financial performance - aak

The Co-Development Company

Financial performance

Capital Market Day 2020

Fredrik NilssonChief Financial Officer


This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein.This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performances, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. AAK has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated.Given these uncertainties, readers should not put undue reliance on any forward-looking statements. Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and AAK does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.

Forward-looking statements


Solid growth throughout 2020, apart from Q2 which was heavily impacted by the Covid-19 pandemicGrowth in year-over-year profit in all our segments in Q3

AAK has a strong track record and continues to deliver in uncertain times

Q1 Q2 Q3

509

546518

411

569

602+7%

-21%

+6%

20192020

Historic growth… …continued

11 12 13 14 15 16 17 18 190

500

2,500

1,000

2,000

1,500

SEK million/000’ MT

Operating profitVolumes


Operating profitLower cost base creates leverage – cost-saving measures initiated in Q2

185

100

115

3533

1,400

0

1,500

50

1,550

1,350

1,450

1,600

1,650

2019 YTD

1,596

1,558

Mix Other 2020 YTDCosts

SEK million

FXVolume

-2%


Update on our accelerated optimization efforts

Non-recurring restructuring costs of SEK 200 million related to long-term structural measures

Annual savings of SEK 150 million to be generated with full run-rate impact by second half of 2021

Non-recurring income of SEK 206 million linked to an optimization of the company’s capital structure

Net impact from non-recurring items on reported operating profit was positive SEK 6 million in the second quarter

Planned savings end of Q2 2021

Run-rate end of Q3 2020

Progress of announced savingsScope and nature of announced savings measures


Actions to optimize costs provide strong platform for profit growthBoth short- and long-term cost-saving measures implemented

Long-term

Headcount reductions Optimizing procurement

Short-term

Headcount Furloughs, temps, unfilled vacancies Reductions in travel, trade shows, etc.

Savings measures Year-over-year savings, fixed FX

-1

-3

-10 -5 0%

Year-to-date

-4

-9

-10 -5 0%

Production

SG&A

Q3

Production

SG&A


Continued profit growth rests on four pillars

VolumeGrowth at least in line with market growth

MixIncrease co-developed solutions

Structural growthM&A and brownfield/greenfield investments

OptimizationFocus on productivity

10%


Strong cash flow in the first three quarters drives decreased net debt

813 53

1153,000

3,200

0

200

2,000

2,200

2,800

2,600

2,400

Acqusitions

2,977

1/1-2020

3,117

505

Cash flow from operations

CAPEX Other 30/9-2020

SEK million

-140

Net debt development year-to-date


Net debt remains low – reduces financial risk and creates room to maneuver

0 0.00

4,500 2.00

3,000

3,5001.50

1.00

2,500 0.50

4,000

Q419

Net debt/EBITDA

Q120

Q118

Q417

SEK million

Q2 17

Q3 17

Q218

Q318

Q418

Q219

Q220

Q119

Q320

Q319

Net debt /EBITDA incl IFRS 16Net debt /EBITDA IFRS 16 impact Net debt

Net debt and debt ratio


Diversified debt portfolio reduces financial risk and creates flexibility

Debt profile

3000

1,200900600

1,5001,8002,100

537

0

< 1 year

SEK million

1-3 year 3-5 year >5 year

1,220

2,100

Maturity profile

68%

32%

Long Term

Short Term

Committed credit facilities of SEK 6,891 million

Short-term

Long-term


Dividend policy to pay out 30–50 percent of net profitBoard of Directors has proposed a dividend of SEK 2.10 for 2019; Extraordinary General Meeting on Nov. 2610 percent CAGR in earnings per share over the last 10 years

Dividend

0.00

7.00

1.00

2.00

3.00

4.00

5.00

6.00

18 20*15

SEK

10 1911 12 13 14 16 17

5.22

2.36 2.45 2.622.98

3.53 3.70 3.954.71

5.86 6.02

+10%

Earnings per share

0.00

0.50

1.00

2.00

1.50

2.50

1.12

0.79

SEK

15

2.10

1311 12 14

1.00

16 17 18 19 20*

0.71 0.750.88

1.291.46

1.631.85

10

+11%

Dividend per share

* Rolling 12 months


Due to the Covid-19 pandemic, certain investments have been postponed

CAPEX overview

994 972810 723 800 784

123449

535

100

600

0

300

900

1,200

1,500

884

1,117

20172016

723

SEK million

2015

0

850 -1,000

0

2018 2019 2020*

810

2021

1,4211,335

AcqusitionsCAPEX

Long-term CAPEX overviewCAPEX priorities

Recent major investments

Safety

Efficiency measures

Capacity expansion

China INFAT® factory

AAK Kamani

*Rolling 12 months


Successful management of the capital structure has resulted in lower tax rate

2015 2016 2017 2018 2019 2020 2021

30

0

26

1

27

23

29

25

28

24

%Guidance 2021

tax rate 24%

Reported tax rate


85–90 percent of AAK’s operations in the United Kingdom is

distributed within the United Kingdom

Main expected cost drivers identified as tariffs on goods sold and

imported into and out of the United Kingdom

Other effects include

Build-up of safety stocks

Additional staff to handle customs, logistics and VAT compliance

Mitigating actions will be taken to limit effects

Preparations to mitigate effects of Brexit remain in place


Despite a challenging environment M&A remains a key enabler in accelerating the execution of our strategy with strong leadership throughout our regions

CapacityGeographic expansion

Technology and capabilities

Adjacent product portfolios

M&A

Invest in continued growth

Bet for the future Optimize performance

Maintain current strategy


Concluding remarks

We generate shareholder value by delivering organic as well as acquisitive growth. Our strong track record of delivering growth in earnings per share and dividend is supported by a solid balance sheet with well diversified funding. Thus, we continue to remain prudently optimistic about the future.


www.aak.com

Thank you

financial performance - aak

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