AAK

Quarterly Report • Oct 24, 2019

Interim report

Third quarter, 2019

2

Financial highlights

Q3 2019

• Total volumes for the quarter amounted to 571,000 MT (564,000), organic growth of 1 percent (4).
• Operating profit, including a positive currency translation impact of SEK 24 million and acquisition costs of SEK 6 million, reached SEK 563 million (526), an improvement of 7 percent. Excluding acquisition costs, operating profit per kilo improved by 8 percent to SEK 1.00 (0.93).

Q1–Q3 2019

• Total volumes for the period amounted to 1,708,000 MT (1,665,000), organic growth of 3 percent (5).
• Operating profit, including a positive currency translation impact of SEK 63 million and acquisition costs of SEK 15 million, reached SEK 1,581 million (1,440), an improvement of 10 percent.
• Net result amounted to SEK 1,112 million (986), an improvement of 13 percent.
• Net result amounted to SEK 398 million (359), an improvement of 11 percent.
• Earnings per share increased by 10 percent, to SEK 1.53 (1.39).
• Cash flow from operating activities amounted to SEK 130 million (524).
• Return on Capital Employed (ROCE), R12M, was 15.1 percent (15.8 at December 31, 2018).
• Earnings per share increased by 12 percent, to SEK 4.30 (3.83).
• Cash flow from operating activities amounted to SEK 932 million (524).
• Return on Capital Employed (ROCE), R12M, was 15.1 percent (15.8 at December 31, 2018).

	Q3 2019	Q3 2018	Δ %	Q1-Q3 2019	Q1-Q3 2018	Δ %	R12 months	Full year 2018
Volumes, '000 MT	571	564	+1	1,708	1,665	+3	2,282	2,239
Operating profit, SEK million	563	526	+7	1,581	1,440	+10	2,097	1,956
Operating profit excl. acquisition costs, SEK million	569	526	+8	1,596	1,440	+11	2,112	1,956
Operating profit per kilo, SEK	0.99	0.93	+6	0.93	0.86	+8	0.92	0.87
Operating profit per kilo excl. acquisition costs, SEK	1.00	0.93	+8	0.93	0.86	+8	0.93	0.87
Net result, SEK million	398	359	+11	1,112	986	+13	1,466	1,340
Earnings per share, SEK	1.53	1.39	+10	4.30	3.83	+12	5.68	5.21
Return on Capital Employed (R12M), percent	15.1	15.7	-4	15.1	15.7	-4	15.1	15.8

Continued profit growth on the back of a strong Food Ingredients performance

Our profit growth continued in the third quarter but at slower pace than during the first half of the year. We continue to improve our margin and operating profit per kilo. Adjusted for acquisition costs, we reached a level of SEK 1.00 in the third quarter, a milestone for AAK. Food Ingredients was the main driver with a strong year-over-year profitability improvement.

Organic volume growth was 1 percent (4) with both Food Ingredients and Chocolate & Confectionery Fats reporting modest volume growth.

Operating profit, adjusted for acquisition costs, amounted to SEK 569 million, an improvement of 8 percent compared to last year and an all-time high operating profit for a third quarter. Earnings per share increased by 10 percent.

Food Ingredients continued its strong trend with an improved operating profit of 13 percent. Dairy and Bakery led the way and Foodservice also reported a good contribution. The performance of Special Nutrition was mixed. High-end solutions continued to grow, although at a slower pace, while we experienced lower volumes for our semi-speciality solutions. We have an impact from lower birth rates in China as well as from destocking by some customers.

Chocolate & Confectionery Fats had a challenging quarter with limited volume growth. There has been an increased pressure from customers to roll existing contracts forward. We have also, as previously communicated, used more of our low-yielding shea kernels which has increased production costs. The last batches are expected to be used during the fourth quarter. Our investment projects to increase capacity and strengthen our supply chain are progressing according to plan and are expected to be completed by year-end. Sourcing of new kernels in West Africa has started very positively. With new kernels in place and additional capacity, we expect to reach normal cost levels within the business area by the middle of the first quarter next year.

As for Technical Products & Feed, both our fatty acids business and our feed business declined compared to the very strong corresponding quarter last year. We have lifted profitability to a new level. While the corresponding quarter last year was a new record, this quarter was still at a good level compared to earlier years.

AkoPlanet™

The launch of AkoPlanet™, our portfolio with tailormade solutions for food manufacturers developing plant-based alternatives, has generated strong volume and profit growth, although from a small base. Our

pipeline of customer co-development projects has more than doubled between the second and the third quarter.

Key strategic events

In September, we acquired 80 percent of Soya International (Europe) Ltd. The UK-based company focuses on the sourcing, processing and distribution of non-GMO semi-speciality and speciality lecithins.

Lecithin is a key ingredient for many customers within our core segments, especially Chocolate & Confectionery Fats and Bakery, but also Dairy, Special Nutrition, and Personal Care. By expanding our portfolio with this value-adding ingredient, we will further enhance our co-development capabilities and be able to create even better solutions in close collaboration with our customers globally.

In October, we acquired an additional 5 percent of the shares of AAK Kamani, the joint venture in India between AAK and Kamani Oil Industries Pvt Ltd. AAK now holds 69 percent of the shares.

Company program

The AAK Way, now in its final stretch, is progressing well and yielding good results. During the quarter, some 90 AAK leaders participated at our Global Leadership Conference to shape the company's strategic direction for the future. We will share more information about this at our Capital Market Day in November.

Concluding remarks

We are well positioned with our offer of plant-based, healthy, high value-adding oils and fats solutions, using our customer co-development approach. We continue to see favorable underlying trends in our markets and we remain prudently optimistic about the future.

Johan Westman President and CEO

AAK Group, Q3 2019

Volumes

Volumes continued to grow, by 1 percent (4). Organic volume growth was 1 percent (4). Speciality and semispeciality products grew organically by 1 percent (2).

Net sales

Sales amounted to SEK 7,153 million (7,034). There was an underlying growth in sales due to a positive currency translation impact of SEK 308 million. This was partly offset by lower raw material prices.

Operating profit

Operating profit reached SEK 563 million (526), an improvement of 7 percent compared to the corresponding quarter in 2018. Excluding acquisition costs of SEK 6 million, operating profit improved by 8 percent.

The currency translation impact was positive SEK 24 million of which SEK 17 million was related to Food Ingredients and SEK 7 million to Chocolate & Confectionery Fats. Operating profit at fixed foreign exchange rates and excluding acquisition costs improved by 4 percent.

Operating profit per kilo reached SEK 0.99 (0.93), an increase of 6 percent. Excluding acquisition costs, operating profit per kilo improved by 8 percent to SEK 1.00 (0.93). The currency translation impact was SEK 0.04. At fixed foreign exchange rates and excluding acquisition costs, operating profit per kilo increased by 2 percent.

Net financial cost

Net financial cost decreased, amounting to SEK 34 million (37). Interest paid to banks is down, however, the new accounting standard for leases, IFRS 16, has resulted in additional interest expenses of SEK 9 million compared to the corresponding quarter last year.

Tax costs

Reported tax costs corresponded to an average tax rate of 25 percent (27). A lower corporate tax rate in Sweden combined with further optimization of the capital structure in the Group have reduced the average tax rate.

Earnings per share

Earnings per share increased by 10 percent, to SEK 1.53 (1.39), due to increased operating profit combined with lower tax costs.

Cash flow and investments

Operating cash flow including changes in working capital amounted to SEK 130 million (524). Cash flow from working capital was negative, amounting to SEK 552 million (negative 37). Strategic purchases of key raw materials to Chocolate & Confectionery Fats comprise the entire negative cash flow from working capital.

Cash outflow from investment activities amounted to SEK 433 million (159), whereof SEK 207 million (0) was related to acquisitions. Capital expenditure was mainly related to regular maintenance investments and capacity increases.

Acquisitions

During the quarter, AAK has acquired 80 percent of Soya International (Europe) Ltd. The UK-based company focuses on the sourcing, processing and distribution of non-GMO semi-speciality and speciality lecithins. Soya International has a third-party processing facility in the Netherlands and holds wellestablished relationships with customers and distributors in 40 markets globally. Last year, the company had revenues of approximately SEK 150 million.

There is a put/call option under which AAK could acquire the remaining 20 percent of the company within the next 2–5 years. The transaction had no significant impact on AAK's earnings. Acquisition-related costs of SEK 6 million were charged to Group Functions during the third quarter.

Return on Capital Employed (ROCE)

Calculated on a rolling 12 months basis, Return on Capital Employed (ROCE) was 15.1 percent (15.8 at December 31, 2018). ROCE was negatively impacted by 0.4 percent due to the new accounting standard for leases, IFRS 16. ROCE for the third quarter was 13.4 percent (15.1 percent for the corresponding quarter 2018). The purchase of strategic raw materials has impacted ROCE negatively.

Financial position

The equity/assets ratio amounted to 48 percent (50 percent at December 31, 2018). Net debt at September 30, 2019 amounted to SEK 3,453 million (SEK 2,667 million at December 31, 2018). In June, SEK 469 million was paid in dividend. At September 30, 2019 the Group had total committed credit facilities of SEK 7,186 million (6,339 as of December 31, 2018), with SEK 5,262 million of unused committed credit facilities.

Employees

The average number of employees at September 30, 2019 was 3,822 (3,609 at December 31, 2018).

Selected key events

During the quarter, we have acquired 80 percent of Soya International (Europe) Ltd. This acquisition will increase customer proximity as lecithin is a critical ingredient with key funcationalities for many customers within our core segments. Lecithin is one of the closest adjacent ingredients to oils and fats. Soya International has a scalable platform and a solid track record.

Food ingredients South America (FiSA) in São Paulo, Brazil.

At the end of August, we participated at Food ingredients South America (FiSA), the largest food ingredients exhibition in Latin America. The three-day event was held in São Paulo, Brazil and was attended by more than 10,000 participants. During the event, we focused on three important pillars – sustainability, health, and plantbased – and we presented several prototypes, reinforcing AAK's versatility and ability to meet the region's different key demands and challenges.

In mid-September, we participated at Food ingredients Asia (FiA), this year held in Bangkok, Thailand. Here we presented solutions from all segments, particularly highlighting plant-based foods, health and nutrition concepts, chocolate compounds, and our COBAO™ Pure solution which was launched during the second quarter.

Food Ingredients, Q3 2019

Operating profit + 13%		Q3 2019	Q3 2018	Δ %	Q1-Q3 2019	Q1-Q3 2018	Δ %	R12 months	Full year 2018
	Volumes, '000 MT	385	376	+2	1,144	1,128	+1	1,524	1,508
Operating profit per kilo + 12%	Net sales, SEK million	4,834	4,650	+4	14,198	13,825	+3	18,841	18,468
	Operating profit, SEK million	364	321	+13	1,018	884	+15	1,339	1,205
	Operating profit per kilo, SEK	0.95	0.85	+12	0.89	0.78	+14	0.88	0.80

Volumes

Food Ingredients reported modest volume growth, 2 percent (3). There was an increased share of customer co-developed solutions.

Bakery continued its positive trend towards an improved product mix with more tailor-made solutions. The US, North Latin America and Asia had good volume growth while other regions reported limited or slightly negative volume growth. Dairy reported a strong quarter with double-digit volume growth, mainly driven by Europe and North Latin America.

Our business for plant-based solutions has generated strong volume and profit growth, although from a small base. Our pipeline of customer co-development projects has more than doubled between the second and the third quarter. Europe and the US have so far been the main contributors to the growth.

The performance of Special Nutrition was mixed. Highend solutions continued to grow, although at a slower pace, while we experienced lower volumes for our semi-speciality solutions. We have an impact from lower birth rates in China as well as from destocking by some customers. Although from a small base, there has been double-digit growth for Medical Nutrition and a continued positive trend for Senior Nutrition.

Foodservice reported minor volume growth. The dedicated work to increase the amount of customer codeveloped solutions has resulted in improved profitability, particularly in the US and the Nordics.

Net sales

Sales amounted to SEK 4,834 million (4,650). There was an underlying growth in sales due to organic volume growth, a higher proportion of speciality solutions, and a positive currency translation impact of SEK 208 million. This was offset by lower raw material prices.

Operating profit

Operating profit improved by 13 percent to SEK 364 million (321). This was driven by a higher proportion of customer co-developed solutions. The currency translation impact was positive SEK 17 million. At fixed foreign exchange rates operating profit increased by 8 percent.

Operating profit per kilo for Food Ingredients improved by 12 percent and reached SEK 0.95 (0.85). The currency translation impact was SEK 0.04. At fixed foreign exchange rates operating profit per kilo improved by 6 percent.

The integration of our recent acquisitions in the Netherlands and the UK is developing according to plan.

Chocolate & Confectionery Fats, Q3 2019

Operating profit + 0%		Q3 2019	Q3 2018	Δ %	Q1-Q3 2019	Q1-Q3 2018	Δ %	R12 months	Full year 2018
	Volumes, '000 MT	116	115	+1	343	314	+9	459	430
Operating profit per kilo - 1%	Net sales, SEK million	1,987	2,007	-1	5,854	5,649	+4	7,816	7,611
	Operating profit, SEK million	206	206	+0	589	565	+4	771	747
	Operating profit per kilo, SEK	1.78	1.79	-1	1.72	1.80	-4	1.68	1.74

Volumes

Chocolate & Confectionery Fats had a challenging quarter with limited volume growth of 1 percent (5). We have an increased pressure from customers to roll existing contracts forward. The long-term trend is, however, still promising. According to market research by Euromonitor, there is an expected global market CAGR (Compound Annual Growth Rate) of 4–5 percent for the coming years. Our investment projects to increase capacity and strengthen our supply chain are progressing according to plan and are expected to be completed by year-end.

Net sales

Net sales amounted to SEK 1,987 million (2,007), a decrease by SEK 20 million. This was due to a positive currency translation impact of SEK 100 million, entirely offset by lower raw material prices.

Operating profit

Operating profit reached SEK 206 million (206). The currency translation impact was SEK 7 million. At fixed foreign exchange rates operating profit decreased by 3 percent.

We have during the quarter used more of our lowyielding shea kernels which has resulted in a significant year-over-year cost increase. The last batches are expected to be used during the fourth quarter. The higher production costs have, to some extent, been offset by a slightly positive price development on highend solutions in the quarter.

There is a planned extended maintenance stop scheduled for our production plant in Aarhus, Denmark during the first quarter next year. With new kernels in place and additional capacity, we expect to reach normal cost levels within the business area by the middle of the first quarter next year.

Operating profit per kilo reached SEK 1.78 (1.79), a decrease of 1 percent. The currency translation impact was SEK 0.06. At fixed foreign exchange rates operating profit per kilo decreased by 4 percent. As mentioned above, the decrease in operating profit per kilo was due to higher production costs.

Rolling 12 months, SEK million

Technical Products & Feed, Q3 2019

Operating profit - 11%		Q3 2019	Q3 2018	Δ %	Q1-Q3 2019	Q1-Q3 2018	Δ %	R12 months	Full year 2018
	Volumes, '000 MT	70	73	-4	221	223	-1	299	301
Operating profit per kilo - 8%	Net sales, SEK million	332	377	-12	1,078	1,126	-4	1,465	1,513
	Operating profit, SEK million	33	37	-11	104	105	-1	154	155
	Operating profit per kilo, SEK	0.47	0.51	-8	0.47	0.47	+0	0.52	0.51

Volumes

Volumes decreased by 4 percent (6) compared to the corresponding quarter in 2018.

Net sales

Net sales for the business area decreased by SEK 45 million due to the lower volumes.

Operating profit

Operating profit reached SEK 33 million (37). Compared to the very strong corresponding quarter last year, both our fatty acids business and our feed business declined. Last year, our feed business was

favorably impacted by the dry weather in Scandinavia which resulted in farmers purchasing more feed products than during a normal year.

Compared to historical performances, we continue to operate on a significantly higher operating profit level due to our successful implementation of our customer co-development within the business area.

The business area reported an operating profit per kilo of SEK 0.47 (0.51).

The AAK Group, first nine months 2019

Volumes

Total volumes were up by 3 percent (5). Organic volume growth was 3 percent (5).

Net sales

Sales amounted to SEK 21,130 million (20,600). There was an underlying growth in sales due to organic volume growth, a higher proportion of speciality solutions, and a positive currency translation impact of SEK 698 million. This was partly offset by lower raw material prices.

Operating profit

Operating profit reached SEK 1,581 million (1,440), an improvement of 10 percent. Excluding acquisition costs of SEK 15 million, operating profit improved by 11 percent.

The currency translation impact was positive SEK 63 million of which SEK 41 million was related to Food Ingredients, SEK 23 million to Chocolate & Confectionery Fats while Group Functions was negative SEK 1 million. Operating profit at fixed foreign exchange rates and excluding acquisition costs improved by 6 percent.

Operating profit per kilo reached SEK 0.93 (0.86), an increase of 8 percent. Excluding acquisition costs, operating profit per kilo improved by 8 percent. The currency translation impact was SEK 0.04. At fixed foreign exchange rates and excluding acquisition costs, operating profit per kilo increased by 5 percent.

Net financial cost

Net financial cost increased, amounting to SEK 97 million (92). Interest paid to banks is down but the new accounting standard for leases, IFRS 16, has resulted in additional interest expenses of SEK 26 million compared to the corresponding period last year.

Tax costs

Reported tax costs correspond to an average tax rate of 25 percent (27). A lower corporate tax rate in Sweden combined with further optimization of capital structure in the Group have reduced the average tax rate.

Earnings per share

Earnings per share increased by 12 percent, to SEK 4.30 (3.83), due to increased operating profit combined with lower tax costs.

Cash flow and investments

Operating cash flow including changes in working capital amounted to SEK 932 million (524). Cash flow from working capital was negative, amounting to SEK 720 million (negative 615). Continued volume growth

impacted cash flow from accounts receivables negatively. Strategic purchases of key raw materials to Chocolate & Confectionery Fats impacted cash flow from inventory negatively. This has to a small degree been offset by lower raw material prices. However, the lower raw material prices had a negative impact on accounts payables.

Cash outflow from investment activities amounted to SEK 1,009 million (463), whereof SEK 488 million (0) was related to acquisitions.

Acquisitions

During the first quarter, AAK announced its acquisition of Dutch company MaasRefinery B.V. and British foodservice company BD Foods Ltd. MaasRefinery had revenues of SEK 50 million in 2018 and BD Foods' revenues for the same year amounted to SEK 120 million. Neither of the transactions had a significant impact on AAK's earnings.

The fair value of the assets and liabilities in the acquired companies resulted in moderate goodwill. Acquisition-related costs of SEK 9 million were charged to Group Functions during the first quarter.

During the second quarter, AAK further strengthened its position in the strategic and fast-growing Indian market by acquiring an additional 13 percent of the shares of AAK Kamani. AAK now owns 64 percent of AAK Kamani. The remaining 36 percent of the shares is owned by AAK Kamani's CEO Prakash Chawla and his family. The transaction had no significant impact on AAK's earnings.

During the third quarter, AAK acquired 80 percent of Soya International (Europe) Ltd. The UK-based company focuses on the sourcing, processing and distribution of non-GMO semi-speciality and speciality lecithins. Soya International has a third-party processing facility in the Netherlands and holds wellestablished relationships with customers and distributors in 40 markets globally. Last year, the company had revenues of approximately SEK 150 million.

There is a put/call option under which AAK could acquire the remaining 20 percent of the company within the next 2–5 years. The transaction had no significant impact on AAK's earnings. Acquisition-related costs of SEK 6 million were charged to Group Functions during the third quarter.

General information

Related parties

No significant changes have taken place in relations or transactions with related parties since 2018.

Risks and uncertainty factors

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 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, please refer to AAK's Annual Report.

Accounting policies in 2019

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, please see our Annual Report.

IFRS 16 replaced IAS 17 as of January 1, 2019. According to the new standard, almost all leases are recognized on the balance sheet as a right-of-use asset and a lease liability. In the income statement depreciation is recognized in operating income and interest expenses in net financial result. The Group is affected primarily by lease agreements of rental for premises and lease of vehicles.

The Group has adopted IFRS 16 using the modified retrospective approach with the cumulative effect initially recognized on January 1, 2019, which means the comparatives for 2018, in accordance with the standard, are not restated. The Group has adopted the majority of the practical expedients allowed for the first time that IFRS 16 is applied, the most significant being to account for leases with a remaining lease term of less than 12 months as at January 1, 2019 as shortterm leases. The Group will also, after initial application, apply the practical expedients of accounting for leases with a lease term of 12 months or less and leases of low value as an expense on a straight-line basis in the income statement. The calculations of the transition effects have now been completed and the lease liability and right-of-use asset as at January 1, 2019 amounted to SEK 741 million. Equity was not affected in the transition to IFRS 16.

The lease liability as at September 30, 2019 is SEK 792 million and the right-of-use asset SEK 779 million. Yearto-date, the new standard has impacted Amortization and impairment losses negatively by SEK 75 million and Other external expenses positively by SEK 88 million, with a net positive effect on EBIT of SEK 13 million. Interest expenses were impacted negatively by SEK 26 million. For further information about current lease agreements, see note 28 in the Annual Report.

Alternative Performance Measures (APMs)

AAK presents APMs to reflect underlying business performance and to enhance comparability from period to period. APMs should not be considered as a substitute for measures of performance in accordance with the IFRS.

Definitions of Alternative Performance Measures can be found at www.aak.com under the Investor tab. For reconciliation of Alternative Performance Measures, see pages 20–21.

Definitions

For definitions, please see our Annual Report.

Events after the reporting period

In mid-October, AAK acquired an additional 5 percent of the shares of AAK Kamani in India. AAK now holds 69 percent of AAK Kamani.

The Parent Company and Group Functions

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 positive SEK 1,386 million (2,060).

Interest-bearing liabilities minus cash and cash equivalents and interest-bearing assets totalled a positive of SEK 3,086 million (1,710 as of December 31, 2018). Investments in intangible and tangible assets amounted to SEK 2 million (5).

The Parent Company's balance sheet and income statement are shown on pages 23–24.

Accounting policies

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.

Changes in the balance sheet

No major change in the parent company since yearend.

Malmö, October 24, 2019

Johan Westman President and CEO

For further information, please contact: Fredrik Nilsson CFO Mobile: +46 708 95 22 21 E-mail: fredrik.nilsson@aak.com

The information is information that AAK AB (publ.) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08:20 a.m. CET on October 24, 2019.

Report of Review of Interim Financial Information

Introduction

We have reviewed the condensed interim financial information (interim report) of AAK AB (publ.) as of September 30, 2019 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.

Scope of 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.

Conclusion

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 24, 2019

PricewaterhouseCoopers AB

Sofia Götmar-Blomstedt Authorized Public Accountant

AAK Group

Condensed Income statement

	Q3	Q3	Q1-Q3	Q1-Q3	Full year
SEK million	2019	2018	2019	2018	2018
Net sales	7,153	7,034	21,130	20,600	27,592
Other operating income	55	31	132	112	180
Total operating income	7,208	7,065	21,262	20,712	27,772
Raw materials and supplies	-5,194	-5,259	-15,394	-15,518	-20,723
Other external expenses*	-658	-632	-1,982	-1,831	-2,462
Cost for remuneration to employees	-620	-506	-1,787	-1,505	-2,073
Amortization and impairment losses*	-172	-138	-508	-414	-552
Other operating expenses	-1	-4	-10	-4	-6
Total operating costs	-6,645	-6,539	-19,681	-19,272	-25,816
Operating profit (EBIT)	563	526	1,581	1,440	1,956
Interest income	3	2	7	5	6
Interest expense*	-36	-32	-103	-85	-124
Other financial items	-1	-7	-1	-12	-9
Total financial net	-34	-37	-97	-92	-127
Result before tax	529	489	1,484	1,348	1,829
Income tax*	-131	-130	-372	-362	-489
Net result	398	359	1,112	986	1,340
Attributable to non-controlling interests	10	5	20	15	18
Attributable to the Parent company's shareholders	388	354	1,092	971	1,322

* Impact in the Income statement related to accounting standard IFRS 16 Leases

Other external expenses	32	-	88	-	-
Amortization and impairment losses	-27	-	-75	-	-
Interest expense	-9	-	-26	-	-
Income tax	0	-	2	-	-

Comprehensive income

SEK million	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Profit for the period	398	359	1,112	986	1,340
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefit obligations	-69	-19	-69	-19	-28
	-69	-19	-69	-19	-28
Items that may subsequently be reclassified to profit or loss:
Translation differences	438	-152	815	532	362
Fair-value changes in cash flow hedges	-2	-	-5	-	-
Tax related to fair-value changes in cash flow hedges	0	-	1	-	-
	436	-152	811	532	362
Total comprehensive income for the period	765	188	1,854	1,499	1,674
Attributible to non-controlling interests	10	3	23	13	18
Attributible to the Parent company's shareholders	755	185	1,831	1,486	1,656

Condensed balance sheet

SEK million	30.09.2019	30.09.2018	31.12.2018
Assets
Goodwill Other intangible assets	2,162 383	1,671 314	1,666 333
Tangible assets	6,022	5,392	5,468
Right of use asset	779	-	-
Financial assets	34	50	30
Deferred tax assets	82	88	61
Total non-current assets	9,462	7,515	7,558
Inventory	5,624	4,468	4,705
Accounts receivables	3,903	3,701	3,441
Current receivables	1,797	1,598	1,594
Cash and cash equivalents	731	723	737
Total current assets	12,055	10,490	10,477
Total assets	21,517	18,005	18,035
Equity and liabilities
Shareholders' equity	10,288	8,738	8,908
Non-controlling interests	93	83	88
Total equity including non-controlling interests	10,381	8,821	8,996
Liabilities to banks and credit institutions	3,042	2,824	2,551
Pension liabilities	291	189	206
Deferred tax liabilities	498	479	490
Lease liabilities	690	-	-
Non-interest-bearing liabilities	574	409	434
Total non-current liabilities	5,095	3,901	3,681
Liabilities to banks and credit institutions	842	631	661
Accounts payables	2,865	2,755	2,685
Lease liabilities	102	-	-
Other current liabilities	2,232	1,897	2,012
Total current liabilities	6,041	5,283	5,358
Total equity and liabilities	21,517	18,005	18,035

No changes have arisen in contingent liabilities.

Condensed change in equity

2019

SEK million	Shareholders' equity	Non-controlling interests	Total equity incl. non-controlling interests
Opening balance January 1, 2019	8,908	88	8,996
Profit for the period	1,092	20	1,112
Other comprehensive income	739	3	742
Total comprehensive income	1,831	23	1,854
Non-controlling interest	18	-18	-
Dividend	-469	-	-469
Closing balance September 30, 2019	10,288	93	10,381

2018

SEK million	Shareholders' equity	Non-controlling interests	Total equity incl. non-controlling interests
Opening balance January 1, 2018	7,664	70	7,734
Profit for the period	971	15	986
Other comprehensive income	515	-2	513
Total comprehensive income	1,486	13	1,499
Dividend	-412	-	-412
Closing balance September 30, 2018	8,738	83	8,821

Financial instruments

SEK million	Asset	Liability
Financial instruments reported in balance sheet September 30, 2019
Sales and purchase contracts	449	93
Currency hedge contracts	156	77
Total derivatives financial instruments	605	170
Fair value adjustment inventory	89	2
Total financial instruments	694	172

Condensed cash flow statement

SEK million	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Operating activities
Operating profit	563	526	1,581	1,440	1,956
Depreciation and amortization	172	138	508	414	552
Other non-cash items	108	15	27	-304	-278
Cash flow before interest and tax	843	679	2,116	1,550	2,230
Interest paid and received	-26	-38	-101	-87	-102
Tax paid	-135	-80	-363	-324	-483
Cash flow before changes in working capital	682	561	1,652	1,139	1,645
Changes in inventory	-705	264	-585	304	63
Changes in accounts receivables	-105	-189	-202	-473	-208
Changes in accounts payables	102	-120	-9	-479	-538
Changes in other working capital items	156	8	76	33	128
Changes in working capital	-552	-37	-720	-615	-555
Cash flow from operating activities	130	524	932	524	1,090
Investing activities
Acquisition of intangible and tangible assets	-225	-160	-521	-465	-725
Acquisition of operations and shares, net of cash acquired	-207	-	-488	-	-
Proceeds from sale of property, plant and equipment	-1	1	0	2	2
Cash flow from investing activities	-433	-159	-1,009	-463	-723
Cash flow after investing activities	-303	365	-77	61	367
Financing activities
Changes in loans	303	-494	586	586	289
Amortization of lease liability	-32	-	-88	-	-
Dividend paid	-	-	-469	-412	-412
Cash flow from financing activities	271	-494	29	174	-123
Cash flow for the period	-32	-129	-48	235	244
Cash and cash equivalents at start of period	744	872	737	480	480
Exchange rate difference for cash equivalents	19	-20	42	8	13
Cash and cash equivalents at end of period	731	723	731	723	737

Key ratios

SEK million (unless otherwise stated)	Q3 2019	Q3 2018	Δ %	Q1-Q3 2019	Q1-Q3 2018	Δ %	Full year 2018
Income statement
Volumes, '000 MT	571	564	+1	1,708	1,665	+3	2,239
Operating profit	563	526	+7	1,581	1,440	+10	1,956
Operating profit excl. acquisition costs	569	526	+8	1,596	1,440	+11	1,956
Net result	398	359	+11	1,112	986	+13	1,340
Financial position
Total assets	21,517	18,005	+20	21,517	18,005	+20	18,035
Equity	10,381	8,821	+18	10,381	8,821	+18	8,996
Net working capital	6,240	5,124	+22	6,240	5,124	+22	5,062
Net debt	3,453	2,918	+18	3,453	2,918	+18	2,667
Cash flow
EBITDA	735	664	+11	2,089	1,854	+13	2,508
Cash flow from operating activities	130	524	-	932	524	-	1,090
Cash flow from investing activities	-433	-159	-	-1,009	-463	-	-723
Free cash flow	-303	365	-	-77	61	-	367
Share data*
Number of shares, thousand	253,731	253,731	+0	253,731	253,731	+0	253,731
Earnings per share, SEK**	1.53	1.39	+10	4.30	3.83	+12	5.21
Earnings per share incl. dilution, SEK***	1.52	1.39	+9	4.29	3.83	+12	5.21
Earnings per share incl. full dilution, SEK****	1.50	1.39	+8	4.21	3.83	+10	5.21
Equity per share, SEK	40.55	34.44	+18	40.55	34.44	+18	35.11
Market value on closing date, SEK	190.85	154.06	+24	190.85	154.06	+24	122.70
Other key ratios
Volume growth, percent	+1	+4	-	+3	+5	-	+5
Operating profit per kilo, SEK	0.99	0.93	+6	0.93	0.86	+8	0.87
Operating profit per kilo excl. acquisition costs, SEK	1.00	0.93	+8	0.93	0.86	+8	0.87
Return on Capital Employed (R12 months), percent	15.1	15.7	-4	15.1	15.7	-4	15.8
Net debt/EBITDA, multiple	1.26	1.19	+6	1.26	1.19	+6	1.06

* Share data recalculated in accordance with the decided share split (6:1) by the Annual General Meeting on May 30, 2018.

** 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 converstion of all outstanding share options to ordinary shares.

Quarterly data by business area

Operating profit

SEK million	2018 Q1	Q2	Q3	Q4	Full year	2019 Q1	Q2	Q3
Food Ingredients	271	292	321	321	1,205	308	346	364
Chocolate & Confectionery Fats	190	169	206	182	747	206	177	206
Technical Products & Feed	36	32	37	50	155	36	35	33
Group Functions	-37	-39	-38	-37	-151	-50	-40	-40
Operating profit AAK Group	460	454	526	516	1,956	500	518	563
Financial net	-24	-31	-37	-35	-127	-30	-33	-34
Result before tax	436	423	489	481	1,829	470	485	529

Net sales by market

2019

SEK million	FI Q3 2019	CCF Q3 2019	TPF Q3 2019	Total Q3 2019	FI Q1-Q3 2019	CCF Q1-Q3 2019	TPF Q1-Q3 2019	Total Q1-Q3 2019
Europe	2,258	1,017	332	3,607	6,413	2,814	1,078	10,305
North and South America	1,984	735	0	2,719	5,897	2,314	0	8,211
Asia	550	208	0	758	1,737	614	0	2,351
Other countries	42	27	0	69	151	112	0	263
Net sales	4,834	1,987	332	7,153	14,198	5,854	1,078	21,130

2018

SEK million	FI Q3 2018	CCF Q3 2018	TPF Q3 2018	Total Q3 2018	FI Q1-Q3 2018	CCF Q1-Q3 2018	TPF Q1-Q3 2018	Total Q1-Q3 2018
Europe	2,105	903	375	3,383	6,268	2,501	1,119	9,888
North and South America	1,965	823	2	2,790	5,705	2,339	7	8,051
Asia	536	241	0	777	1,703	662	0	2,365
Other countries	44	40	0	84	149	147	0	296
Net sales	4,650	2,007	377	7,034	13,825	5,649	1,126	20,600

Alternative Performance Measures (APMs)

Organic volume growth

Percent	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Food Ingredients
Organic volume growth	2	3	1	6	4
Acquisitions/divestments	-	-	-	-	-
Volume growth	2	3	1	6	4
Chocolate & Confectionery Fats
Organic volume growth	1	5	9	4	6
Acquisitions/divestments	-	-	-	-	-
Volume growth	1	5	9	4	6
Technical Products & Feed
Organic volume growth	-4	6	-1	8	8
Acquisitions/divestments	-	-	-	-	-
Volume growth	-4	6	-1	8	8
AAK Group
Organic volume growth	1	4	3	5	5
Acquisitions/divestments	-	-	-	-	-
Volume growth	1	4	3	5	5

EBITDA

SEK million	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Operating profit (EBIT)	563	526	1,581	1,440	1,956
Add back depreciation and amortization	172	138	508	414	552
EBITDA	735	664	2,089	1,854	2,508

Return on Capital Employed (ROCE)

			R12M	R12M
SEK million	30.09.2019	30.09.2018	30.09.2019	31.12.2018
Total assets	21,517	18,005	19,472	18,004
Cash and cash equivalents	-731	-723	-750	-696
Financial assets	-5	-7	-12	-51
Accounts payables	-2,865	-2,755	-2,765	-2,931
Other non-interest-bearing liabilities	-2,214	-1,880	-2,073	-1,935
Capital employed	15,702	12,640	13,872	12,391
Operating profit (Rolling 12 months)	2,097	1,911	2,097	1,956
Return on Capital Employed (ROCE), percent	13.4	15.1	15.1	15.8

Net working capital

SEK million	30.09.2019	Full year 2018
Inventory	5,624	4,705
Accounts receivables	3,903	3,441
Other current receivables, non-interest-bearing	1,793	1,574
Accounts payables	-2,865	-2,685
Other current liabilities, non-interest-bearing	-2,215	-1,973
Net working capital	6,240	5,062

Net debt

SEK million	30.09.2019	Full year 2018
Current interest-bearing receivables	5	20
Cash and cash equivalents	731	737
Pension liabilities	-291	-205
Non-current liabilities to banks and credit institutions	-3,042	-2,551
Current liabilities to banks and credit institutions	-842	-661
Other interest-bearing liabilities	-14	-7
Net debt	-3,453	-2,667

Net debt/EBITDA

SEK million	30.09.2019	Full year 2018
Net debt	3,453	2,667
EBITDA (Rolling 12 months)	2,743	2,508
Net debt/EBITDA, multiple	1.26	1.06

Equity to assets ratio

SEK million	30.09.2019	Full year 2018
Shareholders' equity	10,288	8,908
Non-controlling interests	93	88
Total equity including non-controlling interests	10,381	8,996
Total assets	21,517	18,035
Equity to assets ratio, percent	48.2	49.9

Acquisitions

During the first quarter 2019, AAK acquired the Dutch company MaasRefinery B.V. and the British foodservice company BD Foods Ltd. During the third quarter, AAK acquired 80 percent of the UK-based company Soya International (Europe) Ltd. Due to complexity of calculating a fair value of the assets and liabilities in Soya International, AAK has made a very preliminary assessment. A final assessment will be performed in the fourth quarter.

The effect on AAK's Balance sheet and Cash flow is shown below.

SEK million	Q1-Q3 2019
Fair value of acquired assets and liabilities
Intangible fixed assets	44
Tangible fixed assets	125
Other non-current assets	10
Total fixed assets	179
Total current assets	158
Total assets	337
Total non-current liabilities	187
Total current liabilties	60
Total liabilities	247
Fair value of acquired assets and liabilities	90
Goodwill	355
Total purchase consideration transferred	445
Less cash and cash equivalents in acquired companies	-69
Cash flow from acquisition of operations and shares	376

During the second quarter 2019, AAK acquired an additional 13 percent of the shares in AAK Kamani, India, for an amount of SEK 112 million.

Income statement – Parent company

SEK million	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Net sales	33	32	98	97	119
Total operating income	33	32	98	97	119
Other external expenses	-27	-15	-105	-54	-105
Cost for remuneration to employees	-26	-25	-78	-80	-100
Amortization and impairment losses	-1	-1	-3	-2	-3
Total operating costs	-54	-41	-186	-136	-208
Operating profit (EBIT)	-21	-9	-88	-39	-89
Dividend from group companies	0	1,298	1,497	2,110	2,360
Income from shares in group companies	-	-	-	-	119
Interest income	0	0	1	0	4
Interest expense	-6	0	-21	-8	-17
Other financial items	-2	-2	-3	-3	-5
Total financial net	-8	1,296	1,474	2,099	2,461
Result before tax	-29	1,287	1,386	2,060	2,372
Income tax	6	1	24	6	-11
Net result	-23	1,288	1,410	2,066	2,361
Attributable to non-controlling interests	-	-	-	-	-
Attributable to the Parent company's shareholders	-23	1,288	1,410	2,066	2,361

Comprehensive income – Parent company

SEK million	Q3 2019	Q3 2018	Q1-Q3 2019	Q1-Q3 2018	Full year 2018
Profit for the period	-23	1,288	1,410	2,066	2,361
Items that will not be reclassified to profit or loss:
	-	-	-	-	-
Items that may subsequently be reclassified to profit or loss:
	-	-	-	-	-
Total comprehensive income for the period	-23	1,288	1,410	2,066	2,361
Attributible to non-controlling interests	-	-	-	-	-
Attributible to the Parent company's shareholders	-23	1,288	1,410	2,066	2,361

Condensed balance sheet – Parent company

SEK million	30.09.2019	30.09.2018	31.12.2018
Assets
Other intangible assets	9	10	11
Tangible assets	3	2	2
Financial assets	8,686	5,565	7,044
Deferred tax assets	4	3	3
Total non-current assets	8,702	5,580	7,060
Current receivables	346	76	420
Cash and cash equivalents	0	0	-
Total current assets	346	76	420
Total assets	9,048	5,656	7,480
Equity and liabilities
Shareholders' equity	6,804	5,569	5,863
Non-controlling interests	-	-	-
Total equity including non-controlling interests	6,804	5,569	5,863
Liabilities to banks and credit institutions	2,150	-	1,499
Other non-current liabilities	18	14	26
Total non-current liabilities	2,168	14	1,525
Accounts payables	1	13	18
Other current liabilities	75	60	74
Total current liabilities	76	73	92
Total equity and liabilities	9,048	5,656	7,480

No changes have arisen in contingent liabilities.

Price trends in raw materials

For information regarding cocoa and cocoa butter please refer to information at www.icco.org

Additional information

Press and analyst conference

AAK will host a conference call on October 24, 2019 at 10:00 a.m. CET. The conference call can be accessed via our website, www.aak.com.

The annual and quarterly reports are also published on www.aak.com.

Financial calendar 2019–2020

A capital market day will be held in Aarhus, Denmark, on November 20, 2019.

The fourth quarter and year-end report for 2019 will be published on January 30, 2020.

The interim report for the first quarter 2020 will be published on April 24, 2020.

The Annual General Meeting will be held in Malmö, Sweden on May 13, 2020.

The interim report for the second quarter 2020 will be published on July 17, 2020.

Forward-looking statements

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.

Governing text

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.

Investor Relations contact:

Fredrik Nilsson CFO Mobile: +46 708 95 22 21 E-mail: fredrik.nilsson@aak.com

The first choice for value-adding vegetable oil solutions

We develop and provide value-adding vegetable oil solutions in close collaboration with our customers, enabling them to achieve long lasting business results.

We do so through our in-depth expertise in oils & fats within food applications, working with a wide range of raw materials and broad process capabilities.

Through our unique co-development approach we bring together our customers' skills and know-how with our capabilities and mindset. By doing so, we solve customer specific needs across many industries – Chocolate & Confectionery, Bakery, Dairy, Special Nutrition, Foodservice, Personal Care, and more.

AAK's proven expertise is based on more than 140 years of experience within oils & fats. With our headquarters in Malmö, Sweden, more than 20 production facilities and customization plants, and sales offices in more than 25 countries, our more than 3,800 employees are dedicated to providing innovative value-adding solutions to our customers.

So no matter where you are in the world, we are ready to help you achieve long lasting results.

We are AAK – The Co-Development Company.

AAK AB (publ.)