Provider of value-adding vegetable oils & fats AAK has posted its interim report for the fourth quarter and year-end report 2017, showing a record-high year-over-year operating profit.
Operating profit at the Swedish-Danish company reached SEK 471 million (US$59.7 million dollars), an improvement of 8 percent. The currency translation impact was negative SEK 18 million (US$2.2 million) of which SEK 12 million (US$ million) was related to Food Ingredients and SEK 6 million (US$760,920) to Chocolate & Confectionery Fats, according to company results.
Operating profit at fixed foreign exchange rates and excluding non-recurring items improved by 12 percent.
Total volumes continued to grow nicely and increased by 5 percent, while organic volume growth was 5 percent, according to the company.
The demand for specialty and semi-specialty products continued to be strong and generated organic volume growth of 7 percent. Food Ingredients improved by 8 percent, reaching SEK 299 million (US$379 million).
It was another strong quarter with high single-digit profit growth driven by a continued improved product mix, including a higher proportion of customer co-developed solutions. At fixed foreign exchange rates operating profit increased by 12 percent.
The Dairy segment continued the strong trend from previous quarters and once again reported high double-digit organic volume growth, says AAK.
All regions showed very strong growth except the Nordics which had another challenging quarter.
Bakery also had another challenging quarter, particularly in Europe and North Latin America. Development in the US continued to be weak. However, there was good growth in Asia, the Nordics and South Latin America.
Special Nutrition reported high double-digit volume growth with a significantly better product mix compared to the corresponding quarter last year. This was driven by a double-digit volume growth for our Infant Nutrition product range Akonino.
The company’s other Infant Nutrition product range InFat, sold through Advanced Lipids AB, a joint venture of AAK and Enzymotec, also showed double-digit volume growth in the quarter.
Foodservice reported declining volumes in the quarter. This was mainly due to continued challenging market conditions in the Nordics.
Chocolate & Confectionery Fats reported a result of SEK 176 million (US$22 million), an improvement of 4 percent. Organic volume growth increased by 1 percent. At fixed foreign exchange rates operating profit increased by 8 percent.
The business area has seen a stronger than projected growth in demand, combined with some production disruptions in Aarhus, Denmark. This has resulted in increased production costs and higher supply chain costs.
AAK says it has started to see an improvement in production, however, due to higher volatility in the variations in some of the company’s raw materials and the backlog from 2017, there will be an impact during the first quarter of 2018 as well.
From the end of the first quarter, 2018 AAK is expecting a lower volatility in the variations in these raw materials.
Despite these challenges, profit growth was solid with stable volume development. The mix continued to improve with some organic volume growth for speciality products.
At the end of the quarter, the company signed its first commercial contract for TROPICAO, a chocolate solution for hot climate markets.
Technical Products & Feed reached SEK 31 million (US$3.9 million), an improvement of 29 percent. This was mainly due to an improved product mix in the company’s fatty acids business.
Earnings per share increased by 24 percent, to SEK 8.31 (US$1.05).
Calculated on a rolling 12 months basis, Return on Capital Employed (ROCE) was 15.6 percent (15.8 at December 31, 2016). The Board of Directors proposes that a dividend of SEK 9.75 (8.75) per share be paid for the financial year 2017.
New chairman of the Board
For the Annual General Meeting 2018, the Nomination Committee proposes Georg Brunstam as the new chairman of the Board. With Melker Schörling AB as the main shareholder, Georg has developed Hexpol into a highly profitable, world-leading player in the polymer industry, according to the company.
He recently left his executive position at Hexpol for the role as chairman of the Board and is now proposed for the corresponding role in AAK.
“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,” says a company statement.
“The main drivers are the continued positive underlying development in Food Ingredients and the continued improvement in Chocolate & Confectionery Fats.”
