AAK Report 2010 Contents

14-21 AAK’s three business areas

Cover: Comments by the CEO 10-11 Food Ingredients Food Ingredients is AAK’s largest business Arne Frank describes the year, which laid the Food Ingredients is AAK’s largest business area. AAK is a leading supplier of vegetable foundations for stronger expansion abroad. area. There is growing demand from custom- alternatives to the bakery sector. Product The Group management team has been ers, particularly end-consumers, for healthy development is carried out in close partner- strengthened, and AAK continued its drive products. In response, AAK is focusing on ship with customers. towards sustainable development with respect trans fat-free alternatives and on sustain- for the world in which it operates. able development. The commitment to the Roundtable on Sustainable Palmoil is a good example of this.

6-7 AAK’s vision, strategy and goals Through its expertise in vegetable oils, AAK will develop products with a value content, so that the AAK products will be the first choice for customers, and will add value to the products. 12-13 Business model AAK’s operation is based on processing natural raw materials obtained primarily from West Africa and Asia, but also from Europe and the American continent. The raw material is processed in ten produc- Chocolate & Confectionery Fats tion plants located throughout the world. AAK is a leading producer of cocoa butter replacement fats, in a world where the grow- ing demand for cocoa-based confectionery is coming up against a limited supply of cocoa beans. West African shea has become a sig- nificant raw material, and its unique proper- ties are proving useful in cosmetic products, which are part of the business area.

8-9 Summary by the Chairman of the Board Melker Schörling looks back on 2010.

Contents 2 32-33 Presentation of the Board of Directors

Technical Products & Feed The benefits of vegetable oils as lubricants for forestry machinery are clear, when the focus is on sus t ainabil it y and re sp e ct for the natural 24-25 Employees environment. Vegetable-based lubricating Personnel issues are handled with care, and oils do not damage the natural environment are regarded as absolutely crucial by the from which they originate. Group management team. The company can Animal feed is another part of the busi- not grow without its personnel and their en- ness area’s activities. The greatest advan- gagement. Social responsibility with respect 34-35 Presentation of the Group tage is guaranteed salmonella-free fodder for individual rights is an essential base for Management Team for livestock. the company’s future progress.

36 Glossary

37 Address

26-31 Corporate Social Responsibility These issues are becoming increasingly im- portant to business success in an ever-more complex world. In 2010, AAK issued its first separate report based on an international 22-23 Risks and threats index – GRI, which measured the company’s A business such as AAK’s is exposed to a activities from a sustainability perspective range of risks and threats. The long interval against other companies’ operations. A separate between harvest and production, demands report will also be issued in 2011. a careful approach to currency exposure. The c omp any rel ie s on re al ible transp o r t s, and it s major involvement with the food sector makes care in all stages of production vital.

3 AAK Report 2010 AAK in 60 seconds

AAK has unrivalled experience – more than 100 years – of vegetable oils. On the basis of this experience, the company proc- esses oils for a broad spectrum of applica- tions. AAK’s customers are concentrated in the food, confectionery and cosmetics industries, but the company also supplies environmentally low-impact lubricants for a range of applications, including forestry machinery. Rapeseed meal is used as an ingredient in feed for livestock.

The vast majority of products are used as inputs in the industrial sectors, but an increasing proportion are also sold as own-brand products to consumers.

New products are developed in close partnership with customers, and AAK’s products shall be the first choice for cus- tomers, whose production relies on high value-added vegetable fats. The products are used as substitutes for dairy fat and cocoa butter, as trans-free solutions for fillings in chocolate and confectionery products, as well as in the cosmetics industry.

An example of high value is the company’s vegetable fat for infant formula, whose properties closely mirror mother’s milk.

AAK’s products come from the vegetable kingdom and are renewable. This means that they have a minimal impact on the environment. A fine example of this is AAK’s lubricants, especially for forestry machinery. The waste products discharged by the machinery to the eco-system during the production process have no harmful impact on the environment. AAK is organised in three business areas; AAK has purchasing and sales offices in Raw materials are obtained from areas Chocolate & Confectionery Fats, Food several key locations around the world. such as Asia and West Africa. AAK is Ingredients and Technical Products & committed to sustainable development Feed. The parent company, AarhusKarlshamn and is one of the founders of RSPO, the AB, is a Swedish-registered joint-stock Roundtable on Sustainable Palm Oil, and The Group’s head office is in Malmö, company based in Malmö. The company’s GreenPalm Ltd. Through these initiatives, Sweden, with excellent access to Kast­ shares are listed on NASDAQ OMX, Stock- AAK has contributed to the extraction of rup International Airport. holm, in the Mid Cap segment, Consumer palm oil through natural agricultural de- Commodities sector. velopment, without over-exploitation. Production plants are located in Denmark, Mexico, the Netherlands, Sweden, the UK, Uruguay and the US.

AAK in 60 seconds 4 2010 in summary

A new corporate programme, “AAK subscribe to the equivalent number of Bo Svensson took over as Business Area Acceleration”, has been launched. The new shares in AarhusKarlshamn AB. Manager Technical Products & Feed. programme is based on our existing spe- Senior executives and key personnel have cialisation strategy, but with sharper focus invested in a stock options programme Karsten Nielsen was appointed Chief on practical implementation, concentrating at market price, involving a total of just Technology Officer (CTO). on growth and efficiency and people in over 1,000,000 options to date. the medium and long term. Edmond Borit, Managing Director AAK Arne Frank took over as President and South America, Jean-Marc Rotsaert, Presi- Prioritised growth areas on the AAK CEO on 6 April. dent AAK USA and Octavio Díaz de León, Acceleration project: Bakery, Dairy, CCF, Managing Director AAK Mexico also joined Infant Nutrition, FoodService, Merger & David Smith was appointed Vice President the executive team. Acquisition, Fast-growing economies like European Supply Chain. China and Brazil. Particular emphasis AAK published its first printed Sustain- on productivity and efficiency, and on Anne Mette Olesen was appointed Vice ability Report, under the heading AAK in Human Resources. President Human Resources, Commu- the World. nications and CSR. An extraordinary general meeting of the In November, analysts, the media and company approved the Board’s sugges- Torben Friis Lange was appointed Business investors were invited to a capital market tion on the introduction of an incentive Area Manager Chocolate & Confectionery day in Stockholm. Over 60 participants programme for senior executives and key Fats. were given a detailed review of the Group’s personnel, by issuing up to 1,500,000 administration and future prospects. stock options entitling the holders to

Operational key ratios (SEK million unless otherwise stated) 2010 2009 2008 2007 2006

Gross contribution 3,625 3,744 3,644 3,134 2,723 Gross contribution per kilo, SEK 2.51 2.61 2.36 2.12 1.90 Operating profit 824 827 851 653 455 Operating profit per kilo, SEK 0.57 0.58 0.55 0.44 0.32

Earnings per share, SEK 14.15 10.14 10.80 8.53 6.32 Return on operating capital, % 13.1 12.6 11.0 10.9 7.8

Financial key ratios, including IAS 39 and non-recurring items (SEK million unless otherwise stated)

Net sales 14,808 15,884 17,207 13,005 10,929 Operating profit 882 1,475 151 646 342

Investments 335 316 396 712 501 Operating cash flow after investments 426 1,952 -370 -1,083 -325

Net debt 2,634 3,186 5,112 4,273 3,026 Equity/assets ratio, % 34 35 25 28 33 Net debt/equity ratio, multiple 0.83 1.08 2.15 1.75 1.31

Earnings per share, SEK* 15.26 20.19 0.04 7.67 4.18

* Earnings per share have been calculated using a weighted average of the number of outstanding shares during 2010. Definitions, see page 55 of the Anuual Report. Annual General Meeting, see page 62 of the Anuual Report.

5 AAK Report 2010 AAK’s vision

“The first choice for value-added vegetable oil solutions”

The vision consists of three important parts:

First choice The first choice for our stakeholders: customers, employees, suppliers and shareholders. We aspire to be our customers’ preferred choice which requires us to be competitive, have consistent quality standards, and to be an ultra reliable supplier. First choice is also about time. We aim to have a fast time-to-market of new, value-added solutions.

Value-added solutions We sell complete solutions, not just products. Our value-added solutions are based on our expert knowledge of customer needs. A value-added solution is not just a final product but also a complex bundle of services, such as customisation, problem-solving, market advice, delivery systems, technical support and whatever else is required to meet our customers’ needs. We continually strive to increase our share of value-added solutions relative to bulk products sales.

Vegetable oils This is our core business. Our business is built around the world of vegetable oils. We offer a wide range of products and services related to vegetable oils.

AAK’s vision 6 Strategies and goals

AAK’s fundamental business strategy is From bulk to more speciality products increasingly to develop products, which meet a growing demand for quality and high-value content, with the aim of reducing dependence on bulk products Speciality fats for with relatively low margins. Bulk - Chocolate - Infant Nutrition AAK works in close partnership with its - Bakery customers. Together, we analyse needs - Cosmetics - Dairy and market potential to ensure that AAK - FoodService can offer attractive solutions that improve Speciality the customers’ competitiveness and offer better business opportunities. This strategy has resulted in a number of new products, which have generated business opportunities in the bakery sector and the services aimed at meeting customers’ needs confectionery and cosmetics industries. for marketing, transport and development AAK’s products are marketed to consum- solutions, where AAK’s extensive expertise in ers only in exceptional cases. A significant the area of vegetable oils can, in partnership part of the company’s vision of being the with the customers, result in new products first choice is to offer a strong package of and new business opportunities.

7 AAK Report 2010 Summary by Melker Schörling, Chairman of the Board

Expansion through organic growth and acquisitions

In the past 12 months, AAK has undergone growth on a worldwide basis. We, the mem- financing, in case of rapid fluctuations in raw- major changes. A flatter organisation and a bers of the Board, take an extremely positive material prices. It is important to remember larger executive team have shortened deci- view of AAK’s expansion plans, which involve that these price fluctuations affect only cash sion paths, and this has brought a new vitality organic growth, with coordinated investment in flow, and not results. to the organisation. This is characteristic of production capacity, and acquisitions. Today, Arne Frank’s approach. At the same time, AAK is in an excellent position to undertake Sustainability there has been a new injection of energy into additional acquisitions in several geographi- Sustainability issues are something the Board projects aimed at improving efficiency at the cal markets. is taking extremely seriously. For many years, two plants in Karlshamn and Aarhus. It is all Financially, AAK is in its strongest position AAK has been involved in a number excel- about ensuring that the company maintains in a long time, with excellent cash flow and lent sustainability improvement projects. One an appropriate cost level compared with its sound financial agreements in place. But example of this is the shea we buy from European competitors. I am pleased to say we must remember that the company’s cash West Africa. We have an on-site presence in that this work is progressing according to flow is sensitive to changes in raw materials the villages, with a large local organisation plan, and that there is a clear understand- prices. The higher the prices of raw materi- which purchases the shea nuts gathered by ing at both plants of the need to tackle the als are, the more money we have tied up in the local population from trees growing wild. competition head-on. inventories and accounts receivable. This This is a first-class example of how we are We are extremely fortunate to operate in an means that it is essential for AAK to have a really contributing to sustainable growth in industry, which has experienced continuous reserve at all times, in the form of available an extremely poor part of the world.

Summary by the Chairman of the Board 8 Management issues Continuous growth in the industry stable demand for AAK’s products really is. One of the most vital tasks we carry out in the As I mentioned above, AAK is operating in Under Arne Frank’s management, the chal- Board is finding the right CEO and manage- an industry which is experiencing continu- lenge is now to take the company to the next ment team. If these positions are filled by the ous growth. Of course, the customer pattern level, with profitable expansion in both the right individuals, they will surround themselves is always changing, and this is where it is product range and markets. with competent people and provide them essential that suppliers are able to keep up with the motivation to drive the company and perhaps even anticipate future demand. Finally forward. I have long held the view that, in Demand from our customers has, however, Finally, I would like to say a few words about addition to offering competitive wages and also remained stable, something which was the company’s performance in 2010. As the bonuses, it is a clear advantage if managers clearly evident after the economic disaster Chairman of the Board and a shareholder, also own shares in the company. This ensures we saw a year ago. Many companies in I am, of course, never satisfied with the that the Board, the shareholders and the other industries were hit by a dramatic fall results. But, on the other hand, I appreci- management have a shared interest in the in sales, but this was not the case for AAK, ate that the work commenced in 2010 by company’s success. With this in mind, we have even though some markets experienced a AAK will, in the long term, create a much recently launched an options programme. slight downturn. What has become clear to more competitive and dynamic company. I stress that no-one receives anything free of me is that the Board has realised just how I would like to take this opportunity to thank charge. Everyone is expected to buy options all employees for their efforts in 2010 and at the market price. If AAK performs well, their enthusiastic commitment to making these options will become valuable when AAK an even better company. the holders, within a five-year period, can exercise the option to purchase shares. If the company performs badly, the options will be worthless. Melker Schörling

9 AAK Report 2010 Comments by the CEO, Arne Frank

Financial year 2010 was the year in which we laid the foundations for future expansion

The operating profit in 2010 was in line with Earnings per share improved by SEK 4.01 Senior executives and a number of other our expectations, and was slightly above mar- or 40 percent, from SEK 10.14 to SEK key personnel invested at market price ket expectations. A special mention should be 14.15. in a stock options programme. made of the management in the business area Food Ingredients reported a record high During Q4, AAK began to use hedge ac- Chocolate & Confectionery Fats, who managed operating profit for the full year. counting. This means that, with effect from to stabilise an operation which came under Chocolate & Confectionery Fats did well Q1 2011, there will be no IAS 39 effects significant pressure at the start of the year. in coping with increased competition. to report. Other operations showed positive trends in Technical Products & Feed demonstrated In addition, during the year, we secured volumes, market shares and profitability. a strong recovery. our capital requirements for several years The rationalisation programme in Scan- forward, on advantageous terms. We are The operating profit for the full year was dinavia proceeded according to plan. now well-placed to deal with both high raw SEK 824 million (827). Adjusted for dispos- material prices and an exciting expansion als and at fixed exchange rates, operating of our operations. profit improved by 6 percent to SEK 855 million (810). Customer relations We continued to work in partnership with all our most significant customers and to identify solutions for them. In doing so, we contin- ued to improve the value content, customer benefit and margins of our products. This is fully in line with our established specialisa- tion strategy. AAK has years of knowledge of vegetable oils and fats, as well as their applications, and this is what has made the company a world-leader. The development of products with unique properties, in partnership with our customers, continues to generate new business opportunities for them as well as for AAK. Our vision emphasizes that AAK should be the first choice for customers

Comments by the CEO 10 seeking value-enhancing solutions involv- which focuses on twelve important initiatives more international management team, a ing vegetable oils. in the area of “Growth-Efficiency-People”. much flatter organisation and streamlined On the basis of our existing specialisation decision paths. Sustainable development strategy, which remains unchanged, and now The management is working more closely Today, sustainable development has become with AAK Acceleration, we are prepared to with both our customers and our employ- increasingly important, both to AAK and its take the development of the company to ees. In my opinion, we have also achieved customers. They are accountable to end- the next level. a much healthier balance of competent and consumers, and we must be able to guar- Controlling factors will be customer ben- forward-driving leaders promoted from inside antee an operation which takes sustainability efit, customer focus, growth, efficiency, our the company, a couple of individuals with seriously at all levels. One example of this concern for all our skilled employees and highly-relevant experience recruited from is our commitment to the Roundtable on issues affecting the world around us. We outside AAK, who have performed extremely Sustainable Palm Oil and the GreenPalm will concentrate more on organic growth in well in previous assignments and, finally, operation. AAK continues to hold a leading areas where we can offer unique products or some very capable individuals from “the old position in RSPO and to operate GreenPalm unique expertise. We also aim for expansion guard”. Together, we are now managing “One Ltd. The programmes are intended to provide in markets relatively new to AAK. AAK” with a high level of agreement on what end-consumers with a solid guarantee that We must also continue to drive forward and we should focus on, and how. the products used have been produced using focus on issues surrounding efficiency – our With this strong platform as a basis, we will sustainable and environmentally-appropriate competitors are not resting on their laurels. At continue to create an outstanding company in methods. Our customers have provided us the same time, we will coordinate operations the area of speciality oils, with great respect with excellent feedback on these efforts, and to ensure greater productivity. Purchasing for the demands placed on all of us by a we intend to continue to involve ourselves and product development are two areas of modern society, with the aim of generating in CSR issues to allow AAK to continue this particular importance here. greater customer benefit, growth, improved important trend, for the benefit of all. But none of this will be possible without profitability and new opportunities. motivated and committed employees, and AAK Acceleration for this reason, some of the twelve AAK Ac- Finally Special mention should also be made of the celeration initiatives concentrate on our highly- Finally, I would like to thank all our custom- efforts during the year aimed at defining more competent and skilled personnel. ers who have trusted and worked with us clearly, and with greater focus on action, for many years, our highly-competent and the best way for AAK to progress, as well as New internationalised organisation committed employees, as well as our share- how we can make the most of AAK’s unique As part of these efforts, we have also car- holders who believe in us and are making expertise to exploit fully all the opportunities ried out an extensive organisational review, this journey possible. open to the company. to ascertain which global organisation will This work has emanated from an AAK provide the best support for our strategy and corporate programme, “AAK Acceleration”, AAK Acceleration. The result is a significantly Arne Frank

11 AAK Report 2010 The business model

AAK’s core business is vegetable oil. Monounsaturated fat is found in almonds, Malaysia around 1875. Palm oil production The principal business idea is to pur- olive oil, rapeseed oil and other vegetable really took off after the Second World War, chase raw materials from around the oils. Monounsaturated fat is suitable for and each palm tree produces bunches of up globe and process them in AAK’s ten cooking, since it copes better with heating to 3,000 fruits. Palm oil is extracted from the production units in Europe, North than polyunsaturated fat. pulp, while kernels are used in the production America, Mexico and Uruguay. Polyunsaturated fat is found in shellfish, of palm-kernel oil. Today, palm oil is the most oily fish such as salmon, mackerel, her- common vegetable oil in the world. ring and sardines, as well as in vegetable Raw materials come exclusively from the oils made from rapeseed, sunflower seed, Responsibility for the world in plant kingdom, and include well-known soya and corn. Omega-3 and Omega-6 which we operate products such as rapeseed, palm, soya, are two types of polyunsaturated fat. With the exception of palm oil, most vegetable shea, sunflower seed and olives. A large Trans fats are a particular form of unsatu- oils must be hardened to make them suf- proportion of these materials comes from rated fats. They occur naturally in milk and ficiently solid. Palm oil is, consequently, an Asia and West Africa. fat from ruminants, but are also formed important raw material for AAK. The positive AAK’s business model is based on exploit- when vegetable fat is hardened. effects on human health must be weighed ing the properties of vegetable oils. against the risk of overexploitation in the grow- Palm oil and shea are important elements The development of the properties of fat ing areas. In partnership with WWF (Worldwide of the company’s strategy of developing prod- involves continuous work to offer the mar- Fund for Nature), AAK is one of the initiators ucts with a higher value added, primarily for ket healthier products. Trans fats increase of the Roundtable on Sustainable Palm Oil use by the food, confectionery and cosmetics the risk of cardiovascular disease. Opinion (RSPO), with representation at committee industries. is divided over whether natural trans fats level. As such, AAK supports sustainable AAK has a deep and wide-ranging knowl- have the same negative properties as the production methods for palm oil. In 2007, edge of fats. This is the result of decades industrially-produced equivalents. In most AAK formed a subsidiary with the aim of – actually more than a century – of operation countries, the authorities are promoting re- organising trade in RSPO certificates. The in an area essential to human life. duced consumption of both saturated and company has an exclusive contract with RSPO trans fat. to manage the trade in certificates. We need fat. It is part of all the cells AAK uses a wide range of raw materials to in the body. Our bodies need it to pro- develop, in partnership with its customers, duce hormones and other important World-wide production 2010* types of fats aimed at meeting increasingly substances. diverse requirements. Vitamins A, D, E and K are fat-soluble. Palm oil 46 This means that the body’s ability to ab- Soya oil 39 sorb these vitamins is dependent on the Raw materials gathered presence of fat. Rapeseed oil 23 Fat provides us with energy. Every gram from all over the world Sunflower oil 12 of fat contains nine calories. Carbohy- Rapeseed from Northern and Central drates and proteins contain four calories Europe. Palm-kernel oil 5

per gram. Palm oil from Asia and Latin America. Coconut oil 4 One-third of our daily energy requirements Olive oil from Southern Europe. has to come in the form of calories from Soyabean oil from the US and South Peanut oil 4 fat. For adults, this means a daily fat intake America. Olive oil 3 of 60–90 grams. Sunflower seed from Eastern Europe. 0 10 20 30 40 50 Shea from West Africa. * Preliminary figures. Tonnes (million) Fat is a substance essential to life. There Corn primarily grown in America, are different types of fats. They are primarily Eastern and Southern Europe. divided into four groups. Saturated fats and Coconut from Malaysia and the trans fats increase a person’s cholesterol Philippines. level, while unsaturated fats lower it. While we must continue to respect the world Saturated fat is found in animal products around us, there is increasing demand for such as butter, cream, milk, meat and more sophisticated fats. Much of the raw vegetable oils from tropical plants, such materials supplied to AAK’s refineries is made as coconut oil and palm oil. Saturated up of rapeseed, palm and shea. fats are recognised by the fact that they The oil palm is a native of West Africa, but remain solid at room temperature. was introduced as an ornamental plant in

The business model 12 From rapeseed field to AAK’s factories Rapeseed fields Storage AAK

Harvest

Rapeseed

Rapeseed is a plant 750-1,750 mm high, with World-wide production of rapeseed in MT bright yellow flowers and green leaves shot MT with blue. The oil is extracted from rapeseed 25 contained in small seed pods. 20 Rapeseed is one of our oldest oil plants, EU-27 15 and has been in use for thousands of years. Canada 10 China In India, evidence has been found that it was India 5 used a couple of millennia before the birth 0 of Christ. Today, rapeseed is an important 2010/2011 F 2009/2010 2008/2009 2007/2008 2006/2007 Source: OilWorld source of vegetable oil, and its popularity has increased enormously in the past ten The past ten years have seen an increase processing plants. Since many of our sup- years. in the use of rapeseed oil in technical applica- pliers now have their own rapeseed storage The leading rapeseed producers are tions, but the largest and most dramatic in- facilities, rapeseed is now sold and delivered Europe, China, India, Canada and Australia. crease has been in the biodiesel industry. almost continuously all year round. Rapeseed is a profitable crop, since the oil The diagram below illustrates the grow- Rapeseed is normally delivered by road content of the seeds is relatively high, around ing year for rapeseed in Europe, China and or sea. When a delivery reaches AAK’s fac- 40-44 percent. The rapeseeds are crushed Canada. tory, the first step is to analyse the fat, water to extract as much as possible of the oil. In Sweden, the growing year starts in and waste contents. If the shipment is not Its low level of saturated fatty acids makes August/September, when autumn rapeseed approved after these initial tests, it is sent rapeseed oil a healthy product. is sown, and in April with the sowing of spring back to the supplier. If it is approved, it is Rapeseed meal is a very important by- rapeseed. Harvesting starts in July, and in unloaded from the ship or truck. Further product, which is used as a source of protein late July/early August, most of the rapeseed analyses are carried out, and the rapeseed in animal feed. harvested is delivered to stores and on to the is then stored in our silos.

The rapeseed calendar

Europe: Europe: Weather-sensitive period. Spring-sown oil crops harvested, Europe: China: autumn oil crops sown. Spring oil Harvest season. Canada: Europe: crops sown. Canada: Harvest season. Growing season for autumn Europe: China: Spring oil crops sown. China: oil crops, weather-sensitive Autumn-sown oil Harvest season. Oil crops sown. period. crops can cope with Europe and Canada: China: outwintering. Weather-sensitive period. Oil crops sown.

January February March April May June July August September October November December

13 AAK Report 2010 Food Ingredients Food Ingredients (SEK million) 2010 2009 2008 Net sales 8,927 9,702 10,413 Gross contribution 1,952 1,906 1,708 Gross contribution SEK per kilo 2.26 2.12 1.82 Food Ingredients is AAK’s largest business area. 2010 was a highly suc- Operating profit 475 427 319 cessful year, despite the global recession. One of the business area’s main strengths is its ability to develop customised solutions fast in response to Volumes, health trends in the industry. thousands tonnes 861 898 940

Food Ingredients has continued to defend The market is increasingly demanding Gross contribution per kilo its position as the natural choice for veg- traceability and long-term sustainable pro- etable oils for a broad customer base in a duction methods. As one of the founders of (SEK) market which remains volatile, and in the RSPO (the Roundtable on Sustainable Palm 2.5 face of extremely tough competition. One Oil), AAK is working actively with businesses 2.0 of the business area’s prime strengths is and voluntary organisations to develop sus- its ability to respond quickly and adapt to tainable methods for palm oil production. 1.5 changes and new requirements in the food Through its subsidiary, ­GreenPalm Ltd, processing industry. The Group’s extensive AAK has developed a system for trading in 1.0 know-how and constant development work certificates for RSPO-certified, sustainably- mean that it can respond rapidly to new produced palm oil. The certificate system is 0.5 trends by offering new products quickly. essential if the proportion of certified palm

0.0 Food Ingredients’ ambition is to utilise the oil is to increase, and the trade in certifi- 2008 2009 2010 constant changes in the market, with the cates has, to date, been responsible for 75 aim of generating continued growth. percent of the total trade in certified palm oil. GreenPalm has an exclusive agreement Trends in the food processing with RSPO for the trade in certificates. industry AAK also offers segregated certified palm The trend towards healthy food continues to oil. AAK’s plant in Hull was the first refinery Operating profit dominate developments in the food process- in the world to be approved by RSPO for (SEK million) ing industry. Rapeseed is one of the most delivery of segregated certified palm oil. 500 important raw materials for AAK, and the The plant was also the first to offer this to company buys virtually the whole Swed- customers at the end of 2008. 400 ish rapeseed harvest. The composition of The demand for certified palm oil is ex-

300 rapeseed oil, with the lowest saturated fatty pected to grow, and several major customers acid content of any oil and a high level of have specified dates by which they aim to 200 healthy Omega-3, makes it an increasingly switch to certified palm oil. sought-after food ingredient. The company has purchased certificates 100 The demand for reduced trans fat and for palm oil used in own-brand products saturated fat levels is driving development for catering kitchens. 0 2008 2009 2010 for products with greater value-added, and this benefits AAK. The company’s customers A tough market are responding to calls from consumers for Food Ingredients has several major competi- trans fat-free alternatives, as well as prod- tors, some of which are extremely active ucts containing lower levels of saturated fat. in both bulk, speciality and niche product A relatively new trend is functional foods, segments. The most important of these are Volumes an area where AAK enjoys an important ADM, Bunge, Cargill, IOI Loders and Fuji (Thousands tonnes) advantage, since it can offer healthy al- Oil. In Europe, there are, in addition, more 1,000 ternatives based on purely vegetable raw than 120 local refineries which together materials. have a real impact on the competition in 800 The fastest-growing market segment in the market. The market as a whole is the the food processing industry is convenience subject to fierce competition. In certain 600 foods, a product group which includes ready segments, AAK does, however, benefit meals and snacks, which require speciality from its cutting-edge position in product 400 oils in their preparation. More and more development, particularly with reference meals are consumed outside the home, to dairy fat alternatives, oils and fats for 200 and this trend is expected to continue over the bakery industry and speciality fats for 0 the next few years. infant formula. 2008 2009 2010

Food Ingredients 14 Customised solutions The products can be divided into three main categories:

The most basic consist of bulk oils, and this is where most of the competitors are found. The next category consists of more customised solutions, which meet spe- cific customer requirements in respect of function, adaptation to production methods, health and marketing issues. The third category consists of speciality products, which are primarily aimed at the following segments; - Dairy. - Bakery. - FoodService (Restaurants and catering kitchens). - Infant formula.

AAK aims to offer its customers products with greater added-value, and increase its proportion of speciality products. At present, the spread between bulk and speciality prod- ucts is relatively even. Since transports are responsible for a relatively large share of overall costs, Food Ingredients is, to a great extent, a regional operation, although the market for speciality products with high added value is more global than that for bulk products. The flexibility of the business area as a market player starts in the production plant. The complex infrastructure has been designed with careful regard for both efficiency and flexibility. This is something which permeates further. The authorities in, for example, United InFat is an increasingly popular ingredient the whole value chain, including delivery of Kingdom, as well as the potential introduction for the infant foods industry. This product, raw materials, warehousing, refining, packag- of a tax in Denmark, are driving a trend for which was developed in partnership with ing and distribution to customers. increasing demand for polyunsaturated fats Enzymotec and is sold through Advanced AAK’s product solutions are aimed at add- among producers and consumers alike. Lipids, has become a component of growing ing value to the customers’ end product. significance to infant formula. It is a product Consistent and high quality is, of course, also New Products with an exciting potential for the future. important, as is a high level of product safety. Akomix LS is a fat for the production of ice- In both these areas, AAK is well ahead of the cream. It contains less than half the amount Knowledge transfer at AAK industry as a whole. A genuine understand- of saturated fat of the bulk products. Another In 2008, AAK started utilising the opportunity ing of applications, an ability to adapt the is Akotop NH100, a non-hydrogenated fat to combine the skills of employees in different operation quickly to changes in the market for vegetable cream. countries in development projects, and using and close collaboration with customers have The concept provides AAK customers this as a resource as and when needed. The earned AAK an excellent reputation as a sup- with the opportunity to offer their customers competence transfer has proved successful, plier of products with high added value. healthier products. It is yet another example and in 2010, knowledge of flaked fat and In recent years, AAK has developed numer- of how AAK develops new products in close FoodService was transferred from United ous new products. For all markets, the focus collaboration with its customers. One example Kingdom to Mexico. This contributed to an has been on lowering saturated fat levels. is Essence™, which was launched for the US increase in interest in AAK products among The focus on these products is increasing bakery industry. a new group of customers.

15 AAK Report 2010 In United Kingdom, the focus was on de- Mexico Regional markets fending existing market shares. The company’s In the Mexican market, AAK is now one of the Europe principal operation is the plant in Hull, while largest companies in vegetable oils, despite The plants in Denmark and Sweden make AAK AAK Bakery Service is based in Oldham and the high level of competition in the country. a leader in the Nordic market. The company AAK Foods in Runcorn. AAK has an excellent reputation for quality, offers the food industry a comprehensive range One of the most important customer seg- service level and the ability to develop new of products. The acquisition of Rapsona in ments is the bakery industry. AAK Bakery products. Sweden in 2008 confirmed AAK’s position Services offers an extended product range to Food Ingredients Mexico can look back as a supplier of vegetable oils within the the industry and this has improved AAK’s rela- at yet another successful year, even though FoodService segment. tions with some of the major players on consumption within the country remained AAK’s position as one of the leading suppli- the market. relatively stable. The trend for Mexico to ers of speciality oils to the infant foods industry The Prep brand is a market leader in United become a production base for markets in was confirmed through the investment in a Kingdom in the segment dealing with oils the US continued. The production plant in new production unit in 2008. In combination for restaurants and catering kitchens. This Morelia has a central location, right in the with the Dutch plant, the plant in Sweden range includes high-quality vegetable oils middle of the major food producers. The is the base for the company’s efforts in the for deep-frying, and the sale of Prep prod- health trend, which characterises the global infant foods segment. ucts increased as a result of the launch of food industry continues to make inroads in AAK enjoys a historically strong position new products. The Lion brand continued to Mexico, and multinational producers are en- as a supplier for the food industry in Central grow in 2010. AAK Foods’ principal success couraging this by using healthier oils and and Eastern Europe. The year was dominated is, however, in the production of own-brand fats in their products. by intensive competition and the effects of products for customers, which have been Food Ingredients offers customers a broad the global financial crisis. very well received. range of products suitable for most food indus- try operations. The most important production range is oils and fats for the bakery industry, snacks, margarine and dairy products.

USA In 2010, AAK’s products were in great de- mand in the US market for industrial raw materials. Based in Port Newark, New Jersey, in the densely populated north-eastern part of the country, AAK enjoys an excellent position in comparison with most of its competitors. The North American market for vegetable oils remains attractive, with growing health awareness. Demand continues to increase for vegetable oils free from trans and hydrogen- ated fats. The next challenge is the trend for the lowest possible amounts of saturated fat. Food Ingredients is very well positioned to satisfy this trend. AAK’s principal strength lies in its ability to stay one step ahead of modern product trends and customer expec- tations. Excellent customer service, strong customer relationships, highly-qualified and skilled technicians and flexible production methods are what make AAK USA a market leader which can deliver solutions tailored to customer needs.

Food Ingredients 16 Chocolate & Confectionery Fats Chocolate & Confectionery Fats (SEK million) 2010 2009 2008 Net sales 4,474 4,564 4,878 Gross contribution 1,394 1,508 1,653 Gross contribution Business area Chocolate & Confectionery Fats produces speciality vegetable SEK per kilo 4.68 5.96 5.47 fats used as cocoa butter replacements in chocolate products and fillings, Operating profit 341 394 547 as well as speciality products for the cosmetics industry. For several con- secutive years, the market for chocolate fats experienced strong growth, but Volumes, this slowed down somewhat in 2009. The market has, however, recovered thousands tonnes 298 253 302 in 2010.

AAK enjoys a world-leading position. The total production of chocolate-based confectionery Gross contribution per kilo products on the world market is around 7 million tonnes. (SEK) AAK develops and markets products based on vegetable fats (lipids) for use in the 6.0 cosmetics industry. The trend towards natural raw materials in the cosmetics industry, in combination with AAK’s unique products, has produced significant growth in the seg- 4.5 ment in recent years.

3.0

1.5 Speciality products for the chocolate 0.0 and confectionery industry 2008 2009 2010

CBE (Cocoa Butter Equivalents) is guarantee greater stability in fat bloom and responsible for the greatest growth in temperature, while others provide better the Chocolate & Confectionery Fats consistency and optimised crystallisation area, with an historical annual growth properties. Operating profit AAK’s customer offer includes filling fats, in double digits. For 2009, a slight (SEK million) fall has been noted as a result of fats for chocolate coatings and moulded 600 chocolate products, as well as speciality the global recession, but the market 500 recovered in 2010. Adding CBE to fats for spreadable products. chocolate improves its properties, such 400 Focus on health and as providing greater heat stability. sustainable growth 300 This has opened a market in which One of the strongest trends is the increasing 200 AAK has proved successful. importance of health aspects. Consumers are becoming increasingly aware, and this 100 The increasing CBE production capacity has resulted in increased demand for healthy 0 on the world market has had a negative fats. AAK, with its flexible and, at the same 2008 2009 2010 impact on prices, but AAK has been able time, targeted product development, is at to offset the effects of falling prices with the forefront of this trend, and can respond greater volumes. At the same time, AAK well to the new consumer requirements. has started a world-wide campaign to en- The most important trends are towards courage greater use of CBE. trans-free fats and reduced levels of satu- Volumes rated fats. AAK can offer both trans-free CBR Market trends and new products and low-saturated and trans-free filling fats, (Thousands tonnes) In addition to growth in the CBE area, AAK and has also new, improved coating and 350 has successfully introduced new CBR (Co- moulding products which do not require a 300 coa Butter Replacer) and CBS (Cocoa But- hardening process and contain lower levels 250 ter Substitute) products. AAK has a broad of saturated fat. product range of specialised and customised In 2010, Frost & Sullivan, a global analysis 200 cocoa butter alternatives, which makes this and consulting company, presented AAK 150 a multifaceted business area. with the “2010 European Product Differentia- 100 AAK’s products do not just replace cocoa tion Excellence Award” in the “Confectionery 50 butter. They also add new properties to Ingredients” category, for the development 0 the end products. Many of AAK’s products of Deliair NH. In winning this award, the 2008 2009 2010

17 AAK Report 2010 Speciality products for the chocolate and confectionery industry

properties of AAK’s products were compared The estimated total annual quantity of shea excellent contacts it has already established with those of its main competitors, on the in West Africa is 1,800,000 tonnes. Since in the German market. basis of the following criteria: around two-thirds of the fallen fruit remains The company’s position in the rapidly- unharvested by the local population, and is growing Latin American market has improved Unique function/functionality left to rot on the ground, there is significant further, since AAK are now able to supply the Quality/Complexity. growth potential. Around 500,000 tonnes is market with products from the local plant in Customisation. consumed locally, while a further 200,000 Montevideo (Uruguay). Adaptation to market needs. tonnes reaches the export market. An increasing demand for cocoa butter Brand Perception with respect to the Actions taken by AAK in West Africa, in- alternatives in the US will be met from the unique product. cluding the establishment of the company’s production plant in Port Newark (USA). own representatives, has resulted in a stable Since its launch in September 2009, sales of situation, which allows AAK to respond well Closer to the customer Deliair NH has increased steadily, and AAK to the rapidly increasing demand for CBE. During the year, AAK’s worldwide sales and is involved in several promising projects in product organisation expanded further, with partnership with customers in most of the greater representation closer to customers. world’s regions. This was supported by a strong vision aimed There is significantly greater customer focus at improving AAK’s world-leading position on sustainable palm oil. AAK is monitoring in vegetable fats for the chocolate and customer needs closely, and has intro- confectionery industry. duced a segregated, sustainable palm In this process, the compre- oil for the confectionery industry. hensive global network plays AAK’s broad product range is the an important role in AAK’s result of years of focused develop- contact with the market. It ment carried on in the company’s not only acts as a link to own laboratory, as well as close the different geographical collaboration with customers. markets, but also guaran- Consequently, the development tees that the company can work is closely associated with the monitor global trends and market, with the aim of remaining changes. one step ahead at all times. AAK’s AAK is constantly expanding mission is to deliver innovative solu- its global presence through its tions which reflect market trends and, market activities, while, at the same therefore, meet customer needs. time, increasing the value-added of AAK Academy invites customers to take part its product portfolio. The chocolate and in the work carried out at the laboratories at confectionery market is largely dominated by AAK’s plants, to provide them with ideas and global manufacturers. Five producers – Mars, understanding of the properties of oils and Nestlé, Kraft/Cadbury, Ferrero and Hershey fats, and to involve them in specific product – have 60 percent of the market in total. development projects. Geographical expansion Every stage of the value chain requires While focusing on geographical expansion with specialist expertise – from the purchasing Shea the principal raw material the aim of covering all parts of the world, AAK raw materials to marketing and sales. The production of a broad speciality range continues to work closely with its customers AAK has unique expertise, and its ambition of cocoa butter replacement and filling fats and to offer improved services and shorter is to work in close partnership with customers requires a large number of exotic raw materi- lead times. Distributions centres around the to expand competence in this area. als. Shea is the most important of these. Most world form an important part of this expansion Chocolate & Confectionery Fats products of AAK’s products are based on or contain strategy. The plan is to open new offices in are produced in and delivered by all AAK fat extracted from shea. Other significant raw more countries, and AAK will, in particular, factories worldwide. This global presence, materials are palm and palm kernel oils, most focus even more on the Asian market. including the company’s own plants, dis- of which come from South-East Asia. The recently-opened office in Düsseldorf tribution centres and partnerships, allows Shea trees grow wild in West Africa. Shea is an example of AAK’s European expansion AAK to deliver its highly-consistent product is harvested by the local population, who and clearly demonstrates how AAK is improv- range to its customers in the most efficient collect the fallen fruits. These are purchased ing its ability to deliver products to existing way possible anywhere in the world. locally and are then traded on a market where and potential customers specialising in oil industrial purchasers meet local sellers. and fat solutions by further developing the

Chocolate & Confectionery Fats 18 Speciality products for the cosmetics industry

Market trends The number of consumers is increasing as the skin care and hair care products market broadens. At the same time, there is a grow- ing interest among male customers. New geographical markets are gradually open- ing up in the emerging economies, and this means that the potential customer base will also increase over time.

Speciality products for the cosmetics industry In parallel with this, there is a continued strong trend of health and environmental awareness, with a larger number of custom- ers increasingly demanding healthy and safe products. These customers are looking for new products free from synthetic, animal and mineral oil-based ingredients.

Natural raw materials The range is based on various natural and renewable raw materials. The beneficial prop- erties of shea butter have made it the most sought-after raw material in the cosmetics industry. The softening and moisture-retaining properties of shea butter provide an attractive skin sensation, while its anti-inflammatory function adds valuable bioactivity. Other exotic raw materials include mango, illipe, almond, sesame, apricot and coconut. The rapeseed grown in Sweden also contains high levels of valuable bioactive lipids, which are excellent for sensitive skin products and baby care.

Product development and the future The product range is undergoing constant development. A significant proportion of the Under the Lipex® brand, AAK develops of the world’s foremost specialists in the area. development work is carried out in close and sells vegetable fat-based products All AAK products are based exclusively on consultation with the company’s customers. for use in skin and hair care products, vegetable oils, unlike the synthetic, animal or This consultation covers both technical and make-up and various types of hygiene mineral oil-based products commonly used commercial aspects, and provides AAK with products for washing, showering and in cosmetic and skincare products. a thorough understanding of each customer’s bathing. The Lipex® family includes individual needs and wishes. everything from softening products Global market At present, much of the product develop- to products with biological effects. The products are global, and are sold all over ment is focused on producing products with the world. The main competitors are global certain specific functions and active substanc- In addition, there are products for companies such as Cognis and Croda. Half es. The aim is to create new ingredients which parenteral nutrition. of the cosmetic products market is repre- combine basic functions, e.g. moisturising sented by ten global players with brands or cleansing properties, with more advanced AAK has worked with lipids for the cosmetics such as L’Oréal, Proctor & Gamble, Unilever, functions, such as protection against UV-rays industry for many years, and possesses a level Beiersdorf (Nivea) and Estée Lauder. and environmental contaminants. of experience, which makes the company one

19 AAK Report 2010 Technical Products & Feed Technical Products & Feed (SEK million) 2010 2009 2008 Net sales 1,407 1,295 1,578 Gross contribution 279 261 238 Gross contribution SEK per kilo 0.99 0.93 0.79 Business area Technical Products & Feed is an excellent example of the role that Operating profit 97 82 56 vegetable oils play in society with respect to the environment and health. The business area covers lubricating products for logging machinery, where vegetable oils minimise Volumes, the problem of discharge to the natural environment, to animal feed ingredients. thousands tonnes 282 282 301 Candles made from renewable fatty acids have lower carbon dioxide emis- sions than paraffin candles. Vegetable lubricating oil spilled from a chain- saw is biodegradable. Dairy cattle can be fed guaranteed salmonella-free, Gross contribution per kilo vegetable-based feed. (SEK) 1.0 Fatty acids – glycerol The fact that the products in the Binol 0.8 AAK produces fatty acids sold under the range are also based on renewable raw Tefacid brand, as well as glycerol. Both materials further reduces their environmental 0.6 types of products are extracted by splitting impact. Even though the total market for the fat molecule. lubricants is shrinking, the bio alternatives 0.4 Fatty acids are primarily used by the are gaining increasing market share. 0.2 chemical engineering industry, where they are turned into a number of products, in- Feed 0.0 cluding amines and esters. These are used The customer offer consists primarily of vari- 2008 2009 2010 as inputs in many application areas, e.g. ous product groups in the protein and feed paper chemicals, soap, detergents, rubber fats areas. When rapeseeds are pressed, and plastics. rapeseed oil and rapeseed meal are ex- One example of products, which ex- tracted. The rapeseed meal is processed clusively consists of fatty acids is stearine in the Karlshamn plant, and is marketed Operating profit candles. under the ExPro brand, a product which (SEK million) Glycerol is used in such diverse products improves the effectiveness of the feed 100 as cosmetics, explosives, paint and food. protein and increases the milk yield from The majority of AAK’s customers operate in dairy cattle. This product is sold mainly to 80 the chemical engineering industry. the Nordic feed industry, where the Feed Oleon, KLK Oleo Europe and Emery are business sector enjoys a leading position 60 AAK’s main competitors in the European in the market for bypass proteins. market in fatty acids and glycerol. The struc- The Feed’s range also includes both solid 40 ture of the market is continuing to change, bypass fats and liquid feed fats. Most of

20 a process which will result in fewer but the feed fats are used as ingredients in larger players. cattle feed and, to some extent, in pig and 0 poultry feeds. 2008 2009 2010 Environmental-friendly AAK is able to provide guaranteed technical oils salmonella-free products – a guarantee AAK develops, produces and markets en- which makes the company unique in the vironmental-friendly technical oils, such as industry. metal processing fluids and lubricating oils AAK’s prime rivals are ADM, Bunge, for the metalworking industry, as well as Cargill, Berg & Schmidt, as well as small, Volumes hydraulic and chainsaw oils for the forestry regional producers. (Thousands tonnes) and contracting industries, under the Binol 350 and BioSafe brands. The market 300 Increased environmental awareness in The business area utilises some of the

250 society and in the market has had a positive residual products from the production of impact on sales. The replacement of mineral food oils carried on by AAK’s other opera- 200 oil with Binol products by the metalwork- tions. These are products with low margins, 150 ing industry has generated many benefits, which cannot carry high transport costs. 100 including improved lubrication performance, The market is, therefore, regional, primarily reduced overall cost and, not least, a sig- in Northern Europe. 50 nificantly better working environment. 0 2008 2009 2010

Technical Products & Feed 20 Tefac In the fatty acids and glycerol area, AAK is the leader in the Nordic market, where most of the products are sold. The company has continued to secure its strong logistics posi- tion in the Nordic region. Other important markets are Germany, Poland and Russia. Fatty acids make up around 85 percent of sales, with glycerol representing the remain- ing 15 percent.

Binol The majority of products are sold straight to end-users in the Nordic market under the Binol and BioSafe brands. In other mar- kets, AAK collaborates with various partners and the products are sold under their own respective brands.

Feed 98 percent of feed raw material sales take place in the Nordic region, where AAK is the market leader. Despite the steady fall in the number of dairy farms, the market for feed raw material has remained largely static for many years. In 2010, the dramatic drop in profitability for dairy farmers was felt strongly, and the total market for cattle feed fell by 10-15 percent. The drop in some types of feed for high-yield dairy cattle was even greater. AAK’s volumes fell less than those of the total market, and could also be offset by a cut in costs. Bypass proteins are proteins which are not digested in the rumen of dairy cattle. The body can, therefore, absorb this pro- tein, resulting in significantly lower feed costs during rearing.

21 AAK Report 2010 Risks and threats

AAK’s operations are constantly exposed exposure. This safeguards the company’s plants, and problems with machinery can to risks, threats and external factors margins and AAK’s results are, therefore, not have a major impact. AAK has taken out which impact on the company. The dependent on currency and raw materials insurance to cover a loss in margins. company has adopted a proactive ap- price risks on signed sales contracts. proach to business intelligence, with Since many of the raw materials are pro- Political instability the aim of anticipating changes in the duced at considerable distance from produc- Operating globally always carries risks, but it factors which affect the company’s tion plants and markets, transport costs are can also be a stabilising factor. Although AAK operations. Plans and policies are ad- an important factor, not least through the largely operates in mature markets in the US potential impact on margins of the grow- and Europe, a significant proportion of the justed continuously to counteract any ing demand for environmentally-acceptable company’s growth is generated in developing negative effects on the company. AAK transport methods. Competition is fierce. markets, which are vulnerable to political uses active risk management, such instability. AAK also operates in Eastern Eu- as hedging raw material prices and The processing industry rope and Asia – regions which are, to some currencies, to reduce the risks the AAK operates as part of the processing in- extent, characterised by instability. On the company faces. dustry. The company is not primarily driven other hand, AAK is a well-established opera- by volumes, but improvements in results are tor in these areas, with plenty of experience Raw materials achieved through an increase in the proportion of handling the relevant issues. In addition, Harvests are weather-dependent. A year of of speciality products with higher margins than AAK has adopted a strategy of deliberate poor harvests drives up prices, while a year the relatively low-margin bulk products. risk management. Political instability can of successful harvests reduces them. Most Capacity expansion aimed at increasing impact on currencies and, to some extent, of the raw materials are traded on the inter- total volumes and meeting growing demand on exchange rates. national world market, and raw materials are has a relatively long planning horizon. AAK Global operations also involve a number purchased in foreign currencies. Essentially, must analyse potential growth well in time, of other risks, including: this means that AAK has significant currency but can, in the meantime, balance produc- and raw materials price exposure. AAK has tion among its ten plants, with the aim of Trade barriers. adopted a strategy of active risk manage- achieving greater proximity to markets for Inflation. ment, which means that as soon as a sales specific products, as well as covering swings Changes in national or regional legisla- contract has been signed, AAK will hedge the in supply and demand. Important special- tion, e.g. the introduction of protective equivalent currency and raw material price ity products are produced by the individual tariffs and taxes, which prevent AAK from operating in a free market.

Risks and threats 22 Environmental and health-related legisla- These include confectionery products and Political measures also pose a risk. Ac- tion. cosmetics, as well as products for the food tive involvement in issues relating to CSR, processing sector, such as the bakery industry, Corporate Social Responsibility, is, therefore, Changes in the competitive which generate higher margins. becoming increasingly important to the in- situation dustry as a whole, to forestall legislation on The sector in which AAK operates is un- The health debate issues which are a natural development of dergoing structural changes. At the same There is an ongoing debate on healthy al- human requirements. time, these structural changes provided the ternative foods. For example, the debate on opportunity for the merger between Aarhus trans fats has been quite heated on occasion. High level of competence among United A/S and Karlshamns AB. It is a sec- AAK’s product base is made up of vegetable management and employees tor which has existed for just over a century, oils taken straight from the natural world. The business operation is affected by raw and which, fundamentally, is dependent on The problem of trans fats has, among other material prices, transport costs, energy prices, natural products. There is great pressure things, resulted in a greater use of raw ma- interest rates and exchange rates. AAK has for more intensive development, including terials such as palm oil. Palm oil is hugely adopted policies and rules as to the risks which demands for sustainable, ethical production, significant to AAK. It has a broad application may be taken and, as explained above, has with producers accepting responsibility for area – from chocolate to foods and cosmet- adopted a comprehensive risk management social issues and the impact of their operations ics. It is a great alternative to hardened fat. strategy. The company’s management and on the environment in general. AAK oper- It is semi-solid at room temperature, which employees have long and sound experience ates on the basis of both an organic growth makes it an attractive alternative in the pro- of reacting quickly to changes in external fac- strategy and a selective acquisition strategy. duction of many different foods. By using tors, and of adapting the operation and the A strong balance sheet has laid the financial palm oil, trans fats can be eliminated from company’s range of products and services foundations for future acquisitions. There is many food products. to the customers’ needs. tough competition in the industry. Several AAK has a great ability to adapt its product During the year, management has been competitors operate in the global market, and range quickly, to reflect the latest trends in the strengthened by the injection of new resources deliver large volumes of bulk products with health debate. This is largely due to the fact into Human Resources, Communications and limited margins. AAK is responding to the the company works with all types of vegetable Investor Relations. At the same time, the competition by focusing more on products oils and can reformulate its products fairly Group management team has been expanded with better margins and greater value added. easily to meet customer needs. to achieve shorter decision paths.

23 AAK Report 2010 Employees

AAK has employees all over the world

AAK is a global operation. In addition specialisation strategy, which is es- to 2,101. Most of the reduction has been to ten plants in seven countries, AAK sential for the company to achieve at our European units, while the number of employees can be found working in its business targets. employees at our non-European units has sales organisations covering multiple increased. markets. The company also has local At the start of 2010, AAK had 2,137 employ- Ongoing employees training is essential to employees involved in the purchasing ees. The majority, 96 percent, were employed our operation. In 2010, there were 39,000 of raw materials in many countries on permanent contracts, and 76 percent had training days, which represents, on average, and continents, including Africa. They fixed contracts, depending on agreements 17.3 days per employee. signed in different countries. The remainder A safe workplace is something which AAK are playing an increasingly important were temporary employees and trainees. Dur- takes extremely seriously. For this reason, role in the implementation of AAK’s ing the year, the number of employees fell the company carries out continuous safety

Employee category by age distribution Permanent employees by age

% % 100 Age 100 Age

>50 >50 80 80

40-50 40-50 60 60

30-40 30-40 40 40

<30 20 20 <30

0 0 Management White-collar Blue-collar USA Europe West Africa

Employees 24 checks at plants across the world, and works At the plants, the management systems Internal communication hard to eliminate potential risks. AAK’s efforts involve extensive safety awareness training, Internal communication is essential to the in the health and safety area are based on adoption of targets, identification of risks and operation, since it is the key to ensuring that national legislation, international regulations, continuous following up of results. all AAK employees understand the objec- comparisons with the standards for the in- The management systems at AAK’s plants tives of the company. This is important for dustry and AAK’s own requirements. provide a framework for the identification employee motivation and for their ability to 103 accidents at work were registered by and active elimination of health and safety contribute to the operation. There are many the Group last year, and these resulted in risks, reduction in accident risks, compliance channels for internal communication, but a loss of 740 working days in total. Days of with health and safety targets and a better the most important ones are managers, our absence for other reasons totalled 14,259. approach to safety issues. global intranet, general employee meetings The majority of employees were offered New employees and temporary summer etc. Time and the message to be communi- swine flu vaccination. employees attend a safety course, and every cated determine the best channel. Internal AAK has adopted working environment year, personnel at all AAK production plants communication is also a project within AAK and safety management systems. receive first-aid and fire response training. Acceleration.

Employee category by gender Permanent employees turnover by age

Number Number 1,200 Men 60 1,000 50 Women 800 40 30 600 20 400 10 200 0 0 <30 30-40 40-50 >50 Age Management White-collar Blue-collar

Employee gender distribution

% 100 Women

80 Men

60

40

20

0 USA Europe West Africa

Employee distribution by age Employment contract type Employment type 4 % 16 % 7 % 8 % 30 % 96 % <30 2 % Standard Full time

30-40 10 % Temporary Part time

40-50 Trainee

>50 Consultant

26 % Employment 28 % 73 % pending

25 AAK Report 2010 CSR – AAK in the world

CSR structure CEO and Group Management

Production Management Group CSR

Raw materials acquisition Group Manager CSR

Local Local Local Local Local Local Local Local CSR group CSR group CSR group CSR group CSR group CSR group CSR group CSR group Aarhus Montevideo Morelia Zaandijk SE UK New Jersey West Africa DK UY MX NL USA

Karlshamn Runcorn Benin

Dalby Oldham Ghana

Hull Burkina Faso

Mali

Ivory Coast

Economic development and growth ternationally-recognised conventions and The organisation demands respect for the world guidelines, including the UN’s Convention on At Board level, the task of monitoring follow- around us Human Rights, the ILO’s conventions, OECD up and reporting of issues relating to Corpo- AAK has been a market player for more guidelines and the UN’s Global Compact. rate Social Responsibility falls to the Audit than a century. During all these years, the It is a guide to AAK’s social responsibility Committee. Corporate Communications is company has extracted vegetable oils from and includes the following points. responsible for reporting on the CSR-related natural sources. To ensure long-term suc- work carried out by the Group. cess, financial, environmental and social The collection of data, processing and com- issues must be managed responsibly and Support and respect for human pilation of CSR-related communications is through cooperation, and in harmony with rights. handed by a group made up of representatives the world in which we operate. This is a No complicity in human rights from the Communications, Finance, Legal, central policy in AAK’s operation, to ensure abuses. Environment, HR and Purchasing units. continued success of the strategy of organic Freedom of association and growth and selective acquisitions. Every com- recognise the right to collective Global Reporting Initiative pany must earn the respect of the world in bargaining. The AAK Group accepts responsibility for which it operates, and, for AAK, this means Elimination all forms of forced issues concerning the working environment, making an active contribution to a long-term or compulsory labour. environmental impact, energy consumption, sustainable society. Effective elimination of child labour. business ethics and social respect, and reports Effective elimination of discrimina- on sustainability issues using the international Code of Conduct tion in respect of employment and Global Reporting Initiative as a basis. AAK’s policies and guidelines make up the occupation. company’s Code of Conduct, with emphasis Support for a precautionary ap- The CSR cycle at AAK – dialogue, on sustainable development. Along with the proach to environmental challenges. data collection, examination, analy- Initiatives to promote greater legislation of individual countries, they provide sis and publication environmental responsibility. the framework and govern AAK’s actions in AAK’s CSR reporting follows an annual Encourage the development and various areas. cycle, during which a highly-comprehensive diffusion of environmentally-friendly The Code must be observed by all employ- updating of information obtained during the technologies. ees, managers and members of the Board of previous calendar year is produced, exam- Work against corruption in all its AAK, in all markets, at all times and without ined, analysed and compiled from the New forms, including extortion and exception. Year, to be ready for publication in May-June. bribery. AAK’s Code of Conduct is based on in- This is followed by a period until September

CSR – AAK in the world 26 work are the guidelines for sustainability re- ports which were published for the first time in 2006. GRI sustainability reports permit a comparison of the company’s sustainability reporting organisation with that of other or- ganisations, the capacity available to them and changes over time. AAK’s organisation for managing GRI reports is described in the diagram of the work structure. Eight local groups, which in some countries include sub-groups for smaller production plants, are responsible for the collection of data. A Group Manager responsible for CSR issues compiles the data and reports to the senior management of the Group. The first report was attempted in 2008. Some aspects of the GRI system were used and, in 2009, AAK progressed to producing an almost complete report. The Group’s CSR Manager visited the seven largest production plants to discuss issues with the local CSR teams. The material is complex and represents a new aspect of the operation. The 2008 review was not complete and, for this reason, AAK does not carry out a comparison of the two years. The procedures for the work were soon established, and in 2010, AAK drew up the standards which will govern CSR work for the next few years. GRI is also based on a Group-wide network for cross-communication of experiences and measures at local level, which can be dis- seminated throughout the Group to ensure broad improvement in the presentation of many sustainability issues. during which the company collects feedback developed in partnership with the business through planned consultation with selected sector, public institutions and academia. The report is divided into stakeholders (e.g. employees, managers, in- GRI creates a basis for improvements and categories: dependent organisations, ethical foundations makes it possible to measure these. The EN – Environmental performance and authorities) covering the CSR core areas sustainability reporting guidelines form the indicators. of the environment, energy, supply of raw cornerstones of the system, which is already FPSS – Food processing sector materials, human rights etc. The fact that the used by thousands of organisations all over supplement. reporting process is inspired by GRI’s guide- the world. LA – Labour practices and lines facilitates discussions. Views expressed decent work. during the consultation with stakeholders AAK’s implementation of GRI HR – Human rights. are used to improve preparations and data Sustainability reporting involves measuring, SO – Society performance. collection, and to improve the work carried presenting and accepting responsibility to- PR – Product responsibility. out the following year. wards stakeholders, both inside and outside EC – Economic impact. The reporting process follows the Global the organisation, for what the organisation Reporting Initiative’s framework. GRI is a has achieved in its work to ensure sustain- In 2010, this work was published in a report network-based organisation, which is paving able development. Our sustainability reports separate from the annual report. The same the way for the development of the world’s provide a balanced and reasonable picture of method will be used for 2010, and the report most sustainable reporting framework. To the results achieved by AAK on sustainability- will be published in autumn 2011. ensure the high technical quality, credibility related issues. and relevance of reports, the system has been The cornerstones of the regulatory frame-

27 AAK Report 2010 Global Compact – a guide to social responsibility AAK supports the United Nation’s programme for social responsibility. The programme is summed up in the following ten principles: 1. Support and respect for human rights 2. No complicity in human rights abuses 3. Freedom of association and effective recognition to the right to collective bargaining April 2010 4. Elimination of all forms of forced and compulsory labour 5. Effective elimination of child labour 6. Effective elimination of discrimination in respect of employment and occupation 7. Support for a precautionary approach to environmental challenges 8. Initiatives to promote greater environmental responsibility 9. Encourage the development and diffusion of environmentally-friendly technologies 10. Work against corruption in all it’s forms, including extortion and bribery.

AAK Group Policy: Corporate Social Responsibility Remuneration AAK supports in its actions the ten principles of United Nations We comply at least with local and international legal minimum Global Compact in the areas of human and labour rights, environ- standards concerning wages and benefits including compensa- ment and anti-corruption, and we perceive the principles as a tion for overtime. The size of wages enables workers to meet powerful platform for our activities within sustainability. basic needs. AAK will integrate social and environmental concerns into our business operations and in our interaction with our stakehold- Notification ers. We will use our resources in order of priority based on risk We give fair notice to employees of significant changes that could assessment and sphere of influence. substantially affect them.

Human rights Working environment We support and respect the protection of internationally proclaimed We strive to offer a safe working environment for all employees. human rights and constantly supervise within our sphere of influ Adequate health and safety procedures are implemented. As ence that we are not complicit in human rights abuse. - a minimum, we comply with all local and national health and safety legislation in the countries in which we operate. Freedom of association We respect the freedom of association and the right to collec Workplace violence tive bargaining. - We protect employees in the working place against physical, verbal, sexual or psychological harassment, abuse or threats. Forced labour We do not accept any form of forced labour such as bonded Environment labour, prison labour, slavery, human trafficking or retention of We strive to minimise the environmental impact of our activities important personal documents of employees. through responsible management, widespread environmental awareness and the use of technologies with low environmental Child labour and young workers impact. We recognise that prevention rather than cure is a more We cannot accept the employment of children. The minimum cost-effective approach to avoid environmental damage age of employment shall not be less than the age of completion of compulsory schooling and in any case not less than 15 years Corruption (14 years in some developing countries). Our businesses should work against corruption in all its forms, Where national law permits it, children between the age of 12 including extortion and bribery. and 15 may perform a few hours of light work per day. The work must not interfere with the children’s education. Yours faithfully For young workers below the age of 18 special precautions AarhusKarlshamn AB (publ) are taken to protect them against accidents and damage to their health.

Discrimination We will not engage in or support any form of discrimination in hiring and employment practices. Employment related decisions shall be based on relevant Arne Frank, President and CEO and objective criteria.

Working hours We comply with all applicable local and national standards on working hours and overtime.

AarhusKarlshamn AB (publ) A company in the AAK Group Phone +46 454 820 00 Jungmansgatan 12 Registered office: Malmö info@aak.com SE-211 19 Malmö Company no. 556669-2850 www.aak.com Sweden SE556669285001

CSR – AAK in the world 28 RSPO – Sustainable supply and able to meet the demand for CSPO in a of raw material straightforward and cost-effective way. The The calls for major corporations to deal with internet-based platform can be viewed on CSR issues have never been stronger. To a www.greenpalm.org. company such as AAK, which uses palm oil in its operation, financially-sustainable produc- Objectives tion with responsibility for the environment is The objective of GreenPalm is to; of the utmost importance. In 2003, AAK was Increase awareness of sustainably- involved in the creation of the Roundtable produced palm oil. on Sustainable Palm Oil (RSPO), which aims Prevent the destruction of rain forest. to support the growing and use of certified Support the Roundtable on Sustainable sustainable palm oil (CSPO). Palm Oil (RSPO). AAK has noticed a sharp increase in interest in CSPO from users of palm oil, including A green pioneer food manufacturers, and one of the major GreenPalm is the answer to the problems challenges has been how to separate this which arise in a complex international industry. particular oil and distribute it throughout the It is a simple, flexible system which is easy to world, transporting it from the certificated install, and has already made a difference. plantation to the manufacturer’s own produc- GreenPalm offers financial incentives to tion line. For this purpose, AAK developed a producers, who can prove that they accept method called “book and claim”. The pro- environmental and social responsibility, who gramme, GreenPalm, is administered by a do not destroy important forests, and who British subsidiary of AAK, Book & Claim Ltd, can demonstrate that they constantly try to and has proven the most successful of all improve their methods. Since GreenPalm the RSPO alternatives to supplier chains. operates in an existing chain of suppliers, Organisations, which have signed up include the scheme also serves to save millions of WWF (Worldwide Fund for Nature), Oxfam, jobs in the palm oil industry in some of the Conservation International, Unilever, Tesco, poorest regions of the world. Marks & Spencer’s, Cadbury and Carrefour. After promoting the idea for several years, GreenPalm is now very much up and running

29 AAK Report 2010 CSR – AAK in the world

In autumn 2010, the media focused on the As a major player in the industry, AAK buys “We concern ourselves deeply with envi- use of the weed killer, Paraquat, by one of large quantities of palm oil, which is refined ronmental issues involving our suppliers”, AAK’s suppliers. AAK immediately raised the into a broad spectrum of products at ten AAK says Arne Frank. “We are very pleased that issue within the company, sent out a press plants located around the world. an increasing number of growers are signing release and appointed external auditors to “We buy palm oil from several different up for membership and are actively involved examine the case on site at the supplier in suppliers, including UP (United Plantations). in RSPO. This ensures that they run their Malaysia. By responding to the issue instantly, UP’s owner is also a major shareholder in operations in accordance with the standards AAK was able to inform its customers that the a company with substantial shareholdings laid down. It is clear that UP, which is another identified supplier had acted in accordance in AAK”, says Arne Frank. “But AAK treats driving force behind RSPO and which was with current legislation and completely in line UP like any other supplier.” the first company to gain RSPO approval as with AAK’s environmental policy. AAK is one of the initiators behind RSPO, a producer of sustainably-produced palm the Roundtable on Sustainable Palm Oil, oil, will cease to use Paraquat by the end AAK discusses environmental and the company is still represented on the of the year.” issues with suppliers Board of Directors. The organisation takes For several decades, AAK has bought palm The issue of weed control in palm plantations issues involving weed killers seriously, and is oil from UP’s plantations in Malaysia. has been brought to the fore. The use of demanding that the use of Paraquat is phased Consumers throughout the world are in- Paraquat as a weed killer has been included out. Paraquat has been used as a weed killer creasingly demanding that companies accept in the agenda. on areas of newly-planted palms. responsibility for their total environment.

CSR – AAK in the world 30 31 AAK Report 2010 AarhusKarlshamn AB (publ) – Board of Directors

Melker Schörling Chairman of the Board of Directors. Elected in: AAK 2005 (Karlshamns AB 2001). Born: 19 47. Nationality: Swedish. Main occupation: Founder and owner of Melker Schörling AB (MSAB). Qualifications: MBA. Professional background: CEO of a number of companies, including Securitas AB 1987-1992 and Skanska 1993-1997. Other directorships: Chairman of the Board of Directors of MSAB, Hexagon AB, Securitas AB and HEXPOL AB and member of the Board of Directors of Hennes & Mauritz AB. Number of shares: Via MSAB, Melker Schörling holds 58.5 % of the shares in BNS Holding AB. In turn, BNS Holding AB holds 16,511,756 shares (40.4 %) in AAK.

Carl Bek-Nielsen Vice Chairman. Elected in: 2005. Born: 1973. Nationality: Danish. Main occupation: Executive Director (Corporate Affairs), United Plantations Berhad. Qualifications: Bachelor of Science. Professional background: Executive director, director-in-charge. Other directorships: Chairman of the Board of Directors of United Interna- tional Enterprises Ltd. Vice Chairman of the Board of Directors of United Plantations Berhad. Member of the Märit Beckeman Mikael Ekdahl Other directorships: Chairman of the Board of Directors of Danfoss A/S Elected in: 2006. Elected in: 2005. Board of Contex Holding A/S and (Bitten and Mads Clausens Fond). Born: 1943. Born: 1951. Member of the Board of Directors of Number of shares: Via UIE Ltd, Carl Nationality: Swedish. Nationality: Swedish. Alfa Laval AB (publ.). Bek-Nielsen holds 41.5 % of the Main occupation: PhD Candidate Main occupation: Lawyer and partner Number of shares: 2,000. shares in BNS Holding AB. In turn, and research. in Mannheimer Swartling Advokatbyrå. Share options: 264,500. BNS Holding AB holds 16,511,756 Qualifications: Master of Science Qualifications: Swedish equivalents of Stock options: 80,000. shares (40.4 %) in AAK. and Licentiate in Engineering. MBA and LLB. Kand. Professional background: Project Professional background: Lawyer John Goodwin Martin Bek-Nielsen Manager, consultant, business and partner. Elected in: 2005. Elected in: 2005. development and product/packaging Other directorships: Chairman of the Born: 1944. Born: 1975. development. Board of Directors of Bong AB, Marco Nationality: British. Nationality: Danish. Other directorships: Member of the AB, Absolent AB and EM Holding AB. Main occupation: Financial Main occupation: Executive Director Board of Directors of Beckeman Vice Chairman of the Board of Consultant. (Finance & Marketing) United Planta- Consulting AB. Directors of Melker Schörling AB, Qualifications: Chartered Accountant; tions Berhad. Number of shares: 0. Member of the Board of Directors of Bachelor of Commerce. Qualifications: Agricultural Economics. KonstruktionsBakelit AB. Professional background: Chief Professional background: Executive Anders Davidsson Number of shares: 8,000. Executive, Managing Director, Director (Finance & Marketing). Elected in: 20 07. Administrative Director and President. Other directorships: Member of Born: 1970. Arne Frank Other directorships: Member of the the Board of Directors of United Nationality: Swedish. Elected in: 2010. Board of Directors of United Plantations Berhad, Vice Chairman Main occupation: President and CEO, Born: 1958. International Enterprises Ltd. of the Board of Directors of United Bong AB. Nationality: Swedish. Number of shares: 0. International Enterprises Ltd. Professional background: Management Main occupation: President and CEO, Number of shares: Via UIE Ltd, Consultant with McKinsey & Co. AAK AB. Martin Bek-Nielsen holds 41.5 % Other directorships: Member of the Qualifications: MSc. Industrial of the shares in BNS Holding AB. Board of Directors of Bong AB. Engineering and Management. In turn, BNS Holding AB holds Number of shares: 1,200. 16,511,756 shares (40.4 %) in AAK.

Board of Directors – AAK 32 Standing: Mikael Ekdahl, Leif Håkansson, Märit Beckeman, Martin Bek-Nielsen, Annika Westerlund and Ulrik Svensson. Seated: Melker Schörling, Carl Bek-Nielsen, Anders Davidsson, Harald Sauthoff, John Goodwin and Arne Frank.

Harald Sauthoff Members of the Board Elected in: 2010. of Directors appointed Born: 1955. by the employees Deputy members Auditors Nationality: German. Main occupation: Vice President, Leif Håkansson Ulf Friberg PricewaterhouseCoopers AB Cognis GmbH – now part of BASF, AarhusKarlshamn Sweden AB. AarhusKarlshamn Sweden AB. The Chemical Company. Appointed by IF-Metall. Appointed by PTK-L. Anders Lundin Qualifications: Industrial Business Elected in: 2005. Elected in: 2008. Born: 1956. Management. Born: 1957. Born: 1954. Authorised public accountant. Professional background: Risk Nationality: Swedish. Nationality: Swedish. Principle auditor. Management Agricultural Commodities, Main occupation: Senior positions in Main occupation: Maintenance The company’s auditor General Business Management in the trade unions and local and regional engineer. Responsible for preventive since 2005. Chemical Industry. government and Board work. maintenance. Number of shares: 0. Qualifications: Electrical engineering. Qualifications: Automation engineer. Number of shares: 0. Number of shares: 0. Ulrik Svensson Elected in: 20 07. Annika Westerlund Christer Svantesson Born: 1961. AarhusKarlshamn Sweden AB. AarhusKarlshamn Sweden AB. Nationality: Swedish. Appointed by PTK-L. Appointed by IF-Metall. Main occupation: President and CEO Elected in: 2005. Elected in: 2006. Melker Schörling AB. Born: 1956. Born: 1951. Qualifications: MBA. Nationality: Swedish. Nationality: Swedish. Professional background: CFO of several Main occupation: Laboratory Main occupation: Repairer. listed companies, including Swiss Assistant. Qualifications: Engineering. International Airlines and Esselte. Qualifications: Technical College. Number of shares: 679. Other directorships: Member of the Board Number of shares: 0. of Directors of Assa Abloy AB, HEXPOL AB, Niscayah Group AB, Loomis AB, Hexagon and Flughafen Zürich AG. Number of shares: 0.

33 AAK Report 2010 AarhusKarlshamn AB (publ) – Group Management

Arne Frank Renald Mackintosh Bo Svensson Employed: 2010. Employed: 2002. Employed: 1974. Born: 1958. Born: 1951. Born: 1951. Nationality: Swedish. Nationality: Dutch. Nationality: Swedish. Main occupation: Main occupation: Vice President, AAK AB, Main occupation: President and CEO, AAK AB. President Business Area Food Ingredients Vice President, AAK AB, President, Qualifications: MSc. Industrial Engineering Continental Europe. Business Area Technical Products & Feed. and Management. Qualifications: MSc Food Technology. Qualifications: Graduate Diploma in Food Directorships: Chairman of the Board of Number of shares: 300. Engineering. Contex Holding A/S and member of the Board Stock options: 40,000. Number of shares: 210. of Directors of Alfa Laval AB (publ.). Stock options: 10,000. Number of shares: 2,000. Torben Friis Lange Share options: 264,500. Employed: 2010. Jean-Marc Rotsaert Stock options: 80,000. Born: 1963. Employed: 2009. Nationality: Danish. Born: 1969. Anders Byström Main occupation: Vice President, AAK AB Nationality: American. Employed: 2006. and President, Business Area Chocolate & Main occupation: Vice President, AAK AB Born: 1951. Confectionery Fats. and President, AAK USA. Nationality: Swedish. Qualifications: BSc. Dairy Technology, Graduate Qualifications: MSc. Electrical Engineering. Main occupation: CFO (Chief Financial Officer) Diploma in Business Administration. Number of shares: 0. and Vice President, AAK AB. Number of shares: 0. Stock options: 65,000. Qualifications: MBA. Stock options: 100,000. Number of shares: 0. Stock options: 70,000.

Group Management Team – AAK 34 Octavio Díaz de León, David Smith, Torben Friis Lange, Anne Mette Olesen, Renald Mackintosh, Anders Byström, Arne Frank, Karsten Nielsen, Bo Svensson, Edmond Borit and Jean-Marc Rotsaert.

Octavio Díaz de León David Smith Anne Mette Olesen Employed: 20 07. Employed: 2001. Employed: 2010. Born: 19 67. Born: 1960. Born: 1964. Nationality: Mexican. Nationality: British. Nationality: Danish. Main occupation: Vice President, AAK AB Main occupation: Vice President, AAK AB Main occupation: Vice President, Human and Managing Director, AarhusKarlshamn and President, European Supply Chain. Resources and Communications. Mexico. Qualifications: MBA, Graduate Diploma in Qualifications: MBA, BSc. Chemical Engineering. Qualifications: MBA, BSc. Mechanical & Business Management. Number of shares: 0. Electrical Engineering. Number of shares: 0. Stock options: 60,000. Number of shares: 0. Stock options: 40,000. Stock options: 40,000. Karsten Nielsen Edmond Borit Employed: 1988. Employed: 2001. Born: 1963. Born: 1969. Nationality: Danish. Nationality: Peruvian and French. Main occupation: Main occupation: Vice President, AAK AB Vice President, AAK AB, CTO. and Managing Director, AAK Latin America. Qualifications: Graduate Diploma in Qualifications: MBA, BSc. Food Engineering. Food Technology. Number of shares: 0. Number of shares: 264. Stock options: 50,000. Stock options: 15,000.

35 AAK Report 2010 AAK’s Glossary

Amines – Products made of fatty acids with Essential fatty acids – Two different types of Nutrition – Food, the process of taking in and surface-active properties. Used as inputs in polyunsaturated fatty acids, Omega-3 and absorbing nourishment. a wide range of industries. Omega-6, which are necessary for good health. Cannot be produced by the human Omega-3 – Essential polyunsaturated fatty Bypass fats – Fats that have been tailored to body, but must be acquired in food. Rape- acids in which the first double bond is loca- bypass the rumen of ruminants, which me- seed oil is one of the few vegetable oils that ted three carbon atoms from the end of the ans that a larger amount of fat and energy is contain both types of essential fatty acids. carbon chain. left intact for high-yielding dairy cows. Esters – Chemical components of fatty acids Omega-6 – Essential polyunsaturated fatty Bypass rapeseed meal – Rapeseed meal trea- and alcohols. Triglycerides, which are the acids in which the first double bond is lo- ted in a special process to make it bypass main constituent of fat, consist of alcohol, cated six carbon atoms from the end of the the rumen of ruminants. Nutritionally supe- glycerol and fatty acids, and are thus a type carbon chain. rior to standard rapeseed meal. of ester. Parenteral Nutrition – the process by which CBA (Cocoa Butter Alternatives) – Fats with Fatty acids – Consist of carbon and hydrogen a person receives fluids and nutrition intra- properties similar to those of cocoa butter, in long chains. At one end of the carbon venously. i.e., solid at room temperature and with very chain is a so-called carboxylic group. The rapid melt-off in the mouth. commonest fatty acids in vegetable oils PCR – A method used to identify genetically contain between 12 and 18 carbon atoms. modified seeds (GMO). The abbreviation CBE (Cocoa Butter Equivalents) – A type stands for Polymerase Chain Reaction. of CBA which is identical to cocoa butter, Fatty sterols – Sterols from the plant king- and which may be used in chocolate up dom. Reduce blood cholesterol. Polyunsaturated fatty acids – The carbon to 5 percent according to EU legislation. chain contains two or more double bonds, Manufactured from exotic raw materials, Flaked fats – Fats with a high melting point which are of considerable importance for including shea oil. supplied in the form of little solid “flakes”, the biological function of the fats in ques- which simplifies handling for certain custo- tion. CBR (Cocoa Butter Replacer) – CBA with mer groups. properties similar to those of cocoa butter. Pumpable fats – Products consisting of fat Is used in such things as chocolate coatings Fractionation – Multiple-stage crystallisation crystals disbursed in liquid oil delivered by for cookies and biscuits. More user-friendly process used in the manufacture of CBA. tanker lorry. Mainly used by bakeries where than CBE as no tempering is required. they replace solid fats in 10-kg packages. Glycerol – An alcohol that is one of the consti- CBS (Cocoa Butter Substitutes) – CBA with tuents of the fat molecule. Saturated fats – Fats with no double bonds properties and application areas similar to along the carbon chain. those of CBR. Made from palm-kernel oil. InFat – A speciality fat for infant formulas. Shortening – fat used in the bakery industry. Cocoa butter – Fat extracted by crushing co- IPPC – An EU Directive on environmental coa beans. Its composition lends chocolate audits of industrial plants. The Directive Trans content – The proportion of trans fatty its unique properties. comprises the aggregate environmental acids in a fat. impact of the plant, such as emissions into Dairy solutions – Fats intended for use in the air, effluents into water, waste produc- Trans fatty acids – Unsaturated fatty acids dairy products such as cheese, cream, tion, raw material consumption and energy with a different kind of double bond than cooking fat, ice-cream etc. Replace butter efficiency. those naturally occurring in vegetable oils. fat and contribute positive properties to the end product. Lipids – A collective name for a wide range of Unsaturated fats – Fats with one or more natural products, which include fats. double bonds along the carbon chain. DHA – Omega-3 fatty acid present in fish oil. Mould releasers – Fat-based products which EPA – Omega-3 fatty acid present in fish oil. are applied to the inside of casting moulds. Make it easier to remove the mould when the concrete has set without damaging the surface.

Glossary 36 Address

AarhusKarlshamn AB (publ) Jungmansgatan 12 SE-211 19 Malmö, Sweden Phone: +46 40 627 83 00 Fax: +46 40 627 83 11 E-mail: [email protected] www.aak.com Corporate identity no. 556669-2850

For more information, please visit our website www.aak.com.

This document is a translation of the Swed- ish language version. In the event of any discrepancies between the translation and the original Swedish AAK report 2010, the latter shall prevail.

AAK Report 2010 The first choice for value-added vegetable oil solutions

– The vision consists of three important elements, which govern what we want to achieve:

first choice

value-added solutions

vegetable oils Concept, manuscript and project management: 31 CC and AAK Corporate Communication. Graphics and original: www.johnjohns.se. Photography: www.benfoto.se, Inge Sahlé, AAK, Future Imagebank. Print: AlfaPrint. Photography: www.benfoto.se, Concept, manuscript and project management: 31 CC AAK Corporate Communication. Graphics original: www.johnjohns.se.