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Edited Transcript of AAK.ST earnings conference call or presentation 24-Oct-19 8:00am GMT

Q3 2019 AAK AB (publ) Earnings Call

19 Malmö Oct 29, 2019 (Thomson StreetEvents) -- Edited Transcript of AAK AB (publ) earnings conference call or presentation Thursday, October 24, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Fredrik Nilsson

AAK AB (publ.) - CFO, Head of Corporate Communications, Mergers, Acquisitions & IT and VP

* Johan Westman

AAK AB (publ.) - President & CEO

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Conference Call Participants

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* Alexandra Barganowski

Nordea Markets, Research Division - Analyst

* Carl Mellerby

SEB, Research Division - Equity Research Analyst

* Kenneth Toll Johansson

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Oskar Lindstrom

Danske Bank Markets Equity Research - Senior Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the AAK Q3 report 2019. Today, I am pleased to present Johan Westman, President and CEO. (Operator Instructions)

Speaker, please begin.

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Johan Westman, AAK AB (publ.) - President & CEO [2]

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Thank you very much, and good morning, everyone. Welcome to the AAK Quarter 3 Investor Call. As usual, I have also our CFO, Fredrik Nilsson, with me to present a few of the slides as well as being here for the Q&A session at the end.

The agenda is on Page 2. We'll start with some comments through the third quarter, talk about a few of the strategic initiatives as well as some update on the business areas, and after that, we do a normal Q&A session.

So with that, I am turning to Page #3. Some of the highlights for the quarter. We continue to grow our EBIT. We are -- adjusted for acquisition costs, we are up 8% year-over-year with an adjusted operating profit of SEK 569 million. We have had a strong improvement within Bakery and Dairy. So Food Ingredients is up. And within that, there is a nice improvement on margin, especially within Bakery and Dairy.

We have also reached a milestone in EBIT per kilo. We are now at SEK 1 in EBIT per kilo adjusted for acquisition cost. We also see a good continued growth within our plant-based food solutions, although from a small level, but it's really nice to see the strong demand in the market.

Turning to Page 4, just highlighting that -- our quarter-over-quarter trend. We do continue to grow our EBIT year-over-year.

Heading into Page 5. So with regards to acquisitions, we have, in the quarter, acquired Soya International, which is a company focused on lecithin, and in this case, non-GMO speciality lecithin. The reason for this acquisition for us is that we want to continue to strengthen our value proposition to our customers. And we have looked at are there any adjacencies, ingredients where we would, by adding that to our portfolio, increases -- increase the value proposition or improve the value proposition to our customers. And with lecithin and speciality lecithin, we have seen an opportunity to strengthen our offerings, especially within Chocolate & Confectionery, but also within other business areas of AAK.

With a focus on non-GMO and speciality, we've also found a company invested in the market which is similar to the oils and fats market where you have commodity volumes, but you also have semi-speciality and speciality volume, and we have invested in the semi-speciality and speciality. We are now integrating this company, and so far, everything is working according to plan. We're very pleased with adding Soya International to AAK.

Next page. A few more comments on why do we do this? We -- by adding this, we are adding lecithin to our portfolio, and that is an ingredient used very much in the Chocolate & Confectionery space. Chocolate & Confectionery is a strategic priority of AAK. And with this, we intend to really strengthen the way we go to market with our customers. We also see strong market growth on the back of global trends. Lecithin has good underlying trends like the Chocolate & Confectionery space. As such, we will focus on the non-GMO, clean label, organic as well as sustainability, traceability and health, and this fits very well in that context.

This adjacency is also the adjacency that is -- one of the adjacencies that is really close to the oils and fats. It is derived from the same raw materials that we are using also in other solutions. So with that, it is a good fit to AAK. And we see this also as a scalable platform. So with this acquisition, we have the focus on strategic intent to increase the sales of lecithin going forward, but as well as including that in our total value proposition to our existing customers.

With that, I'll come back to some more comments on the business areas later, but I will hand it over to our CFO, Fredrik Nilsson, on Page #7.

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Fredrik Nilsson, AAK AB (publ.) - CFO, Head of Corporate Communications, Mergers, Acquisitions & IT and VP [3]

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Thank you, Johan. Going into some more financial details. We have a positive FX translation impact of SEK 24 million in the quarter, SEK 17 million was related to Food Ingredients and SEK 7 million was related to Chocolate & Confectionery Fats. Based on current currency rates, we should expect to see a continued positive impact in the next quarter.

Let's move to Page 8 to look at working capital days. Inventory days have increased 1 day. Strategic purchase of key raw materials to Chocolate & Confectionery Fats has impacted the inventories negatively. But I would also like to stress that we have good controls on our oils and fats inventory levels. With improved product mix on more speciality solutions, we had seen underlying pressure upwards on our accounts receivables. Strong pressure from customers also to get extended payment terms.

Accounts payables are down 3 days. With most of our suppliers, we have normal payment terms. But in some new markets, most of the options from the supplier point of view is still cash against document. And the volume growth we are seeing in emerging markets have impacted payment days negatively. It's a focus area to improve.

Let's go to Page 9 and looking at the cash flow. We have a good EBITDA improvement in Q3 with 11% or SEK 71 million in the quarter. Cash flow from working capital is negative in the quarter by SEK 552 million. As you can see, inventory is minus SEK 705 million, and that's entirely due to the strategic purchase of key raw materials into Chocolate & Confectionery Fats. We are seeing a positive cash flow from accounts payable, so that's good. Accounts receivable is negative, and that's mainly due to continued organic volume growth, but also normal seasonality between Q2 and Q3.

Interest costs paid to banks were down in the quarter. Paid tax is up in the quarter, but that's entirely related to timing of payments. I would also like to highlight that the reported tax cost corresponds to an average tax rate of 25%. The lower corporate tax rate in Sweden, combined with further optimization of the capital structure has reduced the average tax rate.

Cash flow from investments minus SEK 433 million, where SEK 207 million was related to acquisition in Soya International, as Johan mentioned. We have also bought part of the minority in AAK Kamani in the quarter. Noncash items is mainly related to the mark-to-market impact of our financial instrument we are using for hedging raw materials, but also changes in pension provision due to actuary updates.

Let's move to Page 10, return on capital employed. Capital employed in the quarter on a rolling 12-month basis was 15.1%. We see a negative impact of 0.4% due to the new accounting standard for leases, IFRS 16, but also the strategic purchase of key raw materials have impacted ROCE negatively in the quarter.

Let's move to Page 11 and loan and duration profile. We have, during the year, been able to increase the average duration in our loan portfolio. And by end of Q3, we had total committed credit facilities of SEK 7.2 billion.

By that, I would like to hand back the microphone to Johan.

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Johan Westman, AAK AB (publ.) - President & CEO [4]

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Thank you very much, Fredrik. And with that, we go to Page 12, and we'll start with comments on the business areas.

Starting with Food Ingredients. Food Ingredients had a really good profit improvement year-over-year with 13%. And the strong EBIT growth is really linked to an improvement of EBIT per kilo. We had a 2% volume growth -- organic volume growth, but we have continued the good trend on improving EBIT per kilo and really focusing on the value-added solutions. And especially, this is within Bakery, Dairy as well as plant-based. Although from a low base, we are increasing our business and also our business opportunities rapidly within the plant-based food solution area.

A bit of a mixed bag with regards to Special Nutrition, where we continue to see growth, although a somewhat lower growth rate for the high-end speciality solutions for Special Nutrition versus the low end and semi-speciality has seen a reduced volume growth for the quarter. The reason for this is that we see birth rates in China being down, and China is really the main receiver of infant nutrition solutions, which is the largest sector within our Special Nutrition business area.

We have also seen customers, due to this and other factors, doing a bit of destocking in the quarter. And the total impact of that results in a slower growth rate for high-end solutions and reduced volume for the semi-speciality and low-end solutions. So still a good margin improvement with regards to still growing the high-end segment but still somewhat lower pace than we have seen earlier this year. All in all, a very good development for Food Ingredients.

Next, Page 13 with CCF or Chocolate & Confectionery Fats. Here, we have seen more or less flat quarter -- year-over-year development, both in terms of organic volume growth and operating profit. And the reason for this is what we have been communicating earlier this year. We continue to have a significant cost impact due to the fact that we are using the last batches of old kernels with a lower-yielding result, and we expect to continue to use the last batches up until the year-end.

So by year-end, we will have consumed the old kernels, with -- which are lower yielding, but we will also be done with our capacity improvements. So heading into 2020, we expect to be in line with improved production process, which is resulting in higher capacity, to be starting using the new kernels that we are getting in and getting back to more normal cost levels from mid-Q1 and forward. And mid-Q1 is just because we are also having a maintenance stop -- planned maintenance stop, but we're having that in the beginning of Q1.

The sourcing of new kernels has started really well. So we are really on track with regards to sourcing the new kernels for the year to come and forward. So I'm very pleased with that. So all in all, we are following our plan. The capacity is about to be finalized -- the capacity improvements. The new kernels are coming in, and we know that we will now use the last batches of old kernels. But all in all, for the quarter, that has had an impact on our results, we're also seeing that some customers have been rolling volumes forward. So a bit lower volume for the quarter than expected.

With that, heading to Page 14 and the Technical Products & Feed. So Technical Products & Feed, we continue to operate on a higher level in terms of earnings compared to some years back. On a quarter-over-quarter perspective, we have seen a drop versus quarter 3 last year. But we should also keep in mind that last year, we were helped by the fact that we had a dry weather in Scandinavia, where farmers purchased more feed products and so forth compared to normal in quarter 3. We also have had a very strong quarter 4 last year. So -- but all in all, we expect TPF to continue to operate on this level that we see today.

With that, continuing into Page 15, just a short kind of summary of the quarter 3 highlights. So our new platform for plant-based food solutions, AkoPlanet, has been well received by the market. We see strong growth for our solutions to the plant-based food area for dairy alternatives as well as meat alternatives. We have a strong pipeline development. So just over the last quarter, we have seen the pipeline of new opportunities double. So very promising for this sector.

We have also, as mentioned, seen the very good development in Dairy, Bakery and Foodservice with EBIT per kilo being improved. In other words, our margin is improving. We're continuing our M&A journey and have now stepped into an adjacency, lecithin. And we were pleased with that. And we continue to focus on new opportunities with regards to strategic acquisitions.

Some of the challenges in the quarter. As I mentioned, Special Nutrition, with lower birth rates in China and destocking by some customers, that led to a somewhat lower volume than expected. And within Chocolate & Confectionery, the combination of rolling contracts by customer as well as our known and planned higher cost due to the lower yielding shea kernels that we're using impacted the result negative.

With that, a few comments on our program, The AAK Way in Page 16. We progress according to plan with good results. We are now really in the last stretch of the AAK Way, and we are building the foundation for the future. As you know, we have been reviewing our strategy during 2019. And with our upcoming Capital Market Day, we will launch the updated new strategy for AAK Way. And based on that, we will also have a new strategic road map going forward.

Page 17. Our management ambition is to reach an average year-over-year EBIT improvement by 10%, slightly below that in quarter 3, but all in all, we are at plus 9% since this ambition started 33 months ago. So all in all, a good track record for AAK.

Page 18, concluding remarks. We are well positioned with our offering of plant-based, healthy, value-adding oils and fats solutions using our customer co-development approach, and we do continue to see, in an overall perspective, favorable underlying trends for our market. And with that, we do remain prudently optimistic for the future. And before we head into Q&A, I'd also like to remind you about the Capital Market Day coming up November 20.

And with that, we are happy to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question from Carl Mellerby from SEB.

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Carl Mellerby, SEB, Research Division - Equity Research Analyst [2]

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My first one relates to the Special Nutrition and the comments you made regarding birth rates in China and destocking. Would it be possible to quantify the impact in Q3 and also if you expect this to continue going forward? And secondly, for the CCF division, this pressure from customers to roll existing contracts forward. Can we get more details on this and also the cost impact going forward?

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Johan Westman, AAK AB (publ.) - President & CEO [3]

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So with regards to birth rates and destocking, so we just see that this is kind of a -- this is a normal pattern. When you see a decline like we're seeing in the birth rates, we see customers also adjusting accordingly, but we are not specific on exact numbers in that case. There is -- what we have seen is that we do see a continued growth for the high-end solutions and a slightly lower development for the low end and semi-speciality.

On a longer-term basis, we do see that the market for high-end infant nutrition is on a good trajectory going forward. So on a long-term perspective, there is still capital and money being spent in the sector, and we are well positioned, but we have seen, due to the lower birth rates, customers having in this sector also quite long or high stock levels. And with that, when they are adjusting, that has an impact to us, but we're not specific on the numbers.

With regards to Chocolate & Confectionery, the situation we have been in and the market have been in, if you followed us, you know that there has been quite a strong demand over the last years on high-end Chocolate & Confectionery solution and it's really for these products where we reached also the capacity limits and challenges with our cost base due to the low-yielding kernels that we have had to use. So on the back of that, there has also been a -- with a high demand also a pressure up on prices. So now when the demand is getting back, we -- it's quite natural that we see customers also starting to optimize the portfolio a little bit. So it's nothing more, nothing less than that.

We do see the underlying growth for Chocolate & Confectionery being strong for the years to come. And what we do know now is that we will have our cost base back to, call it, normal by mid-Q1 and 4.

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Operator [4]

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Next question from Kenneth Toll from Carnegie.

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Kenneth Toll Johansson, Carnegie Investment Bank AB, Research Division - Financial Analyst [5]

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First, on the Soya International acquisition in lecithin. One thing that you have been strong at historically is to consolidate a fragmented market. Do you think that there are more acquisitions to do to consolidate this market? Or do you feel that you get a strong position already with this acquisition?

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Johan Westman, AAK AB (publ.) - President & CEO [6]

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So first, yes, we believe we get a strong position with this acquisition. But are there other opportunities going forward? Yes, there are, without being more specific than that. So this is a sector where there are opportunities for M&A going forward, but there is also already with this an opportunity to grow organically and especially combining our total offering and on the back of that, really driving the growth of this through our normal channels, but also improving the value proposition that we can make in the future.

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Kenneth Toll Johansson, Carnegie Investment Bank AB, Research Division - Financial Analyst [7]

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Great. Then also from the older times when you were more open on what segments -- or the performance per end market segment in the Food Ingredients division before 2017, you showed that the Bakery business had been lowering profits for quite some time. And Dairy was also struggling a bit. But now in this quarter, you say that you increased profitability in Food Ingredients due to Dairy and Bakery, among others. So what has turned -- what has turned and what has improved now? Is it a specific region? Or are there new products? Or -- yes, what happened?

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Johan Westman, AAK AB (publ.) - President & CEO [8]

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Yes. And it's not a quarter -- it's not a happening in Q3. This is a gradual improvement. We have been commenting as well that Bakery has been improving over time. We have seen really strong development. With a focus on high value-added solutions with our co-development approach and our approach to value selling to our customers, we have been able to improve these sectors, although being, on an average level, slightly lower than some of the other products that we have. Still improving this and focusing on selling the more high value-added solutions and using our co-development approach.

So on an average, the total Dairy and Bakery has improved. Regions where this is particularly strong, for example, Europe, North and Latin America, to name a few. Really good development, I think, on performance by the total teams around this. So this is more across the board and focusing on selling the right products where AAK has a good value proposition.

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Kenneth Toll Johansson, Carnegie Investment Bank AB, Research Division - Financial Analyst [9]

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Okay. Great. And then also, my last question is on the plant-based products you have. You commented earlier that this is quite a small part of the Food Ingredients division in terms of sales, volumes and so on. But still now, you mentioned it was one of the reasons for the improved EBIT per kilo that you have success in the plant-based side. So should we interpret this that this product range is really starting to add to -- in a more significant way to EBIT now?

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Johan Westman, AAK AB (publ.) - President & CEO [10]

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Well, let's separate. Incrementally, yes, it is, within Food Ingredients, one of the areas where we're growing faster, but we are growing from a small level. So if you look at the total number, it's still the smaller add, but it's still an add. So let's not read too much into it. So starting from a small level or a low base, but it is, in fact, growing fast, and we do see a strong interest in the market. There is a strong increase of customer co-development opportunities and projects with our customers, both in the dairy alternative space as well as the meat alternative space. So it's still too early to say that this is significant in the total numbers, but it is a good sign of, call it, the focus of the total industry and also our position to be able to serve this industry.

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Kenneth Toll Johansson, Carnegie Investment Bank AB, Research Division - Financial Analyst [11]

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And you also say that it's both for Europe and the U.S. you see interest?

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Johan Westman, AAK AB (publ.) - President & CEO [12]

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At the moment, we do see global interest. But at the moment, U.S. and Europe is still the largest markets for plant-based food, as we see it.

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Operator [13]

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Next question from Oskar Lindstrom from Danske Bank.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [14]

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Oskar Lindstrom. Sorry, I didn't recognize how you pronounced my name or the name of the bank, sorry. I have 3 questions. The first one is regarding rolling contracts from your customers. Should that be understood as some kind of price pressure? Or what's the sort of -- what's happening there?

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Johan Westman, AAK AB (publ.) - President & CEO [15]

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Yes. The -- what we see is that under some -- or under the forecasted, call it, volume pickup from our customer, we have seen a bit of rolling that forward, so slightly lower sales than we had expected. And the reasons for that, we can probably speculate in. But we know that after a period of price increases and shortage of demand, there is more demand and a bit price pressure down, but still a strong market out there. So incrementally, we see slightly lower volume than expected in quarter 3.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [16]

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All right. So it's more on the volume side rather than on the pricing side?

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Johan Westman, AAK AB (publ.) - President & CEO [17]

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Yes. But the effect of that is obviously a price and demand optimization in the market.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [18]

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Okay. Should that also go on into Q4, I presume? Or...

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Johan Westman, AAK AB (publ.) - President & CEO [19]

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It's normal market conditions. So it's about you lower your price, you can sell more; and you keep your price high, it's a little bit less. So it's an optimization for the customers as well as for us. So we do see that continuing going forward. But not that it's margin erosion, we also see cost improvements. Last year was a high cost year both for us but also from sourcing kernels in West Africa for the market.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [20]

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All right. And that actually comes into my second question, which is on the -- will you say anything about the size of the impact of the kernels that, that has had this year that we should not expect to see next year?

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Johan Westman, AAK AB (publ.) - President & CEO [21]

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What you can see is obviously our flattened or reduced operating profit per kilo, which has been significantly impacted by the fact that we had increased costs, but we offset part of that with also managing price versus demand. What we do see going forward is that we will go back to normal cost levels. So with that, there is an opportunity to improve margins, but there is also a market out there, so we need to play the game and be very competitive in the market. So I would say that the guidance going forward here is that we will go back to normal, slide -- sliding into an improved cost structure and then follow the market, but there is a good forecast for Chocolate & Confectionery in the long term.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [22]

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And just following up on that, also on the Chocolate & Confectionery. The new capacity that's coming on stream, as I understood it, mid-Q1, will you use that fully -- utilize that fully, I mean, immediately mid-Q1? Or is it something where there's like a gradual increase in production volumes.

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Johan Westman, AAK AB (publ.) - President & CEO [23]

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The capacity is going to be there. The utilization of that will be a function of supply and demand. But it's -- if anything, we will slide into using more and more while we grow with the market with our market share. So the capacity will be there, but the utilization of it is, obviously, depending on how much we sell, and we haven't contracted all that capacity day 1 because we wanted to make sure that we have it before we sell it.

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Fredrik Nilsson, AAK AB (publ.) - CFO, Head of Corporate Communications, Mergers, Acquisitions & IT and VP [24]

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And also I'd add, Oskar, that the capacity will be there end of Q4 this year.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [25]

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And how much capacity are we talking about in tons, say, I presume?

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Johan Westman, AAK AB (publ.) - President & CEO [26]

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We are not mentioning tons in capacity, but we do talk about 10% to 20% increase of capacity compared to before.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [27]

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For Chocolate & Confectionery? Or...

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Johan Westman, AAK AB (publ.) - President & CEO [28]

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For the high-end solutions -- for this high-end solutions that we referred. So this is one of the product ranges that we have, one of the most important ones.

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Oskar Lindstrom, Danske Bank Markets Equity Research - Senior Analyst [29]

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Okay. And my final question is on the destocking. How much of that has been done already? And should we expect more destocking to impact Q4 as well? What's your feeling?

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Johan Westman, AAK AB (publ.) - President & CEO [30]

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With the information we have, without specific comments on customers, we have a few, let's say, that it will be to year-end, and then we're done. And with others, half -- the first half of 2020 as well.

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Operator [31]

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Next question from Alexandra Barganowski.

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Alexandra Barganowski, Nordea Markets, Research Division - Analyst [32]

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Can you hear me?

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Johan Westman, AAK AB (publ.) - President & CEO [33]

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Yes.

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Alexandra Barganowski, Nordea Markets, Research Division - Analyst [34]

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Okay. So my first question related to the Food Ingredients segment where you previously have stated that you're sort of prioritizing customers in high-end solutions that perhaps provide you with lower volumes. Sort of related, I guess, to the last question as well, but is this your strategy also going forward?

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Johan Westman, AAK AB (publ.) - President & CEO [35]

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Well, our focus is to continue to really develop the speciality solution for our customers and being there with our co-development approach where customers needs our help or where we have new solutions to offer. And that is where our focus is in terms of investments and in terms of innovation and in terms of the day-to-day co-development, improvement of our customers' product. And that is leading us to doing business where it is a -- call it, higher-priced solutions, more complex and difficult solutions. But whether that is a lower volume or not, that is not the same equation, right? We're certainly looking for the high-volume opportunities within this. But if we talk about priorities, it is the high-value that is our priority versus moving volume.

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Alexandra Barganowski, Nordea Markets, Research Division - Analyst [36]

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Sure. And my next question relates to the Chinese sort of demand. When you claimed that you are seeing sort of lower -- or impact from lower birth rate in China and at the same time, you are obviously investing in your Chinese factory, do you expect that going forward, that factory will have sort of lower capacity needs? Or do you still expect it to have the same increase as you anticipated when you -- and progress in investing in it?

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Johan Westman, AAK AB (publ.) - President & CEO [37]

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So that's a good question. We haven't changed any forecast on the usage of that plant. And this is where there is still a strong demand or a push for high value-added solutions. So the high-end solutions, they are more advanced. Infant nutrition solutions are still forecasted to have a high demand in the world and in China, specifically. And China is already today, the main receiver of these volumes being produced in China or being produced elsewhere and sold into -- ships into China.

So for us, this is installing our next capacity improvement in the market where it is consumed. So we believe that is the right thing to do strategically. It gives us a better opportunity to serve international customers as well as domestic Chinese customers. And we're also moving the cost base to where we sell and distribute. So all in all, the investment in China really stands on its own. The total demand for AAK in the market will obviously have a -- is a factor of birth rates, but also the shift into more high value-added solutions, so more, call it, the penetration of advanced solutions. And that's where the forecast is strong even though birth rate is going down.

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Operator [38]

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We don't have any more question for the moment. (Operator Instructions) We have a new question from [Oliver Lukor from Dictum].

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Unidentified Analyst, [39]

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I have 2 questions and a little bit unusual question as a follow-up. I was wondering about the kernel, the shea kernel harvesting quality. Could you elaborate? Was it so good this is one of the reason why you build a strategic inventory? And the second question is regarding the Fuji Oil forward integration by Blommer. Is this an opportunity for AAK? Or is it rather a threat for your Confectionary and Chocolate business?

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Johan Westman, AAK AB (publ.) - President & CEO [40]

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Okay. I start with the first question. So what we are seeing in terms of quality is that we're seeing, as far as we can judge -- we still haven't used the new kernels yet, so we don't know the actual yield until we start using it. I would like to remind us all about this as a natural crop that is grown in West Africa. So the actual yield and the actual, call it, quality or the volume we get out of it, we will only know when we crush it. But with the analytics that we have and the measurements that we can do, it seems like a normal crop. It seems to be a normal crop. And we have sourced significant volumes because we believe in the market going forward, and we needed to replenish our inventory to make sure we have enough kernels for the year to come, but also a safety stock and also some buffer into 2021, and hopefully, improved and still growing strong market.

With regards to competitors and their acquisitions, we will not comment that specifically. We remain where we are. So we are still an oils and fat -- vegetable oils and fast solution provider, where Chocolate & Confectionary is one of the most important markets. Even with customers taking, call it, outsourcing from the consumer products producers, we do see strong demand across the board for our solutions, either going directly to their business-to-consumer producers or to the business-to-business chocolate compound producers. And we haven't seen really an impact of the latest movements here. So we have both sectors as customers today, and we expect to have that going forward. We believe in staying where we are and focusing on being a really strong provider of plant-based oils and fats.

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Unidentified Analyst, [41]

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Then the rather unusual question. The picture you're showing on your presentation in front of the vegetable burger, can you give us a hint what the AAK content in this burger is?

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Johan Westman, AAK AB (publ.) - President & CEO [42]

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Well, I will not comment to customer specifically, but the content, when we supply -- we typically supply the total fat content in the burger. If you -- so in the ingredients list, we have the opportunity to sell product by product, but we have seen that we have an opportunity to be able to supply the total demand for plant-based oils and fats. And then depending on the recipe, how much that is, that becomes then the volume that we would sell into a burger or the volume per burger, if that makes sense.

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Unidentified Analyst, [43]

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So this is regardless what kind of oil or what kind of vegetable is used, whether it's palm or whether it's soya oil, you can offer the total fat content for burger?

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Johan Westman, AAK AB (publ.) - President & CEO [44]

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We are strategically focused over many years to be a supplier of many different oils and fats from different raw materials. So we are a multi-oil plant-based focused company already to start with, and that's how we also focus going forward. So our development in this area will be to make sure that we, one, sell to the customers what they need today; but also, two, co-develop with them and bring new solutions to make these products even better, more tasty, better structure, healthier and so forth. So I expect the total market to go into reformulating a new recipes, as we see it developing. And with that, we will remain as a multi-oil and solutions provider. So yes, I think in other words, we have the oils and fats that can be used.

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Operator [45]

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We don't have any more question for the moment. (Operator Instructions) We don't have any more question. Back to you for the conclusion, sir.

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Johan Westman, AAK AB (publ.) - President & CEO [46]

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Then with that, we thank you, everyone, for listening in and for your questions, and talk to you soon. Have a good day.

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Operator [47]

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Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.