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Ladies and gentlemen, welcome to the AAK Audiocast for Teleconference Q3 2021. Today, I'm pleased to present CEO, Johan Westman. [Operator Instructions]Johan, please begin your meeting.
Thank you so much, and good afternoon, everyone. Welcome to the AAK Q3 Earnings Call. I have with me here also Tomas, our CE -- CFO, and we will run this presentation. Agenda for today will cover some highlights for the third quarter 2021. Some key events as well as a business and financial update, and as usual, we have concluding remarks and a Q&A session at the end.And with that, let's move into the presentation on Page 3. Summarizing the third quarter, we can conclude that we have continued on a good path forward. We have delivered strong earnings growth in the quarter. If you look at operating profit at fixed currency, we are up 12% year-on-year and with operating profit, our margin up 8% year-on-year, reporting operating profit of SEK 642 million. So really strong momentum in the business.This in a situation with a quite demanding macroeconomic climate really, and this is not unique at all to AAK, but certainly something that we all see around us. So when looking at that, we are quite proud of being able to continue to develop and deliver strong earnings. Looking into our different business areas, we see Food Ingredients with a slight volume decline, but really on the back of strategic initiatives where we are prioritizing high value-added solutions, and that has an impact on our product mix. But looking at that, still, we have been able to improve our operating profit per kilo, so our margin is up 4%, while volumes being slightly down, and the earnings are up, and I'll come back to that later.Also, we're looking at Chocolate & Confectionery Fats, really strong momentum in the industry and a strong momentum for AAK in this industry. We reported an operating profit growth of 12% year-on-year on the back of higher volumes. We've also had a very good quarter within our area for Technical Products & Feed, with an operating profit growing 65% year-on-year in a combination of continued strong performance in our crushing operation as well as an increased demand for natural ingredients also in products outside the food industry space.With that, moving into Page 4, some key events for this quarter. At AAK, we continue to engage and collaborate to make impact with regards to sustainability. And one example that we have here on this page is that we, together with our dear customer, Nestle, as well as with one of our suppliers, Musim Mas, we have addressed deforestation in a smallholder program in the Aceh province in Indonesia. And smallholders are an important part of the industry, but where deforestation is particularly a challenge, and this is why we now in a corporation, really try to make an impact also in this area.We have also continued our path with regards to strengthening our position within Lecithin. We have acquired the company BIC Ingredients, which really adds to our portfolio, our specialty portfolio with regards to Lecithin. And furthermore, we have strengthened our portfolio for Special Nutrition through the partnership that we announced with regards to DHA. So really adding an ingredient into our product portfolio. And this we have done in a partnership with Progress Biotech. So these are some examples of key events for this quarter and they are really addressing sustainability, they're addressing product portfolio and even adjacent product portfolios.Continuing a bit on sustainability. We can also conclude that we are making really strong impact, we are moving ahead, making progress in our supply chains. We recently launched new targets, really making sure that we show impact. And with regards to verified deforestation-free volumes, we have increased that by 36% since we introduced our new targets. So this is about a year ago where we launched these targets, and we are up 36% with regards to verified deforestation-free.Also looking at traceability. Looking at traceability, we are up 10% and that, again, is a strong performance. It's so important to be transparent. It's so important to show traceability all the way back to plantation. And here, we start from a higher level, but have been able to improve it by 10% year-on-year. And that is shown in the graph as well and verified deforestation-free should be up 38% even versus last year.We also continue with our women program in West Africa. And this program is a program where we include now 346,000 women in West Africa in our supply chain. So this is not a charity program. This is a program that is important for our supply chain, finding and supplying us with shea kernels that we use in our processes and at the end sell to our customers. And this program, we are now really improving it further and increased it by 8% year-on-year.So all in all, examples of how AAK really focuses on sustainability, really drives impact in our supply chain, and we will continue to put this as a highest top priority in the company.Moving into Page 6, Food Ingredients. Now we're into our business areas. I mentioned in the beginning that we have driven a bit of a portfolio based strategy impact in Food Ingredients. Those of you who follow the company know that we launched a portfolio based strategy for the company as a whole. Part of that is looking at how to optimize our portfolio. Part of that is how to optimize our cost structure. And within Food Ingredient in this quarter, we can see an example of that. While the volumes are slightly down, they are down a bit by purpose. And we have increased our volumes and our earnings in the higher end segments. So all in all, we're showing an operating profit per kilo increased by 4%. And that is something that we have had for some time. Those of you who follow us know that we've had a good performance in our crushing operation for some time, and this continues nicely. We now also see a higher demand of more natural ingredients also in products with regards to Technical Products. So really good momentum in this.As we continue on Page 9, looking at the raw materials that we have, we mentioned a few here. So for our key raw materials, we can conclude that the price levels are still very high, very high in a historic view. But we can also conclude, when looking at what we have delivered in terms of operating profit, operating profit per kilo and even adjusted for currency impact, we're growing the volumes, we're growing our earnings and we're growing our earnings on an operating profit per kilo basis. So one could argue we managed the situation well. We are able to deal with higher raw material prices and inflation.Now, the macroeconomic climate is demanding and will continue to be a challenge. But we have shown that we are capable of navigating, we're capable of adjusting as we go forward.With that, I'd like to hand it over to you, Tomas, for some further comments on our financials.
Thank you very much, Johan, and good afternoon, everyone. Continuing on Johan's final comments on the increase in raw material prices. That, as you know, has a fairly high-impact on our cash flows as well.And as you can see from the Slide 10, we have -- in previous quarters this year, have a negative impact from increased raw material prices. It affects our working capital throughout. And when we look at inventory, it's gone up substantially in absolute numbers due to the increase in raw material prices. But when we look at the number of inventory days, they're actually decreasing throughout the year of 2021. So that's very positive.Our cash flow from operating activities ends up at SEK 113 million and when we look at our free cash flow, we're actually at a negative SEK 183 million, as you can see as well. With the current increases in raw material prices, we expect the negative impact to continue for the remainder of this year and into the beginning of next year as we see normally a 6 to 9-month lag in these increases in our balance sheet.When we come to CapEx, we've guided before about SEK 800 million for this year. We see a slow -- a little bit slower movement than we would like to see. And as you can see from this slide here, we've spent about SEK 150 million in Q3. The new guidance estimate is SEK 600 million to SEK 700 million this year. It's, as I said, slightly below the historic level and the desired pace, mainly driven by availability of suppliers and resources. But when we look at it, we don't consider it to have any negative impact on operations or capacity. And we have a very good pipeline portfolio of projects going forward. And the temporary drop here doesn't change our long-term focus or performance.
And rather a spillover effect into next year other than anything.
Yes, which we expect to see during 2022. Moving on to next page, Page 11, a picture of our return on capital employed, and it continues on a stable level from last quarter, just about 15%, 15.5%. And historically high levels as well as you can see. We -- and as you also remember, the increase from mid last year is mainly driven by our recovery of profitability and capital employed has stayed reasonably stable. The capital is affected by the increases of raw material prices, but we've seen an offset by negative currency effects, revaluation of the balance sheet as we've gone through the year as well.And moving on then to the next page. You see net debt EBITDA ratio remains very stable as well at low levels, and we continue to see these good, stable levels develop here. And we have a solid foundation for continued growth, both through continued investments as well as through potential acquisitions going forward.And by that, I hand it back to you, Johan.
Thank you, Tomas. Certainly, a strong, solid balance sheet and financial position in the company. Just to highlight also with regards to our Capital Markets Day, after almost 2 years of COVID restrictions and so forth, we are now offering a face to face Capital Markets Day. So for those of you that wants to join us, please do so at November 23. We have a nice lineup of colleagues of mine that will give you a good insight into our current trending as well as some more deep dives into our business. So please join us on the 23 of November in Malmo for the Capital Markets Day of 2021.And with that, we move into the final page, concluding remarks for the quarter and to start -- to end it where we started it, concluding a solid quarter, repeating our operating profit is at SEK 642 million for the quarter, which is up 7% year-on-year, but really looking at that from a fixed currency perspective, it's up 12%. So in essence, we are growing our operating profit, and we're actually also growing our margin, reported 3% up on our operating profit per kilo basis, but 8% up year-on-year, if you look at the fixed currency. So all in all, continue to develop on our strategy, although that being in a macroeconomic climate that is a bit demanding.With that, we can conclude, we are offering plant-based, healthy, high value-adding oils and fats solutions. We still drive our customer co-development approach. We continue to strengthen our portfolio of solutions that are good for both people and planet. And despite a continued short-term uncertainty, we see no reason for changing our long-term ambitions, and that is really based on the underlying trends that we see. So all in all, we remain prudently optimistic about the future, and we are committed to living our purpose of Making Better Happen.And with that, we end the presentation part and welcome questions.
[Operator Instructions] Our first question comes from the line of Alex Jones from Bank of America.
Three questions, if I can. The first one on infant formula margins. So you mentioned in the release that they're down slightly this quarter. Could you confirm for us the reason behind that? Is that similar to last quarter, where it's raw mat inflation takes longer to pass-through to local Chinese customers? Or is there anything structural changing on that margin? Second question on Chocolate margins. Despite the FX headwind getting smaller at a group level, intensified and nearly doubled per kilo in Chocolate this quarter. Could you give us a little bit of color around why that is? And how we should think about that into Q4 next year? And then finally, the bigger picture on M&A. On past earnings calls, you've talked about the pipeline being good, but it being difficult to conduct due diligence in an environment where you can't travel globally. Could you give us a bit of color around how that's developing now that the world is opening up a bit?
Well, so starting off with infant formula, yes, you're right. There's not a big change quarter-over-quarter so -- or rather not a big change sequentially at all. But -- and I repeat, we have a strong position in infant formula market. We are moving well with the move of volumes from, call it, European players into the Chinese players, and we have a strong position. Well, within that industry, and certainly in China and when we sell to -- from China to Chinese customers. There is a higher share of fixed-price contracts where you need to live your contracts and then adjust and with that, you get a bit of a different dynamics around how to compensate for inflation, for example. So that is one piece of the element. And also as we highlight -- we highlighted in the report a bit. Lower margins compared to the corresponding quarter last year. That is also due to that the price level on certain products is a bit different in China, price dynamics. So again, repeating a good position, a good traction in terms of volumes. But from a margin perspective, slightly lower margins per kilo, call it, in the current mix. Then, moving on to CCF volumes and FX effect. Do I understand you correctly? Your question was a bit more on why was the FX effect higher proportionally in CCF versus the group? Was that the question?
Yes. Yes, why it's got worse on EBIT per kilo in CCF this quarter versus last quarter?
I mean the total EBIT -- the total EBIT per is not big drama. First of all, I would say we're moving on really nicely in Chocolate & Confectionery. We're increasing volumes. We're getting leverage and traction. But as we mentioned before, on a quarter-to-quarter, year-on-year perspective, we highlighted last year that price levels were slightly lower this year on certain components. And then, there's always a -- an effect of what's the total mix? What is the level of filling fats versus CBs versus other products? So there's always a slight mix effect in that as well. And then, FX is a function, of course, overall, where we sell. So I wouldn't argue that this is a big drama. It's more linked to dynamics around what market is selling a bit more than the other. What products are selling a bit more than the other. I don't know if you have anything else to add there, Tomas?
No, I don't think so. It's basically as Johan said. It's the geographical mix to a great extent and what currency we trade in where the volumes move and so forth.
It was strong across the board in terms of volume, but more so in South Latin America and Europe from a volume perspective. Is that okay for CCF?
Yes, that's great.
Okay. And then last one is on M&A pipeline. No big change. I mean, the world is opening up a little bit, but not in every region of the world. And I will not comment specifically where our different targets are in different stages in our pipeline. But we continue to drive, we continue to push, we continue to find ways to move our pipeline forward, even if travel is a bit restricted. And of course, in countries and areas where travel eases up, it becomes easier to meet and move things forward. But also, we're trying to move things forward in spite of COVID restrictions also. So not a big change compared to the last quarter.
And the next question comes from the line of Heidi Vesterinen from Exane.
I've got 3 as well. First one, are you concerned by the price pressure we're seeing at retail level in Chinese infant nutrition? We hear that the price of ultra-premium products are down double-digit. I wonder if that's going to put pressure when you try to raise prices into next year, while we have inflation in the cost side? That's the first one. Second one, I think last quarter, we had talked about a competitive environment in CCF. Has the situation changed in Q3 and what's your outlook there? And then last one, how sustainable is the performance in Technical Products Feed?
Heidi, thank you for your questions. First of all, not sure we'll see exact -- of course, any type of retail pricing will, at the end of the day, impact our customers and what does that mean for us, right? But it's not a one-to-one. We have seen a continuous increase of spend in premiumization in China. So the market as such is growing from a total spend perspective with the consumers. But in this case, of course, it's the parents to the consumers buying infant formula. There is an underlying growth in spend. And then, with regards to specific pricing on specific products, that is not a one-to-one link to us because we are one ingredient, among others. And the total margin that our customers have is built up by many elements and many ingredients, and there is quite some premium in that.So am I concerned? Not necessarily we -- one should always be humble and concerned to a certain level, but we have an important ingredient. There has been some lower price level already experience by us, as I mentioned, being strong in the Chinese market. There are slightly different price levels for our products to compete there. But again, we have done that successfully, and we have a good market share with the big customers, the big players in China. With regards to the competitive landscape in CCF. I think that has been common. We started last year, where I was articulating our yearly tenders and contracts with customers and could conclude that we were going into 2021 with slightly adjusted price levels, but we have had that through the year. I mean that hasn't changed.That was contracted a year ago. So there is no big difference. We have been able to be successful in spot business, in new business in the year. There is a good underlying growth. We are being very competitive in terms of our solutions in the market, and that's why you see our nice volume growth of 12%. If anything, where we are now, as we speak, am I -- I would say that if anything, we are seeing equal levels going forward or maybe slightly better. So if you look at it from a year-on-year perspective, we should not talk as much about competitive pressure going forward as we did from last year into this year.On Technical Products & Feed, how sustainable is it, obviously, when you see a strong quarter like we presented, and the margin is going up, the absolute number delivered is up significantly. Is that sustainable? And what I do believe is sustainable is the trends that we see. So trends around sustainability in Food Ingredients is also trends that we see in other areas where we deliver. At AAK, we continuously focus on finding high-end solutions using our knowledge of oils and fats, the technology knowledge that we have and our co-development approach, and that has been successful also into Technical Products outside the food space.And that's what we've seen here that more and more there is a demand for natural product, natural ingredients, sustainable solutions, moving away from fossil fuel, and when doing so, with regards to oils and fats, plant-based oils and fats are solutions that one could offer into certain other products, and that's what we're seeing. I think that trend is sustainable. How sustainable is our consistency on this EBIT level? Let's see. I mean, we're certainly shooting for a new plan -- a new level then up from there. But we are also performing really, really well as we articulate. So it's not a given, but certainly, the trends behind some of the demand is sustainable.
And the next question comes from the line of Oskar Lindstrom from Danske Bank.
Two questions, I think, left on my list. Number one is around logistics, an increasing issue for a lot of producers. You have a global footprint and -- is your setup in terms of logistics and ability to withstand logistics complications, any different, do you believe, from your peers and competitors?
Yes. Let's -- I don't think necessarily it is. I mean, we are different from our competitors in many ways in what we offer, and some of our competitors have a different structure in terms of how they are working and integrate. There are many differences with some of our competitors. So of course, the setup differs a bit and the logistics differ a bit. But if you ask the question in how do we differ from others transporting from Southeast Asia or from Europe to the U.S. and into Latin America, etc.? On a high level, macro level, we are not very different from others. What we do have in AAK is that we have a decentralized structure. We have a centrally organized sourcing and trading and shipping and logistics organization, but we also have a decentralized business leadership.What we have shown during COVID is that this is a very efficient way of operating. We are very agile. We have been quick at arriving to continuous plans and working around any challenges that we have. And there are no guarantees for the future, but I think we can argue that the last year, 1.5 years, has been a year of challenges in supply chains, with logistics and other things, and we have been able to navigate, we've been able to operate. Of course, it's a challenge, of course, the uncertainty is there, but we do have an organization that really is on top of it, and that's been working so far, and that's the trust I put in our organization going forward. Again, risks are high, no guarantees, but we have a good setup and a strong organization.
Right. My second question is on Food Ingredients. I think some of the other people have asked a similar question. But could you say anything about the volume growth and the EBIT per kilo growth that we saw in the quarter in Food Ingredients? I mean, plant-based foods continue to grow, Special Nutrition, Foodservice, how important -- which of these was it that drove EBIT per kilo and volume -- or sorry, not volume, but drove EBIT per kilo growth in the quarter?
So it is really a combination. I think I take your question...
The reason I'm asking is, I mean, was it -- I'm thinking, is it in Foodservice, then it's kind of a recovery from pandemic lows that's driving the EBIT per kilo, but if it's more plant-based than Special Nutrition, maybe it's more trend. That's what I'm after. That's what I'm thinking about.
Yes, I'm taking your question as an opportunity to maybe hammer in the message about Food Ingredients for AAK. It is a good example of us having a few eggs in our basket, right? A legs to stand on. So what we see is that we, on purpose are driving a product management agenda, optimizing our portfolio, letting go, call it, a volume with lower margin, freeing up capacity for volume of higher margin. At the same time, having good traction in -- from a sustainability perspective and other areas that drives the demand for certain products, take plant-based food as one example.And continued strong position in Special Nutrition. So when you sum up this quarter, slight volume decrease, but improvement in profit per kilo and an improvement in absolute numbers. It is really the sum of strategic activities and the sum of the demand in certain segments that builds it up. So there's no one single lever in this case. There's no one single explanation for the reduction of volume and one single explanation for the increase of volume. But for example, in Bakery, where we have a purposeful program of optimizing, reducing a bit of volume, structural change, freeing up capacity and focus on other segments, but then looking at Food -- yes, it is a rebound in Foodservice, but it's not only Foodservice, it's really across the board, that EBIT per kilo in many of the subsegments that we look.
And I think the overall picture is pretty clear this quarter, at least that we see the strategic move that we're making. And the low average margin products are reducing in volume and the above margin -- average margin products are being increased, and that's intentional. So that's the result you see. But it's across the board.
Following up on that, I mean, should it be interpreted that now, so let's say, after the pandemic, you are able to push that part of your strategy harder in this inflationary environment?
I could answer a straight yes. Can we do that? Of course, we can. I mean, that's what our strategy is all about, but I will give it some context. During the pandemic, we have all been at home offices or travel restricted, and we showed pretty decent earnings and earnings growth in spite of that. Look, compared to pre-pandemic, I think we're up operating profit at fixed-FX of 30% versus '19. So one could argue that we've been able to navigate through COVID quite nicely. But one area which has been more demanding for us is, of course, our closeness to competitor -- to customers, doing our customer co-development projects, inviting our customers to our Customer Innovation centers around the world and really moving the needle with their product portfolio, helping them to achieve better solution.And I think that's where one could potentially see a bit of a catch-up effect as we come out of COVID. It's easier to get together. It's easier to push new product launches, new incremental improvements or innovations to market. That's, of course, something where I hope that we will be able to show that we're accelerating. I mean, this is not something you would see sequentially quarter-by-quarter. But over time, coming out of COVID, should -- if anything should help us to push high-end solutions through our work together with customers. And our strategy is geared towards higher value-added products versus lower-margin products.
And the next question comes from the line of Kenneth Toll from Carnegie.
I have just one question or a clarification. Now, during the quarter, I got many questions on the higher raw material costs and how that would affect your earnings. And you talked a little bit about the Chinese situation that you had some delays in raising price. Do you have contracts where you just push the raw materials on to your customers? Or do you have agreement where you can hedge inputs prices? Or can you tell us a little bit about the mechanics there, please?
Yes. So maybe lifting the question a bit up. So if you look at it on really AAK level, you can -- I think you can all do the math on -- or, call it, on the back of an envelope, right? The raw material price's increasing dramatically across the board. Utility is increasing dramatically, freight and transport decreasing dramatically and then you look at our numbers. All right? So are we able? Yes, we are. Then, when we click down, there are certain dynamics, and I mentioned one dynamic smaller. If you look at it from a total -- yes, one dynamic is an infant formula with Chinese contracts.But in general, we have rolling contracts that we update frequently in a negotiation with customers. I would never ever say that we have an automatic pass-through clause, but there is a reason to renegotiate, there is an appreciation for renegotiating when inflation, whether that is raw material or other inputs cost moves up and down. And that's something we talked about before. It's more significant now, of course, with sharp, steep increases. But I think looking at Q3, it's promising. Everything else equal. If we would not have adjusted prices, if we would not have been able to do that, we would never have delivered the numbers you're seeing.
And as you mentioned as well. As we mentioned before, back-to-back hedging is the way we manage our risk as well on the raw material. So once we have the contract in place, with the price it's based on, what we can then hedge our raw material in the market for. So that's one way, of course, also to maintain the profit level. But when you look at infant nutrition, the market structure looks a bit different than the rest of the general AAK business, if you will, where that's passing on those increases and also hedging to a greater extent is possible, of course.
Yes. Some companies also talk about problems with the availability of raw materials and that has led to disruptions in production, and you have to reschedule and so on. So have you experienced any problems like that? Or is it more just higher prices?
Yes, we certainly have. And back to my comment earlier, we are not free from this. We are a global -- someone mentioned that, I mean, we're a global company. We have global supply chains. We source from all parts of the world, almost a lot coming from Southeast Asia, coming into Europe, coming into U.S., outsourcing in Latin America into different plants, etc. We are really a global supply chain. So we have challenges across the board. We have been faced with COVID challenges. We have been faced with transportation shipments.But we -- I'm back to that, I'm not going to -- I like to -- a big hand of applause to the organization. We are on top of it. We're managing it. Again, there are no guarantees. The risks are still high across the world, but that's our way of operating. So we're not free from these challenges, but we -- and we have done our fair share of rescheduling and looking at alternative suppliers and alternative routes and rescheduling. There's been a lot of that, and there will be more of that. But again, that's -- I choose to show my appreciation to the organization. We're dealing with it, and we are on top of it.
You see that both in Tier 1 and the logistics side. And -- but that's where we, I think, excel and show that we can perform with a robust and sturdy organization to provide that flexibility, if you will. Because every -- I mean, as everyone else, we are exposed to that, too, as Johan said.
And the next question comes from the line of James Targett from Berenberg.
A couple of follow-up questions for me. Firstly, just on the volumes in the Food Ingredients. I mean, obviously, the specialization strategy, focus on higher-margin ingredients has been your strategy for a long time, but it's been, I guess, a few years since that mix, if you like, has driven some negative volumes on an annual basis anyway. So I guess my question is, is there something specific with a one-off impact for this quarter, which we saw volumes decline because of this mix shift? Or is this something which is going to continue this level of decline for the next few quarters, albeit obviously at a higher EBIT per kilo, just so we know what to expect? And my second question on the Technical Products business. You mentioned the higher demand and the trends for some natural non-food ingredients. I don't have a great feel for what your capacity is in Technical Products for these ingredients. So maybe if these trends continue and you're seeing the strong demand, to what extent can you actually fill the full demand in this area?
First in answering your question on Food Ingredients there. So I think, first of all, with regards to AAK, there is usually not a lot of, call it, one-off type of movement. And when they are, if they are, we would certainly comment that. So we are supplying the global world, food supply chains and Chocolate & Confectionery supply chains and so forth. So this is a bit of movements that we see. So the mix shift is not a one-off big thing, but it's a shift. But then, of course, in the total volume picture, you have a bit of -- well, when you click one level down, of course, you have one region, maybe pulling more one culling less. You have a bit of coming in, coming out of COVID effect.There are a few other elements, of course, impacting the volume, but we are trying to highlight the bigger items. So there is a slight shift towards a more high value-added mix versus earlier quarter, but you should not expect that to be a one-off significant only this quarter impact. Our ambition is there, our strategy is there, but don't expect it to be big-ticket items, big swing items, it should not be on a sequential level. Then, with regards to TPF, maybe one clarification from my side. When -- we supply natural ingredients to products, meaning that customers of ours producing with -- a product, whatever that it could be a candle, could be a rubber solution, it could be something else, a personal care solution, etc. So they are asking for ingredients to fulfill the product functionality. We supply plant-based oils and fats. So we use that typically, that could be using a ingredient that we have in food or that could be a side stream, a side fraction that we get on fractionating a food ingredient.So in essence, we have our refineries, our oils and fats refineries, can supply Food Ingredients, Personal Care, Technical Products & Feed. So if ships go in certain product categories, whether they are outside food ingredients or not, we are able to maneuver. So I would argue that we have quite a good capacity opportunity with regards to different trends. We don't typically have specific assets that could only do one thing. We have a few of those. But in general, we are an oil refining company. So we should be pretty capable of following continued trends for certain product categories wherever that is.
And we have one more question from the line of Alex Sloane from Barclays.
Yes, just a couple of questions for me. Just maybe the first one, just to follow-up on the Food Ingredients volumes. I wonder if you're able to quantify in the quarter, the underlying volume growth, if you will, and then the actual impact from the strategic decisions you've made in terms of the magnitude of the drag on volumes that it had? And if that's something we should consider when we're thinking about Q4 and Q1 of next year? And then, just secondly, I mean, just on the move with the algae DHA, that sounds very interesting. I mean, could this be maybe the start of a strategy where you're using your strong customer relationships and market presence in infant formula to broaden your offer beyond actually oils and fats to supply adjacent ingredients as well? I'll be interested in your views there. And then, just finally, on Technical. Obviously, volumes, I think, in Q2 were down 15%, and you talked about some one-off impacts there. So I just wondered if the 17% volume growth we've seen in Q3 is in part phasing from Q2 into Q3?
All right. Thank you, Alex. First, on the Food Ingredients, I repeat what I said before. There is not a big swing between underlying market growth versus our strategy. So it is impacting in piece by piece. But imagine, we're still getting out of COVID, there are different dynamics getting into COVID and getting out of COVID. In Food Ingredients, we're supplying Bakery, Dairy volumes, high volumes in many areas. So there is a bit of that element into it. So I wouldn't read too much of big trends with regards to underlying market versus AAK strategy, but just see it as nuances to the development. I think I close it at that. With regards to DHA, first of all, yes, is this -- is there an opportunity for us to look at how to strengthen our portfolio with adjacencies? Yes. In this specific case, we're still talking about our home turf with regards to oil. This is oils and fats.But adding to our portfolio, something that we did not have before, but certainly building on our capabilities, in this case, using a partner for how to source the specific ingredient. There is also an opportunity to look at potential adjacent ingredients outside the oils and fats space, but they are still mixed into infant formula solution or a medical solution or a senior nutrition or performance nutrition solutions. So this is clearly part of our strategy. This is exactly what we're talking about in our health and nutrition platform that we launched in our portfolio based strategy. Continue to invest, continue to look at partnerships, maybe in M&A where it makes sense, but build -- keeping it tied to the core, either a additional oil or fat for delivery and/or an adjacency, but certainly linked to how we can leverage that into our, for example, infant nutrition customers.So yes, see it as an indication of the move, not necessarily a confirmation of shifting completely to adjacent ingredients, but certainly adding that as an element and including additional oils and fats, as in this case. All right. And then TPF volumes, I wouldn't argue it necessarily call it a swing and a catch-up from the last quarter. We had -- we stopped production a bit longer in quarter 2 than we usually do and that had an impact on our ability to deliver. But in this industry, with terms of -- in terms of volumes, there is also some feed business with very high volumes. So there are some -- there is some volatility and demand that could shift quarter-to-quarter. So I think, in essence, the important thing in here is that we continue to focus on having a good performance in the crushing operation and continue to seek opportunities to sell high value-added solutions to different market segments. So there will be swings also going forward. But the focus and strategic focus is to, over time, increase the average performance of this business.
And as previously mentioned, the natural ingredient, there is a positive trend on volume there, but that's not the explanation for the full increase, of course. It goes more towards feed where we see it's a lot larger volumes at the base, of course. But the positive trend is there for natural ingredients and that we view as very, very positive as well, of course, for our business.
There are no further questions. I'm handing it back to you.
Thank you so much. Thank you to everyone that's listening to this earnings call and the questions to clarify, again, closing it off with a strong quarter for AAK, showing operating profit at a record high level in a demanding macroeconomic climate. And with that, thank you so much. Wish you all a great weekend. Thank you. Bye-bye.
This concludes the conference call. Thank you all for attending. You may now disconnect your lines.