Good day, and welcome to the AAK second quarter 2022 interim results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Johan Westman, President and CEO. Please go ahead. Thank you so much, and good afternoon, everyone. Welcome to our earnings call for AAK quarter two. Together with me today is Tomas Bergendahl, our CFO, and we will together run this presentation. We have on the first page the agenda for today, some highlights of the quarter, as well as comments to key events and a bit more in-depth on the business and financials. Then after concluding remarks, we will open up for Q&A. Let's turn to page three. Summary of the quarter. Well, I think it's fair to say that quarter two was a quarter of high volatility and quite a demanding business climate. We as a company have decided as well as started to execute a controlled exit out of Russia. We have seen raw material disturbances, one linked to the invasion of Ukraine by Russia, which has had ripple effects. We have also seen a ban from the government in Indonesia on exporting palm oil, and we have a continued high inflation across the board. We've seen record high raw material prices during the quarter. In all essence, a quite demanding quarter. Despite these challenges, we continue to deliver. Our volumes are up 1% year-on-year, and our EBIT, our earnings, operating profit is up 15% year-on-year, supported by strong favorable FX. When we look at operating profit per kilo, it continues to be strong. It really shows in this dynamic climate, in a high inflationary climate, being able to show continued earnings growth, continued earnings per kilo growth, it shows our capability to handle volatility, to handle inflation and different kinds of disturbances. We have a robust and sustainable operating model. Next, page four. We have had our AGM meeting on May 18. It was nice to see a face-to-face meeting back on the calendar. We've also, during the quarter, strengthened our financial structure by issuing bonds for a total of SEK 1 billion. Now heading into some details on our business areas. First, Food Ingredients on page five. We continue to drive for improved margins, and margin performance is really what drives the results. Our operating profit per kilo is up, leading to a strong operating profit, which is up 18% year-on-year, up 3% at fixed FX. Also here we see a favorable FX helping. Continue strong trend in food service, and we continue to optimize our bakery business, which in turn helps improve our earnings as well as our operating profit per kilo margin. Also glad to see that our focus on plant-based food solutions continues to pay off. Our specialty fat systems is growing double-digit in the quarter. Although single oil or less special solutions for the sector has showed somewhat more flat-ish development in the quarter. All in all, a strong quarter for Food Ingredients. If we then move into Chocolate & Confectionery Fats on page six. Here we see continued strong volume growth. Keep in mind our exit from Russia is particularly impacting this business area. We're showing volume growth despite the fact that we started to execute our controlled exit out of Russia, losing sales into Russia. Our operating profit is up 5%, but it's a slight decrease at fixed FX. However, when looking at Chocolate & Confectionery, if we exclude FX effects, as well as looking at it in a like for like comparison without Russia or the sales we had into Russia, then we actually increased our EBIT per kilo, our margin also here in Chocolate & Confectionery Fats. All in all, a continued strong quarter for Chocolate & Confectionery. With that, moving into Technical Products & Feed on page seven. The strong trend that we have seen over the last quarters continues also in quarter two. Our operating profit is up 48% year-on-year, and our operating profit per kilo is up 41%. This is driven by a continued strong demand for natural ingredients for Technical Products & Feed. With that, I hand it over to Tomas for comments on raw material prices, cash flow, and some more financial details. Thank you, Johan. Good afternoon, everyone. Continuing on slide eight. Raw material prices have seen extreme volatility in the quarter and the markets continue to be very dynamic. As you can see in the graph on the page below, on palm oil in particular, the peak in price so far occurred in April. From there, we've seen a roughly 30% drop in price to the end of June. In July, prices have continued down from the June end position. Raw material prices impact our working capital and our capital employed, as you know. As we've stated previously, a 10% change, all else equal, will affect our working capital by ± about SEK 700 million. Also very importantly, with a time lag of six to nine months. Slide nine. The quarter generated a positive operating cash flow before interest and tax of SEK 95 million. The cash flow bridge on the page that you're looking at includes item affecting comparability and the non-recurring costs related to the exit from the Russian market impacts both EBITDA and the working capital change. It nets out on both positions, generating the operating cash flow of SEK 95 million. Interest costs have increased from the comparable period, mainly driven by borrowings in high inflation rate countries. In the accounting, as you can see in our report, this is offset by applying hyperinflation accounting where applicable, in this case in Turkey. CapEx spend ended up at SEK 255 million in the quarter, SEK 482 million year to date. The guidance for the full year remains at just north of SEK 1 billion. As previously stated, please bear in mind the gap of six to nine months between changes in raw material prices and impact on working capital. As previously stated, we expect a continued negative impact for the remainder of 2022 on our cash flows. Next slide, please. Slide 10. The return on capital employed ended up at 15% for the quarter. Due to the increasing raw material prices and its delayed effect on our working capital, we estimate that the downward trend that you see will continue into Q3, driven directly by raw material price increases. Next slide, 11. The same effect can be seen in the net debt/EBITDA, which is increasing to 2.03. Also here, this is driven by the increase in raw material prices, and we expect this trend to continue into Q3 based on the prices that we've seen six to nine months back. Johan, back to you. Thank you, Tomas. As mentioned in the beginning, it's also worth concluding. It has been a quite volatile quarter. But at the same time, when you look at the underlying performance of AAK and our underlying, you know, trends, you know, we remain optimistic, prudently optimistic about the future. All in all, despite the challenges and uncertainties that we have faced, we continue to navigate well and we delivered strong results. We are an important supplier of plant-based ingredients for food as well as for technical products. We are well-positioned in the different industries that we serve, and we're also well-positioned to manage risk and to deliver value. We have shown that over the past few years of very dynamic business environments. Despite continued uncertainty, that is needless to say almost, there is uncertainty in the near term and midterm, but we see no reason to adjust our view on the strong favorable underlying trends in the markets that we serve. Thus, we continue to remain prudently optimistic about our future, and we are fully committed to living up to our purpose, making better happen. I'd also like to remind you about us having a Capital Markets Day on the 29th of November, this year. After the summer holidays, as we come into the late fall, November 29, we will have our Capital Markets Day. With that, we are opening up for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using your speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Alex Jones of BofA. Please go ahead. Great. Good afternoon. Thanks very much for taking my questions. I've got three, if I may. The first two, just going back to the Indonesian palm oil export ban that we debated a lot on this call three months ago. The first one, could you just sort of discuss with us how you navigated that and confirm that there'll be no negative impacts on volumes either in this quarter or next quarter? Then the second question, a bit longer term. In your discussions with customers, how has the export ban affected their willingness to use palm oil? Have any of them thought now about reformulating away from it, either towards other oils in your portfolio or to alternatives that competitors offer, like cocoa butter, because of the sort of political instability that the ban, even though it was in place for a short time, implies? Then third quick question, just on chocolate margins. You say in the report that they were down 15% year-on-year, constant FX. Can you confirm that's just from the impact of losing Russian volumes or is there anything else going on on the chocolate margin, constant FX? Thank you. Thank you for the questions. I'll take them in order. First of all, with regards to the ban, it was fortunately enough and not that long. I mean, it was long enough. It created instability, call it, and we had to, you know, kick in some contingency plans and so forth. You know, in a helicopter view, we were able to manage that without. The answer to your question, it was not really an impact to our results or volumes, but we had to manage a bit between factories and where we deliver and so forth. Call it we had to manage underneath the surface in order to deliver to our customers, and we did so. That is, that was how we managed, and we foresee that we will be able to manage going forward. Having said that, I mean, there is still risk. When disturbances like this come, it creates an additional, you know, disturbance to an already, call it, kind of volatile raw material market. It's not, you know, not more, not less than that. With regards to long-term impact, yes, we of course had conversations with customers immediately with the ban, you know, more in a contingency plan type of matter. What do we do? What can we do, and so forth? I wouldn't say that the total picture of products and solutions to our customer base has really changed, and now let's go for this, this. There has been a few discussions like that, but keep in mind, AAK, we are specialized in oils and fat, plant-based oils and fats. We have a broad portfolio of solutions based on different kinds of raw materials. In the reformulation asks, we are a good provider, a good partner to our customers. That brings opportunities as well as, you know, a few risks of maybe losing business to a competitor or to an alternative raw material. We haven't really seen a weakening demand due to more usage of cocoa butter linked to this. We still have a strong product, good functionality, as well as a price competitive product versus cocoa butter. With regards to the CCF margin, yes, we were. This is the business area within AAK, where the impact of exiting Russia has the biggest impact to AAK because Russia was, for us, a strong Chocolate & Confectionery Fats market with also, you know, using some of our, you know, high value added, high priced products. When you adjust for that, if we are allowed to, in a like for like manner, comparing last year to this year, we actually grew our operating profit per kilo slightly. The answer to your question is yes, it's linked to that. There's nothing else dramatic that has happened in the market at all. Great. Thank you. Did that answer your questions? Yeah, that's very helpful. Thank you. Thank you. Our next question today comes from Heidi Vesterinen with BNP. Please go ahead. Hi. Good afternoon. I've got three questions as well. The first one is on raw materials. We see that spot vegetable oil prices have been declining. I wondered how deflation impacts customer behavior. For example, I wondered if they might destock or postpone purchases. Have you seen any evidence of this? Then two questions on food ingredients. First on food service, I think in the release you talked about a decrease in U.S. volumes. What are you seeing there, and what is your outlook for food service? On special nutrition, you talked about demand for high-end solutions decreasing. Why is that happening, and what is your outlook? I thought there was a premiumization trend, so just curious on this comment. Thanks. Thank you. If we start with raw material prices, I think you raise a question that is almost rhetorical in terms of how we need to act, right? Of course, with fluctuation, when prices go up, any customer would try to manage that by having the best possible, you know, contract in place to offset the inflation. As prices come down, you wanna renegotiate or negotiate so that you get the best impact of that. It is our task to manage our contract portfolio, and of course it is essential for companies like us that customers as well as we live up to the agreements that we have. It's up to us to manage our contract portfolio and avoid call it breaking contracts or snowballing and so forth. Of course, that is a risk in this environment because people try to optimize their own position. With regards to, you know, food service and U.S., you know, there's no drama. We have seen over the years coming out of COVID that we had a strong pickup and now we are, you know, turning into a more normal situation. It was no drama, and our comment is kinda U.S. declined somewhat. Call it that we came back from COVID, and then after that it's more business as usual, I would say. Could you repeat your third and final question, please? It was on special nutrition. I think you said demand for high-end solutions have been decreasing. What is driving that? I thought there was a premiumization trend. You know, what are you seeing and what is the outlook? Yeah. Thank you. When looking at that, yes, there is a premiumization trend, but as you have heard us commenting also, we're, you know, for years now, there is many things moving here. One being the absolute demand in China, where most of the high-end specialty ingredients go for this, where birthrates have impacted it to some extent. We've also had a competitive, you know, price pressure where we are holding our position in that market. When you look at that all in all, well, then we see a slight decrease there. The premiumization trend is there, and that will, you know, we think it will continue as well as when birthrates come up, you'll see a swing in volumes. It's not new for this quarter at all, and no big drama, but in the year-on-year comparison, a slight decrease there. Thank you. Thank you. Our next question today comes from James Targett with Berenberg. Please go ahead. Hello. Good afternoon, everyone. Yeah, just two questions left for me. Just firstly on the CCF volumes in Russia, just in terms of how successful you've been so far, kind of redirecting any of those. I appreciate it's only been a couple of months, but any kind of color you can give on what progress you've made there. Then just secondly, just on the pullback in palm oil. I mean, is there any insights you're willing to share with us as to where, you know, you think prices could stabilize, given the current situation? That'd be very helpful. Thank you. Thank you. With regards to Russia, obviously, it's not as easy to just reroute. If it was easy, then we could have sold more even before that, right? Obviously, when situation happens like it did, then you focus your efforts on trying to reroute as much as you can. It's not rerouting, it's rather trying to open up new channels, competing in different markets, and raising the bar, raising the ambition to sell to other regions, other customers, when these customers are not sold to anymore. That's what we are doing, and we're doing it well. Of course, when we stopped supplying into Russia, that had an immediate impact, and as we commented, it's between SEK 30 million-SEK 40 million of impact to our P&L sheet in a year-on-year comparison. We repeat that we think that the yearly impact is around SEK 75 million-SEK 100 million, and probably to the upper part of that spectrum, linked to us not selling into Russia, basically. At the same time, as you can see, despite that, we're showing 7%, you know, volume increase. That's strong. I mean, we have a strong position in this market. As said before, we're not alone in the market, but we have a strong position, and we clearly see other markets growing a bit, when we have stopped selling into Russia, and we have good opportunities to do that. Again, in a like-for-like comparison, those are lost volumes, and we need to scale up as much as we can in other regions. Last comment there on palm oil price development. Very difficult, of course, to forecast because we are not alone in this market, meaning, as an industry, there is a lot of palm oil going into feeding the world, an extremely important raw material for affordable food across the world. At the same time, it is also feeding the replacement of fossil-based fuel into renewable energy, et cetera. It's extremely difficult to forecast where the prices will go. It all depends on government decision, demand, and the split between food and energy or fuel, where palm oil is used in both areas. Okay, thank you. Our next question today comes from Oskar Lindström with Danske Bank. Please go ahead. Yes, good afternoon, gentlemen. A couple of questions from me. The first two are actually follow-ups to previous questions here. Number one here is on the infant segment. I mean, you said I didn't quite understand the answer on how you had a premiumization trend, and yet the high-end volumes are declining. Is this because you're losing market share essentially in the premium segment in infant in China? My second question is on Russia. Is the negative effect fully now in what we see in the second quarter? Or you know, were there some residual income from Russia that we won't see in the third quarter? Finally, just on other, you know, your exposure to natural gas. I know it's not a significant source of energy for you, but are there any sort of indirect effects that you could see or that we should be aware of, if we have a situation later this year with limited availability? Those were my three questions. Thank you. Thank you. First on the premiumization. The premiumization trend is that, in this case, parents are prepared to pay more to buy, advanced solutions and pay more for premium. All right. That's the trend. If you then have a birth rate reduction, there are less babies, meaning, you're prepared to buy something of higher quality and higher price for your baby, but you only buy as much as you need, to feed that baby. It's fully possible that, volumes are down while a premiumization trend is up. Adding to that, there is a premiumization trend, but that doesn't mean that necessarily every ingredient can be higher priced just because the final product is priced higher, because of higher quality. There is still a competitive landscape, business dynamics for any type of product, any type of ingredient. As we mentioned a few times, we are also in a competitive situation in China, so we're not alone. We cannot just increase prices just because of a premiumization trend if there is competition meeting us, right? It's really possible to have that trend while not growing specialty segment quarter by quarter. At the same time, again, we are well-positioned. We still get our products into this market. They are in with good margins, high margins compared to the average of AAK. We are still, you know, positive, optimistic, we're well-positioned, but these are the, you know, dynamics in that market. With regards to Russia, we had the biggest impact of our exit of Russia in this quarter. It's a controlled exit with both us exiting our call it AAK local market company business as well as our JV. In that controlled exit, we have now been able to exit that in a good way, but there has been some residual business in Q2 under the controlled exit, yes. There will be slight impact further into Q3, but this was the bigger impact or the bigger step, call it. With regards to natural gas exposure, again, very difficult to see, but of course, you know, we've seen the environment that we operate in now, high volatility, high uncertainty. Of course, something on top of that could cause something for us. Most likely more so visible in energy prices, where we have shown capability to manage, navigate and also price our products in the market. Tomas, adding to that. No, it was just back to the Russia question as well, just to restate again that we still believe that the full year effect will be the SEK 75 million-SEK 100 million. Yeah. Even though we've seen the biggest impact now and there were some residual volumes, we are also reallocating into new geographies, right? Just to bear that in mind. Exactly. That we look at the upper span of SEK 100 million. Yeah. Yeah. Thank you. Just to maybe follow up then on that answer you gave on Russia. I mean, you've given before the SEK 75 million-SEK 100 million span and you're saying, you know, maybe up, you know, closer to the higher end of that. On a quarterly basis, and then you've also said that there should be a net effect after redirecting of, if I remember correctly, SEK 30 million-SEK 40 million negative, after having redirected. In the second quarter, we didn't see the full annualized negative impact from the exit of Russia. But also we didn't see the full effect or any effect of redirecting volumes to other markets. What was the sort of net impact in the second quarter, if possible? Yeah. Thanks, Oskar. The net impact is the SEK 30 million-SEK 40 million that we've outlined in our report. There was also a slight negative effect in Q1. Then the remainder to the annual span is what we're looking at in Q3 and Q4 collectively. Mm. To get to the- All right. If you try to make it simple, I mean, we're losing everything we sold into Russia before. Yeah. That opens up an opportunity to sell somewhere else. Mm. Then we're trying to make the best estimate of that in a like-for-like perspective. That's what we call the net impact. The net impact this quarter was roughly SEK 30 million-SEK 40 million in a like-for-like comparison. If we are specific, then the remainder of the year is the residual, and that would mean something like SEK 25 million-SEK 30 million a quarter. Could be a bit different by quarter. Thank you. Our next question today comes from Alex Sloane at Barclays. Please go ahead. Yeah. Hi. Thanks for taking the question. I mean. Um, and- Maybe- Sorry, maybe adding to that. Majority of that, Oskar and everyone else, is in the CCF, our Chocolate & Confectionery business area, if you wanna be more specific. Sorry, Alex. Yeah. No problem. Maybe actually just the first one, sorry to continue on the Russia line, but would you be able to just kind of maybe give us some color on within the 7% volume growth in the quarter, what was the impact of exiting Russia in the quarter, and what will that be in the second half on volume, based on Russia kind of being exited entirely, whereas in the quarter you talk about controlled exit? That would be really helpful. The second one, just a small clarification on CCF. Obviously, the world's largest chocolate factory is currently shut down. Is there any impact that we should expect on AAK from that in Q3 or not? The final one, just on Technical Products, obviously very strong improvement year-on-year, but a bit weaker sequentially, a bit weaker than consensus had in sequentially. I think you had sort of primed us to expect seasonally weaker biofuel demand. We're just wondering if there's anything sort of beyond that, in the sequential decline on profitability. You know, how was the crush margin in the quarter, and how does that look going forward? Thanks. Thank you. We're getting into a lot of details on Russia, where we haven't reported all of that. I'll stand a bit short on that first question, but just to give you a bit more color, right? We have our 7% increase in this quarter despite, you know, exiting Russia. We have had a good trend on Chocolate & C onfectionery over many quarters. Now going forward, I think, you know, this quarter is close to, you know, a full exit of chocolate volumes in Russia or for AAK into Russia. I think that's, yeah, what we can give you at this stage. With regards to CCF and you know other companies' issues, we haven't seen a major impact to AAK at this stage. We will continue to support all our customers independent of what issues they would have or not have with their production. Hasn't seen a big impact as of now and don't forecast to be. I think that's as much as I can. I will not comment you know any specific company directly. TP&F weaker biofuel more linked to you know seasonality than anything else. You know still strong position in the market. The trend around replacing fossil based ingredients into different types of technical solutions is still there. We believe strongly in that going forward as well. The gross margins has been more flat on a year-on-year perspective, right? Not a big increase, but still on high good levels. That's very helpful. Just maybe just to squeeze one more in on the TP&F. Would the kind of the second quarter profitability level be, you know, kind of more what we should be thinking for the second half, or should we be thinking somewhat closer to the first quarter? I would say that when you look at the year-over-year, the second quarter is the lowest performing quarter on an annual basis, and it's part of the logic there is the maintenance stop that we always run in Q2. I would say for guidance, look at the seasonality quarter by quarter, and how we have performed in the past, I would say. But the maintenance stop is a key impact in Q2, and it's planned, but it's in Q2 every year. Yeah. Last year we had a longer maintenance stop than this year. Yeah. When you compare Q2, we now run more days in Q2 than we did in Q2 last year. If everything else stayed the same, we would expect next year's Q2 to be the same days of running as this year's Q2. It was last year that was a bit shorter than normal. When you look at, as Tomas said, into Q3, then rather compare Q3 last year, which was more normal, but still with high crushing margins. No big drama there, but a still continued strong trend for natural ingredients is our expectation. Very helpful. Thank you. Thank you. Ladies and gentlemen, as a reminder, star then one if you have a question. Our next question today comes from Per Jørgensen with IMT Asset Management. Please go ahead. Yes, thank you. Just a question regarding the capacity. If you take a look at what happened before COVID, during COVID, and after COVID, you are around 2.3 million tons in total. Will we still see some further investments in new capacity? Is the SEK 1 billion enough to put some more capacity? Or will we see some more strategic moves for you? That's my first question. My second question is regarding this product portfolio management, where you have been quite capable of transforming your bakery business and get food service back on track. I gather that bakery and food service is still around 60% of Food Ingredients. What's left in this product portfolio management on the margin side? Thank you. Thank you, Per. First on the capacity side, we are growing. We have a focus to continue to grow. That's our strategy. There will be more capacity needed. I reiterate what we have said before. We are looking for a combination of acquisitive growth as well as organic growth. If we have the opportunity to acquire a company that is up and running with capacity, you know, room for growing, that's very nice or even a asset more brownfield-like asset, we would do that as well. If that's not possible, we would go for greenfield. Yes, the short answer to your question is yes, we will continue to invest in capacity. We're also investing in optimizing our existing footprint with looking at how we can run productivity projects and squeezing more capacity out of the already existing assets, doing debottlenecking as well. That is also ongoing. Has been ongoing, of course. At the moment, we have no other forecast than the one we have given on CapEx. M&A comes on top of that, of course, when and if we can execute that. With regards to portfolio management, thank you for highlighting and reflecting on that. It's been successful. Within, especially within bakery, also within dairy, there is more to do. This is an area where AAK can do much better. In terms of what's left to give, well, we're closing in on pre-COVID, call it volumes in food service, so that kind of rebound effect is there, but we still have an opportunity to perform better in the market. There's still opportunity to optimize, you know, dairy bakery portfolios, but we also have the potential and an opportunity to optimize further. We're running in our critical enabler project linked to our strategy that we launched, which is a portfolio-based industry-focused strategy, but we're also running across the board product management and getting better at running product management, and there is still opportunity to drive margin improvements out of that from our total portfolio products. Portfolio and product management also affect capacity. That's something we keep in mind when we choose production lines and how to run it and so forth. Okay. You will still be able to get a few percentage points per year out of the volume with the present capacity or do you need a new factory or a acquisition to get to the next level, so to say? [crosstalk] We will still be able to. Still keep your ambition to grow the EBIT with +10% a year on average? To deliver on our target, our ambition, then we need more capacity, yes. The answer to your prior question, will we be able to get more capacity out? Yes. We will not be able to get enough capacity to deliver year-on-year 10% improvement without also adding either greenfield or acquisitive capacity. Yeah. That has also been your history in the past, so that's no new information, so to say. No. No. I would say that, I take the opportunity based on that to comment. I think, what is now different to maybe, you know, three, four, five years ago, it's an extreme volatility around us. We have been through. Yeah. The years of COVID, and now we have a critical situation in Europe with the war ongoing as well as an extreme inflationary pressure. I think that's where, you know, looking at all of that, you could also turn around and say, "Well, AAK stands strong. We continue to deliver. We're able to manage." There will be bumps on the roads up and down, but we also with this show our strong operating model, our business model. Nothing is given for the future, but we stand strong at the moment. Yeah. Great. Excellent. Thanks. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. Thank you so much. Thank you for calling in. That concludes our Q2 earnings call. Again, thank you for the questions. To summarize it one more time, extreme volatility, extremely dynamic, and at the same time, we are an important supplier predominantly into with food ingredients into the food sector, also important ingredients into technical products, and that is always good in a very dynamic environment. We remain prudently optimistic. Thank you for listening. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day. Thank you so much.