Earnings results

AAK’s chocolate and confectionery fats division sees 20% sales gain in 2017

By Douglas Yu contact

- Last updated on GMT

AAK's chocolate and confectionery fats saw a 20% increase in net sales in 2017. Pic: AAK
AAK's chocolate and confectionery fats saw a 20% increase in net sales in 2017. Pic: AAK

Related tags: Marketing, Cocoa butter, Cocoa solids, Aak

Swedish firm AarhusKarlshamm AB (AAK) has reported ‘record-high’ operating profit of SEK 471m ($58m) for Q4 2017, an 8% increase compared to the same period last year.

The company’s operating profit for full-year 2017 was SEK 1.79bn ($220m), representing an 11% increase compared to SEK 1.62bn ($199m) last year.

However, AAK said its operating profit during Q4 was negatively impacted by the currency translation – SEK 18m ($2.22m) in total, of which SEK 6m ($739,000) was related to its chocolate and confectionery fats business.

Additionally, AAK’s net sales in Q4 and full-year 2017 reached SEK 6.59bn ($811m) and SEK 26.44bn ($3.26bn) respectively, improving from SEK 6.33bn ($780m) in Q4 2016 and SEK 22.06bn ($2.72bn) in full-year 2016.

The sales increase was mainly due to “a positive product mix and organic volume growth,”​ AAK pointed out in its financial report.

AAK’s food ingredients business in particular reached SEK 4.47bn ($550m) worth of net sales in Q4 (8% increase) and SEK 17.67bn ($2.18bn) for 2017 (20% increase) as the demand for specialty and semi-specialty products was “very good,”​ said Fredrik Nilsson, the company’s CFO and acting CEO.

However, within the business segment, “bakery had another challenging quarter, particularly within Europe and North Latin America,”​ Nilsson said. “Development in the US continued to be weak… there was good growth in Asia, the Nordics and South Latin America.”

20% annual sales growth in chocolate and confectionery fats

Nilsson told ConfectioneryNews most of AAK’s 20 plants globally manufacture chocolate and confectionery oil and fats.

“We are also coming up with new ingredients that can replace cocoa butter, but we also do filling fats going into different chocolate applications,”​ he said.

AAK’s chocolate and confectionery fats business saw a 20% increase in net sales during 2017, reaching SEK 7.35bn ($905m). Its Q4 net sales, however, posted SEK 1.79bn ($220m) declining by 4% compared to last year.

The sales decline during the quarter was caused by a negative currency translation impact of SEK 90, said Nilsson. “This was partly offset by volume growth and an improved product mix.”

Some production disruptions in Aarhus, Denmark, in Q4 also negatively affected AAK’s confectionery ingredient business, added Nilsson.

“This has resulted in increased production costs and higher supply chain costs,”​ he said. “We have started to see an improvement in our production. However, due to higher volatility in the various in some of our raw materials… there will be an impact during the first quarter of 2018 as well.”

“By the end of the first quarter 2018, we expect a lower volatility in the variations in these raw materials,”​ said Nilsson.

Nilsson also mentioned AAK signed its first commercial contract for TROPICAO, a chocolate technology for hot climate markets, at the end of Q4.

AAK does not have a sales target for 2018, but its operating profit is expected to grow by 10%, he said.

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