AAK Report 2013

The first choice for value-added vegetable oil solutions Contents

AAK Group The first choice for 1 2013 in brief 3 Comments by Melker Schörling, value-added vegetable Chairman of the Board 4 Comments by Arne Frank, oil solutions CEO and President

6 AAK´s vision AarhusKarlshamn (AAK) is one of the world’s leading producers of high value- 7 AAKtion added speciality vegetable oils and fats solutions. These oils and fats solu- 8 The business model tions are characterized by a high level of technological content and innova- – speciality vegetable oils and fats tion. AAK`s solutions are used as substitute for butter-fat and cocoa butter, 10 Business Area Food Ingredients trans-free and low saturated solutions but also addressing other needs of our 13 Business Area Chocolate & Confectionery Fats customers. AAK has production facilities in Denmark, Mexico, the Nether-

16 Business Area lands, Sweden, Great Britain, Uruguay and the US. Further AAK has also toll Technical Products & Feed manufacturing operations in Russia and Malaysia. The company is organized 18 Risks in three Business Areas; Food Ingredients, Chocolate and Confectionery Fats 20 Employees and Technical Products & Feed. AAK’s shares are traded on the NASDAQ 22 Responsible growth OMX, Stockholm, within the Large Cap segment. Further information on AAK

24 Board of Directors can be found on the company’s website www.aak.com.

26 Executive Committee

28 AAK Glossary

II | AAK Report 2013 AAK in 60 seconds

AAK’s vision is to be the first choice in AAK’s raw materials are derived from relations enable AAK to create lasting value-added vegetable oil solutions. renewable sources primarily sourced solutions that meet customer needs, in Northern Europe (rapeseed), expectations and high standards. AAK has more than a century of Europe and Mexico (sunflower), US unrivalled experience with vegetable (soya beans), West Africa (shea AAK is one of the founders of the oils for a broad spectrum of applica- kernels) and Southeast Asia and Latin Roundtable on Sustainable Palm tions. Our customers are primarily America (palm). Oil (RSPO). AAK also founded and from the food, confectionery and cos- operates GreenPalm, which provides metics industries. We also supply the AAK’s 12 production plants are an exclusive web-based platform for animal feed and technical industries. located in Denmark, the Netherlands, the trade in certificates for sustain- Mexico, Sweden, the UK, Uruguay able palm oil. Through these and other AAK’s products are ingredients, and the US. We also have sourcing initiatives, AAK continuously contributes including alternatives to dairy fat and operations, toll manufacturing and to the promotion of sustainable palm oil. cocoa butter, trans-free solutions, low sales offices in several key locations saturated fats solutions, nutritious fats around the world. The parent company, AarhusKarlshamn for infant formula, environmentally- AB (publ.), is a Swedish-registered friendly lubricants, and healthy skin New products are developed in close joint-stock company. The company’s care products. partnership with customers, draw- shares are listed on NASDAQ OMX, ing on oils and fats expertise and Stockholm, in the Large Cap segment, knowledge of market trends. Close Food & Beverage sector.

Three business areas

Food Ingredients Chocolate & Technical Confectionery Fats Products & Feed

Our largest business area primarily of- Our second largest business area offers Our Technical Products & Feed business fers solutions to the Bakery, Dairy, Food functional cocoa butter alternatives for area provides Biolubricants for metalwork- Service industries and Infant Nutrition. chocolate, compounds for coating and ing, forestry and construction, fatty acids moulding, and speciality fats for confec- and glycerine for various applications and tionery fillings. proteins and fats for animal feed.

Volumes Net sales Operating profit

Technical Technical Technical Food Ingredients Food Ingredients Food Ingredients Products & Feed Products & Feed Products & Feed 17 % 65 % 10 % 65 % 8 % 62 %

Chocolate & Chocolate & Chocolate & Confectionery Fats Confectionery Fats Confectionery Fats 18 % 25 % 30 %

III | AAK Report 2013 In the world

Production plants and sales offices Sales offices Customisation plants Sourcing operations

Growth market ambition

100 13 % 90 20 % Strong growth 22 % - Asia - Latin America 80 18 %

18 % 70 60 % Some/good growth 31 % - USA 60 - CEE - CIS 50

40 Low/no growth 69 % - Nordics - West Europe 30 62 % 47 % 20 40 % *Management ambition.

0 2006 2009 2012 2015-2016*

AAK Report 2013 | IV 2013 in brief

Volume increased by 7 percent (organic related costs was SEK 1,117 million The smallest business area, growth 2 percent) during 2013 due to (975), an improvement by 15 percent. Technical Products & Feed, reached an organic growth of speciality and semi- operating profit at SEK 97 million (88), specialities but also growth from The largest business area, Food an improvement by 10 percent. acquisitions. Ingredients, reported record high operating profit at SEK 771 million Cash flow after changes in working Net sales decreased by SEK 374 million (703) an improvement of 10 percent. capital for the full year of 2013 amounted mainly due to lower raw material prices Operating profit per kilo decreased to SEK 1,300 million (1,539), including and a negative currency translation from SEK 0.75 to SEK 0.73, a decrease reduced working capital of SEK 217 impact of SEK 328 million. by 3 percent mainly due to dilutions million (589). related to acquisitions. Operating profit excluding acquisition re- Earnings per share increased by lated costs was a record high, reaching The business area Chocolate & 14 percent, to SEK 17.87 (15.66). SEK 1,127 million (1,003**), an improve- Confectionery Fats reported an ment of 12 percent. All business areas increased operating profit at SEK 369 Return on Capital Employed (ROCE), reported double digit growth. (316), an improvement by 17 percent. calculated on a rolling 12 months basis, The operating profit per kilo improved was 16.5 percent compared to 14.2 Operating profit including the impact last by 21 percent to 1.23 (1.02). percent at year-end last year. year of Sandy and including acquisition

We continue to see positive effects of to work closely with AAK´s Customer position in this field, which has resulted the AAK Acceleration programme Innovation team when developing new in a number of new products with sig- (Growth-Efficiency-People). products and solutions. nificantly reduced amount saturated fats and maintained functionality in a wide A strategic acquisition was made of Our strong and continued commitment to range of foods. Unipro, the Turkish supplier of oils and responsible growth was lined out in our fats in Turkey and the surrounding annual Sustainability Report document- In January 2014 we launched the com- region. This acquisition is an integral part ing our achievements and future objec- pany program for 2014-16, “AAKtion”. of AAK Acceleration, and adds presence tives. The new program is intended to further in areas which are identified as strate- strengthen the focus on “Sales-Innova- gically important. The integration has AAK and Premier Foods, one of the big- tion-Execution”. proceeded according to plan. gest food producers in the UK, agreed to a three-year, exclusive, oils and fats Jens Wikstedt was appointed as Presi- Terrence Thomas was appointed as collaboration and product co-develop- dent Europe and as member of the AAK President of AarhusKarlshamn USA Inc. ment to be its long term co-development Executive Committee as of January 17, and as member of the AAK Executive partner. 2014. Committee as of March 25, 2013. The new Nordic Nutrition Recom- Fredrik Nilsson was appointed as Chief AAK opened a state-of-the-art Innovation mendations, commissioned by the Financial Officer (CFO) and as member Center in Shanghai, China to support Nordic Council of Ministers, focused on of the AAK Executive Committee as of the execution of the AAK Acceleration decreasing the consumption of saturated January 17, 2014. program. The Innovation Center gives fats. Through a consistent long term our Chinese customers the possibility investment AAK has gained a leading

Operational key figures (MSEK million unless otherwise stated) 2009 2010 2011 2012 2013

Net sales 15,884 14,808 16,695 16,911 16,537

Adjusted operating profit (EBIT) 827 824 918 * 1,003** 1,127 *

Operating profit 827 824 914 975 1,117

Operating profit per kilo 0.58 0.57 0.64 0.66 0.69

Earnings per share 10.14 14.15 14.72 15.66 17.87

Return on Capital Employed 12.60 13.10 13.30 14.20 16.50

* Adjusted for acquisition costs ** Adjusted for acquisition costs and the effects of Hurricane Sandy costs Definitions, see page 55 of the AAK Annual Report. Annual General Meeting, see page 62 of the AAK Annual Report.

AAK Report 2013 | 1 2 | AAK Report 2013 Comments by Melker Schörling, Chairman of the Board

Another strong year AAK’s strengthened competitiveness through belief in the long-term perspective of the AAK is continuing its successful transforma- strong focus on specialisation and produc- company. I personally have great confidence tion, and 2013 became the best year in its tivity as well as volume growth and operat- in AAK, its management and its highly com- history with continued growth. All the three ing profits. As Chairman of the Board, I am petent employees around the world. business areas had a strong year, including pleased to see that progress runs through On behalf of the Board and all sharehold- Chocolate & Confectionery Fats, where mar- the whole Group, across business areas and ers, I would like to thank everyone in AAK ket prices for cocoa butter finally returned to geographies. for their dedicated contribution to AAK during historically more normal levels. The AAK Acceleration programme has now 2013. I look forward to 2014, which I expect run its planned three-year course and has to be another year of good progress for the Focus on fast-growing markets created a strong platform for future growth. company and all its stakeholders. One of AAK´s strategies for growth is to in- To maintain the positive trend, I look forward vest in fast-growing markets, primarily in Asia to the new company programme which was and South America. The acquisition of Turk- launched in the beginning of 2014 to guide ish Unipro from Unilever in July is completely AAK going forward. in line with this ambition. Turkey is also well Melker Schörling positioned to be a central location for export Long-term engagement to some of the neighboring countries. Of AAK is one of the core holdings of MSAB, course this new platform for increased sales which holds 35 percent of the shares in the of semi-speciality and speciality products in company. This reflects our commitment and Turkey and the Middle East is interesting for shareholders. Furthermore AAK’s businesses in Mexico and South America are developing very positively. In addition, AAK has taken further steps to strengthen its presence in China.

Ensuring competitiveness AAK´s main strategy is to reinforce its position as global market leader within speciality vegetable oils and fats and to be the first choice for value-added vegetable oil solutions. To achieve this strategy the AAK Accelera- tion programme was launched in 2010 with its focus on three priority areas: Growth, Ef- ficiency and People. I’m pleased to acknowl- edge that the programme has succeeded in nearly every aspect of its scope and that nearly every objective has been met. AAK Acceleration has been a key contribution to

AAK Report 2013 | 3 Comments by Arne Frank, CEO and President

We entered 2013 with some uncertainty, due The growth in operating profit is a result of Improving our geographical both to the economic difficulties in Europe, progress across most business segments. footprint with exciting steps and to the effects on our operations in the US This is true not least for our biggest busi- into fast-growing markets caused by Hurricane Sandy. However, the ness area, Food Ingredients. Here, we have In July, we acquired Turkish Unipro from Uni- strong performance within the Food Ingredi- seen a very strong development driven by lever. Even if Unipro isn’t yet a very large ents business area and an expected recovery good volume growth in speciality and semi- activity, it is of outmost strategic importance in the Chocolate & Confectionery Fats busi- speciality products. We have been especially to us as it affects several parts of the AAK Ac- ness area, has re-installed a prudent opti- successful in the Infant Nutrition segment celeration programme. The new AAK Turkey mism for the future. This has been further and the Latin American regions. gives us a broader geographical presence strengthened by the strong execution of our For the Chocolate & Confectionery Fats and makes it possible to reach certain impor- AAK Acceleration programme, launched in business the recent significant increase in tant medium and fast-growing markets in a 2010 to support our speciality strategy. It has cocoa butter prices has helped us to return more competitive and profitable way. had three priority areas: Growth, Efficiency to a more the advantageous situation. After a We opened a state-of-the-art Innovation and People – all of them important aspects stable first six months, operating profits took Center in Shanghai in October. AAK has for our future development. off during the third quarter. Although volumes several Innovation Centers around the world, remained stable, the product mix became and opening one in China also supports the Organic growth throughout the Group significantly more profitable. execution of the Acceleration programme. Most positive is the organic growth we have Our smallest business area, Technical China is, as we all know, a fast-growing mar- seen, creating good growth in operating prof- Products & Feed, also demonstrated good ket, and here we want to give our custom- it, with an all-time-high for the full-year 2013. growth in operating profit. ers the possibility of working closely with our Customer Innovation teams when developing new or different products and solutions.

Significant productivity improvements The projects for improving productivity have been successful, especially in Europe. In Hull, in the UK, and in Aarhus, Denmark, productivity has increased by 30 percent or more since early 2010. In Karlshamn, Swe- den, the productivity improvement over the same period is as much as 60 percent. Part of the savings has gone to improving operating profit, but some of it has been reinvested, mainly within new product development, the sales force, and customer innovation. These large improvements have not come without

4 | AAK Report 2013 challenges. Challenges that are now behind Health and reducing saturated fats ate, our global and local customers, employ- us as of early this year. AAK has for many years focused on eliminat- ees, investors and suppliers. ing trans fatty acids, decreasing the amount In 2013, we have focused on five areas: Further investing in the future of saturated fats throughout the product food safety, which is the top priority among To further strengthen our future organisation range and today we hold a leading position consumers and our customers; sustainable and the succession for key positions, we in this field. sourcing, where we can make a difference; launched the second AAK Graduate Trainee In November, the new Nordic Nutrition resource efficiency, where we work hard to programme in 2013, targeting university Recommendations were published, commis- reduce energy consumption and greenhouse graduates in Europe. Over its one-year pro- sioned by the Nordic Council of Ministers. Its gas emissions; employee safety, where 2013 gramme, the trainees experience a mix of focus is on decreasing the consumption of was a year with a focused and elevated on-the-job learning, individual development saturated fats, and the new recommenda- safety initiative; and local community en- activities and formal training providing them tions emphase that the type of fat we eat is gagement. with a good overview of the value creation in more important than the total amount of fat. the AAK value chain. This recommendation is also very close to 2014 the existing recommendations from WHO. In early 2014 AAK launched a new com- An exclusive agreement with an It is with great satisfaction we see the pany program, AAKtion, that will guide AAK important customer alignment between our development strat- through 2014-2016. AAK’s vision to be the first choice in value- egy and the new recommendations. A fur- Based on AAK’s customer value proposi- added vegetable oil solutions calls for con- ther indication of the interest in these types of tions for health and reduced costs, our cus- tinuous improvements in our solutions for the products was the nomination of our new ice tomer product co-development and solutions customers, and in how we cooperate with cream fat, Akomix LS 25, for the prestigious approach, we continue to remain prudently them. A key enabler here is the continued FI Europe Excellence Award in the category optimistic about the future. development of new products, together with “Dairy innovation of the year”. Another AAK The main drivers are the continued positive our customers and based upon their needs. nominee was Chocofill NH 100, which was underlying development in Food Ingredients One proof of our capabilities is the three- nominated for the “Confectionery Innovation and the continued improvement in Chocolate year, exclusive agreement that we signed of the Year” category. & Confectionery Fats. with British Premier Foods in November. It covers a collaboration on existing products Responsible growth is the way we as well as product co-development for the do business future. Premier Foods is one of the UK’s larg- Responsible growth is one of the corner- Arne Frank est branded food producers, and of course stones of our strategy, and it is essential we are delighted to have been chosen for this to our aspiration to be our customers’ first exciting collaboration. choice. For us, responsible growth is about This agreement also signals that we are acting responsibly towards all key stakehold- approaching the end of the major re-design ers – the local communities in which we oper- of our AAK UK business.

AAK Report 2013 | 5 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.

6 | AAK Report 2013 AAKtion

Our strategy is to reinforce our position in good progress and strong results, as well Several of the current key strategic directions as global market leader within speciality as improved AAK’s position in the market will continue to be the corner stones of the vegetable oils and to use that to deliver which has resulted in a stronger financial AAK strategy: performance. on our objectives. The strategy supports Focus on semi-speciality and our vision: to be the first choice for value- AAKtion speciality products added vegetable oil solutions. In early 2014 AAK launched a new company Strong focus on organic growth program that will guide AAK through 2014- Expansion in growth markets AAK Acceleration 2016. The name of the program is AAKtion Customer co-development AAK Acceleration has guided and driven – a clear signal that action and execution will Growth based on food safety and AAK’s development during 2011-2013. The be central to keep up the current momentum responsibility AAK Acceleration programme had three pri- and to continue to develop AAK further. ority areas: The previously communicated management AAKtion will put additional focus on three ambitions on financial performance remain Growth specific areas to support the organic growth: unchanged. Efficiency People Sales Innovation Twelve priority projects addressed key oppor- Execution tunities within these areas. This has resulted

AAK Report 2013 | 7 The business model – speciality vegetable oils and fats

Rapeseed Palm Olive Soya beans Sunflower Shea kernels Corn Coconut

AAK’s core business is speciality vegeta- quirements. In each case, our technical and Shea from West Africa ble oils that meet the needs of the food, commercial experts identify the optimum so- Corn primarily from America and confectionery and cosmetics industries. lution to a specific need. Eastern and Southern Europe Coconut from Malaysia and Sourcing renewable raw materials from Natural raw materials the Philippines around the globe, we manufacture our We obtain our raw materials from rapeseed, broad product portfolio at 12 production palm kernels, soya beans, shea kernels, sun- plants in Europe and the Americas. flower seed, olives and many other sources. World-wide production 2013* Drawing on our extensive knowledge, and

Our products are of both nutritional and func- more than a century of experience, we exploit Palm oil 58 tional value, outstanding in their structure, the properties of vegetable oils to add value melting and crystallisation behaviour, rheo- to customers within our target industries. Soya oil 44 logical properties, flavour release and skin Rapeseed oil 23 penetration. Product development is often We source raw materials from all over the carried out in close cooperation with custom- world: Sunflower oil 15 ers, suppliers, research organisations or oth- Palm kernel oil 7 er external partners. This ensures a strong fit Rapeseed from Northern and with market and customer needs and takes Central Europe Peanut oil 4 advantage of the latest technologies. Palm kernels from Asia Olive oil 4 Supporting our strong focus on customi- Palm oil from Asia and Latin America sation, we operate a highly flexible produc- Olive oil from Southern Europe Coconut oil 3 tion process. This enables us to respond to Soya beans from the US and 0 10 20 30 40 50 60 specific customer needs for many different South America * Preliminary figures. Tonnes (million) functionalities, such as health profile, taste, Sunflower seed from Eastern Europe processing, logistics, labelling and legal re- and Mexico Source: OIL WORLD Statistics Update Jun. 21, 2013

8 | AAK Report 2013 What is fat and why do we need it?

Fat is essential to life. The many types are divided into four main Fat is part of all the cells in the body. Our bodies need fat to groups: produce hormones and other important substances.

Saturated fat is found in animal products such as butter, cream, Vitamins A, D, E and K are fat-soluble. That means the milk, meat and vegetable oils from tropical plants, such as body’s ability to absorb these vitamins is dependent on coconut oil and palm oil. Saturated fats are characterised by the presence of fat. their ability to remain solid at room temperature. One-third of our daily energy requirements must be Monounsaturated fat is found in almonds, olive oil, rapeseed oil met by calories from fat. For adults, this means a daily and other vegetable oils. Monounsaturated fat is suitable for cook- fat intake of 60–90 grammes, each gramme containing ing, being more heat stable than polyunsaturated fat. nine calories. Carbohydrates and proteins contain four Polyunsaturated fat is found in shellfish, oily fish such as salmon, calories per gramme. mackerel, herring and sardines, and vegetable oils. Omega-3 and Saturated fats and trans fats are believed to increase Omega-6 are examples of polyunsaturated fats. the level of “bad” LDL cholesterol in the blood, while Trans fats are a particular form of unsaturated fats. They occur unsaturated fats have a positive effect on blood naturally in milk and fat from ruminants, but are also formed when cholesterol. vegetable fat is hardened (hydrogenated).

Health trends step, which has become widely associated the UN Global Compact and our policies and Developing fats with special properties in- with trans fat, and are either low or very low codes. Driving progress, we work with five volves continuous work to bring to market in saturated fats. In many countries, health focus areas: Marketplace, Supply Chain, En- products with characteristic functionalities authorities actively encourage consumers to vironment, Workplace and Community where such as healthier composition or other spe- reduce their consumption of saturated and we continuously set and deliver on ambitious cific functionalities. As our customers strive trans fat. objectives and benchmarks for our perfor- to respond to the fast-changing demands mance, internally and externally. of their markets, it has become increas- Responsible growth The interaction with customers is based ingly necessary for us to meet their needs Responsible growth is a key objective of our on sound business ethics and a deep un- by developing customised, highly functional AAK Acceleration programme and essen- derstanding of our responsibility for safe- products. tial to our vision of being the first choice for guarding customer brands. As a supplier Many customer demands are inspired by value-added vegetable oil solutions. For us of ingredients for some of the world’s best- health trends. Over the years, our expertise responsible growth is about our responsibil- known brands, we recognise our role and our has enabled us to maintain high fat function- ity towards all of our key stakeholders – the customers’ expectations and see these as ality while eliminating trans fats, believed to local communities where we operate, our key elements in the execution of our AAK increase the risk of cardiovascular disease. global customers, employees, investors and Acceleration programme. Similarly, many of the products in our range suppliers. The foundation of our model for are now processed without a hydrogenation responsible growth is the ten principles of

AAK Report 2013 | 9 Business Area Food Ingredients

In the area of Food Ingredients, 2013 was another successful year for AAK with strong growth and record-high operating profit. Through our market-responsive and health-oriented solutions, we continue to demonstrate our ability to meet customer needs.

Operating profit Operating profit per kilo Volumes

(SEK million) (SEK) (Thousand tonnes) 800 0.80 1,100 700 771 0.70 0.75 0.73 1,000 703 600 0.60 1,049 0.62 800 937 500 0.50 831 518 400 0.40 600 300 0.30 400 200 0.20 200 100 0.10 0 0.00 0 2011 2012 2013 2011 2012 2013 2011 2012 2013

Food Ingredients Innovative solutions, continued customer plementation of such changes is an important (SEK million) 2011 2012 2013 co-development and consistency in quality means for us to generate continuous growth. Net sales 10,076 10,729 10,798 have further strengthen our position as the Health is one of the key trends in the mar- Operating profit 518 703 771 first choice for vegetable oil solutions across ket in which AAK has taken a proactive role. Operating profit per a wide global customer base. Particularly our kilo, SEK 0.62 0.75 0.73 fast responsiveness to the changing require- Health trends in the food industry Volumes, ments of the food industry has enhanced our The trend towards healthy food continues to thousand tonnes 831 937 1,049 customer relationships and competitive edge. dominate developments in the food process- Market changes and new legislations are the ing industry. drivers for creating renewed value-added so- The physical characteristics of liquid oils lutions for our customers. Our continued im- and the composition of certain soft oils like

10 | AAK Report 2013 rapeseed oil, which is both high in omega-3 and has the lowest saturated fatty acid content of any oil, are excellent for creating healthier oil solutions with great functionalities. The demand for reduced saturated fat levels continues to drive the development of products with more added value. Increased demand for customised solutions in a number of growing segments act also as a source for further demand for AAK’s know-how within the field of new unsaturated vegetable oil solutions. Consumers demand high and persistent quality products and healthier food products. Together with our customers we drive the development of healthier alternatives for the consumer market. Our ability to select the right components from a vast range of vegetable oils and fats means that we are able to create efficient solutions that satisfy most new demands through customer co- development.

A competitive market We operate in a fiercely competitive market the Bakery, Dairy, Infant Nutrition and Food alongside several major competitors, some Service industries. Our aim is to offer cus- of which are more active in bulk commodity tomers products with greater added value oil supply, while others also operate in the and, through that, increase the value of our speciality segments. In Europe, more than speciality product lines. 120 local refineries also make a real impact. In segments that require specialised capa- New products Infant Nutrition bilities and knowledge, however, we benefit The extension of our Bakery, Dairy, Food Infant Nutrition remains the fastest-growing greatly from our cutting-edge position within Service industries and Infant Nutrition prod- market segment within our Food Ingredients product development and technical know- uct ranges has strengthened our unmatched area. High demand for customised blends how. This is particularly true regarding dairy performance in all of these food segments. of speciality oils and fats for premature and fat alternatives, oils and fats for the bakery Providing solutions with minimum saturated first-stage formulas has again enabled us to industry, speciality fats for infant formulas, fats, while not compromising on the physical extend our share of this fast-growing market and in the area of food service. The AAK characteristics, we have gained an excellent dramatically. Sales of InFat™ has further in- Acceleration programme has given us the platform for improving the health profile of creased in importance and are now growing results we were working for with a clearer nearly all customer products. rapidly, not only in Europe, but also world focus on sales and market development ac- New additions such as non-hydrogenated, wide. This structured lipid component for tivities, enabling us to exploit our strengths non-trans and increased levels of low satu- infant formulas is sold through Advanced and competitiveness. rated fats, have supported our business and Lipids, the joint venture between AAK and customers significantly. These are all clear Enzymotec. Our proven track record of being Customised solutions examples of how new product development a trustworthy, reliable supplier and partner We are offering customised products in and innovation in close collaboration with in the field of Infant Nutrition enables us to nearly all categories. The majority, however, customers can create clear value-added grow further in a strong and competitive way. are to be found among our specialities for solutions.

AAK Report 2013 | 11 Regional markets

Europe With factories in Sweden, the UK, the Neth- erlands and Denmark, and sales organisations in nearly all countries in Europe, AAK has become a leading company throughout Europe. With our new organisation in Turkey we are now also one of the strongest players in this region. In the UK, the implementation of AAK’s speciality strategy has paid off, and we are now performing well in the field of speciality oils & fats in the same way as our other AAK units. Our principal operation is at the plant in Hull, while AAK Food Service is based in Hull and Runcorn.

Mexico In an environment characterised by high competition, product commoditisation, and an increasing concern for health and environmental issues, AAK Mexico has managed to produce solutions that fit and surpass our customers’ requirements, reiterating our position as a high-quality value-added solutions provider. AAK Mexico has become an important supplier for most companies that require the use of fats and oils in their processes. We have continued to invest in projects that position AAK Mexico ahead of the industry needs, thus creating a competitive edge in innovation. of the competences of our people has been USA Strategic precision and assertive execu- a successful equation. 2013 was a year of recovery for AAK USA tion have proven to be key elements in our AAK Mexico will continue to be a provider following Hurricane Sandy, especially at the day-to-day operations. Simultaneous, focus of a wide range of solutions to meet the ex- Port Newark, New Jersey facility. From ad- on market demands and in the development pected challenges of the market in the future. versity comes change and renewed energy, and AAK USA came together and redoubled its efforts to delight customers with value- added solutions. Hence, AAK quickly rebuilt trust with customers who were impacted by the storm. The Bakery business centered on the Louisville, Kentucky site continued to deliver strong growth. We had numerous examples of AAK’s customer innovation team working hand-in-hand with customers to deliver outstanding products to consumers. AAK USA continues to invest in the Louisville facility to drive improvements in safety, quality and productivity as we prepare to capture future growth opportunities. The integration of Oasis Foods into the AAK family continued in 2013. The ex- changes of best practice brought numerous efficiency and growth opportunities. As AAK’s go-to-market teams focused on food service and food manufacturing share knowledge and customer insight we expect to identify new opportunities for growth.

12 | AAK Report 2013 Business Area Chocolate & Confectionery Fats

Chocolate & Confectionery Fats continued to follow the AAK Acceleration programme, where one of the priority projects was to achieve organic growth within the business area. Our vision is to be the world-leading supplier of value-creating speciality fat solutions to the leaders in the confectionery industry, and we focus on increasing our global presence. In 2013 market conditions eased up with rising cocoa butter prices.

Operating profit Operating profit per kilo Volumes (SEK million) (SEK) (Thousand tonnes) 400 1.50 350

378 369 300 320 1.20 309 300 300 1.23 316 1.18 250 0.90 1.02 200 200 150 0.60 100 100 0.30 50

0 0.00 0 2011 2012 2013 2011 2012 2013 2011 2012 2013

Chocolate & Confectionery Fats Chocolate & Confectionery Fats produces our new product launches are developed and (SEK million) 2011 2012 2013 speciality vegetable fats used as cocoa but- customised in close cooperation with our cus- Net sales 4,954 4,583 4,200 ter replacements in chocolate products and tomers. Our solutions for the confectionery Operating profit 378 316 369 fillings, as well as in speciality products for industry cover a wide range of product ap- Operating profit per the cosmetics industry. plications, including chocolate fats and com- kilo, SEK 1.18 1.02 1.23 pound fats for coating and moulding, filling Volumes, Solutions for our chocolate customers fats, barrier fats and spreads. thousand tonnes 320 309 300 Based on the market and customer needs, Recognising the regional variations in the we offer a wide product portfolio. Many of functionalities our customers seek, we strive

AAK Report 2013 | 13 to adapt our solutions to create the greatest We also focus on major emerging choco- A typical chocolate filling contains 30 per- possible benefit for the customers’ business late markets where growth is driven by the cent filling fat, which plays a key role in se- and to the end-users’ chocolate experience. rising income of a growing middle class, in- curing a good chocolate experience in terms The typical functionalities we offer influence creasing urbanisation and a higher level of of stability, melting properties, texture, flavour the taste, appearance and texture of the final health awareness. Here, new innovations release and health profile. Additional bene- confectionery product. characterise changes in the food industry, fits of our product range include improved As AAK has a strong market focus, we de- such as the increasing convergence of the mouthfeel and prolonged bloom stability for liver innovative solutions that reflect market chocolate confectionery and bakery seg- a longer shelf life. Efficient barrier fats allow trends and anticipate customer requirements. ments and the snacking trend. This adds the inclusion of, for example, nuts in a filling. Our wide product range is the result of tar- changes and complexity within product in- geted development work carried out in our novation and production, which fits very well Right materials laboratories, where we work with customers with the AAK business model for customer Every stage of our value chain requires spe- and suppliers. AAK offers technical service co-development. cialist expertise – from purchasing of raw to our customers to optimise their use of our materials to marketing and sales. When pur- solutions in their factories. We often organ- A product addressing every chasing raw materials, we maintain a high ise academies for customers to inspire them customer´s need level of quality control to ensure food safety, about newly developed applications and Our products and value-creating solutions but also a high focus on initiatives to ensure concept proposals for use in their products. offer the customers an opportunity to differ- corporate social responsibility. Our innovative projects to develop health- entiate their confectionery products to make ier versions of our products have proven to them preferred by consumers. We offer a Shortening the shea supply chain be successful, so we are able to offer prod- customised product range under the follow- For decades, the shea kernel has been an ucts that both comply with high food safety ing brands: important source of nutrition and income in standards and are free of trans fats and low the rural parts of West Africa. We have been in saturated fats. Today, most of our products Illexao™ – Cocoa Butter Equivalents or involved ever since the first kernels were ex- are completely without trans fats. Improvers (CBE/CBI) for chocolate cost ported in the 1950’s and are today the big- reductions or chocolate with added or gest consumer of shea kernels outside Africa. Driving growth globally improved functionality Over the past few years, we have success- We are focusing on maintaining and develop- Akopol™ – Cocoa Butter Replacers fully shortened the supply chain to include ing good and strong relations with existing (CBR) for compounds with cocoa only those participants that actually add val- customers, and on developing new contacts tolerance ue. One consequence of this is that we now in emerging markets. This dual focus creates Cebes™/Silko™ – Cocoa Butter Substi- also obtain direct supplies from thousands a well-balanced growth. tutes (CBS) for compounds with fast of rural women in Burkina Faso and Ghana. AAK is a strong, long-term business part- meltdown and fast crystallisation ner, working in close partnership with global Chocofill™/Deliair™ – Filling Fats for The volatile cocoa market accounts and regional leaders within the con- customised fillings in line with customer Cocoa butter has now tripled in price since fectionery industry. As we continue to expand needs the lows of the first half of 2012 with a posi- our worldwide organisation, we supply our tive effect on CBE in both volume and value. customers from our production plants all over For further information regarding cocoa and the world. cocoa butter, please refer to information at www.icco.org.

14 | AAK Report 2013 Functional ingredients for beauty and personal care

AAK develops and sells functional lipids for use in skin care, hair care, colour cosmetics and various personal care products. Our Lipex® range is appreciated for its moisturising and softening ability and positive effect on skin health.

Having worked with lipids for the cosmetic ties with an increased emphasis on safety, Product development delivering industry for the past 30 years, today we rank naturalness and sustainability – a trend that customer value among the world’s leading specialists in the supports the use of safe, sustainable and Our product range is under constant develop- area. All our ingredients are based on veg- functional ingredients based on natural raw ment in close consultation with our custom- etable oils, distinct from alternative, synthetic, materials. At AAK, we expect to see sustain- ers. Drawing on the technical and commer- animal or mineral oil-based raw materials. able vegetable oil solutions increasingly re- cial insights our customers provide, we are place synthetic and mineral-based solutions. able to shape a well-considered response to Global Reach market trends. The beauty and personal care industry is in- Sustainable ingredients Much of our product development focuses ternational. The ten largest companies hold The Lipex® product line is made from natural, on developing products with specific func- 50 percent of the global market, and typically renewable raw materials. Shea butter, with tions and active substances. The aim is to increase their market share each year, often its beneficial properties, is the most sought- create new ingredients that combine basic through acquisitions of regional brands. Con- after, vegetable-based raw material in the functions, such as moisturising or softening sequently, we sell Lipex® all over the world. cosmetic industry. Shea is widely recognised properties, with more advanced functions, for its skin softening and moisture-retaining such as protection against UV rays and en- Dynamic market trends properties while its anti-inflammatory function vironmental contaminants. A growing number of consumers make daily contributes valuable skin healing and pro- At AAK, we enhance the power of nature, use of beauty and personal care products. tecting effects. with the objective of creating new, attractive Main drivers of this trend are economic de- Other Lipex® products are produced from ingredients that open new opportunities for velopment in Asia and South America, and mango, illipe, cocoa, rapeseed and more. our customers. the rising interest in skin care and grooming Rapeseed grown in Sweden contains high products for men. levels of valuable bioactive lipids – excellent Today, the industry has coupled its tra- for sensitive skin products, sun care and ditional focus on innovation and novel- baby care.

AAK Report 2013 | 15 Business Area Technical Products & Feed

Technical Products & Feed saw another year of decreasing net sales – and at the same time improving operating profits. The explanation is lower prices on raw materials – and an improving feed and technical fatty acids business.

Operating profit Operating profit per kilo Volumes (SEK million) (SEK) (Thousand tonnes) 120 0.40 300

100 0.37 0.36 250 275 271 103 265 97 0.30 0.33 80 88 200

60 0.20 150

40 100 0.10 20 50

0 0.00 0 2011 2012 2013 2011 2012 2013 2011 2012 2013

Technical Products & Feed Our Technical Products & Feed business ide emissions are significantly lower. Within (SEK million) 2011 2012 2013 area is an excellent example of the role farming, dairy cattle can benefit from vege Net sales 1,665 1,599 1,539 that vegetable oils play with respect to the table-based feed that has excellent nutritional Operating profit 103 88 97 environment and health. Within forestry, properties. With the exception of our Binol Operating profit per for example, our biodegradable lubricating range, technical and feed products are made kilo, SEK 0.37 0.33 0.36 products for logging machinery minimise from the residual fractions that remain after Volumes, the discharge of pollutants. Candles are an- food oil production. The market is primarily thousand tonnes 275 265 271 other example. Made from renewable fatty in Northern Europe. acids rather than paraffin, their carbon diox-

16 | AAK Report 2013 Industrial applications metalworking industry, along with hydraulic and liquid feed fats are also used as ingre- We produce fatty acids and glycerol by split- and chainsaw oils for the forestry and con- dients in feed for cattle and, to some extent, ting the fat molecule and refining the out- tracting industries. pigs and poultry. come into high-purity products. Within the metal-working industry the re- As the name suggests, bypass protein and Our Tefac fatty acids in the form of fatty placement of mineral oil with renewable Bi- bypass fats are not digested in the rumen of esters and amines go into a broad range of nol products generates a significantly better dairy cattle. Instead they bypass the rumen industrial oleochemical applications. Other working environment, in addition to improved and are absorbed as amino acids and fatty important application areas include paper lubrication performance and reduced overall acids in the small intestine. High-yield dairy chemicals, soap, surfactants, rubber and cost. Increasing environmental awareness cattle require both in order to attain optimum plastics. Consumers also gain direct benefit has a positive impact on sales. milk production. when they buy stearine candles which, based Although the total market for lubricants Some 98 percent of our feed products are entirely on fatty acid, are a sustainable alter- is shrinking, our bio-alternatives to mineral- sold in the Nordic region, where AAK is the native to paraffin wax. based products are gaining market share. market leader for bypass protein and bypass Glycerol is used in a diversity of products, Most Binol and BioSafe products are sold to fats. Despite the continuing steady decline in for instance cosmetics, explosives, paint, end-users in the Nordic market. In other mar- the number of dairy farms in the region, the concrete and anti-freeze applications. kets, we collaborate with various partners, market for feed raw materials has changed At present, the market for fatty acids and who sell the products under their own brand. very little in recent years, due to the con- glycerol is undergoing a major consolidation solidation of the dairy farming industry and process, which will inevitably lead to fewer, Feed increased yield per cow. larger players. AAK is the leading supplier to For animal feed, our primary products are the Nordic market, where most of the prod- bypass protein and fats. When rapeseeds ucts are sold. Other important markets are are pressed and the oil extracted, the re- Germany, Poland and Russia. maining rapeseed meal is processed in our Karlshamn plant. The result is our protein- Technical oils – biolubricants rich ExPro brand, which improves the effec- Our Binol and BioSafe technical oils cover tiveness of feed protein and increases milk processing fluids and lubricating oils for the yield from dairy cattle. Our solid bypass fats

AAK Report 2013 | 17 Risks

AAK’s operations are constantly exposed to risks, threats and external factors with an impact on the company. Through a proactive approach to business intelligence, the company aims to anticipate changes in factors affecting operations. Plans and policies are adjusted continuously to counteract potential negative effects. Active risk management, such as hedging raw material prices and currencies, reduces the risks the company faces.

Raw materials Harvests are weather-dependent. While a operator in these areas, we have extensive We have the ability to adapt our product year of poor harvests drives up prices, a year experience of handling such issues. In addi- range quickly to the latest trends in the health of successful harvests reduces them. Most tion, we operate with a deliberate risk man- debate. This is largely due to the fact that of our raw materials are traded on the inter- agement strategy. we work with all types of vegetable oils and national world market, where they are pur- Global operations involve a number of can reformulate our products fairly easily to chased in foreign currencies. This exposes other risks, including: meet customer needs. We focus strongly on us to significant currency and raw material product co-development with our customers. price risks. Trade barriers This limits the risks involved in commercialis- Our strategy of active risk management Inflation ing new products. means that, as soon as a sales contract is Changes in national or regional Regulatory measures also pose a risk. Ac- signed, we hedge the equivalent currency legislation, e.g. the introduction of tive involvement in Corporate Social Respon- and raw material price exposure. This safe- protective tariffs and taxes, which sibility related issues is, therefore, becoming guards margins against price risks on agreed prevent AAK from operating in a increasingly important to forestall legislation sales contracts. free market on issues that are a natural development of Since many raw materials are produced Environmental and health-related human requirements. at a considerable distance from our produc- legislation tion plants and markets, transport costs are Highly skilled an important factor. Particularly the potential Changes in the competitive Business operations are affected by raw ma- impact on margins from the growing demand environment terial prices, transport costs, energy prices, for environmentally-acceptable transport The sector in which AAK operates is under- interest rates and exchange rates. Our man- methods has to be taken into consideration. going structural change. As a sector that agers and their staff are experienced in react- Competition in commodities is fierce. has existed for just over a century and has ing quickly to changes in external factors and a fundamental dependence on natural prod- adapting operations, products and services The processing industry ucts, there is great pressure for more inten- to customer needs. AAK is part of the processing industry. Im- sive development. This includes demands provements in results are achieved through for sustainable, ethical production, where organic volume growth and by increasing producers accept responsibility for social is- sales of speciality products with higher mar- sues and the environmental impact of their gins relative to lower-margin bulk products. operations. AAK operates on the basis of Capacity expansion aimed at increasing an organic growth and selective acquisition total volumes in order to meet growing de- strategy. A strong balance sheet has laid the mand has a relatively long planning horizon. financial foundations for future acquisitions. AAK must analyse potential growth in good There is tough competition in the industry. time. In the meantime, it is possible to bal- Several global competitors deliver large vol- ance production among our 12 plants to en- umes of bulk products with limited margins. able processing of specific products closer Our response is to focus more on products to their markets and accommodate swings with better margins and greater added value. in supply and demand. Key speciality prod- These include confectionery products and ucts are produced at dedicated plants, where cosmetics, as well as value-added ingredi- problems with machinery can have a major ents for the bakery, dairy and infant nutrition impact. AAK has insurance cover for loss of industries. margins and other consequences of business interruptions. The health trend There is an ongoing debate on healthy al- Political instability ternative foods. The trans fat debate, for ex- Operating globally always carries risks, but it ample, has been quite heated on occasion, can also be a stabilising factor. Although AAK resulting in a greater use of raw materials largely operates in mature markets in the such as palm oil. Palm oil is a significant raw US and Europe, much of company growth material for us at AAK and has a broad ap- is generated in developing markets, which plication area – from chocolate to foods and are vulnerable to political instability that can cosmetics. A great alternative to hardened impact currencies and exchange rates. We fat, it is semi-solid at room temperature, mak- also operate in Eastern Europe, the Middle ing it an attractive choice in the production East, Asia, Africa and South America, where of many foods. By using palm oil, trans fats instability may arise. As a well-established can be eliminated from many food products.

18 | AAK Report 2013 AAK Report 2013 | 19 Employees

Production plants and sales offices Sales offices Customisation plants Sourcing operations

Our people are key to our success formed to address AAK safety on a global gramme for new commercial employees, and With employees in more than 25 countries scale and to establish world-class safety further we strengthened our product training. on five continents, AAK is a truly global op- standards throughout AAK. We work to All this was aimed at helping our team im- eration. Today we have 12 production sites strengthen our safety culture with every em- prove their ability to identify customer op- in 7 countries and a global procurement ployee throughout the organisation. There- portunities and create more value for our and sales organisation. Organic growth and fore we have developed and implemented customers. acquisitions are expanding that global pres- procedures dealing with change manage- The first batch of trainees completed our ence. In 2013, we were pleased to welcome ment, auditing, incident tracking and process 12-month graduate trainee programme suc- 38 new colleagues from Unipro (Turkey) to safety management based on national leg- cessfully and all of them are now continuing the AAK family. islation, international regulations, compari- their careers in AAK. A new batch of trainees AAK had an average of 2,207 employees sons with industry standards and our own were enrolled in the graduate trainee pro- in 2013. During the year, the number of em- AAK requirements. gramme in both commercial and operational ployees remained stable, with organic growth positions, where they will gain a deep insight and the acquisition being offset by continued Review and develop into both the operational and commercial restructuring of our European sites. Hence, Aligning all our efforts is key to reaching the value chain as well as receive formal training. we also had to say goodbye to a number of AAK growth objectives. To ensure that objec- employees. We thank each and every one tives are aligned throughout the organisation, Communication is key of them for their dedicated efforts for AAK all employees completed their Performance Strong dedication to internal communication and wish them the best of luck in their future and Development Plan (PDP) during the is vital to ensure engaged and committed endeavours. first half of the year. As part of the PDP, all employees who understand the company employees discuss last year’s performance objectives as well as their link to the em- 2013 was ‘Year of Safety’ in AAK and objectives with their managers, and new ployees own personal objectives. Town hall In 2013 we had our ‘Year of Safety’ with focus performance objectives are set along with a meetings, articles on our global intranet, on further increasing safety in all aspects of plan for personal development monthly management conference calls and our operations. Here, we promoted the re- To ensure that all employees are properly communication packages are used to ensure sponsibility of each employee to think safety qualified for their job, extensive training takes that all AAK employees are well informed and and implementation of the safest practices. place, either locally or as part of our global understand how they can make the best con- Our safety scope includes every facet of our training programmes. tribution. operation from process and manufacturing In 2013, we continued to focus our atten- safety to the sales force and administration. tion on training our commercial organisation. The global safety management team was We continued our global sales training pro-

20 | AAK Report 2013 Employees

Employee distribution by age Employee category by age Employees by age

% % 13 % 100 100 33 % 80 80

60 60

40 40

20 20 23 % 0 31 % 0 Management White-collar Blue-collar Americas Europe West Africa

<30 30-39 40-49 >49 <30 30-39 40-49 >49 <30 30-39 40-49 >49

Employment contract type Employee category by gender Employee gender

% % 15 % 100 100

80 80 6 %

1 % 60 60

9 % 40 40

20 20

69 % 0 0 Management White-collar Blue-collar Americas Europe West Africa

Permanent Temporary Apprentice Female Male Female Male Agency staff At-will

AAK Report 2013 | 21 Responsible growth

Responsible growth is the key objective of our AAK Acceleration programme, and is essential to our vision of being the first choice for value-added vegetable oil solutions. For us, responsible growth is about our responsibility towards all of our key stakeholders – the local communities where we operate, our customers, our employees, our investors and our suppliers. Based on our strategy, input from our stakeholders and market trends we have developed a model for responsible growth to guide our global Corporate Social Responsibilty work.

AAK Responsible growth

CSR organisation

Objectives and GRI

Transparency Marketplace Supply chain Environment Workplace Community Stakeholders Sedex Legislation Sustainability Trends Report Benchmarks AAK web Partnerships

Group CSR policies and codes

UN Global Compact

The UN Global Compact (UNGC) is a solid We have defined five CSR focus areas – the other businesses, NGOs, and governmen- platform and a broad concept based on ten ‘pillars’ – that are important to our business. tal agencies is a key element of the Global universal principles within Human and La- These provide an overview and help us focus Compact concept, and we are proud to par- bour Rights, Environment and Anti-corrup- our resources. ticipate in several partnerships. The RSPO, tion. It enjoys participation by all of the major To maintain momentum and drive improve- the Global Shea Alliance, the UNDP and the players in global business and CSR, includ- ment, we define objectives within each of the Burkina Faso project are a few examples of ing the GRI (Global Reporting Initiative), ETI five focus areas. Further, we monitor many these. (Ethical Trading Initiative), ICC (International other indicators internally, based on the GRI Our CSR system is not static, adjusting Chamber of Commerce) and OECD (Organ- guidelines. instead to input from such stakeholders as isation for Economic Cooperation and De- The engine behind all of this is our global customers, investors, and employees. We velopment). AAK has been a member of the CSR organisation, established in 2007. monitor new and upcoming legislation. We UNGC since 2002. To be transparent and share informa- follow trends in our communities, and bench- AAK’s CSR policies and codes are based tion with stakeholders is also part of our mark our CSR practices against those of re- on the UNGC, and apply globally to all AAK approach. Sedex facilitates the sharing of tailers, customers and competitors. business activities. As are the policies and information with local customers. Our Sus- Our overall objective is to grow AAK re- codes of many of our customers, which en- tainability Report shares information globally, sponsibly and achieve sustainability as a hances our strategic alignment. primarily with investors in AAK, and via the whole. web with all stakeholders. Partnering with

22 | AAK Report 2013 Responsible growth CSR organisation

Management CEO and Executive Committee

Production

Sourcing Global CSR Manager

CSR team CSR team CSR team CSR team CSR teams CSR teams CSR team CSR teams Aarhus Montevideo Morelia Zaandijk SE UK USA West Africa DK South MX NL America

Karlshamn Runcorn Benin

Dalby Hull Ghana

Burkina Faso

Mali

Ivory Coast

AAK´s model for responsible growth covers the five focus areas Marketplace, Supply chain, En- vironment, Workplace and Community. In our annual sustainability report we present the key achievements within each of these areas.

Some examples of this year’s progress are: 6.4 percent reduction of total direct CO2 emissions per processed unit 13 percent decrease in total waste 25 percent decrease in lost days rate thanks to improvements in work safety 95 percent of direct raw material suppliers approved and signed the AAK Supplier Code of Conduct More than 30,000 women collecting shea kernels are now included in the AAK Kolo Nafaso programme

To obtain a printed copy, please contact AAK Corporate Communications at [email protected] Responsible Growth AAK Sustainability Report 2012/2013

AAK Report 2013 | 23 Board of Directors

Melker Schörling Arne Frank Ulrik Svensson Chairman of the Board of Directors. Elected in: 2010. Elected in: 2007. Elected in: 2005 (Karlshamns AB 2001). Born: 1958. Born: 1961. Born: 1947. Nationality: Swedish. Nationality: Swedish. Nationality: Swedish. Main occupation: President and CEO, Main occupation: CEO Melker Schörling AB. Main occupation: Chairman of the Board of AarhusKarlshamn AB. Qualifications: BSc. Economics and Business. Directors of Melker Schörling AB. Qualifications: MSc. in Industrial Engineering Professional background: CFO of several listed Qualifications: BSc. in Economics and Business and Management. companies, including Swiss International Air- Administration. Professional background: Chairman, CEO and lines and Esselte. Professional background: CEO of a number of President of TAC, Executive VP of Building Other directorships: Member of the Board of Di- companies, including Securitas AB 1987-1992 Automation Business Unit at Schneider Electric rectors of Assa Abloy AB, HEXPOL AB, Loomis and Skanska 1993-1997. SA, Chairman and CEO of Carl Zeiss Vision AB, Hexagon AB and Flughafen Zürich AG. Holding GmbH. Other directorships: Hexagon AB, Securitas AB Number of shares: 0. and HEXPOL AB and member of the Board of Other directorships: Member of the Board of Directors of Hennes & Mauritz AB. Directors of Alfa Laval AB (publ). Number of shares: Melker Schörling AB holds Number of shares: 364,550 (together with family 14,318,350 shares (35 percent) in AAK. through own company).

Members of the Board of Directors appointed by the employees

Leif Håkansson Annika Westerlund AarhusKarlshamn Sweden AB. AarhusKarlshamn Sweden AB. Appointed by IF-Metall. Appointed by PTK-L. Elected in: 2005. Elected in: 2005. Born: 1957. Born: 1956. Nationality: Swedish. Nationality: Swedish. Main occupation: Senior positions in Main occupation: Laboratory Assistant. trade unions and local and regional Qualifications: Technical College. government and Board work. Number of shares: 0. Qualifications: Electrical engineering. Number of shares: 0.

24 | AAK Report 2013 Märit Beckeman Lillie Li Valeur Märta Schörling Elected in: 2006 (Karlshamns AB 2004). Year elected: 2013. Elected in: 2013. Born: 1943. Born: 1970. Born: 1984. Nationality: Swedish. Nationality: Danish. Nationality: Swedish. Main occupation: Project work at the Depart- Main occupation: Vice President in Arla Foods Main occupation: Consultant Pond Innovation & ment of Design Sciences, Division of Packaging amba, responsible for South East Asia. Design. Logistics at LTH, Lund University. Qualifications: MBA and BSc. in Medicine. Qualifications: MSc. in Business and Qualifications: PhD. Master of Science and Professional background: Strategy and business Economics. Licentiate in Engineering. development; global and Asia market expertise; Professional background: Consultant Pond Professional background: Project Manager, Food, ingredients, pharmaceutical and consul- Innovation & Design. Consultant, Business development and Product/ tancy industry experience, B2C B2B commercial Other directorships: Board member of Melker packaging development. background with Novartis, Arla Foods and Bain Schörling AB. & Co. Other directorships: Member of the Board of Number of shares: 0. Directors of Beckeman Consulting AB. Number of shares: 0. Number of shares: 0.

Auditor

Sofia Götmar-Blomstedt Born: 1969. Authorised public accountant. Lead Auditor. The company’s auditor since 2013.

AAK Report 2013 | 25 Executive Committee

Arne Frank Fredrik Nilsson Renald Mackintosh Elected in: 2010. Employed: 2007. Employed: 2002. Born: 1958. Born: 1977. Born: 1951. Nationality: Swedish. Nationality: Swedish. Nationality: Dutch. Main occupation: President and CEO, Main occupation: Vice President Main occupation: Vice President AarhusKarlshamn AB. AarhusKarlshamn AB. Chief Financial AarhusKarlshamn AB. President Infant Qualifications: MSc. in Industrial Engineering Officer (CFO). Nutrition, Food Service Continental Europe, and Management. Qualifications: MSc. Business Administration. Personal Care and Binol. Other directorships: Member of the Board of Number of shares: 0. Qualifications: MSc. Food Technology. Directors of Alfa Laval AB (publ). Stock options: 15,000. Number of shares: 300. Number of shares: 364,550 (together with family Stock options: 40,000. through own company).

Octavio Díaz de León Edmond Borit David Smith Employed: 2007. Employed: 2001. Employed: 2001. Born: 1967. Born: 1969. Born: 1960. Nationality: Mexican. Nationality: Peruvian and French. Nationality: British. Main occupation: Vice President Main occupation: Vice President Main occupation: Vice President AarhusKarlshamn AB. Managing Director AarhusKarlshamn AB. Managing Director AarhusKarlshamn AB. President European AarhusKarlshamn Mexico. AarhusKarlshamn South America. Supply Chain. Qualifications: MBA, BSc. Mechanical & Qualifications: MBA, BSc. Food Engineering. Qualifications: MBA, Graduate Diploma in Electrical Engineering. Number of shares: 0. Business Management. Number of shares: 0. Stock options: 38,000. Number of shares: 0. Stock options: 40,000. Stock options: 40,000.

26 | AAK Report 2013 Executive Committee

Torben Friis Lange Jens Wikstedt Terrence Thomas Employed: 2010. Employed: 2014. Employed: 2013. Born: 1963. Born: 1958. Born: 1962. Nationality: Danish. Nationality: Swedish. Nationality: American. Main occupation: Vice President Main occupation: Vice President Main occupation: Vice President AarhusKarlshamn AB. President Asia, CIS, AarhusKarlshamn AB. President Europe. AarhusKarlshamn AB. President AAK USA Middle East. Qualifications: Bachelors degree of Economics and Canada. Qualifications: BSc. Dairy Technology, and Business Adm. Qualifications: MBA, BSc. Chemical Graduate Diploma in Business Administration. Number of shares: 550. Engineering. Number of shares: 0. Stock options: 0. Number of shares: 0. Stock options: 100,000. Stock options: 40,000.

Karsten Nielsen Anne Mette Olesen Employed: 1988. Employed: 2010. Born: 1963. Born: 1964. Nationality: Danish. Nationality: Danish. Main occupation: Vice President Main occupation: Vice President AarhusKarlshamn AB. Chief Technology Officer AarhusKarlshamn AB. Chief Marketing Officer (CTO). (CMO) and CSR. Qualifications: Graduate Diploma in Food Qualifications: MBA, BSc. Chemical Technology. Engineering. Number of shares: 264. Number of shares: 0. Stock options: 15,000. Stock options: 60,000.

AAK Report 2013 | 27 AAK’s Glossary

Amines – Chemical components containing Esters – Chemical components of fatty acids Polyunsaturated fatty acids – Fatty acids an ammonia. When made based they are and alcohols. Triglycerides, which are the with two or more double bonds in the on a fatty acid it becomes a surfactant (for main constituent of fat, consist of the alco- carbon chain. example used for cleaning) because it has hol glycerol and 3 fatty acids, and are thus both fat- and water soluble properties. a type of ester. Rheological properties – Flow properties, viscosity. Describes the force it takes to Amino acids – Acids containing ammonia, Fatty acids – Consist of carbon and hydro- make a material (semiliquid or solid) to protein building blocks. gen in long chains. At one end of the car- change its form. bon chain is a carboxylic group. The com- Bypass fats – Fats that have been tailored to monest fatty acids in vegetable oils contain Saturated fats – Popular name for saturated bypass the rumen of ruminants, which me- between 12 and 18 carbon atoms. fatty acids. ans that a larger amount of fat and energy is left intact for high-yielding dairy cows. Glycerol – An alcohol that is one of the con- Saturated fatty acids – Fatty acids which stituents of the fat molecule. does not contain double bonds in the car- CBA (Cocoa Butter Alternatives) – Fats with bon chain. physical properties similar to those of co- Hydrogenation – The process of adding coa butter, i.e., solid at room temperature hydrogen to the oil to saturate the double Snacking – Snacking is a habit of eating and with very rapid melt-off in the mouth. bonds in mono- or polyunsaturated fatty between regular meals and covers eve- acids. rything from beverages, fruit, cookies and CBE (Cocoa Butter Equivalents) – A type of chocolates. CBA which is chemically identical to cocoa InFat™ – A speciality fat for infant formulas. butter, and which may be used in chocolate Surfactants – A substance which is soluble up to 5 percent according to EU legislation. Lipids – A collective name for a wide range in different materials, for example water Manufactured from exotic raw materials, of natural products, which include fats. and oil, therefore they are active on the including shea oil. surface of particles and help mixing com- Monounsaturated fat – Popular name for ponents which are normaly not mixable. CBR (Cocoa Butter Replacer) – CBA with monounsaturated fatty acids. Fat within properties similar to those of cocoa but- only one double bond along the carbon Trans fats – Popular name for fats contain- ter. Is used in such things as chocolate chain. ing trans fatty acids. coatings for cookies and biscuits. More user-friendly than CBE as no tempering is Monounsaturated fatty acids – Fatty acids Trans fatty acids – Unsaturated fatty acids required. with one double bond in the carbon chain. with a different kind of double bond than those naturally occurring in vegetable oils. CBS (Cocoa Butter Substitutes) – CBA with Nutrition – Food, the process of taking in physical properties and application areas and absorbing nourishment. Unsaturated fats – Fats containing mono- similar to those of CBR. Made from palm- and polyunsaturated fatty acids, a popular kernel oil. Omega-3 – Polyunsaturated fatty acids in name formono- and polyunsaturated fatty which the first double bond is located three acids. Cocoa butter – Fat extracted by crushing co- carbon atoms from the end of the carbon coa beans. Its composition lends chocolate chain. its unique properties. Omega-6 – Polyunsaturated fatty acids in Crystallisation – The solidification process which the first double bond is located six of an oil, the process going from the liquid carbon atoms from the end of the carbon (oil) phase to the crystalic (fat/solid) phase. chain.

28 | AAK Report 2013 AAK’s Glossary 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 Swedish language version. In the event of any discrepan- cies between the translation and the original Swedish AAK report 2013, the latter shall prevail. information on AAK can be foundinformation on the company’s website www.aak.com. on theNASDAQ OMX,Stockholm, withintheLargeCapsegment.Further Fatsfectionery andTechnical Products&Feed. AAK’s sharesaretraded organized inthreeBusinessAreas;Food Ingredients, Chocolate andCon also tollmanufacturing operations inRussia andMalaysia. The company is AAKhas Netherlands, Sweden,Great andtheUS. Britain,Uruguay Further ourcustomers.Mexico, AAKhasproductionfacilitiesinDenmark, the of butter, trans-free and low saturated solutions but also addressing other needs innovation. AAK`ssolutionsareusedassubstitutefor butter-fat andcocoa technologicalsolutions arecharacterized contentand by ahighlevel of value-added specialityvegetable oilsand fats solutions. These oilsandfats high of theworld’s leadingproducers AarhusKarlshamn (AAK)isoneof -

Published by AarhusKarlshamn AB, Sweden. Produced by AAK Corporate Communication. Graphics and original: www.johnjohns.se. Photography: www.benfoto.se, AAK, Futureimagebank, Matton, Fotosearch. Print: Exakta AB.