AAK Annual Report 2017

As a well-established operator in these areas, we have extensive experience of handling such issues. In addition, we operate with a deliberate risk management strategy. *OREDO RSHUDWLRQV LQYROYH D QXPEHU RI RWKHU ULVNV LQFOXGLQJ Trade barriers. ,QÀDWLRQ Changes in national or regional legislation, e.g. the introduction of protective tariffs and taxes, which prevent AAK from operating in a free market. Environmental and health-related legislation. Trade sanctions and export controls AAK is committed to conducting business in accordance with applicable trade sanctions laws and export control regulations which AAK believes are important tools in the international community’s strive to inter alia improve human rights. AAK will not tolerate any violation of trade sanctions laws, export control laws or related regulations by its employees. This means that AAK will not engage, directly or indi- rectly, in any business, dealing, or transaction prohibited by applicable trade sanctions or export control regulations. Furthermore, AAK and its employees will not carry out any direct or indirect business activities with any person, entity or government targeted by trade sanctions, nor export goods or services subject to applicable export control laws without required licenses and/or approvals from the relevant authorities. Changes in the competitive environment The sector in which AAK operates is undergoing structural change. As a sector that has existed for just over a century and has a fundamental dependence on natural products, there is great pressure for more intensive development. This includes demands for sustainable, ethical production, where producers accept responsibility for social issues and the environmental impact of their operations. AAK operates on the basis of an organic growth and selective acquisition VWUDWHJ\ $ VWURQJ EDODQFH VKHHW KDV ODLG WKH ¿QDQFLDO IRXQ - dations for future acquisitions. There is intense competition in the industry. Several global competitors deliver large volumes of bulk products with limited margins. Our response is to focus more on products with better margins and higher-added value. These include confectionery products and cosmetics, as well as value- adding ingredients for the bakery, dairy and infant nutrition industries. The health trend There is an ongoing debate on healthy alternative foods. The trans fat debate, for example, has been quite heated on occasion, resulting in a greater use of raw materials such as SDOP RLO 3DOP RLO LV D VLJQL¿FDQW UDZ PDWHULDO IRU XV DW $$. and has a broad application area – from chocolate to foods and cosmetics. A great alternative to hardened fat, it is semi- solid at room temperature, making it an attractive choice in the production of many foods. By using palm oil, trans fats can be eliminated from many food products. We have the ability to adapt our product range quickly to the latest trends in the health debate. This is largely due to the fact that we work with all types of vegetable oils and can reformulate our products fairly easily to meet customer needs. We focus strongly on product co-development with our customers. This limits the risks involved in commercial- izing new products. Regulatory measures also pose a risk. Active involvement in Corporate Social Responsibility-related issues is, there- fore, becoming increasingly important to forestall legislation on issues that are a natural development of human requirements. Changes in external factors Business operations are affected by raw material prices, transport costs, energy prices, interest rates and exchange rates. Our employees are experienced in reacting quickly to changes in external factors and adapting operations, products and services to customer needs. 25