AAK Annual Report 2016

37 Directors’ Report )RU WKH ¿QDQFLDO \HDU -DQXDU\ ± 'HFHPEHU 7KH %RDUG RI 'LUHFWRUV DQG WKH &KLHI ([HFXWLYH 2I¿FHU RI $$. $% (publ.), corporate identity number 556669-2850, with its registered RI¿FH LQ 0DOP| KHUHE\ SUHVHQW WKH )LQDQFLDO 6WDWHPHQWV DQG &RQVROLGDWHG )LQDQFLDO 6WDWHPHQWV IRU WKH ¿QDQFLDO \HDU -DQXDU\ – December 31, 2016. 3HUIRUPDQFH DQG ¿QDQFLDO SRVLWLRQ We are proud to report that our decisive, targeted, hard work, based on our clear strategy, has produced good results. 7KH RSHUDWLQJ SUR¿W ZDV DW D UHFRUG KLJK OHYHO RQFH DJDLQ $OWKRXJK SDUWV RI WKH ZRUOG PDUNHW DUH IDFLQJ VLJQL¿FDQW challenges, the Group continued to report a double-digit LPSURYHPHQW LQ SUR¿W FRPSDUHG WR WKH SUHYLRXV \HDU 7KLV is a trend that has continued since 2010. Net sales increased by SEK 1,943 million to SEK 22,057 million (20,114). This increase was due primarily to a better product mix, higher raw material prices and acquisitions, but was mitigated in part by a negative currency translation effect of SEK 648 million. Volumes increased by 7 percent, primarily due to the acquisitions made. Organic growth amounted to 2 percent, despite lower volumes for commodity products in Food Ingredients, which showed exceptional growth in 2015. 2SHUDWLQJ SUR¿W H[FOXGLQJ QRQ UHFXUULQJ LWHPV ZDV DW D record high of SEK 1,615 million (1,411), an improvement of 14 percent. The currency translation effect was negative and DPRXQWHG WR 6(. PLOOLRQ 2SHUDWLQJ SUR¿W WUDQVODWHG DW ¿[HG H[FKDQJH UDWHV H[FOXGLQJ QRQ UHFXUULQJ LWHPV LP - proved by 17 percent. All business areas had a double-digit SHUFHQWDJH LPSURYHPHQW LQ RSHUDWLQJ SUR¿W LQ FRPSDUHG to the previous year. 2SHUDWLQJ SUR¿W LQFOXGLQJ QRQ UHFXUULQJ LWHPV DPRXQWHG WR SEK 1,615 million (1,409), an improvement of 15 percent. Non-recurring items amounted to SEK 0 million (-2) and consist of acquisition-related expenses of SEK 15 million (15) and a positive net effect of SEK 15 million concerning the acquisition of California Oils Corporation. 2SHUDWLQJ SUR¿W SHU NLOR H[FOXGLQJ WKH DERYH QRQ UHFXUULQJ items, amounted to SEK 0.82 (0.77). This was due to an improved product mix but was mitigated by a negative currency translation effect and expenses in connection with new investments. 7KH *URXS¶V SUR¿W DIWHU ¿QDQFLDO LWHPV DPRXQWHG WR 6(. PLOOLRQ 1HW ¿QDQFLDO LWHPV ZHUH 6(. PLOOLRQ (-114), an increase of SEK 56 million due to an increase in the Group’s loans in high-interest rate countries as a consequence of ongoing new investments and recent acquisitions, plus increased working capital on account of higher raw material prices. The equity/assets ratio was 44 percent as at December 31, 2016 (48 percent as at December 31, 2015). Consolidated net debt as at December 31, 2016 was SEK 2,620 million (SEK 2,083 million as at December 31, 2015). On December 31, 2016, the Group had total credit facilities of around SEK 6,139 million. &DVK ÀRZ IURP RSHUDWLQJ DFWLYLWLHV EHIRUH FKDQJHV LQ ZRUNLQJ capital, amounted to SEK 1,476 million (1,356). Working capital increased by SEK 263 million (reduction of SEK 380 million), primarily as a consequence of higher raw material prices combined with the working capital tied up in new investments. &DVK ÀRZ IURP RSHUDWLQJ DFWLYLWLHV LQFOXGLQJ FKDQJHV LQ working capital, amounted to SEK 1,213 million (1,736). After LQYHVWPHQWV LQFOXGLQJ DFTXLVLWLRQV FDVK ÀRZ DPRXQWHG to SEK -208 million (720). The Group’s net investments in non-current assets and acqui- sitions totalled SEK 1,421 million (1,016), comprising ongoing maintenance and growth investments, and acquisitions in the USA and acquisitions of non-controlling interests in Mexico, plus strategic investments in Brazil and China. Return on Capital Employed, calculated on a rolling 12 months basis, amounted to 15.8 percent (15.7 percent on December 31, 2015). This was despite the negative impact of higher working capital as a consequence of higher raw material prices, new investments and acquisitions. Earnings per share before dilution were SEK 23.71 (22.17), an increase of 7 percent. The proposed dividend amounts to SEK 8.75 (7.75), an increase of SEK 1.00 or 13 percent. The Company’s largest business area, Food Ingredients, reported D UHFRUG RSHUDWLQJ SUR¿W RI 6(. PLOOLRQ DQ LQFUHDVH RI SHUFHQW 7KH RSHUDWLQJ SUR¿W SHU NLOR LQFUHDVHG E\ SHUFHQW WR SEK 0.75 (0.72). This was due to an improved product mix but was mitigated by a negative currency translation effect and expenses in connection with new investments. The Bakery segment had yet another challenging year, particularly in Western Europe. The Dairy segment reported strong organic volume growth. Butterfat prices have been at a very low level for a number of quarters but have risen dramatically since the summer. The Special Nutrition segment, which comprises Infant Nutrition, Senior Nutrition and Medical Nutrition, reported high volume growth, which is due to exceptional volume growth for the Akonino ® product range in Infant Nutrition. Our other product range in Infant Nutrition is InFat ® , ZKLFK LV VROG YLD $GYDQFHG /LSLGV $% D MRLQW YHQWXUH EHWZHHQ AAK and Enzymotec. This product segment reported good volume growth combined with an improved product mix. Foodservice reported organic volume growth that was particularly good in the UK and the USA. There was negative volume growth for commodity products, after exceptional growth in 2015. Chocolate & Confectionery Fats reported a strong improvement LQ RSHUDWLQJ SUR¿W RI SHUFHQW WR 6(. PLOOLRQ SULPDULO\ as a consequence of strong volume growth. Volumes increased E\ SHUFHQW DQG DIWHU WZR \HDUV RI VLJQL¿FDQWO\ SRRUHU PDUNHW conditions in Ukraine and Russia, both countries showed strong growth. The volumes for both high and low value-adding products continued to grow organically, and the volume growth for low value-adding products was particularly good during the second half of the year. The strong product development of recent years