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Welcome to the AAK Q4 2024 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Johan Westman; and CFO, Tomas Bergendahl. Please go ahead.
Good morning, everyone. Thank you for joining us here today, and thanks to all of you who joined us a few months ago also at our Capital Markets Day in Karlshamn. We really appreciate interacting with our investors and analysts. Joining me today, as you heard, we are in Malmö at our headquarters. We're going to review our fourth quarter financial results, and I have Tomas Bergendahl with me here today, our CFO.
With that, let's turn to Page #2. Here is what we will cover today. The quarterly highlights, selected events, a business and financial update and then some concluding remarks from our side. And after that, we will have a Q&A session.
With that, let's move to Page #3. Just a few comments. This presentation includes forward-looking statements that come with risks and uncertainties. These are our views on future events and financial performance, but actual results could be different. So just please keep that in mind when we are going over the material that we have in front of us.
Please turn to Page #4. Let's start with the quarterly highlights for quarter 4 2024. We had a solid finish to what has been another strong year for AAK. In the quarter, volumes decreased by 1%, mainly driven by Food Ingredients. Our operating profit per kilo, our margin continued to increase, up by 16% year-on-year at fixed currencies. This was largely driven by our global optimization programs, which have improved our operations as well as continued favorable market conditions in Chocolate and Confectionery Fats. As a result, our absolute operating profit increased by 11% or 14% at fixed FX. This builds on the 47% growth we delivered in quarter 4 last year in 2023. So while we are seeing slightly softer volumes here in the fourth quarter, we have managed to maintain momentum, and we delivered a very solid result driven by improved profitability.
Moving on to cash flow. Operating cash flow amounted to SEK 118 million. Our financial position remains strong. Our net debt-to-EBITDA stands at 0.29, which highlights our ability to maintain a healthy, strong balance sheet. This also gives us flexibility going forward. Our return on capital employed, our ROCE, came in at 22.4%. This is a reflection of the strong operating profit we have achieved and our ongoing focus on driving returns. We have proposed a dividend from the Board of Directors, which is at SEK 5 per share. This corresponds to an increase of 35% compared to last year. So a nice increase also driven by our increased earnings. Overall, it's been a solid finish to what has been a very strong year for us at AAK.
With that, let's turn to the next slide. Before diving into the performance of each respective business areas, let us take a brief pause to reflect on a few events that shaped the fourth quarter. We have opened up a biotechnology innovation center in Lund to support industries such as food, feed and cosmetics. By bringing enzyme and fermentation research in-house, we can improve efficiency, drive idea development and strengthen our expertise within the company. Lund, the city of Lund and the location was chosen for its active innovation environment with a mix of start-ups, established biotech firms and its proximity to academic institutions and research facilities, offering opportunities for collaboration and knowledge sharing.
I would also like to take a moment to highlight an important achievement. AAK's win at the Food Ingredients Europe, FIE 2024, with the Sustainability Innovation Award for our company. This recognition celebrates our efforts in empowering women in West Africa through our own program called Kolo Nafaso and reducing emissions across the shea supply chain. It's a reminder of our ongoing commitment to sustainability and responsible sourcing across the industry. A big thank you to everyone who contributed. This achievement continues to inspire our work at AAK. And as briefly mentioned already, back in November, we hosted a well-attended Capital Markets Day at our Karlshamn facility in Sweden, where we raised our 2030 profitability aspiration to SEK 3 per kilo or above SEK 3 per kilo, reinforcing our belief in the future growth.
For those who could not attend, I encourage you to watch the recordings available on our website to catch up on the insights shared during this event. Tomas, could you please give us an update on the Foodservice divestment that we also announced?
Yes. Thank you, Johan, and good morning, everyone. As I'm sure most of you recall, we announced in October of 2024 that we had entered into an agreement to divest our foodservice facility located in Hillside, New Jersey in the U.S. The transaction was finalized as scheduled on December 31, resulting in a onetime positive cash flow impact of SEK 646 million, which came in then the fourth quarter of '24. The impact on the P&L from the divestment was, as previously communicated, not material. We are confident that the new owners, together with all the employees from the Hillside plant, will continue to develop the business, and we wish them all the best going forward. Meanwhile, our investments, as also announced into our foodservice plant in Sweden as well as the upgrade to one of our food service plants in the U.K. are both progressing according to plan.
With that, I'll hand back to you, Johan, to go through the different business areas.
Thank you. So let's move on to the next slide, business area highlights, starting with Food Ingredients. Starting with volumes, we saw a year-over-year decrease of 4% in the quarter for Food Ingredients. This decline was primarily driven by lower sales of non-specialty oils with lower margins as well as a decline in dairy. Operating profit per kilo increased to SEK 2.28, up from SEK 1.96 representing a 16% growth in operating profit per kilo. Currency effects had a negative impact of SEK 0.11 per kilo. The growth in operating profit per kilo was broad-based with improvements across the major segments that we delivered.
Bakery, in particular, led the way with strong performance. When we exclude currency effect, operating profit per kilo increased by 21%. Operating profit increased to SEK 767 million compared to SEK 685 million last year. This represents a solid growth despite the headwind on negative currency translation effect amounting to SEK 36 million. At fixed foreign exchange rates, operating profit increased by 17% in the quarter.
So with that, let's move into Chocolate & Confectionery Fats on the next slide. We saw a modest increase of 1% year-on-year in Chocolate & Confectionery Fats. This growth was primarily driven by Europe, Asia and the Middle East and Africa. However, this was somewhat offset by weaker results in the Americas and a softer consumer demand for chocolate. On the profitability side, operating profit per kilo increased to SEK 4.19, up from SEK 3.91 last year, marking a 7% improvement. The currency translation effects were minimal with only a SEK 0.01 per kilo impact. The primary drivers here were strong contributions from Europe and the Americas, supported by favorable market conditions. Our operating profit rose to SEK 520 million compared to SEK 481 million last year, an increase of 8% year-on-year. This reflects our ongoing ability to generate consistent and meaningful profit growth even in a mixed consumer demand environment.
And with that, let's move into the next page. Now some business area highlights for Technical Products & Feed. Let's look at the results for Technical Products & Feed. Volumes increased by 7% year-on-year, with growth coming from both Technical Products and Feed. Operating profit per kilo saw a healthy increase, reaching SEK 0.86 per kilo, which represents a 9% improvement year-on-year. Operating profit for this segment totaled SEK 69 million, which is a 17% increase compared to the same period last year.
With that, we have now covered the business area, and now I will hand it over to you Tomas, to provide some further details to our financial results.
Thank you. Please turn to Slide 9. Operating cash flow in the quarter amounted to SEK 118 million, as Johan mentioned before, and was driven by earnings, offset by an increase in working capital, mainly driven by inventory. Inventory increased by just over SEK 1.4 billion, made up of roughly SEK 550 million related to inventory level increases from seasonality-driven sourcing of primarily shea and palm. This number also includes SEK 200 million from the previously communicated temporary ramp-up of conventional raw material in preparation for the implementation of EUDR. In addition, inventory values are up just above SEK 850 million, driven by an increase in raw material prices based on the 6- to 9-month lag that we've mentioned before. The excess EUDR-related inventory now totaling just over SEK 400 million at the end of '24, which is conventional without EUDR-related premiums is temporary and will be run down during the first half of '25, primarily in Q1.
Accounts receivable was slightly reduced in the quarter, while payables remained relatively flat. CapEx amounted to just over SEK 363 million in the quarter, slightly higher compared to the level in Q3. The total CapEx spend for the year was SEK 1.25 billion, right in line with our communicated estimate. As previously mentioned, the divestment of Hillside generated a positive cash flow in the quarter of SEK 646 million. We have also, in the quarter, restructured 2 of our sourcing agreements, which is expected to deliver financial and operational benefits over the term of the agreements; however, with the onetime negative operating capital impact negatively of roughly SEK 500 million to SEK 600 million, which will come in, in the first quarter of 2025.
Please turn to the next slide. Return on capital employed increased following the continued strong development of operating profit. EBIT for the last 12 months was SEK 4.9 billion, up roughly SEK 130 million sequentially from Q3, together with capital employed at SEK 21.8 billion, the latter somewhat flat over the last few quarters, resulted in a return on capital employed of 22.4%, which is up 0.3% from Q3 in '24.
Next slide, please. Driven by the strong operational earnings as well as a positive cash flow and the divestment of Hillside, net debt-to-EBITDA remains at a level that provides us with financial flexibility at 0.29 in Q4, slightly down from 0.39 in Q3 and significantly down from the peak of about 2 in Q2 2022. With a strong balance sheet, the Board is, as Johan mentioned before, proposing a dividend of SEK 5 per share for the financial year of '24. Subject to approval at the AGM, it represents a 35% increase from the previous years compared to the 20% increase in EPS for the same period and an 82% increase compared to the dividend paid for the 2022 financial year.
With that, I'll hand it back to Johan for some concluding remarks and then some questions.
Thank you. Let's move into the slide on concluding remarks. We are wrapping up a strong year with a solid quarter 4 performance. We achieved 11% operating profit growth on top of last year's 47% growth. Our return on capital employed stands at 22.4%, driven by a strong operating profit, reinforcing our financial resilience and efficiency. Looking ahead, we have just raised our 2030 aspiration. Given our strong performance and early achievement of a key milestone, we now target a plus SEK 3 per kilo margin going forward, demonstrating our belief in future improvements and long-term growth opportunities for AAK. For 2025, we remain focused on continued progress while maintaining a prudent yet optimistic outlook for the year ahead. Above all, we stay dedicated to making better happen.
And with that, I will hand it back to the operator, and we would love to get some questions from the audience.
[Operator Instructions] The next question comes from Johan Fred from SEB.
One per segment, if I may. So starting off on a question on Food Ingredients. Volumes were down 4% year-over-year, while operating profit grew 12%. You alluded a bit on this during the call, but could you elaborate on what drove the strong earnings development? Is this due to the optimization programs or mix? Or how should we think about the discrepancy between volume and operating profit?
All right. Thank you. So I think, yes, the optimization programs that we have has contributed. But if we look at volume and mix in this case, as I mentioned briefly, there was a lower sales of nonspecialty, and that was specifically due to a large part of that was to lower sales of lower value-added rapeseed solutions. So call it lower sales on lower value-added products and higher sales or good sales volumes on higher-margin products. So there was a positive mix effect for Food Ingredients while also being supported by our optimization program.
Great. Makes sense. And on CCF, I'm a little -- or how should we interpret the commentary around demand or market conditions? In the report, you stated that volumes were negatively affected by reduced consumer demand for chocolate, while later you say that operating profit per kilo was driven by continued favorable market conditions. How should we interpret these 2 statements?
Great question. Good opportunity to clarify. So when we look at the intel that we have on the Chocolate & Confectionery market as all, meaning the consumption by consumer, what is procured in retail, right? We have seen Chocolate & Confectionery producers be -- call it, the market being down some 2%, 3%, everything else equal. What we then supply, what is our addressable market? We have built up a portfolio -- a broad portfolio of plant-based oils and fats ingredients to the Chocolate & Confectionery space, where part of that is replacing cocoa butter, which is an important ingredient with a cost-efficient functional ingredient that we have.
And that's where you see the favorability in terms of market conditions because with high cocoa prices and so forth, we see customers being even more interested in trying to offset cost and achieve good functionality in their products, hence, looking at some of the products that we have like cocoa butter equivalents. And we have seen a good growth within our portfolio on these products. So if that makes sense, you could see the end consumer market being slightly soft, but also positive trends within our addressable market with our solutions.
And we can also add that within CCF, it still grows by 1% despite the market conditions that Johan talked about. On the overall, we see CBE is doing well and growing more than the 1% we see for the segment in total.
Okay. Makes sense. And are you seeing this reduction in demand for chocolate globally? Or is it linked to any specific geographies that's performing worse than others?
Well, I think the -- I mean, we are certainly active. So our total chocolate and confectionery business area is delivering to the global chocolate and confectionery industry. We supply the big players in this industry. So everything that we sum up here is kind of the sum of the global trends. Then, of course, there could be regional differences within the industry. We've seen Americas being slightly down and the others are growing. Again, we show 1%. So it's around that. But more importantly, when we look at the chocolate and confectionery market as a whole, you have seen over many years that there is a positive trend around Chocolate & Confectionery. There's still a great opportunity going forward with a large part of Asia consuming a lot less chocolate than in the rest of the world.
So when I speak to experts or colleagues in the industry, if you will, there is a positive view on a continued good development and growth for chocolate and confectionery products out there. However, in the short term, you have seen this spike in cocoa prices having an impact on inflation. Of course, that could create short-term reaction. But long term, we are positive to the total market growth in this sector.
Okay. And a final follow-up, if I may there. So the volume growth was 1%, yet you state that CBEs grew faster than that. How should we think about sort of the volume development for the segment going into 2025?
Well, it's a sum of what we just discussed, I think. So we need to look for what is the end consumer demand, which drives the production of Chocolate & Confectionery products in total. And then also realizing or coming back to what I said before, within that, AAK has a strong position on being able to replace cocoa butter. So that's an opportunity given the certain market conditions. And we have a strong position for chocolate and confectionery ingredient as a whole. So looking into '25, keep an eye on consumer demand, how that develops and then knowing that AAK has a strong position within the market.
The next question comes from Benjamin Wahlstedt from ABGSC.
I would like to follow on the previous question on chocolate demand. You mentioned 2% to 3% lower chocolate volumes in the quarter. Could you specify if this is across both chocolate bars and chocolate snacks? Or are you talking about like chocolate as an ingredient here? Or what is this metric?
Thank you. So when we comment, we comment on the total chocolate and confectionery market, which includes chocolate bars, snack bars, et cetera. And we speak about -- when we said, down, we mean the end consumer market. So in essence, consumers go into retail to buy snacks. When we then talk about our volumes...
Perfect. And...
Go ahead. Go ahead.
Yes. So what I'm after is, I know your exposure to chocolate or your total addressable market in chocolate bars and chocolate snacks differ quite a lot. And in perhaps tougher consumer times, it's not unreasonable to think that consumers would opt for like chocolate snacks, especially if cocoa prices are way up. So are there differences between categories in these lower -- 2% to 3% lower chocolate volumes is basically what I'm after?
Yes. Great question, right? So it's difficult for us to see the full granularity of that, and I don't have that full data. But yes, there are differences and especially with regards to our addressable market. So keep in mind, if you see a chocolate product, which says 100% cocoa and so forth, there is no AAK ingredients inside. However, when you go to an energy bar or a snack bar with different kinds of ingredients included, could be fruits and nuts and filling layers and wafers and coating chocolate, that's where our prime market is, where we have lots of solutions going into that, including the possibility with the CBEs to also replace a bit of pure cocoa butter into a chocolate bar.
So the combination of the chocolate demand plus the total market for snack bars, et cetera, is our addressable market. So yes, there are differences. And one should also keep in mind that we have been, call it, resilient or strong in scenarios in the past as well because within a downturn, upturn or inflationary environment, consumers might opt for what is called trading down, choosing something that is maybe less expensive on the shelf. But in those products, there could be even more of the AAK ingredient or addressable market, if you will. So sometimes difficult to give you the precise answer on what's moving up and down, but we have seen a strong resilience and a good play for AAK in different environments.
Perfect. That's clear. And then another question on -- or could we have another update on your views of the balance sheet as well, low leverage post Q4. Can you share anything new on M&A? Or what are your thoughts on your balance sheet in general, please?
Yes. I would have loved to comment on M&A, right? We have a strong balance sheet. We're certainly capable of executing a good M&A. I say good M&A because we're not going to throw good money after bad opportunities, if you will. And I've mentioned this before, our market is not a fragmented market with lots of transactions ongoing in any time period. So we are active. We are searching for M&A. We're looking at good investments for internal capacity improvements or efficiency improvements in our optimization program. That's the primary focus for our capital allocation.
As we mentioned in the Capital Markets Day, if we are not executing M&A or organic growth investments, and we still continue with a very strong balance sheet, we will consider other capital allocation mechanisms like dividend going forward. But for the time being, we have a strong balance sheet. We're not nervous about that. We proposed a strong good increase of the annual dividend, and we are still looking for M&A. But again, it's not a fragmented market, so we cannot just flip the switch, but we are active.
The next question comes from Priya Patel from UBS.
I've got 2 -- 3 questions. So firstly, on Food Ingredients. Volumes were negative and part of that was due to weakness in the dairy business. Could you explain the dynamics that you're seeing within like the Asian dairy market and just color on whether this weakness has continued into Q1?
Thank you. First, I'll take the latter part of the question. We do not give guidance or forecast. So I will not do that on dairy specifically within Food Ingredients either. In Food Ingredients, we have a broad portfolio where we sell to bakery, dairy, infant formula, plant-based dairy, et cetera, right? So it's quite a broad portfolio. And we saw a bit of weakness in dairy, a bit of weakness in EMEA, which is Asia, Middle East and Africa. However, when you look at the volume decrease, again, that was primarily driven by low sales of some low value-added nonspecialty rapeseed solutions. So in total Food Ingredients, quite confident we had a strong quarter, and that's what you see on the margins as well that we had a good sale of the products that we focus on.
Okay. And then just on the non-specialty oils, are these products that you've removed from the portfolio as part of the internal optimization program?
In this case, not. It's rather active decisions on what we sell and what we don't sell and so forth. But we have had during the course of the last couple of years, active deselection of products that we don't sell anymore or we reprice them to have a decent margin to continue them. So that's part of the optimization program. But in this specific case, it was our choice not to sell these products in the market.
Okay. And then finally, just in the Chocolate division. So you mentioned that CBEs grew more than 1% in the quarter. Just wondering if you can disclose what percentage of the overall chocolate volumes are CBEs?
So thank you for the question. I fully understand it. This is where we draw a line in the sand, if you will, and not detailing that in order to keep confidentiality and our position in the market. We're not alone. We have strong competitors, even though we have a very, very strong product portfolio. So I'm going to pass on that. But just to give a bit of color to it, when looking at CCF specifically, let's not forget that we grew -- we have been growing 8% in Chocolate & Confectionery in 2024 as a whole compared to 2023. The growth was 1% in the quarter, but again, with a very positive mix. So we've been able to continue to grow the cocoa butter equivalents, the high value-added products, somewhat softer volumes on the other ingredients. So all in all, a very positive development and good momentum still for AAK in Chocolate & Confectionery.
The next question comes from Alex Jones from BofA.
I've got a couple, but I'll start back on chocolate. You talked in response to one of the prior questions about this gap between the end market and your performance that's now a couple of percent. Do you think that's the full effect of cocoa reformulation activity? Or as customers continue to look at their products, do you think there's potentially greater outperformance you can deliver versus the end market into 2025, especially in Q1 when some of the annual contracts reset in January?
Thank you. Again, I will not comment specifically on Q1, but I'll just repeat some of the dynamics in there. So do we believe that there is still reformulating activities ongoing? Yes, we do. Is there -- is the cocoa prices still high? Yes, they are. The industry, our customers, they are certainly interested in better functionality, better cost efficiency in their ingredient list. So I forecast that to stay. There's going to be a good demand for high-quality ingredients that could help offset cost and be competitive versus cocoa butter as an example.
Whether that has an impact on Q1, Q2 and so forth, it's a combination. Of course, the end consumer markets, who is reformulating what and when and also our ability to deliver to those volumes and our competitors' behavior, right? So it's always that mix. I just want to repeat that. But from a long-term perspective, again, we are positive to the development of the end market, and we're also positive to the development and opportunities that we see within our addressable market.
Great. And then following up on the non-specialty oils in Food Ingredients. Should we expect that type of volume optimization to continue to weigh on the volume growth of the division going forward? Because I suppose at the Capital Markets Day, it sounded like you are now a little bit more focused on driving volume growth. So I just wanted to check if that is the case or if there's still some of this optimization that we can expect in future quarters and years?
Yes. Great question, right? And there will always be tactical decisions one quarter to another. Overall, we maintain our strategy. We are fully committed to deliver on our 2030 aspiration. That stands for Food Ingredients as well. There is more optimization to be done. But yes, we are also focusing on driving volume. Again, for the products, the opportunities that we see. So I'm glad that we do not, as an organization, just give after on price and sell to any price just to get volume. That's not the task for the organization. It is to really looking for that value over volume and a healthy balance.
Now in this case, we're addressing more of an active decision not to move volume and find other opportunities instead. And that's not the systematic trend that one would extrapolate, but could happen in a quarter, could happen in another quarter. If we see an opportunity to move volume to a decent price, we'll sell it, but we will also be -- keep on being tactical and trying to always optimize the end result. And you see that. So in this case, it was a positive opportunity to drive margin versus lower margin volume.
And these type of products are also more price sensitive than the more complex and high-end products. And therefore, back to Johan statement before, that also allows us to make some judgment calls of what we want to take on or not quarter-by-quarter. And demand varies as well, of course, right, on these type of products.
Yes. Understood. One final question on the restructured sourcing agreements that you talked about. Could you just give a little more detail about sort of why there's a negative impact initially and what the offsetting benefits might be in the longer term?
Well, as I mentioned, the -- we do see in these new updated contracts that we have a financial and operational benefit. So primarily financial benefit is the end of it, EBIT-wise. But we also then see some negative impacts, primarily in this case, due to some transportation timing and also on the payables side. So we've adjusted our purchasing on these 2 contracts to enable us to have a better price versus the working capital effects mainly on payables.
The next question comes from Oskar Lindstrom from Danske Bank.
A couple of questions from my side. First off, on volumes. I mean you said you had sort of weaker volumes due to replacing simpler products with more complex products. Do these more complex products require more of your sort of capacity in the system? So what I'm trying to get at is, has this switch meant that you are -- have a higher or a lower or unchanged capacity utilization? And where are you now in terms of capacity utilization and available capacity given the Q4 product mix? So that's my first question. Should I take the other ones or...?
We can start with this one. To some -- if you look at it from an overall perspective, yes, there is a difference, right? So some of the higher-margin products are higher-margin products because we have refined them to that. We have blended them to that. So they can take longer time in some processes. They could also utilize more processes in the factory in order to get to the end ingredient with that specific functionality. So yes, some of these solutions take more of the capacity, if you will. However, I also want to be clear that in Food Ingredients, this volume drop that we referred to on a less refined low specialty rapeseed, it's not a capacity free up or capacity drain. So that's kind of excluding that. It's more like a tactical decision.
So I wouldn't call that -- I wouldn't extrapolate that too much, and there's no drama in that. Then when it comes to pure capacity, it's also dependent on some of the chocolate solutions have specific processes, infant formula solutions to some extent, the specific processes. So we need to go line by line in order to give you a statement on capacity. There's no big change from today, quarter 4 versus quarter 3, quarter 2 last year. We still have some headroom in many of the processes, and there's a bit tighter in others and where it's tighter, we have an ongoing debottlenecking agenda and investment agenda to keep on raising demand. But quarter-to-quarter could obviously be that we sometimes hit the ceiling, but then we may be sure that we have a debottlenecking and an investment agenda to increase capacity over time.
Okay. On CCF and the -- do you have any deeper understanding of the reasons for the weakness in the U.S. I presume chocolate market? And is there any indication that it was driven meaningfully by a wider use of weight loss drugs? Or were there other factors behind the weakness in the U.S. chocolate market demand?
I do not want to speculate at all in relation to weight loss drugs and so forth. And our general -- I've had that question many times before, right? I personally do not think that, that has a link to it at all. These drugs are there for reasons that others can comment. I think in the longer term, we are human beings. We will continue to eat food. We will continue to snack. We hopefully will have a good balance on exercising and keeping our health, right? And with that, I hope that the population of the world will continue to be healthy and stay healthy and live longer.
But when you break it down to Chocolate & Confectionery, Americas, what we see is the end consumer market data. We don't have the full visibility, and we don't get the full transparency on that from our customers. What we have seen and you have all seen it is, of course, there is an inflation ongoing towards the shelf in retail with increased cocoa prices. There's no doubt about that. What is the exact impact in quarter 4? Difficult to say whether it came from X or Y, but inflation is there. Again, we have seen a positive trend for chocolate and confectionery for many years. Many of the industry representatives that I talk to are positive to the long-term development of chocolate and confectionery end markets total. And within that, AAK has a strong position with our solutions for filling fats, et cetera, and last but not least, the cocoa butter alternatives that we have.
My final question is on acquisitions versus greenfields. And for some time, I have been saying that you're looking for acquisition targets. And I guess you've got some geographical white spots in Southern Europe and parts of the U.S. as well, I guess. Could you opt for greenfield investments in these regions if you don't find anything soon? Or is it not big enough of a problem that you can wait sort of several years to find suitable acquisition targets rather than go ahead with a greenfield?
I rephrased the question to be more generic than Southern Europe or Americas. Would we opt for greenfield? Yes. That is exactly what we did in China and in Brazil. We were looking for targets and didn't find suitable acquisitions, and we then decided to go greenfield in China and go greenfield in Brazil. We then added additional investments in China for infant formula production, which was a greenfield factory on the site that we already had. And we are certainly considering that in regions where we would like to grow.
We made a brownfield, you could call it, acquisition on the Southeast Coast of India recently, where pretty much we bought an old factory that we are going to move into AAK standards, if you will, in order to grow in India. That is like -- it's a brownfield technically, right, but it's greenfield investments going in there. So that's how we operate. So I would love to do a good M&A again. There's not that many out there, so we need to just be patient and be ready. In the meantime, we evaluate any organic opportunity that we would see benefits AAK.
But it should also be said that if we do have good targets, but it will take some time to realize them, we will work that pipeline before making a decision on a greenfield given that it adds capacity in what in most places are mature markets.
The next question comes from Joan Lim from BNP Paribas Exane.
Just 3 questions from me, please. So one, you reiterated your ambition to outgrow end markets. Can you help us understand what is the end market growth you are seeing? I know you said for Chocolate & Confectionery Fats, but what about Food Ingredients in areas like bakery, dairy and special nutrition? And what are some of the drivers of volume growth that will help AAK outgrow end markets? This is my first question.
Thank you. So over time, we've seen low single-digit growth in plant-based oils and fats across the board, right? So you look at Food Ingredients, a mix of bakery, dairy, infant formula, plant-based alternatives to meat and dairy, and so we've seen a low single-digit growth. And we are saying that we're going to target growing faster than that, but we add to the markets, the segments where we -- that we address. So we're not saying that we're going to grow faster than the commodity type market, but we are going to try to grow faster on the specialty oils and fats market. What is it that will make AAK successful? It's to remain where we are. So we are a downstream specialized multi plant-based oils and fats ingredient player.
So we will remain focused on delivering functional fat ingredients, sustainable oils and fats ingredients and nutritious oils and fats ingredients that enable our customers to either shift from can be an animal-based solution they have today or shift from cocoa butter to the cocoa butter equivalent, et cetera. And that's our focus. That is where we try to differentiate. If you raise above a bit and look at overall trends, there is no doubt that in order to really have an impact on climate, we -- in the world, we need to get food right. So to get food right, there is no doubt that we need to continue to optimize every single source of food that we have, be that a plant-based source or animal-based source.
But long term, there is no doubt that we also need to look at the mix of what we eat the diets. And we have a quite positive view that in the long run, with the focus on science-based targets, avoiding being dependent on fossil-based ingredient in the nonfood products, but also arriving to a more healthier, nutritious and sustainable diet or food plate over the week. There should be a positive impact on plant-based oils and fats. And that's where we focus our innovation to enable healthy, nutritious and affordable food ingredients based on, in our case, plant-based oils and fats. So that's a short-term and a long-term perspective.
Okay. That actually fits quite nicely into my second question. So on RFK Jr. So potentially, if he gets appointed as Health Secretary, what impact would increase regulations on seed oils or on fats have on AAK? And I guess a link to that on U.S. tariffs as well, AAK sources about 25% of your palm oil from Latin America and Mexico is about 12% of group sales. Are you worried at all about the impact of U.S. tariffs?
We obviously follow that just like everyone else is doing at the moment. I would like to be crystal clear on the majority of what AAK sells in a region is also produced in the region. So if we look at from that perspective, and we zoom in on the U.S., a majority of what we sell in the U.S., we also produce in 1 of the 3 plants that we have. Now you bring up the raw materials, which is correct. Do we import raw materials into the U.S.? Yes, we do. But this is where we then look at what we have been seeing over many, many years. There is a volatility in raw material markets. We've seen it under COVID and with disruptions in supply chains around the world. We are very capable to manage raw material fluctuations.
So if you look at the raw material, if there is a tariff impacting raw material, at the end of the day, it will only impact the cost of the raw material, and we are well equipped to manage that and also price our products to that. That would likely lead to inflation maybe on the shelf in retail in the U.S., but that's something that we have dealt with before. You've seen fluctuations on palm before. We've seen fluctuations on soy or coconut before. So no, not that worried about that. Back to the first part of the question, we do not speculate on anyone being elected or not and what that would have. Allow me to still answer the question on oils and fats ingredients. I think, first of all, we have a broad portfolio.
There will be a continued demand for food and food solutions within the oils and fats space, whatever the regulation is, it could maybe shift demand towards X or Y, but we have a broad portfolio, and we are very strong at helping customers reformulate. So let's not speculate on what kind of regulation will come or not, but we're very capable on reformulating and offering a very strong portfolio. And maybe last but not least, I think we, in general, should be very careful on kind of black and white opinions on what is good or bad. It needs to be fact-driven. I think it's up to us as an industry to always put facts on the table, strive for healthy nutritious ingredients to affordable prices, and that's going to remain our focus going forward. So many of these kind of that would be seen as disruptions often turn out to be an opportunity for us.
But I just want to be clear on the first point as well. Our operations in the U.S. have almost no imports from any of the countries that the U.S. are now discussing tariffs on, right? Most of it is sourced through Southeast Asia. What we source in Latin and South America is used for our production in Latin and South America, such as Brazil, Mexico, but also in Colombia. So the impact of the tariffs as we look through our operations, is minimal as it stands right now.
That's very helpful. And my last question is just going back to your optimization program. At the end of 2023, you had said that AAK successfully addressed about 60% of capacity across your 5 larger sites. And at that time, there was a remaining 40% to address across your smaller and medium units. Can you provide more color on how much more is there to go on improving capacity in 2025?
Yes. We've done a few more plants in the AAK footprint. So we're doing another 3. We're on the third one since we made that comment in addition to where we were then. So without having a number in my head, I think we're sort of above 70%, closer to 75% of the installed capacity. And we still continue to find good improvements. But I also mentioned during the CMD, we're also making then a second run. We mentioned our facility in Port Newark as an example, where we had one of the first deep dives.
We're now going back there again and doing a review on the opportunities that weren't fulfilled in the first run. So it's more of an irritative sort of process to find additional opportunities, and we think there's more to be gained also in a plant like Port Newark, where we were 1.5 years, 2 years ago with one of the first deep dives. So it's ongoing. We've been through then, let's say, above 70% of the installed capacity all in all, but we're also going back to take a look at the plants we've been to with learnings from the later plants in the process, if you will.
So you're still confident on -- you had said you expect EBIT growth to grow 10%, of which 70% will be led by optimization. You're still confident that this can help your EBIT growth ambition?
We are still very confident in all the activities that we do internally, such as the deep dives, also our procurement efficiency programs, the cost program that we also announced that we're going through right now, we're confident that, that will contribute to our aspiration in 2030 of plus SEK 3 per kilo, yes.
Now we have time for the last question. The next question comes from Victor Hansen from Carnegie.
A couple of detailed follow-up questions. I'll begin with chocolate. I was hoping that you could give us some color on how much of your CCF volumes are to relatively new customers, meaning those that have switched to you recently due to the high cocoa prices versus your existing customers?
Okay. Thank you. Sorry, but we don't disclose exactly that, but I can only confirm that, yes, we have received new customers on the back of that, and we have received, call it, the opportunity to supply into existing customers, but on new products where they have not used, for example, cocoa butter alternatives before. They have now addressed that and gave us an opportunity to reformulate into those products. So I can confirm that, that's a positive impact, but we will not disclose exactly how much.
Okay. Fair enough. And a second question on chocolate. Could you say now with the high raw material prices and volatility also for palm oil, for instance, could you say how much cheaper your CBEs are currently versus cocoa butter?
Again, I fully understand the questions on why, but we refrain from -- if I did that, you would know exactly -- and I would offer our competitors the opportunity to back calculate our pricing. So I'll not do that. There is still a gap, right? So the cocoa prices are much higher. The cocoa butter prices are much higher than the price in our products, and we price our products against our margin targets as well as being forced to, of course, deal with the competitive landscape because we're not alone. So what we sell our products for is a function of what we can deliver in terms of value to our customers, but also what our competitors offer.
So that's where it is, but it's a big delta to cocoa butter prices versus, call it, the CBE market price of today. But even before this spike that we saw, we had a good offering still at those levels where we were back then. So -- and then with regards to fluctuations like palm oil and others, I encourage you to look at some of the material from the Capital Markets Day and some of the trends for AAK over the last 5, 6 and more years. There has been ups and downs in raw material prices. We have a very strong organization that is used to and capable to manage fluctuations and with that, still growing our margins and growing our earnings. You can backtrack the fluctuations in raw materials for 5 years and then you look at our overall trend in terms of earnings, and you'll see that we've been able to fly through disruptions, if you will, with good stability.
And we should also add and reiterate what we've said before. This is not just a price game. This is also functionality in the product. So we offer something else than what you can get from a cocoa butter. With our equivalent, we also add functionality in there, and that's also very important to our end -- to our customers and to the end product.
And when we invest in innovation and new products, product development, that's what we target, longer shelf life, better functionality, taste, et cetera, nutrition, health, all of that we bring into our innovation pipeline also within Chocolate & Confectionary.
That's perfect. And a final question for me. On M&A, now that your profitability levels have moved higher, so you've expanded the gap versus smaller competitors profitability-wise. Would you consider paying a bit more for your targets in order to perhaps get them over the finish line?
That becomes a great question, but somewhat hypothetical, right? We would -- we are always assessing any opportunity. And we are, of course, active. I've said that we are active in the market, so we're obviously having dialogues. And we will make a call based on current market conditions, the -- what we see as an opportunity, synergies and et cetera. It's not as easy to say we're prepared to pay more, but it's always good with a strong balance sheet and a good currency.
We want to, of course, pay fair market value for any acquisition and try to avoid to pay for something that we add to the business after the acquisition because that's our knowledge and know-how, and that's how we and have in the past, improved on the acquisitions that we bought and built them into what AAK is today.
I should probably add to that question, I would like to send a signal that we are very active and looking and we want to, but we also have a solid process and a solid team that avoids us making a decision, which wouldn't be beneficial for the company, right? So I would also send that signal and feel confident that we're really trying to evaluate making -- throwing good money after good opportunities, not vice-versa.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Thank you so much. Thank you again, everyone, for listening in. We have had a solid finish to a very strong 2024. For the year, volumes are up 2%, and we have had an absolute EBIT growth of 19%. Thank you so much for listening.