First quarter 2023

Interim report

Financial highlights

Q1 2023

Total volumes decreased by 6 percent to 541,000 MT (575,000), largely due to last year's exit from the Russian market and the optimization program in Bakery. Excluding Russia, volumes declined by 3 percent.
Operating profit, including a positive currency translation impact of SEK 64 million, increased by 43 percent, reaching SEK 952 million (664). At fixed foreign exchange rates, operating profit increased by 34 percent.
Profit for the period totaled SEK 662 million (492).
Earnings per share equaled SEK 2.55 (1.89).
Cash flow from operating activities amounted to SEK 1,102 million (negative 1,150).
Return on Capital Employed (ROCE), R12M, was 15.2 percent (14.5 on December 31, 2022).

	Q1 2023	Q1 2022	Δ%	R12M 2023	Full year 2022
Volumes, '000 MT	541	575	-6	2,225	2,259
Operating profit, SEK million	952	664	+43	2,826	2,538
Operating profit, excluding IAC, SEK million	952	664	+43	3,176	2,888
Operating profit per kilo, SEK	1.76	1.15	+53	1.27	1.12
Operating profit per kilo, excluding IAC, SEK	1.76	1.15	+53	1.43	1.28
Profit for the period, SEK million	662	492	+35	1,950	1,780
Profit for the period, excluding IAC, SEK million	662	492	+35	2,269	2,099
Earnings per share, SEK	2.55	1.89	+35	7.50	6.84
Earnings per share, excluding IAC, SEK	2.55	1.89	+35	8.73	8.07
Return on Capital Employed (R12M), percent	15.2	15.4	-1	15.2	14.5

Items affecting comparability (IAC) for the full year 2022 related to the controlled exit from Russia (Q2 2022: negative SEK 350 million).

Rolling 12 months, '000 MT

Strong start to the year; volumes and operating profit confirmed per April 13 pre-announcement

I am pleased to confirm that we had a strong start to the year, with solid performance across all three business areas, including a strong cash flow and an improved Return on Capital Employed. Despite the ongoing challenges posed by the state of the global economy, we remain successful in delivering value to our customers.

Business performance

As communicated on April 13, we achieved a first-quarter operating profit growth of 43 percent compared to the same period last year, driven by particularly strong performance in Food Ingredients and Chocolate & Confectionery Fats. The main growth drivers were continued focus on speciality solutions, productivity improvements and favorable yearover-year market conditions, including an improved ability to compensate for inflationary effects. Our team has worked intensively to maintain supply chain stability and ensure the timely delivery of products to our customers, another contributor to our continued improvement.

Volumes declined 6 percent year-over-year as expected due to our controlled exit from the Russian market and the optimization program in Bakery. Excluding Russia, volumes declined 3 percent in the first quarter compared to the first quarter of 2022.

Innovation and co-development

We have continued to invest in innovation and codevelopment, focusing on new product development and solutions to ensure that we meet the evolving needs of our customers. One of AAKs strengths is our ability to understand the full ingredient matrix of foods and to use this expertise to co-develop plant-based oils and fats solutions with our customers.

The most recent milestone on our co-development journey was the inauguration of a plant-based Innovation Center of Excellence outside Amsterdam in March this year. The threestory state-of-the-art center showcases AAK's codevelopment process, including two pilot plants for plantbased meat and dairy, an application laboratory, codevelopment workspaces, a culinary kitchen, and sensory facilities, all under one AAK roof. The center allows customers to bring great-tasting plant-based foods to market faster and with confidence.

The EU Deforestation Regulation

Set to take effect later this year with an 18-month implementation period, the EU Deforestation Regulation is an effort to reduce the importation of products associated with deforestation and forest degradation to the European market. This regulation will apply to a range of products, including soy, palm oil, beef, leather and timber.

As a company with over two decades of experience in promoting sustainable supply chains, AAK has made significant progress in recent years toward achieving a 100 percent-verified deforestation-free and traceable global palm oil supply chain by 2025. As of last year, we reached 100 percent traceability to mill, 87 percent traceability to plantation and 71 percent verified deforestation-free within our palm supply chain.

While we support the legislative initiative, we have raised concerns about the risks associated with geolocation and the potential implications for implementation. Long-term, the development is a step in the right direction.

Concluding remarks

AAK started the year strong, and while some of the performance was driven by favorable market conditions, we remain prudently optimistic about the future, and we are well positioned to capitalize on new growth opportunities. We will continue to prioritize the health and safety of our employees, customers, and partners, while remaining committed to delivering long-term value to our shareholders.

Johan Westman, President and CEO

AAK Group, Q1 2023

Volumes

Volumes totaled 541,000 MT (575,000), a decrease by 6 percent compared to last year. Excluding the Russian market, volumes declined by 3 percent.

Net sales

Sales reached SEK 12,345 million (11,239), an increase by 10 percent. The increase was driven by price adjustments due to increased raw material prices, a favorable product mix via a continued focus on speciality solutions, and a positive currency translation impact of SEK 713 million.

Operating profit

Operating profit totaled SEK 952 million (664), an increase of 43 percent compared to the corresponding quarter in 2022, largely driven by strong operating profit per kilo in Food Ingredients and Chocolate & Confectionery Fats. AAK achieved this growth via a continued focus on speciality solutions and productivity improvements. Additionally, the first-quarter operating profit benefitted from favorable yearover-year market conditions, including an improved ability to compensate for inflationary effects.

The currency translation had a positive impact of SEK 64 million, of which SEK 37 million related to Food Ingredients and SEK 27 million to Chocolate & Confectionery Fats. Operating profit at fixed foreign exchange rates increased by 34 percent.

Operating profit per kilo totaled SEK 1.76 (1.15), an increase of 53 percent. The currency translation impact was positive SEK 0.12. At fixed foreign exchange rates, operating profit per kilo increased by 43 percent.

Net financial cost and tax costs

Net financial cost totaled SEK 77 million (18). The financial cost increased due to increased financing of working capital, higher interest rates, and higher borrowing in high-interest countries. Reported tax costs correspond to an average tax rate of 24 percent (24).

Earnings per share

Earnings per share equaled SEK 2.55 (1.89).

Cash flow and investments

Operating cash flow including changes in working capital amounted to SEK 1,102 million (negative 1,150). Cash flow from working capital amounted to SEK 377 million (negative 2,004). Following the decrease in raw material prices during the second half of 2022, there was a positive cash flow from inventory and a smaller positive effect from accounts receivables, while accounts payables had a negative cash flow effect in the quarter.

Based on the duration of our contract portfolio, there is a time lag of 6–9 months until the cash flow effect from any raw material price volatility becomes visible.

Cash outflow from investment activities amounted to SEK 362 million (227), of which SEK 89 million (0) stemmed from acquisitions of operations. The acquisition of Arani Agro Oil, announced during the 2022 fiscal year, was completed in January 2023, and is included in AAK's financials from January 1, 2023, onward. Capital expenditure was mostly spent on maintenance investments, productivity improvements and capacity increases.

Return on Capital Employed (ROCE)

Calculated on a rolling 12-month basis, Return on Capital Employed (ROCE) was 15.2 percent (14.5 on December 31, 2022).

Financial position

The equity-to-asset ratio was 50 percent (44 percent on December 31, 2022). Net debt on March 31, 2023, totaled SEK 4,968 million (SEK 5,707 million on December 31, 2022). Net debt / EBITDA totaled 1.36 (1.71 as of December 31, 2022).

On March 31, 2023, the Group had total credit facilities of SEK 10,162 million (9,806 as of December 31, 2022), of which there was SEK 8,425 million (8,366 as of December 31, 2021) in committed credit facilities. Unused committed credit facilities on March 31, 2023, totaled SEK 4,950 million (4,295 as of December 31, 2022). Non-committed credit facilities totaled SEK 1,736 million (1,440 as of December 31, 2022), SEK 1,465 million (976 as of December 31, 2022) of which were unused.

Employees

The average number of employees on March 31, 2023, was 3,990 (3,962 at December 31, 2022).

Selected key events

AAK opens plant-based Innovation Center of Excellence outside Amsterdam

Overlooking the iconic Zaanse Schans area just outside of Amsterdam, AAK has built an Innovation Center of Excellence to develop plant-based foods. The three-story state-of-theart center in Zaandijk showcasing AAK's co-development process features two pilot plants for plant-based meat and dairy, an application laboratory, co-development workspaces, a culinary kitchen, and sensory facilities, all under one AAK roof. The center allows customers to bring great-tasting plant-based foods to market faster and with confidence.

Raising the bar on cocoa flavor

AAK recently launched CEBES™ Choco 15, a solution for affordable premiumization, raising the bar on cocoa flavor. Affordable indulgence is essential in a recessionary environment. Consumers will still enjoy small treats and emphasize value for money, with taste remaining the primary criterion for consumers when making decisions on buying chocolate confectionery.

Our newly launched CEBES™ Choco 15 is the only compound on the market that allows up to 15 percent of cocoa ingredients. It is the right mixture of affordability and quality without trade-offs.

Sustainability from plant to brand

On April 4, we published the 2022 AAK Sustainability Report. The report demonstrates how sustainability is at the heart of our purpose, Making Better Happen™. For AAK, sustainability is a journey, not a destination, and we will continue to take new steps to improve from plant to brand.

We encourage each of you to take the time to review the report and familiarize yourselves with our accomplishments, successes, and opportunities to further improve. Consumers, customers, and investors are increasing their demand for transparency and sustainability. The front section covers the key highlights, the links between our sustainability work and our strategic direction and aspiration, and the key sustainability priorities across our value chain. The back section covers more detail and links to the different reporting requirements like GRI, TCFD, Sustainable development goals, and Taxonomy.