Quarterly Report • Oct 29, 2014
Quarterly Report
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1
Interim report for the third quarter 2014
Again a record high operating profit was achieved. This was mainly driven by the expected and continued significant improvement in Chocolate & Confectionery Fats. Food Ingredients remained stable despite some headwinds. Total volumes were up 6 percent.
Operating profit, excluding non-recurring items, reached SEK 331 million (313), an improvement of 6 percent compared to the corresponding quarter in 2013.
Operating profit, including acquisition related costs amounting to SEK 7 million (10) and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, reached SEK 344 million (303), an improvement of 14 percent. The currency translation impact was positive SEK 16 million.
Operating profit per kilo, excluding nonrecurring items, remained stable at SEK 0.75 (0.75) despite the dilutive impact of the recent acquisitions in Belgium and Colombia and challenges in Infant Nutrition in China. Operating profit per kilo in Food Ingredients declined from SEK 0.78 to SEK 0.71. Operating profit per kilo excluding the dilutive impact of the acquisitions mentioned above would have been SEK 0.08 higher. Operating profit per kilo in Chocolate & Confectionery Fats improved significantly and reached SEK 1.59 (1.36). Technical Products & Feed improved to SEK 0.37 (0.36).
Business Area operating profit:
Earnings per share increased by 10 percent, to SEK 5.36 (4.86).
Sales amounted to SEK 4,715 million (4,206). The increase was mainly due to the impact of the acquisitions and a positive currency translation impact of SEK 238 million.
Food Ingredients reported, all in all, a stable quarter, however, with a very mixed picture. Dairy solutions reported high single-digit growth. Infant Nutrition, product range Akonino®, also grew very strongly.
However, as earlier communicated and expected, our InFat® business through Advanced Lipids AB; a joint venture of AAK and Enzymotec, continued to struggle very severely in the Chinese market. Further, commodity volumes continued to decrease.
Chocolate & Confectionery Fats developed very well with high double-digit growth for Cocoa Butter Equivalents (CBE). In Ukraine volumes decreased. However, volumes in Russia increased.
Operating cash flow including changes in working capital amounted to negative SEK 52 million (positive 303 million). As predicted earlier, working capital increased and the increase amounted to SEK 369 million (increase 12 million) due to higher raw material prices during the fourth quarter 2013. Working capital is expected to be relatively stable during the fourth quarter 2014. In the first quarter 2015 we do expect material improvements following today's low prices on our main raw materials.
ROCE has been negatively affected by acquisitions and initial greenfield investments in Brazil and China. Return on Capital Employed (ROCE), calculated on a rolling 12 months basis, was 16.5 percent (16.4 at December 31, 2013). The ROCE for the third quarter was 14.3 percent (16.1 percent at September 30, 2013).
AAK has during the quarter made acquisitions in Belgium and Colombia. These have been consolidated during the third quarter and they both have a dilutive impact on operating profit per kilo for the Group and for Food Ingredients. Both acquisitions are on track with their integration plans.
The construction of a new factory in Brazil, which has been announced earlier, is developing according to plan.
Further, the company has announced a decision to construct a speciality and semispeciality edible oils factory in China.
In January 2014, we launched the new company program "AAKtion" for 2014-2016. The program is intended to further strengthen our focus on "Sales-Innovation-Execution". AAKtion is developing according to plan.
Based on AAK's customer value propositions for health and reduced costs, and our customer product co-development and solutions approach, we continue to remain prudently optimistic about the future.
The main drivers are the continued positive underlying development in Food Ingredients and the continued improvement in Chocolate & Confectionery Fats.
Arne Frank Chief Executive Officer and President
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | |||
|---|---|---|---|---|---|---|---|
| SEK million | 2014 | 2013 | % | 2014 | 2013 | % | 2013 |
| Income statement | |||||||
| Volumes ('000 MT) | 442 | 416 | +6 | 1,241 | 1,196 | +4 | 1,620 |
| Operating profit excluding non-recurring items* | 331 | 313 | +6 | 899 | 799 | +13 | 1,127 |
| Operating profit including non-recurring items* | 344 | 303 | +14 | 903 | 789 | +14 | 1,117 |
| Net profit | 225 | 201 | +12 | 588 | 512 | +15 | 741 |
| Financial position | |||||||
| Total assets | 12,455 | 9,356 | - | 12,455 | 9,356 | - | 10,045 |
| Equity | 5,268 | 4,051 | - | 5,268 | 4,051 | - | 4,364 |
| Net working capital | 3,406 | 2,481 | - | 3,406 | 2,481 | - | 2,581 |
| Net interest-bearing debt | 2,886 | 2,367 | - | 2,886 | 2,367 | - | 2,255 |
| Cash flow EBITDA |
442 | 390 | +13 | 1,184 | 1,050 | +13 | 1,460 |
| Cash flow from operating activities | -52 | 303 | - | 197 | 1,092 | -82 | 1,300 |
| Cash flow from investing activities | -352 | -329 | +7 | -661 | -589 | +12 | -732 |
| Free cash flow | -404 | -26 | - | -464 | 503 | - | 568 |
| Earnings per share Earnings per share before dilution |
5.36 | 4.86 | +10 | 14.03 | 12.39 | +13 | 17.87 |
| Earnings per share after dilution | 5.31 | 4.78 | +11 | 13.89 | 12.21 | +14 | 17.62 |
| Key figures | |||||||
| Volume growth, % | +6 | +8 | - | +4 | +7 | - | +7 |
| Operating profit per kilo (excl. non-recurring items*) |
0.75 | 0.75 | - | 0.72 | 0.67 | +7 | 0.69 |
| Return on Capital Employed (R12 months) | 16.5 | 16.0 | +3 | 16.5 | 16,0 | +3 | 16.4 |
| Net debt / EBITDA | 1.79 | 1.68 | +7 | 1.79 | 1.68 | +7 | 1.54 |
*) Non-recurring items for the third quarter consist of acquisition costs of SEK 7 million (10) and the non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium. Non-recurring items for Q1-Q3 consist of acquisition costs of SEK 16 million (10) and the non-recurring items of SEK 20 million.
Operating profit and operating profit per kilo in the diagrams above have been adjusted to exclude acquisition costs and nonrecurring items.
Volumes increased by 6 percent compared to the third quarter 2013 mainly due to the acquisitions in Belgium and Colombia. Organic growth was negative by 3 percent. On the other hand, Dairy solutions showed high single-digit growth. Our value propositions with "no trans, low sat and lower cost" is gaining further traction in several key markets. Infant Nutrition, product range Akonino®, grew strongly in all markets. The issues in the Chinese market for our InFat® business in Advance Lipids AB; a joint venture of AAK and Enzymotec continued. There was a negative effect from the new additional direct tax in Mexico for industrially produced bakery, confectionery and other indulgence products. Further, commodity volumes were shrinking.
Chocolate & Confectionery Fats continued to develop very nicely with very high double-digit growth in Cocoa Butter Equivalent (CBE). The market interest for CBE continues to be strong.
Net sales increased by SEK 509 million mainly due to acquisitions and a positive currency translation impact of SEK 238 million.
Operating profit, excluding acquisition related costs and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, reached SEK 331 million (313), an improvement of 6 percent compared to the corresponding quarter in 2013.
Operating profit, including acquisition related costs amounting to SEK 7 million (10) and a nonrecurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, amounted to SEK 344 million (303), an improvement of 14 percent. The currency translation impact was positive SEK 16 million.
Operating profit per kilo excluding acquisition costs and the non-recurring, net positive impact related to the acquisition of CSM Benelux NV in Merksem, Belgium, remained stable at SEK 0.75 (0.75) despite the dilutive impact of the recent acquisitions in Belgium and Colombia and our challenges for Advanced Lipids in China. Operating profit per kilo in Food Ingredients declined from SEK 0.78 to SEK 0.71.
Operating profit per kilo in Chocolate & Confectionery Fats improved significantly and reached SEK 1.59 (1.36). Technical Products & Feed improved to SEK 0.37 (0.36).
The costs for Group Functions have increased by SEK 2 million, mainly due to increased resources in R&D. The costs are in line with the innovation focus in the new company program, AAKtion. In addition, the third quarter operating result included acquisition related costs of SEK 7 million (10) and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium.
Net financial cost increased and amounted to SEK 29 million (26). The increase was explained by increased borrowings for the financing of acquisitions and increased working capital.
Operating cash flow in the third quarter came out as expected and amounted to negative SEK 52 million (positive 303 million). As predicted and communicated previously, working capital increased. The increase amounted to SEK 369 million (increase by 12 million last year), due to increased raw material prices during the fourth quarter 2013. Working capital is expected to be relatively stable during the fourth quarter 2014. However, in the first quarter 2015 we do expect material improvements following today's recordlow prices on our main raw materials.
After net investments amounting to SEK 352 million (329), which included acquisitions and initial greenfield investments, cash flow was negative SEK 404 million (26).
As announced in the second quarter interim report, AAK has acquired the oils and fats business of CSM Benelux NV in Merksem, Belgium. The company is a leading bakery fats supplier mainly to the bakery markets in Belgium, the Netherlands and France. The acquired business employs around 100 people and had revenues of approximately SEK 970 million in 2013.
The impact on AAK's operating profit is expected to be very limited during 2014 and accordingly, this acquisition has a dilutive impact on operating profit per kilo.
The transaction was completed on July 1, 2014 and the unit was consolidated in the third quarter.
As communicated earlier, the acquisition will not start contributing to AAK's operating profit until the second half of 2015. A material turnaround of the business is planned for. As a result of this acquisition, negative goodwill of SEK 95 million was recorded in the third quarter. The Group has made a provision of SEK 75 million for necessary restructuring costs related to the planned integration and execution of synergies to improve results from the latter part of 2015. Accordingly, a non-recurring, net positive impact of SEK 20 million has been reported on the line "Other operating income" in the Income Statement on page 14.
The restructuring and integration of this business is on plan.
On July 10, 2014 AAK acquired Fabrica Nacional de Grasas S.A. (FANAGRA), a Colombian company that specializes in vegetable oils and fats for the bakery segment. The company has 155 employees and had revenues of approximately SEK 270 million last year, with an annual volume of 30,000 MT. The impact on AAK's operating profit is expected to be very limited during 2014 and accordingly, this acquisition has a dilutive impact on operating profit per kilo.
On July 18, 2014 AAK announced that it had signed an agreement to acquire the Turkish frying oil brand Frita from Unilever. Frita, a market leader in the frying oil segment in Turkey, covers a significant part of the local Food Service market. The brand had revenues of approximately SEK 75 million in 2013. The acquisition should be seen as a natural addition to AAK Turkey's existing product portfolio and is an add-on to the Unipro acquisition during the third quarter of 2013. The impact on AAK's operating profit is expected to be very limited.
On September 5, 2014 AAK announced that it will construct a speciality and semi-speciality edible oils factory in China. The intention is to pursue our global growth strategy and to add further presence in this strategically very important market.
The factory will be located in Zhangjiagang along the Yangtze River delta. This region, just northwest of Shanghai, is one of the most important Chinese centers for inbound and outbound logistics for efficient national coverage.
The investment is expected to amount to approximately SEK 400 million over a two-year period. The start-up of the new factory is planned for the beginning of 2016 and fully utilized it will increase AAK's total capacity by approximately 100,000 MT, with room for further expansion at a later stage.
The construction of the factory is part of a longterm plan in China that started with the establishment of an AAK sales subsidiary in 2011 and which was followed by the opening of an innovation center in Shanghai last year.
The equity/assets ratio amounted to 42 percent (43 percent at December 31, 2013). Net debt at September 30, 2014, amounted to SEK 2,886 million (SEK 2,255 million on December 31, 2013).
At September 30, 2014, the Group had total committed credit facilities of approximately SEK 5,918 million (4,716 as of December 31, 2013), with approximately SEK 2,720 million of unused committed credit facilities.
The average number of employees at September 30, 2014 was 2,463 (2,207 at December 31, 2013). The reason for the increase in the number of employees is the recent acquisitions in Belgium and Colombia.
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | ||||
|---|---|---|---|---|---|---|---|---|
| Operating profit | SEK million | 2014 | 2013 | % | 2014 | 2013 | % | 2013 |
| Volumes ('000 MT) | 298 | 272 | +10 | 807 | 776 | +4 | 1,049 | |
| 0 % |
Net sales | 3,089 | 2,780 | +11 | 8,294 | 7,991 | +4 | 10,798 |
| Operating profit per kilo | Operating profit | 211 | 211 | 0 | 583 | 553 | +5 | 771 |
| -9 % |
Operating profit per kilo | 0.71 | 0.78 | -9 | 0.72 | 0.71 | +1 | 0.73 |
Food Ingredients reported a volume growth of 10 percent mainly due to the acquisitions in Belgium and Colombia. Food Ingredients reported, all in all, a stable quarter. This, however, with a very mixed picture. Dairy solutions reported high single-digit growth. Infant Nutrition, product range Akonino®, also grew very strongly, while commodity volumes continued to decrease.
There was a negative effect from the new additional direct tax in Mexico for industrially produced bakery, confectionery and other indulgence products.
As expected and communicated earlier, Infant Nutrition speciality volumes, InFat® business in Advance Lipids AB; a joint venture of AAK and Enzymotec, continued to be negatively affected by the Chinese market for infant formulas.
In Advanced Lipids, AAK is, amongst other functions, responsible for sales. However, in China specifically, sales are handled by our JV partner Enzymotec.
300 400 500 600 700 800 900 50 100 150 200 250 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Rolling 12 months, SEK million Quarter, SEK million Food Ingredients - Operating profit Quarter Rolling 12 months
Net sales increased by SEK 309 million mainly due to increased volumes related to the acquisitions and a positive currency translation impact of SEK 186 million.
Operating profit remained stable at SEK 211 million compared to the very strong third quarter 2013 at SEK 211 million. The currency translation impact was positive SEK 10 million.
Operating profit per kilo, including the dilutive impact of the acquisitions in Belgium and Colombia and our challenges for Advanced Lipids in China, declined, as expected, from SEK 0.78 to SEK 0.71. Operating profit per kilo excluding the dilutive impact of the acquisitions mentioned above would have been SEK 0.08 higher.
Operating profit for the full year 2014 is expected to improve compared to last year.
For comparable units, volumes were negative by 3 percent.
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | ||||
|---|---|---|---|---|---|---|---|---|
| Operating profit | SEK million | 2014 | 2013 | % | 2014 | 2013 | % | 2013 |
| Volumes ('000 MT) | 79 | 77 | +2 | 230 | 219 | +5 | 300 | |
| +19 % |
Net sales | 1,277 | 1,059 | +21 | 3,571 | 3,059 | +17 | 4,200 |
| Operating profit per kilo | Operating profit | 125 | 105 | +19 | 332 | 254 | +31 | 369 |
| +17 % |
Operating profit per kilo | 1.59 | 1.36 | +17 | 1.44 | 1.16 | +24 | 1.23 |
Volumes increased by 2 percent.
The product mix improved strongly with high double-digit growth in speciality products (mainly CBE) while low-end products declined. In Ukraine volume continued to decline, while in Russia volumes continued to grow. The recently implemented Russian ban on food imports does not include AAK's ingredient products.
For comparable units, volumes decreased by 2 percent due to reduced low-end product volumes, while CBE volumes achieved very high doubledigit growth.
Net sales for Chocolate & Confectionery Fats increased by SEK 218 million as a consequence of increased volumes and an improved product mix. The currency translation impact was positive SEK 50 million.
The professional efforts within this business area during last years, with very low cocoa butter prices, the work with customer co-development and promoting CBE based on other customer benefits than just cost, are now yielding results and will yield further.
As expected, operating profit improved significantly, by 19 percent, and reached SEK 125 million (105). Margins continue to improve driven by the dramatic increase in cocoa butter prices since 2013. The currency translation impact was positive SEK 7 million.
Operating profit per kilo improved by 17 percent to SEK 1.59 (1.36). The main reasons for these improvements are the higher proportion of CBE and a lower proportion of low-end product.
Regarding the threat from Ebola in some of the neighbouring countries to our shea kernel sourcing activities, we are applying very strict safety procedures and precautions. Currently, we see no other effects to our activities in West Africa apart from our precautionary initiatives. See more under Risks and uncertainty factors on page 11.
The performance of this business area is expected to continue to improve significantly compared to the same quarter last year.
| Operating profit | SEK million | Q3 2014 |
Q3 2013 |
% | Q1-3 2014 |
Q1-3 2013 |
% | Full year 2013 |
|---|---|---|---|---|---|---|---|---|
| 0 % Operating profit per kilo |
Volumes ('000 MT) Net sales Operating profit Operating profit per kilo |
64 348 24 0.37 |
67 367 24 0.36 |
-5 -5 0 +3 |
204 1,092 77 0.38 |
201 1,201 73 0.36 |
+1 -9 +5 +5 |
271 1,539 97 0.36 |
| +3 % |
Volumes decreased by 5 percent compared to the corresponding quarter in 2013. This was mainly related to lower sales of technical products.
Net sales for the business area decreased by SEK 19 million or by 5 percent as a result of a changed product mix.
Operating profit remained stable at SEK 24 million (24).
Operating profit per kilo increased by 3 percent at SEK 0.37 (0.36).
For 2014, operating profit is expected to be stable or to improve slightly compared to the prior year.
Volumes increased by 4 percent during the first nine months mainly due to acquisitions. Organic growth was negative 2 percent due to shrinking commodity volumes, lower volumes of semispeciality products in Mexico and the InFat® issues. Most other businesses have developed well or very well.
Net sales increased by SEK 707 million mainly as a result of the acquisitions. Currency translation impact was positive SEK 286 million.
Operating profit excluding acquisition related costs and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, for the first nine months of 2014 was a record-high, reaching SEK 899 million (799), an improvement of 13 percent. The currency translation impact was positive SEK 21 million.
Operating profit, including acquisition related costs amounting to SEK 16 million (10) and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, reached SEK 903 million (789), an improvement of 14 percent.
Operating profit per kilo, excluding acquisition costs and a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium, amounted to SEK 0.72 (0.67) despite the dilutive impact of the recent acquisitions in Belgium and Colombia. Operating profit per kilo in Food Ingredients improved despite the dilutive impact of the acquisitions and reached SEK 0.72 (0.71). Operating profit per kilo in Chocolate & Confectionery Fats improved significantly and reached SEK 1.44 (1.16). Technical Products & Feed improved to SEK 0.38 (0.36).
Net financial cost increased to SEK 86 million (77) mainly due to increased borrowings as a consequence of financing the acquisitions, initial greenfield investments and the increase working capital. One-off costs related to refinancing have impacted the first nine months.
Cash flow after changes in working capital for the first nine months of 2014 amounted to SEK 197 million (1,092), including increased working capital of SEK 644 million (improvements 335 million) due to increased raw material prices and the impact of growth in Chocolate & Confectionery Fats.
During the first quarter 2014 AAK decided to commence construction of a new speciality and semi-speciality edible oils factory in Jundiaí, São Paulo, Brazil. The investment is expected to be approximately SEK 400 million over a two-year period. The start-up of the new factory is planned for the latter part of 2015 and fully utilized it will increase AAK's total capacity by 100,000 to 120,000 MT.
The new factory will expand our product portfolio of Food Ingredients and Chocolate & Confectionery Fats products in Brazil and particularly strengthen our ability to supply Bakery and Dairy solutions as well as further develop our Chocolate & Confectionery Fats business. The new factory will include an innovation center which will give our customers the possibility to work closely with AAK's Customer Innovation team.
The following acquisitions have been made and these have been consolidated in the third quarter:
| Sales 2013 SEK million |
Employees | |
|---|---|---|
| CSM Benelux NV |
970 | 100 |
| FANAGRA | 270 | 155 |
These acquisitions have been made during the year and are not of a significant nature.
More details related to acquisitions and initial greenfield investments can be found on pages 5– 6.
AAK has signed new committed credit facilities. The new credit facilities are partly a five-year club deal of EUR 400 million (approximately SEK 3,600 million), partly two committed three-year bilateral facilities, totaling SEK 1,500 million.
At the Annual General Meeting on May 8, 2014 it was decided to change the company name from AarhusKarlshamn AB (publ) to AAK AB (publ).
No significant changes have taken place in relations or transactions with related parties since 2013.
Late during the second quarter 2014, the company made a final settlement related to Hurricane Sandy insurance compensation.
As communicated in a press release dated May 16, 2014, AAK AB has initiated an arbitration at ICC, International Court of Arbitration, against the company Enzymotec Ltd with respect to certain disputed matters under the Shareholders' Agreement entered into on June 14, 2007 regarding the joint venture company Advanced Lipids AB.
AAK is generally very cautious about taking legal actions. This dispute is commented upon because Enzymotec has released information regarding the dispute.
AAK is a global company represented in many countries and as such is exposed to a number of commercial and financial risks. Accordingly, risk management is an important process for AAK in its work to achieve established targets.
Efficient risk management is an ongoing process conducted within the framework of business control, and is part of the ongoing review of operations and forward-looking assessment of operations.
AAK's long-term risk exposure is assumed not to deviate from the inherent exposure associated with AAK's ongoing business operations.
For a more in-depth analysis of risks, refer to AAK's Annual Report for 2013.
AAK and Ebola Virus Disease (EVD) AAK is sourcing shea kernels throughout West Africa and has offices, yards and warehouses in Burkina Faso, Mali, Ivory Coast, Ghana, Togo
and Benin. Some of these countries are bordering countries with the EVD outbreak.
AAK is constantly monitoring the EVD situation in West Africa following advice and guidance from authorities and competent international organizations.
Bearing in mind our widespread and robust supply chains and our shea kernel stocks, we do not currently expect any problems sourcing shea kernels or supplying our customers with products containing shea (primarily CBE). Currently, our shea kernel sourcing activities are not influenced – apart from our precautionary initiatives.
This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS 34, Interim Financial Reporting. For information regarding the accounting policies applied, see the Annual Report for 2013. The accounting policies are unchanged, compared with those applied in 2013. A number of new and amended standards are effective for periods beginning after January 1, 2014. None of these is expected to have a significant effect on the consolidated financial statements of the Group or the Parent company.
For definitions, see the Annual Report for 2013.
The Parent Company is a holding company for the AAK Group. Its functions are primarily activities related to the development and administration of the Group.
The result for the Parent Company after financial items amounted to negative SEK 61 million (positive 52).
Interest-bearing liabilities minus cash and cash equivalents and interest-bearing assets totalled a negative of SEK 801 million (negative 661 as of December 31, 2013). Investments in intangible and tangible assets amounted to SEK 1 million (0).
The Parent Company's balance sheet and income statement are shown on pages [14–15].
The costs for Group Functions have increased mainly as a consequence of the increased
management ambition related to growth and AAKtion, specifically Innovation involving additional resources for new product development. Group Functions also included acquisition related costs in the second and third quarter. During the third quarter a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium was recorded.
AAK AB (publ) is the Parent Company of the AAK
Group. The company has prepared its financial reports in accordance with the Annual Accounts Act and RFR 2 Reporting for legal entities.
No major change in the parent company since year-end.
Malmö, October 29, 2014
Arne Frank Chief Executive Officer and President
The information is that which AAK AB (publ) is obliged to publish under the provisions of the Stock Exchange and Clearing Operations Act and/or the Trading in Financial Instruments Act. The information was released to the media for publication on October 29, 2014 at 08.15 am CET.
We have reviewed the condensed interim financial information (interim report) of AAK AB (publ) as of September 30, 2014 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Malmö, October 29, 2014
PricewaterhouseCoopers
Sofia Götmar-Blomstedt Authorized Public Accountant
| Group | Parent | |||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | Q1-3 | Q1-3 | Full year | |
| SEK million | 2014 | 2013 | 2014 | 2013 | 2013 | 2014 | 2013 | 2013 |
| Net sales | 4,715 | 4,206 | 12,958 | 12,251 | 16,537 | 54 | 47 | 72 |
| Other operating income * | 59 | 32 | 111 | 118 | 172 | 0 | 0 | 0 |
| Total operating income | 4,774 | 4,238 | 13,069 | 12,369 | 16,709 | 54 | 47 | 72 |
| Raw materials and supplies | -3,590 | -3,242 | -9,776 | -9,530 | -12,792 | - | - | - |
| Other external expenses | -395 | -318 | -1,105 | -919 | -1,265 | -55 | -50 | -78 |
| Cost for remuneration to employees | -345 | -287 | -1,001 | -866 | -1,189 | -48 | -42 | -57 |
| Amortisation and impairment losses | -98 | -87 | -281 | -261 | -343 | -1 | -1 | -1 |
| Other operating expenses | -2 | -1 | -3 | -4 | -3 | 0 | 0 | 0 |
| Total operating costs | -4,430 | -3,935 | -12,166 | -11,580 | -15,592 | -104 | -93 | -136 |
| Operating profit (EBIT) | 344 | 303 | 903 | 789 | 1,117 | -50 | -46 | -64 |
| Income from shares in group companies | - | - | - | - | - | - | 115 | 1,146 |
| Interest income | 1 | 1 | 4 | 4 | 6 | - | - | - |
| Interest expense | -28 | -20 | -75 | -58 | -81 | -10 | -16 | -20 |
| Other financial items | -2 | -7 | -15 | -23 | -25 | -1 | -1 | -1 |
| Total financial net | -29 | -26 | -86 | -77 | -100 | -11 | 98 | 1,125 |
| Result before tax | 315 | 277 | 817 | 712 | 1,017 | -61 | 52 | 1,061 |
| Income tax | -90 | -76 | -229 | -200 | -276 | 13 | - | 0 |
| Net result | 225 | 201 | 588 | 512 | 741 | -48 | 52 | 1,061 |
| Attributable to non-controlling interests | 2 | 3 | 6 | 6 | 9 | - | - | - |
| Attributable to the Parent company's shareholders |
223 | 198 | 582 | 506 | 732 | -48 | 52 | 1,061 |
*) including a non-recurring, net positive impact of SEK 20 million related to the acquisition of CSM Benelux NV in Merksem, Belgium.
| Group | Parent | |||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | Q1-3 | Q1-3 | Full year | |
| SEK million | 2014 | 2013 | 2014 | 2013 | 2013 | 2014 | 2013 | 2013 |
| Profit for the period | 225 | 201 | 588 | 512 | 741 | -48 | 52 | 1,061 |
| Items that will not be reclassified to profit or loss: |
||||||||
| Remeasurements of post employment benefit obligations |
-9 | - | -16 | - | -7 | - | - | - |
| -9 | - | -16 | - | -7 | - | - | - | |
| Items that may subsequently be reclassified to profit or loss: |
||||||||
| Translation differences | 239 | -144 | 485 | -105 | -54 | - | - | - |
| Fair-value changes in cash flow hedges | 0 | -3 | -7 | 27 | 21 | - | - | - |
| Tax attributable to fair-value changes in cash flow hedges |
0 | 1 | 2 | -7 | -5 | - | - | - |
| 239 | -146 | 480 | -85 | -38 | - | - | - | |
| Total comprehensive income for the period | 455 | 55 | 1,052 | 427 | 696 | -48 | 52 | 1,061 |
| Attributable to: | ||||||||
| Non-controlling interests | 2 | 1 | 8 | 7 | 10 | - | - | - |
| Parent company shareholders | 453 | 54 | 1,044 | 420 | 686 | -48 | 52 | 1,061 |
| Group | Parent | |||||
|---|---|---|---|---|---|---|
| SEK million | 30.09.2014 | 30.09.2013 | 31.12.2013 | 30.09.2014 | 30.09.2013 | 31.12.2013 |
| Assets | ||||||
| Goodwill | 1,277 | 1,089 | 1,115 | - | - | - |
| Other intangible assets | 118 | 128 | 123 | - | 1 | 0 |
| Tangible assets | 3,637 | 2,929 | 3,027 | 1 | 1 | 1 |
| Financial assets | 191 | 139 | 162 | 5,476 | 4,532 | 5,476 |
| Total non-current assets | 5,223 | 4,285 | 4,427 | 5,477 | 4,534 | 5,477 |
| Inventory | 3,411 | 1,997 | 2,501 | - | - | - |
| Current receivables | 3,392 | 2,830 | 2,886 | 73 | 46 | 146 |
| Cash and cash equivalents | 429 | 244 | 231 | 0 | 0 | 0 |
| Total current assets | 7,232 | 5,071 | 5,618 | 73 | 46 | 146 |
| Total assets | 12,455 | 9,356 | 10,045 | 5,550 | 4,580 | 5,623 |
| Equity and liabilities | ||||||
| Shareholders' equity | 5,226 | 4,020 | 4,330 | 4,712 | 3,858 | 4,909 |
| Non-controlling interests | 42 | 31 | 34 | - | - | - |
| Total equity including non-controlling | ||||||
| interests | 5,268 | 4,051 | 4,364 | 4,712 | 3,858 | 4,909 |
| Total non-current liabilities | 3,701 | 2,872 | 2,797 | - | - | - |
| Accounts payables | 2,247 | 1,374 | 1,727 | 5 | 1 | 18 |
| Other current liabilities | 1,239 | 1,059 | 1,157 | 833 | 721 | 696 |
| Total current liabilities | 3,486 | 2,433 | 2,884 | 838 | 722 | 714 |
| Total equity and liabilities | 12,455 | 9,356 | 10,045 | 5,550 | 4,580 | 5,623 |
No changes have arisen in contingent liabilities.
| SEK million | Total equity capital |
Non controlling interests |
Total equity incl. non controlling interests |
|---|---|---|---|
| Openings equity January 1, 2014 | 4,330 | 34 | 4,364 |
| Profit for the period | 582 | 6 | 588 |
| Other comprehensive income | 462 | 2 | 464 |
| Total comprehensive income | 5,374 | 42 | 5,416 |
| New issue of shares Dividend |
102 -250 |
- - |
102 -250 |
| Closing equity September 30, 2014 | 5,226 | 42 | 5,268 |
| SEK million | Total equity capital |
Non controlling interests |
Total equity incl. non controlling interests |
|---|---|---|---|
| Openings equity January 1, 2013 | 3,812 | 24 | 3,836 |
| Profit for the period | 506 | 6 | 512 |
| Other comprehensive income | -86 | 1 | -85 |
| Total comprehensive income | 4,232 | 31 | 4,263 |
| Stock options Dividend |
3 -215 |
- - |
3 -215 |
| Closing equity September 30, 2013 | 4,020 | 31 | 4,051 |
During 2014, 540,500 new shares have been issued which have increased equity by SEK 102 million.
| SEK million | Asset | Liability |
|---|---|---|
| Financial instruments reported in balance sheet September 30, 2014 |
||
| Raw material hedge contracts | 317 | 72 |
| FX hedge contracts | 70 | 53 |
| Interest rate swaps | 14 | 68 |
| Total derivatives financial instruments | 401 | 193 |
| Fair value adjustment inventory | -35 | 58 |
| Total financial instruments | 366 | 251 |
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | |
|---|---|---|---|---|---|
| SEK million | 2014 | 2013 | 2014 | 2013 | 2013 |
| Operating activities | |||||
| Cash flow from operating activities before changes in working | 317 | 315 | 841 | 757 | 1,083 |
| capital | |||||
| Changes in working capital | -369 | -12 | -644 | 335 | 217 |
| Cash flow from operating activities | -52 | 303 | 197 | 1,092 | 1,300 |
| Investing activities | |||||
| Cash flow from investing activities | -352 | -329 | -661 | -589 | -732 |
| Cash flow after investing activities | -404 | -26 | -464 | 503 | 568 |
| Financing activities | |||||
| Cash flow from financing activities | 543 | 24 | 641 | -585 | -666 |
| Cash flow for the period | 139 | -2 | 177 | -82 | -98 |
| Cash and cash equivalents at start of period | 277 | 254 | 231 | 330 | 330 |
| Exchange rate difference for cash equivalents | 13 | -8 | 21 | -4 | -1 |
| Cash and cash equivalents at end of period | 429 | 244 | 429 | 244 | 231 |
| Q3 | Q3 | Q1-3 | Q1-3 | Full year | |
|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2013 | |
| Number of shares, thousand | 41,662 | 40,898 | 41,662 | 40,898 | 41,122 |
| Earnings per share, SEK* | 5.36 | 4.86 | 14.03 | 12.39 | 17.87 |
| Earnings per share incl. dilution, SEK** | 5.31 | 4.78 | 13.89 | 12.21 | 17.62 |
| Earnings per share incl. full dilution, SEK*** | 5.27 | 4.71 | 13.82 | 11.99 | 17.38 |
| Equity per share, SEK | 125.44 | 98.31 | 125.91 | 98.31 | 105.76 |
| Market value on closing date | 377.00 | 401.50 | 377.00 | 401.50 | 412.00 |
* The calculation of earnings per share is based on weighted average number of outstanding shares.
** The calculation of earnings per share is based on weighted average number of outstanding shares including dilution from outstanding subscription options (in accordance with IAS 33).
*** Earnings per share after full dilution is calculated by dividing net income for the period by the total number of average outstanding shares for the period including a conversion of all outstanding share options to ordinary shares.
| 2013 | 2014 | |||||||
|---|---|---|---|---|---|---|---|---|
| Full | ||||||||
| SEK million | Q1 | Q2 | Q3 | Q4 | year | Q1 | Q2 | Q3 |
| Food Ingredients | 158 | 184 | 211 | 218 | 771 | 174 | 198 | 211 |
| Chocolate & Confectionery Fats | 84 | 65 | 105 | 115 | 369 | 116 | 91 | 125 |
| Technical Products & Feed | 26 | 23 | 24 | 24 | 97 | 29 | 24 | 24 |
| Group Functions | -26 | -28 | -27 | -29 | -110 | -32 | -32 | -29 |
| Total AAK Group excl. non recurring items |
242 | 244 | 313 | 328 | 1,127 | 287 | 281 | 331 |
| Acquisition costs and non-recurring items |
-10 | -10 | -9 | 13 | ||||
| Total legal operating profit AAK Group |
242 | 244 | 303 | 328 | 1,117 | 287 | 272 | 344 |
| Financial net | -23 | -28 | -26 | -23 | -100 | -26 | -31 | -29 |
| Result before tax | 219 | 216 | 277 | 305 | 1,017 | 261 | 241 | 315 |
For information regarding cocoa and cocoa butter, please refer to information at www.icco.org
AAK will host a conference call on October 29, 2014 at 1 p.m. CET. The conference call can be accessed via our home page, www.aak.com.
The annual and quarterly reports are also published on www.aak.com.
A capital market day including a plant visit in Karlshamn, Sweden will be held on November 12, 2014.
The fourth quarter and year-end report for 2014 will be published on February 3, 2015.
The interim report for the first quarter 2015 will be published on April 22, 2015.
The interim report for the second quarter 2015 will be published on July 17, 2015.
The interim report for the third quarter 2015 will be published on October 29, 2015.
The fourth quarter and year-end report for 2015 will be published on February 2, 2016.
This report contains forward-looking statements. Such statements are subject to risks and uncertainties as various factors, many of which are beyond the control of AAK AB (publ), may cause actual developments and results to differ materially from the expectations expressed in this report.
The report has been translated from Swedish. The Swedish text shall govern for all purposes and prevail in the event of any discrepancy between the versions.
Fredrik Nilsson, CFO Phone: + 46 40 627 83 34 Mobile: + 46 708 95 22 21 E-mail: [email protected]
or
Anders Byström, Director External Accounting and Investor Relations Phone: + 46 40 627 83 32 Mobile: + 46 709 88 56 13 E-mail: [email protected]
AAK is one of the world's leading producers of high value-added speciality vegetable oils and fats solutions. These oils and fats solutions are characterized by a high level of technological content and innovation. AAK`s solutions are used as substitute for butter-fat and cocoa butter, trans-free and low saturated solutions but also addressing other needs of our customers. AAK has production facilities in Belgium, Colombia, Denmark, Mexico, the Netherlands, Sweden, Great Britain, Uruguay and the US. Further AAK has also toll manufacturing operations in Russia and Malaysia. The company is organized in three Business Areas; Food Ingredients, Chocolate and Confectionery Fats and Technical Products & Feed. AAK's shares are traded on the NASDAQ OMX, Stockholm, within the Large Cap segment. Further information on AAK can be found on the company's website www.aak.com.
AAK AB (publ)
Jungmansgatan 12, SE-211 19 Malmö, Sweden
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