AAK Annual Report 2019

44 The Company’s largest business area, Food Ingredi- ents, reported a record-high operating profit of SEK 1,366 million (1,205), an increase of 13 percent. The operating profit per kilo increased by 11 percent to SEK 0.89 (0.80). The increase in operating profit was primarily driven by semi-speciality solutions in Dairy, Bakery and Foodservice. The performance within the Special Nutrition segment was mixed. Lower birth rates in China and destocking by some customers had a negative impact on Infant Nutrition while Medical Nutrition continued to grow. Solutions for plant-based foods generated strong volume and profit growth. Chocolate & Confectionery Fats reported an improve- ment in operating profit of 6 percent to SEK 794 million (747). The use of low-yielding shea kernels with a higher cost base when compared to using normal-yielding shea kernels impacted operating profit negatively. The profit growth was driven by an improved product mix and some favorable spot business opportunities during the second half of the year. Investment projects to increase capacity and strengthen the supply chain have been completed according to plan. The sourcing season for new kernels has been good and with new kernels at hand and additional production capacity, the cost level is expected to normalize within the business area by the middle of the first quarter 2020. Volumes increased by 7 percent. Operating profit per kilo decreased from SEK 1.74 to SEK 1.73 as a consequence of the yield challenges. Operating profit for AAK’s smallest business area, Technical Products & Feed, decreased by 3 percent from SEK 155 million to SEK 150 million. Compared to the record-high operating profit in 2018, both the fatty acids business and feed business declined. Compared to historical performances, the business area is operating on a significantly higher operating profit level due to a successful implementation of the company’s co-development approach within the business area Operations and significant events Business areas The company’s business areas are Food Ingredients, Chocolate & Confectionery Fats and Technical Products & Feed. Group-wide functions are included in the Group Functions segment. Food Ingredients maintains its strong regional positions, primarily in Europe, USA and North Latin America, but is gradually strengthening its positions in other regions. Chocolate & Confectionery Fats and Personal Care have world-leading positions, and these will gradually be expanded in an increasingly global arena. Technical Products & Feed has a strong local position in Northern Europe and will continue to focus its growth efforts in these geographic areas through its close links to the Karlshamn factory in Sweden, bringing significant synergy effects. New strategic direction During the year, the company has reviewed its market and capabilities to define AAK’s strategic direction going forward. Building on a very strong historical performance, we will preserve the DNA of our company. Passion, drive and entrepreneurship that can be found in all corners of AAK, our unique co-development approach and customer centricity, and our determined focus on sustainability will remain key going forward. The strategic direction will be focused on the oppor- tunities within the specific industries we serve as well as sustainability, health and nutrition. We will step up our focus and investments within Plant-based Foods and develop a Health & Nutrition platform. For Special Nutrition and Chocolate & Confectionery Fats we will invest for continued growth while focusing on optimizing our performance within Bakery and Dairy. Acquisitions During the first quarter, AAK acquired the 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. Acquisition-related costs of SEK 9 million were charged 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, and during the fourth quarter, AAK acquired another 5 percent. AAK now owns 69 percent of AAK Kamani. During the third quarter, AAK acquired 80 percent of Soya International (Europe) Ltd. The UK-based company focuses on sourcing, processing and distribu- tion of non-GMO semi-speciality and speciality lecithins. Soya International has a third-party processing facility in the Netherlands and holds well-established relationships with customers and distributors in 40 markets globally.