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Jerker Hartwall President and CEO

Annual General Meeting 2009


Agenda for today This is AAK AAK and the financial crisis Strategy Business Areas Result Cash flow The future

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AAK is the world’s leading producer of vegetable speciality fats

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This is AAK Total sales: approx SEK 17 billion (13) EBIT 2008, SEK 851 million (653) (exclusive of final settlement of insurance compensation) 2,500 employees 9 production plants in 7 countries Head office in Malmรถ, Sweden

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AAK around the world AAK Sweden

AAK UK

Production plants Sales offices

AAK Denmark

AAK The Netherlands

AAK US AAK Mexico

AAK Latin America

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Sales per geographic areas 2008 Rest of Övriga världen the world 8% 6% (6%)

Europe Europa 69(71%) % 69% 75%

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Nord/SydNorth/South amerika America 18%

25% (23%)

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Sales per Business Area

Technical Products & Feed

Food Ingredients

10% (10)

61% (59)

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Chocolate & Confectionery Fats

29% (31)

Oils & Fats represent 90% of the sales

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Our vegetable raw material base Rapeseed Palm

Rapeseed

Soya

Soya

Olive

Sunflower

Shea Shea

Sunflower Olive

Palm Soya

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World production Olive Peanuts Coconut Palm kernel Sunflower Rapeseed Soya Palm 0

10

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20

30

40

Million tonnes

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Vegetable oils – character Rapeseed – 6% saturated – 94% unsaturated, thereof 11% Omega 3*

Sunflower – 10% saturated – 90% unsaturated, 0% Omega 3

Olive oil – 15% saturated – 85% unsaturated, 0% Omega3

Palm oil – 50% saturated – 50% unsaturated, 0% Omega 3

Coconut oil – 91% saturated – 9% unsaturated, 0% Omega 3

* Omega 3 is good for the heart, the brain and the eyesight

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AAK’s Business Areas


AAK’s Business Areas Regional Global

Food Ingredients

Chocolate & Confectionery Fats

- Speciality - Bulk - Speciality Total sales 10,400 MSEK EBIT 319 MSEK

Total sales 4,900 MSEK EBIT 547 MSEK

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Regional

Technical Products & Feed - Speciality - Bulk Total sales 1,600 MSEK EBIT 56 MSEK

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AAK and the financial crisis


AAK and the financial crisis Quotation from Year End report ”The effects on AAK of the financial crisis and weakened business climate are difficult to assess” ”However, due to the severity of the global downturn, the uncertainty is significantly larger than in previous periods of recession” ”Political and credit risks are increasing, and the extent of consumers’ reaction to the downturn is at this stage difficult to predict”

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Food Ingredients

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The financial crisis and Food Ingredients What has happened in the Food Ingredients market? Limited volume effect globally Fast change towards cheaper products Continued fast development towards non-trans products with low content of saturated fat The retail business’ own brands (private label) are gaining compare to branded goods

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The financial crisis and Food Ingredients What has happened in the Business Area Food Ingredients? Limited volume effect Strong margin development Positive development in acquisitions – Lion Foods, Croda Food Services, Rapsona

The strategy towards more speciality products continues according to plan We are good at re-formulating quickly EBIT SEK 80 million (60) Margin development +16%, 1.66 SEK/kg to 1.93 SEK/kg

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AAK – a world leader in vegetable speciality fats

-

High content of technology

Lowest price

-

Speciality producer

Bulk producer

Raw materials Annual General Meeting 2009, CEO

Raw materials 18


Chocolate & Confectionery Fats

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The financial crisis and Chocolate & Confectionery Fats Quotation from business Barry Callebaut: Public report of results for first six months of fiscal year 2008/09 “… negative growth in global chocolate consumption for the first time in more than a decade. In some key Western European and North American chocolate markets consumption declined by between 5% and 9%.” “Many food manufacturers, artisans and retailers reduced their stocks in the wake of economic uncertainties and were reluctant to place new orders.” Annual General Meeting 2009, CEO

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The financial crisis and Chocolate & Confectionery Fats Quotation from business Nestlé: First-quarter sales performance 2009: “In Eastern Europe, the combination of the economic downturn, the increase in the cocoa price and currency devaluations resulted in reduced demand.“ Mars: Nathalie Roos, president of Mars Chocolate France at a press conference on April 2 2009: “Activity at its Haguenau factory, that makes Mars bars, milky ways and M&M’s, will be reduced by 10 per cent in comparison to 2008 following a flexi-time agreement signed with the local unions.” “We are feeling the full impact of new purchasing patterns by consumers.” Annual General Meeting 2009, CEO

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The financial crisis and Chocolate & Confectionery Fats What has happened in the Chocolate & Confectionery Fats market? Volume decrease in the Western world in the range of 5-10% Volume decrease in Eastern Europe more than 10% Asia is showing a stable development Development towards cheaper products The retail business’ own brands (private label) are gaining compare to branded goods Destocking

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The financial crisis and Chocolate & Confectionery Fats Destocking

AAK

Chocolate producers

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Retailers

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The financial crisis and Chocolate & Confectionery Fats Destocking

AAK

Chocolate producers

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Retailers

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The financial crisis and Chocolate & Confectionery Fats What has happened in the Business Area Chocolate & Confectionery Fats? Comprehensive destocking at customers’ Great caution in Eastern Europe Volumes down by 20% EBIT SEK 74 million (139) Margin development +26%, 4.73 SEK/kg to 5.94 SEK/kg

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Technical Products & Feed

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The financial crisis and Technical Products & Feed What has happened in the Technical Products & Feeds market? Recession in the car industry globally Recession in the paper and chemical/technical industries Over-capacity in the business Feed industry not yet effected

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The financial crisis and Technical Products & Feed What has happened in the Business Area Technical Products & Feeds? Deliveries to the car industry heavily reduced Deliveries to the paper and chemical industries heavily reduced Deliveries to the feed industry not yet effected EBIT SEK 13 million (20) Margin development +4%, 0.79 SEK/kg to 0.82 SEK/kg Annual General Meeting 2009, CEO

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Our strategy Annual General Meeting 2009, CEO

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From crop to consumer

Where AAK is located in the primary value chain

Farmers (Raw materials)

Producers of ingredients (Oils & Fats)

Food Producers

• Nestlé, •United • AAK Kraft, Plantations • Loders Croklaan, Unilever Berhad Fuji Oil • Mars •IOI, Kuok • ADM, Cargill, Group, etc. • Cadbury Bunge •Lantmännen • Ferrero

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Retailers

Consumers

• Wal-Mart • Tesco • Metro • ICA

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Strategy World market

Speciality solutions

AAK

AAK

Loders Fuji Others

Global niche strategy Annual General Meeting 2009, CEO

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Growth strategy Bulk products

Speciality solutions

Volumes

Profitability index

Market

1

10 Annual General Meeting 2009, CEO

30

>100 32


From bulk to more speciality products EBIT

Speciality products for - Chocolate

Speciality

- Baby food - Bakery - Cosmetic - Acquisitions

Bulk Bulk Time Annual General Meeting 2009, CEO

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Growth strategy Specialisation

Selective acquisitions

Product development

- Bulk products - Strong customer base established over a long time Annual General Meeting 2009, CEO

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Growth – strategy Specialisation

Selective acquisitions

Product development

Lion Foods

Croda Food Services

Enzymotec

Rapsona

- Bulk products

- Strong customer base established over a long time Annual General Meeting 2009, CEO

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New speciality products for many applications

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InFat – The right fat for infants Quality similar to mother milk Gives significant increase of energy intake and calcium absorption Gives calm digestion and optimal skeleton development

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Example of our specialisation strategy New factory

2008

2007

Advanced Lipids

Joint Venture between AAK and Enzymotec

High degree of speciality

Enzymotec

More speciality fats

2000

Simple oils Annual General Meeting 2009, CEO

Baby Food 38


New speciality factory – for infant formula

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Bakery

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Example of our specialisation strategy AAK The Bakery Fat Specialist

Year 2007

No. 1 in bakery fats

Bakery process aid Croda Food Services

Acquired bakery fat producer

2000

Simple oils Annual General Meeting 2009, CEO

Bakery fat 41


Food Ingredients – Speciality products create global business AAK Sweden

AAK UK AAK Netherlands

AAK Denmark

AAK US AAK Mexico

AAK Latin America

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Food Ingredients – Speciality products create global business AAK Sweden

AAK UK AAK Netherlands

AAK Denmark

- Speciality fats for bakery - Infant formula

AAK US AAK Mexico

AAK Latin America

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Food Ingredients – Speciality products create global business AAK Sweden

AAK UK AAK Netherlands

AAK Denmark

- Speciality fats for bakery - Infant formula

AAK US AAK Mexico

AAK Latin America

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Result 2008 Annual General Meeting 2009, CEO

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2008 Sales +32 %, SEK 17.207 million (13.005) Operating profit +30%, SEK 851 million (653) (exclusive of final settlement of insurance compensation) Increased volumes and margins within Chocolate & Confectionery Fats and Food Ingredients Positive development in the acquisitions made in recent years within Food Ingredients

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Important events 2008 The most important events were the start-up of our new CBE factory and the re-start of the older factory in Aarhus, Denmark, which was damaged in the December 2007 incident A new factory in Karlshamn was commissioned in September, providing a significant capacity increase in the fast-growing speciality products for infant formula Acquisition of the Swedish company Rapsona with products for restaurants, catering and bakeries Through our strong presence in West Africa we have a steady in-flow of shea, which is the most important raw material for our CBE products Annual General Meeting 2009, CEO

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First quarter 2009 Annual General Meeting 2009, CEO

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First quarter 2009 Sales +15 %, SEK 4.223 million (3.683) Operating profit -24%, SEK 157 million (207) Improved cash flow and stronger balance sheet

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Insurance Negotiations about the compensation are ongoing but have not yet been completed. AAK still expects additional significant positive effects from insurance compensation on operating profit partly related to 2008, partly related to 2009 and cash flow.

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Operating profit, first quarter 2009, per Business Area SEK million

140 120 100 80

2007 2008 2009

60 40 20 0

TPF

FI

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CCF 51


Operating profit, rolling 12 months

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Operating profit, rolling 12 months Excl final insurance compensation

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Cash flow


Raw material price development

Raps

Palm

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Soya

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Cash flow from ongoing business (before investments), rolling 12 months SEK million 600

400

200

0 Q4 2006

Q1 2007

Q2 2007

Q3 2007

Q4 2007

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

-200

-400

-600

-800

-1000

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Rationalisation project continues


AAK’s rationalisation project First wave of synergies SEK 200 million 2005 – 2007

Second wave of synergies SEK 100 million 2007 – 2010

Total SEK 300 million 2005 – 2010

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Specialisation of the Swedish and Danish sites (second wave) Cost synergies of approx. SEK 100 million Fully implemented during 2010 One-off costs of SEK 150 million, accounted for in 2007 - of which SEK 50 million did not have any cash flow effect

• The project is developing as planned and will provide a strong base for further rationalisations

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The future Annual General Meeting 2009, CEO

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Roadmap to growth in the coming years ve s,

N pr ew oj ec t

Ba ke

ry

s

rv ic e Fo od

fo r t In fa n

Se

m

ul Co a sm et ic s

ti er na lt A

o c o h C BE C

te a l

D a D ir FA y Fa t

EBIT

s, t fa

Applications

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The future – Chocolate & Confectionery Fats Annual General Meeting 2009, CEO

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Cocoa Butter Equivalents, future opportunities Cocoa Butter Equivalents

Cocoa butter

The same quality Cocoa butter Cheaper raw material Expensive raw material Exact quality Variation in quality ------------------------------------------------------------------Cocoa Butter Equivalents AA K K = AA Better and cheaper raw material

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Chocolate consumption by geographic area – CBE potential

New CBE potential

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The future – Chocolate & Contectionery Fats The use of CBE increases. CBE is cheaper and has the same functionality as cocoa butter AAK has created the world’s largest CBE centre in Aarhus, Denmark AAK has developed the best shea supply

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The future – Food Ingredients Annual General Meeting 2009, CEO

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The future – Food Ingredients The driving force is health, e.g. non-trans products, low content of saturated fats Fast re-formulation to cheaper products Changes are positive for a speciality company as AAK

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Strategy – driving the product mix towards increased share of speciality products Profit

Bulk oils

Speciality products Infant formula Bakery fats FoodService

2000

2008 Annual General Meeting 2009, CEO

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The future for AAK We develop the speciality strategy We make selective acquisitions We are under development to become a more balanced company We are well positioned – based on investments made, geographic platforms, and strong product development

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Vegetable healthy oils have an exciting future

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AAK is in a strong position to benefit from these opportunities 70


AAK has an interesting future Annual General Meeting 2009, CEO

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/CEO%20AGM%20presentation%20May%2019%202009%20  

http://www.aak.com/Global/CEO%20AGM%20presentation%20May%2019%202009%20.pdf

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