AAK Annual Report 2020

AAK Annual Report 2020 54 Reasons to invest in AAK As for most companies, 2020 was a very special year for AAK due to Covid-19. But despite the challenges with the pandemic, we continued to improve our profitability year-over-year, although at a slower pace than previous years. Our ambition for the coming years stands: to grow our operating profit 10 percent year- over-year with a good earnings per share growth. 1. Above the market growth AAK has over the past decade grown faster than the underlying markets in our focus areas – speciality and semi-speciality solutions in Food Ingredients and Chocolate & Confectionery Fats – and our strategic direction will continue to support our growth journey. Market data* shows that in terms of volumes the oils and fats market in total is growing at approximately 3 percent with the speciality market growing even faster. Through our unique customer co-development approach we intend to continue to win market shares. With our recent greenfield investments and acquisi- tions, we have continued to strengthen our geographic footprint. Through this expansion we are represented in regions where both population and urbanization are on the increase – demographic changes that present sub- stantial market opportunities. We also see a growing middle class with a higher income and an increased spending power as well as a growing senior population as people live longer. 2. Structural growth – Mergers & Acquisitions Despite considerable investments to increase capacity and several acquisitions to add both capacity and new capabilities, we have over recent years built a very strong balance sheet with an improved equity ratio. AAK has a proven track record of making successful acquisitions. During the past decade, we have acquired 15 companies. In 2020, we increased our presence in Russia by acquiring NPO Margaron LLC, and we also bought the remaining 31 percent of the shares in AAK Kamani in India. Going forward, we will continue to make selective acquisitions based on our M&A strategy: • Geographic expansion – focus is on emerging markets but more mature regions where we have limited or no presence are also of interest • Capacity – opportunities to add capacity at existing production sites or by acquiring capacity • Technology – oils and fats remain our core business, but we are open for other ingredients that can be blended with our solutions if it adds customer value or makes it less complex for customers • Adjacent product portfolios – in 2019, AAK entered the lecithin market where we have the ambition to be a more substantial player *Transparency market research, HIS Global, 2018. 3. Optimization – focus on productivity Measures to adapt to a new situation and optimize our structure, particularly through tight cost management, had a clear effect on operating profit in 2020. The structural measures will generate annual savings of about SEK 150 million and are expected to reach full run-rate by the second half of 2021. This is fully in line with our strategic direction to optimize our Bakery, Dairy and Foodservice businesses and to strategically invest in Chocolate & Confectionery Fats, Plant-based Foods, health, and nutrition. 4. Well positioned to benefit from consumer trends Through our unique customer co-development approach and by focusing on global key drivers, AAK is very well positioned to benefit from current consumer trends such as health and well-being, sustainability, premiumization, convenience, customization, and transparency. An important example is our natural and plant-based solutions that are on trend with consumer demands for health and nutrition. Sustainability is another competitive advantage as AAK, with our focus on traceability and sustainability throughout the value chain, is considered a trustworthy partner. We are furthermore well positioned in the speciality segment in which there is a great demand for co-developed and high-quality premium solutions. Continued profit growth rests on four pillars