President and CEO, AAK AB (publ)
AAK CMD 2022 – Johan Westman, President and CEO – Business update
AAK's Capital Market Day is a recurring event where analysts, investors, and media representatives are presented with information on AAK's business strategies as well as financial updates.
On this link, watch Johan Westman, President and CEO, give a business update at the 2022 Capital Market Day.
About Johan Westman
Johan Westman, President and CEO of AAK, has presented strategic and financial updates at the company’s Capital Markets Days. At the 2024 event, Westman described a “positive trend” in plant-based food, technical products, and personal care, noting that AAK views replacing fossil-based ingredients in products such as candles and cosmetics as a “huge opportunity.” He stated that the company has a “strong track record” of earnings growth and has updated its EBIT per kilo target to “above 3 SEK per kilo,” having reached a prior target faster than anticipated. Westman attributed the company’s recent performance to a decentralized and agile organization that has navigated “high uncertainty, volatility, inflation, and war,” as he noted in 2022. He also highlighted investments in sustainability, including bio boilers in Aarhus, Denmark, a partnership with Mars to support women in West Africa, and commitments to no deforestation and science-based targets. Westman reaffirmed a goal of 10% annual operating profit growth, calling it a “bold target” that the company has historically achieved.
Transcript (14 segments)
J
Johan Westman0:20
Thank you so much Lydia, and once again welcome to the AAK Capital Markets Day 2022 — all of you in the room, every stakeholder, and those of you online, and of course colleagues of mine and Lydia helping us around this day. I will start off by introducing AAK. For some of you that will be something new, for some of you that will be a bit of repetition. Some of you have followed AAK for a long time, I know that, but there are also new investors or potential investors here in the room and online, so let's do that first.
AAK — we are a multi-oil ingredient house. We refine, blend, produce oils and fats, specialty oils and fats based on plant-based sources to create functionality for our customers' products. In essence, products that you typically eat, because a lot of what we do goes to the food industry. So in essence, we supply to producers of food, but we also supply the producers of technical products and feed — so various applications where oils and fats, plant-based oils and fats, make a difference. That as an example goes into chocolate and confectionery, infant nutrition — both where a lot of oil and fats are needed in the product — as well as into bakery, dairy, personal care, food service, plant-based food as an industry, new applications and technical products, one example being candles, replacing paraffin with a more natural ingredient for candles. So a broad base of customer industries or consumer industries that we serve.
We can do this because we have multi-oil sourcing and multi-oil knowledge, and more important than anything else, we have a deep understanding of the chemistry around oils and fats. We have a deep understanding of how to apply these ingredients into consumer products. So in essence, we understand chocolate, we understand the breakdown of mother's breast milk in a way that we can help mimic, as far as we can, that composition of the fat in that product — in this case infant nutrition, just to give you a flavor of what we do. We source from around the world, so really a global sourcing, and we also produce and deliver around the world.
Where do we act? Where are we, who are we? We are a downstream player in our industry. So we typically source a refined oil and then we refine it further to the right specifications. We can also blend it — so we take a fraction, could be enough in itself, but we can also blend that with another oil, another type of specification, into a property, a functionality that delivers what our customer wants in order to make their product be as good as it should be for you when you eat it, taste it, or use it for other applications. So a downstream position where we sell to food producers, as that example is, and they sell to retailers, and then we as consumers go and buy something in the retail store. So a downstream position, but in a business-to-business context, selling to producers of food or other products that you would buy.
You just heard in the movie a little bit about our purpose. We are a purpose-led company. The beauty of the purpose — making better happen — is that it really speaks to all of us in the company. It speaks to how we operate, and it's applicable every day of the week. You can always wake up in the morning and ask yourself, what can I do better? And that drives the culture that we have, that drives the behaviors that we want to nurture, and that certainly applies to making better food happen, also better returns happen for shareholders, also to become a better company for our employees or future employees. So a very inclusive purpose, you might say.
So what is AAK today? We are a global company serving customers across the globe — be that global customers, be that local customers in a country, in a region. We are about 4,000 employees. We operate with about 20 factories around the world, and we have customer innovation centers around the world where we do exactly what that movie showed — customer co-development, meaning that we invite customers to come to us to try to make their product better, do product development together with the customer, playing with their product and our ingredient in a way that will make it better. And that is how we also become a long-term partner to our customers. We are typically a go-to partner when they need help with something, and that's where we focus.
Well, if that is what we are in essence, let's bring us down to the present. We are certainly operating in an environment today with high uncertainty, volatility, inflation, and war. The last couple of years has been nothing else but a dramatic amount of disturbances or things to deal with. In essence, it makes me proud to be part of AAK and our organization. When I look back on the last three years — being able to navigate COVID, navigate uncertainty and raw material supply chains, running through an exit out of Russia, dealing with inflation on many items that we source, and utilities, and many other things — clearly we are, as many other companies in other industries, we are impacted. But what makes me proud is the way we have navigated, the way we deal with it. Our organization is an organization with passion and drive, agility, and we're also decentralized. And that's been very helpful in times like this where we can trust passionate, driven colleagues around the world to do the right thing. Obviously we are very connected as well.
So when I look back at AAK, how we have navigated, the financial results that we present — while we can do so much better because we have to live our purpose, we can do better — I'm at the same time very proud of what we have delivered and navigated so far. And we continue to navigate, because looking forward, of course, we see a world of continued uncertainty. But again, AAK has shown that we can deliver.
Coming back a bit to sustainability — you heard in the movie that we look at this from plant to brand. Making better happen works really well in sustainability and ESG because it is all about what we can do tomorrow to make things better, not trying to shoot for the best all the time. Focus on how can we get better, how can we solve this problem, and then move on. It works really well in our sourcing — we engage to transform. We can't do it on our own; these are not our companies. But we can engage to transform. We focus a lot internally: how can we reduce the usage of water, for example, or how can we increase the usage of green electricity, how can we improve our company for our employees, etc. And of course, looking forward, how can we be part of a solution together with customers that makes a product better, but also makes a product more sustainable — or rather, the total supply chain of arriving to something that we eat, which is better tomorrow than it was before. That is how we try to focus our efforts.
And to give you a bit of flavor of that, looking at it from an ESG lens: we are increasing the usage of green electricity, we are reducing the usage of water, we are putting strong targets on increasing — reaching 100% verified deforestation-free in our supply chains. We're also looking at biodiversity, planting trees, trying to put trees back again. As well as focusing internally, we have projects on inclusion, diversity — how to make AAK a better place to work, including empowerment. Some of you know about our Karaneer engagement with women in West Africa, a program where we microfinance, help women to get a better livelihood, including more than 300,000 women in West Africa — 300,000, that's a huge number — that we access with cars, mopeds, bikes, visiting 4,000 villages in West Africa, a very tough region with high risks, and we're still there, to get an important source for us, but at the same time empowering these women.
And we are also making a step up in governance — how can we comply, but also how can we really make sure that we drive for the better and that we can also report and document that. Other examples of what we have done: we have invested in bio boilers in Aarhus, Denmark — or we are about to, it's a project that is ongoing — targeting a 90% CO2 reduction in that plant alone, even to the extent that it impacts Aarhus as a city. And it is reducing our cost, and it's linked actually to the supply chain of shea kernels from West Africa, with the women that we just talked about picking these kernels and selling them to AAK. We use them, we produce food solutions, and we now use the residual — the last residual — to burn for our own energy, and the last piece, the ashes, can also be used as fertilizer. So really trying to get as close to a circular economy as possible in this case.
We've also committed to science-based targets — scope one, scope two, and scope three. EU is changing regulation a bit with regards to scope 3, including FLAG and non-FLAG. And we'll come back to this a bit more on the fireside chat, but we, as AAK, we need to report both non-FLAG and FLAG, and we have committed to that. So we're just about to file our targets for approval, and when we have that, we will report back on our actual targets. But full commitment on this. And we also work together with customers. WISH Project in West Africa is an interesting one where we, together with Mars — large customer of ours, a large player in the world — we together have a project for increasing the livelihood of women in West Africa in our supply chain. These are just a few to give you some hints about what we are doing.
We have also, as you know, those of you that were with us before COVID, in the Capital Markets Day in 2019, I think it was, we said that we had made a major strategic review to put a detailed strategy and plan in play. We have now, three years later, reviewed that — so what has worked well for us, where are we performing, where can we do better. And we have added an aspiration to this. I will not run through that now, but when I come back, that is what I will present. But before we do that, we will also have more financial comments and details from our CFO Thomas. So that was a bit of an update on who is AAK and how do we navigate current times, and a bit of a teaser — what's coming next. Thank you.
Thank you, Johan.