capital remains low in the quarter. We see a 13% inventory decrease versus year end and a 5% reduction versus Q2 last year. It's driven by lower level of finished goods, partly offset by live animals. Our target for working capital, as a percentage of sales rolling 12, is adjusted for financing is 6%.
In Q2, this metric stood at 4.6%, including financing adjustments, meaning that we are at an efficient and low working capital level for the quarter, despite the ramp-up effect in Lithuania. Next slide, please. For 2025, in total, the CapEx is estimated at approximately SEK 550 million, which includes the necessary investments related to the acquisition earlier this year in Osterwolder, in addition to the acquisition price, meaning that the acquisition in the Netherlands earlier this year and Lithuania in the quarter, total amounting to approximately SEK 330 million, will come on top of the SEK 550 million. The blended effective tax rate is expected to be approximately 20%. As said, dividend will be paid out in September. In total, the dividend is up 9% versus last year. Next slide, please. Back to you, Jonas.
Thank you, Fredrik. Next, I would like to talk about one of our cornerstones and actually license for us to operate. There are three key areas when it comes to creating trust for what we do. It is responsible animal welfare, safety for consumers and employees, and nutritious products. Those three are super important for us. Of course, one of our licenses to play, but also a really important focus for us to actually be the responsible player in the poultry industry. That is important for Scandi Standard . If we move into the next slide, please. That is why we have a sustainability scorecard where we show and are transparent about our different measurements regarding sustainability measures. We are the only poultry producer, as far as we know, that shows this every quarter in such a transparent way.
If we look at our LTIs, they are down low in this quarter and the last quarter as well. We see a long-term positive trend in improving our LTI performance. We are really proud of the results of this month, but we also know that we have much more to do. If we look into our use of antibiotics, we are below our short-term targets. When we are entering a new business with other ways of producing chicken, we are putting in our Scandi Standard standards and transforming to our way of working and lowering the antibiotic use over time. That will affect the numbers now when we are entering new areas for Lithuania, as an example. We also see our animal welfare indicator, food patch score, at a low level this quarter. If we move into the next slide, please.
This is also a slide that we've shown before, but we think it's super important for us to state our four important strategic pillars. It is to increase the value of our protein, and that is about taking out more and more value out of the bird and defining the right products, the right markets, but also taking care of the total carcass. Then we have ramping up the efficiency, and that is also an important focus of not only the efficiency in the plant, but the efficiency in the whole value chain. There we can see examples of how we are actually taking control both in the live operations with good measurement and good cooperation with our farmers, but also how we can create high efficiency in our plants.
Then we have the integrated sustainability, and that is important in our total business that we work with sustainability in all means. The fourth one is better together. That's the way we're working because we are in five different home markets with strong local preference. When we are optimizing things together and utilize the best practice all around, that will let Scandi Standard benefit from the local players. If we move into the next slide, please. This slide, we want to remind you of our 2027 targets. On the right-hand side, you can see the targets. We are expecting strong growth over time and over the coming years. Therefore, we'll set a target of 5%- 7% net sales growth. We have an EBIT target in excess of 6% by 2027.
We're also measuring the progress in terms of EBIT per kilo that we have presented in the slides before, and that is above SEK 3 per kilo. That is a supporting target for all our other targets. We will have a ROCE above 15%. We will reduce our CO2 emissions by 42%. It's bold goals, but we see that we're moving in that direction and we feel confident that we will reach the targets in 2027. If we move into the next slide. This is also a reminder for you about our structured approach of receiving recognition in our sustainability focus areas. On the right-hand side, you can see the ESG ratings. We are proud of the achievements, and of course, the CDP achievement and being an A in CDP. I think it's only 15 listed companies, if I remember right, that have the CDP A rating.
I think it's only two in the food industry in Sweden. If we move into the next slide, please. This is the clear roadmap to reach our SEK 3 per kilo target on EBIT. That is mainly two things. It's about what we say, climb the value ladder or increasing the value of our protein. That is about balancing supply and demand. It's about value creation. It's about differentiation. It's also about utilizing further parts of the chicken. It's not only breast fillet and legs that make the profit. There are a lot more. We are focusing on that, and that is our ingredients business. We see large efficiency potential in the value chain and optimizing that from farm to nugget. If we move into the next slide, please.
To summarize it all, we see strong growth and performance delivered in the quarter, all-time high EBIT for both the second quarter and for the first half. We're moving steadily towards our financial targets. We're expecting further improvements in the second half, 2025. We remain highly focused on the startup of acquired entities. As mentioned before, Lithuania delivered positive EBIT, which is ahead of our plan. Netherlands are on track for starting Q4 2025, and our final dividend installment is due in September of SEK 1.25 per share. That's all from us in the presentations. We move over to the Q&A session.
Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your device is unmuted locally. If you change your mind, please press star followed by the number two to remove yourself from the queue. We have a question from Daniel Schmidt with Danske Bank. Please go ahead. Your line is open.
Yes, good morning, Jonas and Fredrik. I just wanted to follow up on the comments regarding Ready-to-eat. I think, Jonas, you said that you are in the middle of passing through price increases that have sort of a structural lag. What are you sort of implicitly saying there? Does that mean that you will have some lagging effects also in Q3 and then you'll be fully caught up as we get to Q4? Is that how we should interpret it?
Yeah, that's how it should be. We should mention that we still see increasing prices in the third quarter as well in Ready-to-cook. It's more about that. It's always a little bit delayed when we're passing prices through. It should be seen as positive when we are increasing the prices in our value chain where Ready-to-cook is our strongest foothold. Of course, when the price is rising, there are delays in the price implementation. Most of those discussions are already done with the customers, and then they are implemented in Q3 and Q4. Of course, if we still see continued increase, that will pass it further on.
It also means that you will be benefiting on the Ready-to-cook side from increasing prices, but you will be hurting on the Ready-to-eat side. The net effect is still positive, you think?
Absolutely.
Yeah.
I can see you saying so.
All right.
I'll be a big part.
When it comes to the Netherlands, when you bought it, you mentioned sort of late Q3 and then you changed it to early Q4, if I remember correctly. Now you're saying Q4. Is it still early Q4 that you plan to be ramping up or start production?
Yeah, it's still early Q4.
What do you expect in terms of startup costs as we get into the late part of Q3 and early Q4?
Yeah, we will get back to that later in the coming quarter when we are ramping up. We will not get any exact numbers in this quarter. We have a positive momentum in ramping up Osterwolder, and we will ramp it up sequentially. We will start line by line. Actually, one of the reasons for not having even more growth in Ready-to-eat is that we have on some SKUs capacity constraints that actually will help us when we are starting up the new line in Osterwolder. That is why we're confident when we're moving up things sequentially that we will have the orders in the book on the SKUs that we start from the beginning. There will be a low amount of volumes in the start, and that will, of course, have an overhead effect. We will get back on that.
Is that a much bigger operation compared to what we saw in terms of startup costs in Lithuania? Is that fair to say?
No, not in terms of how we look at the effects when we're ramping up things. Lithuania is more a value chain ramp-up with bigger effects when we are starting. On the other hand, Oosterwolde is a production capacity that we will grow in. As we have said from the beginning, we're increasing our capacity with 90%. It will not be fully up and running. Of course, that will take a long time because it's a plant we will grow within. The cost of it will come sequentially and not at the same amount on short term as Lithuania.
Okay. Good. Just maybe a very detailed question, maybe to Fredrik. The appreciations are lower in RTC this quarter compared to last year. You've added these acquisitions. At least Lithuania is clearly up and running. Is there any other parts of sort of assets that have been fully written off? Is that the reason?
Did I hear correctly about depreciation?
Yeah, it's a very detailed question. It's actually lower now in RTC compared to last year.
I would say it's mainly linked.
Let me get back to you on that specific question. Another question for you, Fredrik, maybe. Did I get you right when you said that the CapEx is SEK 550 million for the sort of guidance for 2025, and then on top of that, the SEK 330 million? Is that correct?
Yes.
Is that still to come? Is that correct? Part of that $330 million is also still to come this year. It hasn't been cash out yet.
No, the $330 million has been paid. It's a.
All of that is already sort of in the cash flow?
Yes, in the first and second quarter.
In terms of maintenance CapEx, or how to put it, the 550, how much of that has already been in the cash flow and how much is to come in the second half?
About almost 200 has been impacted in the first half year. The rest is in the second half. It's important to state that it's not maintenance CapEx. That is also super important too.
Yeah, it's regular CapEx.
Yeah, it's regular CapEx that we're developing our home markets. The other ones are linked to the acquisition. Yes, I'm preparing the factory in the Netherlands for production.
Yeah, thank you. That's all for me, guys.
Thank you.
Thank you. Just as a reminder, please press star followed by one if you'd like to ask a question. We have no further questions in the queue, so I'll hand the call back over to the management team for any closing comments.
Yes, no further comments from us. We want to thank you all for listening to this call and hope you have a good day. Thank you very much for joining.
Many thanks.
Thank you. This concludes our call. Thank you very much for joining. You may now disconnect your line.
Thank you. Bye.