AAK Annual Report 2019

55 How would you describe AAK’s financial performance in 2019? It has been a strong year where we have seen year- over-year growth in terms of volumes, operating profit, operating profit per kilo, and earnings per share. This is particularly impressive considering the challenges we have had with low-yielding shea kernels in Chocolate & Confectionery Fats and a more mixed performance in Special Nutrition due to lower birth rates in China and destocking by some global customers. The continued double-digit improvement in operating profit is in line with our ambition, and we have now had 36 straight quarters with record-high operating profit quarter-over-quarter as well as a record-high full-year result every year since 2010. What is your comment on the cash flow? To be able to meet future demand, we have continued to invest in capacity and to make strategic acquisitions. Despite this, we have had a positive cash flow after investments during the last three years. We expect capital expenditure to be at a slightly higher level in 2020 compared to 2019. Cash flow from working capital was negative in 2019. Good working capital management on accounts receivables impacted cash flow favorably. This was offset by strategic purchases of key raw materials to Chocolate & Confectionery Fats which had a significant negative impact on cash flow from inventory. During the fourth quarter, we saw a sharp increase in raw material prices, particularly for palm. This will have an impact on our cash flow and working capital during 2020. We continue our focus on working capital days and further improvements should be possible, particularly relating to payment terms with our suppliers and late payments from some customers. How do you allocate capital? We always try to maximize our ability to invest in growth and create a higher shareholder return. To ensure continued growth, we want to have a strong balance sheet and be well capitalized with a net debt/EBITDA ratio lower than 3. Our current ratio is 1.10. At the end of 2018, we established an MTN program (Medium Term Note) with a framework amount of SEK 4,000 million. The program supports us in diversifying our existing sources of funding and gives us a flexible alternative to current bank facilities. Over the last years we have invested significant amounts in organic growth, built new factories, and made several acquisitions to strengthen our footprint and add new capabilities to AAK. Going forward, we will continue to invest in growth, both in equipment and in our employees, to secure that we can continue to be our customers’ preferred co-development partner. Fredrik Nilsson, CFO CFO: Strong performance with double-digit profit growth