Looking at AAK’s financial performance 2016, the AAK Group’s CFO and acting CEO, Fredrik Nilsson, gives you an insightful analysis. He also looks ahead, telling you more on how AAK’s company programs will guide us during the next years.
With another good AAK year behind you, how would you describe the company’s financial performance?
“I would describe it as solid, no doubt. We have now been able to deliver 24 straight quarters with record-high operating profit quarter-over-quarter as well as a record-high full-year result every year since 2010. This is a quite impressive track record,” Fredrik Nilsson says.
“The organic growth for our speciality and semi-speciality solutions continued during 2016 and we have definitely gained market shares. We have also identified the drivers for further organic growth and continued our effective cost control with annual productivity improvements.”
What are your comments on the cash flow?
“After a very strong cash flow in 2015 we have seen an outflow from working capital in 2016, mainly due to significantly higher raw material prices. As a consequence of the organic growth, we have also tied up more working capital in accounts receivables. Our focus on working capital days continues and some further minor improvements should be possible, particularly to improve payment terms with our suppliers,” Fredrik Nilsson says.
“The Group’s capital expenditure continued to be at a high level due to our two greenfield projects in Brazil and China. We furthermore acquired California Oils Corporation on the US West Coast—a very strategic acquisition in order for us to be a national player in the US. For 2017, we expect the capital expenditure to be at a more normal level.”
“For the fifth year in a row AAK increased the dividend paid. AAK strives to pay a stable dividend linked to the company’s long-term performance. Total paid dividend was SEK 328 million or 35 percent of the consolidated profit after tax,” Fredrik says.
With your company program AAKtion now completed, what ambition level for the coming years can we expect?
“Our former management ambition was launched in 2010, aiming to double our operating profit from SEK 800 million to SEK 1,600 million, excluding acquisitions and at fixed FX. With some support from acquisitions and positive FX we reached that target by the end of 2016. The average annual improvement year-over-year excluding acquisitions and at fixed FX has been 10 percent since 2010.”
Fredrik Nilsson concludes: “The activity levels in our company programs AAK Acceleration and AAKtion have been high and combined with our solid foundation and supported by very strong business drivers we see no reasons to lower the ambition level for the coming years. We expect, on average, a 10 percent year-over-year improvement in operating profit which will support a good and consistent improvement in earnings per share. Our new company program, The AAK Way, will guide us up through 2019. Our key focus with the program is to enable the company to continue to deliver strong organic growth. This will be achieved by focusing on five priority areas: Go to Market, Operational Excellence, Special Focus Areas, Innovation, and People.”