Scandi Standard AB (publ)

STO:SCST

Earnings Call Transcript 2021-Q4

[Operator]

Good morning or good afternoon, and welcome to the Scandi Standard Q4 2021 presentation. My name is Adam, and I will be your operator today. [Operator Instructions]. I will now hand you over to CEO of Scandi Standard, Otto Drakenberg to begin. Otto, please go ahead, when you're ready.

[Otto Drakenberg, Interim MD & CEO]

Thank you very much, and good morning, everyone, and very welcome to this presentation of Scandi Standard's Year-End 2021 Results. I am, as said, Otto Drakenberg, I'm the acting CEO of Scandi Standard. And with me today, I have again Julia Lagerqvist, the company's CFO. Next slide, please. During the fourth quarter of 2021, Scandi Standard business continued to face a number of challenges, as we also indicated in our quarter 3 report. At the same time, we have made significant progress on our improvement program as previously communicated, and compensated cost inflation losses in our RTC business in Denmark, reduced export prices and effects of reduced throughput in Sweden and Ireland has had a substantial impact on our quarter 4 results. Our net sales in the quarter were SEK 2.4 billion, in line with previous year, but adjusted EBIT amounted to only SEK 3 million. To address the challenges and headwinds that we have experienced also in quarter 4, we have implemented a number of measures within the group-wide improvement program that was launched earlier in 2021 in quarter 3. In the short term, we have successfully negotiated price increases with most of our major customers, which will gradually become effective during the first quarter of this year. We have also taken robust measures in Denmark, and we will complete the comprehensive program to strengthen our production processes during the first half of this year. To conclude, the effect of the improvement program this far and the trends that we see looking out into 2022, strengthen our assessment of a gradual recovery in earnings during this year. Next slide, please. Our profitability is currently deviating materially from historic earnings. For the 2016 to 2020 period, our EBIT margins were stable around the 4% level. But as you can see, we have had a drop of almost 2 percentage points in 2021. The measures we are taking now are aiming to address both the macro headwinds and the operational challenges to set out the path to recovery and create the foundation for future profitable growth. And I will end the following slides to elaborate on the progress on these critical areas. Next slide, please. The first factor affecting our performance negatively in quarter 4 is the cost inflation and the lead time in passing on these increases to the customer. Feed prices have increased by 18% over the last year and has a large impact as it accounts for virtually 1/4 of the total cost base. Other input factors such as packaging, energy and transportation costs have also increased substantially. It is reassuring though that we have successfully negotiated price increases with the majority of our customers in our 5 countries, which will gradually become effective in the first quarter of 2022. This will, to a large extent, cover the cost inflation measured in the back end also of 2021. Additional cost increases have though emerged during the beginning of 2022, and we've initiated the process to address these 2 with suppliers and customers. Needless to say, we're also working rigorously to minimize the lead time effects of the current increases going forward. And as previously discussed, we are convinced that there are good arguments for poultry being better positioned in comparison to other proteins in an inflationary environment. As you can see in the lower right-hand table, we hope to reap the benefit of that throughout this year. Next slide, please. The second factor affecting our performance in quarter 4 is the export prices. And as you can see in the graph on this slide, export prices have dropped by 18% compared to what we saw in quarter 1 2020. This has been driven by a global oversupply as a result of COVID-19 pandemic and has been aggravated by negative effects from prolonged regulatory export restrictions regarding bird flu. The bird flu had a substantial impact on our results. In fact, the full year effect is estimated at minus SEK 80 million, of which SEK 28 million only in quarter 4. Our export business represents 7% of total sales in ready-to-cook. And the export channel continues to be important, primarily as it allows us to utilize the whole bird such as the legs, wings and feet. Worth noticing here is that ready-to-cook Denmark has for historical reasons, had a relatively higher dependence on the export channels due to the oversupply in the local markets. We are now seeing signs of improved market balance with significant capacity reductions across Europe. However, another bird flu case was registered in our markets in January, indicating that there will be a period of continuous restrictions for the coming 3 to 6 months affecting prices. Internally, our strategic focus is to reduce exposure to export markets, and we have taken measures also to improve the anatomic balance in the local markets in that -- to that extent. We've also improved our sales and planning processes in each of our countries to further reduce excess production. Next slide, please. The third factor affecting our quarter 4 performance is our loss-making Danish ready-to-cook business. The losses in more than -- in total, more than SEK 200 million for the full year of 2021, mainly derived from a failure in the execution of the strategy for slower growing birds, which led to a situation where premium quality products had to be sold at conventional price levels, combined with a large exposure to the export markets and the increased cost prices, the losses have escalated. We have now taken robust measures to mitigate and come back from these periods of losses. We have made major changes to management in Denmark. We are working closely with our customers to adapt the slower growing bar concept in the Danish market. Further, we have updated the product assortment, and we made significant staff reductions to ensure increased efficiency in our plants. We expect the most significant changes of all these measures to become effective during the second half of 2022. We have to bear in mind though, that the Danish market is difficult. It is still affected by export prices to a significant extent, and it will take some time before we can see the full effects of the updated strategy. But rest assured, we are working vigorously to implement these measures all the way. Next slide, please. The fourth factor affecting us has been the deviations in quality and production processes, which resulted in a group-wide review of all our plants that I initiated earlier in 2021, and that was completed in quarter 3 of last year. The review led to an action plan with the aim to close all open items by midyear 2022. As part of the action plan, we decided to temporarily reduce the intake of birds in Sweden and Ireland. And this, of course, impacts the results negatively in the short term, but has also resulted in an improved operational capability going forward in these countries. We have also established a group-wide early identification process to ensure that we address any upcoming deviations in a timely and forceful manner. And this is a topic high on the agenda for myself, the management and the Board of Scandi Standard. We can conclude that even if the situation and the attention in the Swedish market has affected chicken as a category, we are convinced that the measures taken by us will strengthen the competitiveness for our consumer brand over time. Next slide, please. To support progress against the set targets and also creating the foundation for value creation going forward, we have also carried out a number of organizational changes in the previous period. We have strengthened the country management teams in all markets, and we have reviewed all group functions to make sure that they are set up in the right way to really help our countries delivering their plans. We have also downsized overhead to adjust to the lower production volumes. And to conclude, I believe that we're showing good progress on the implementation of the improvement program. Now let's look more at the business segments in some detail. Next slide, please. Looking at an overview of the segment's contribution, it's clear that our challenges continue to be tied to the area ready-to-cook, representing 3/4 of our total net sales. We continue to see a good development for the ready-to-eat business, driven by the food service and the recovery in that sector, but this could not offset a disappointing performance in ready-to-cook in the quarter. The segment other that you can see in the table includes ingredients and overhead costs for your reference. Next slide, please. The headwinds that I've talked about primarily relates to our ready-to-cook business, which had a negative EBIT of SEK 30 million -- SEK 32 million compared to a result of plus SEK 56 million in the same quarter the year before. From a sustainability point of view, though, we are at good levels with our main animal welfare and food safety parameters. For perspective, the animal welfare indicators, that you can see the table here at 9, is substantially lower than the European normal levels of around 40 to 60. At the same time, we have experienced an adverse development regarding worker safety, which is our third sustainability parameter here. And that worker safety development is mainly driven by a higher stock turnover during the pandemic, where we've had a higher proportion of temporary employees and also had to change people in various job positions to keep the factories going. This development, of course, is unacceptable and is being acted on forcefully by myself and managers at all levels. And in parallel with immediate interventions that we're already taking, we are putting in place a systematic program to train people so that we will get down to industry levels and below in the coming periods. Next slide, please. Looking at our business in ready-to-eat. We delivered a good performance in quarter 4 with sales of SEK 543 million, which is an increase of 14% for the quarter. And for the full year of 2021, sales reached over SEK 2.1 billion, which is an increase of almost 11%. Cost inflation was in ready-to-eat was to a large extent mitigated and the EBIT margin landed at 5.8% for the quarter. And for the full year, the margin was strengthened to 6.6%. I'm very pleased with the RTE results, and I look forward also to see strong performance in that area going forward. Next slide, please. A strong driver for the growth in ready-to-eat is the continued rebound in the foodservice channel, increasing by 16% in quarter 4. Foodservice is also the largest channel, representing 64% of sales for ready-to-eat. And with the current relaxation of restrictions due to the pandemic in 2022, we look forward to continued good performance here. We could also see strong performance in retail in quarter 4, indicating a more permanent step up in retail demand, showing an increase of 13%. And also here, we look forward to a continued strong performance also going forward. To conclude, we see very good opportunities for the ready-to-eat segment, both in foodservice and in retail and we are prioritizing investments in this sector to support the growth. And with that, I now hand over to you, Julia, for a deep dive into the financials, and then I will come back and conclude Julia?

[Julia Lagerqvist, Chief Financial Officer]

Thank you, too. So we come back to the overall P&L going to Page 14. And as you've seen, the quarterly performance was weak. However, our EBITDA was still at SEK 125 million in the quarter and for the full year, close to SEK 600 million. We had a positive noncomparable item in the quarter of SEK 26 million. This is related to the final purchase price settlement for our Iris acquisition in Romania form. There was somewhat lower finance cost in the quarter, impacted by ForEx. And overall, the net income for the quarter landed at SEK 4 million compared to SEK 21 million last year and giving us an earnings per share of to. Going to next page, 15, we look at our returns. The returns have been declining in the quarter, driven by the core results. However, given our cash preservation measures, our equity ratio still remains stable at around 30%. Coming to Page 16, looking at our working capital. We see a continued low level and an improvement versus last year. We've had an increase in flows in inventory. This has been offset by improvements in payables and receivables, which have been positively impacted by timing factors going in our favor. And also we have some postponed tax payments related to COVID state aid, roughly SEK 45 million. Overall, our target level for working capital to sales adjusted for financing remains around 6%. And adjusting the quarter 4 results for COVID-19 state aid and also the financing elements, we are at 5.5%, so slightly below the target. Coming to Page 17, looking at our cash flow. We do see this release of working capital that we have talked. And in addition, we also had a low CapEx spend as a result of our cash preservation measures. We did in the quarter had some impact from positive impact on tax payments driven by adjustments to prepayment of taxes and we did the final payment for the settlement of the Manor Farm acquisition of a total SEK 136 million, impacting our total cash flow. Coming then on to Page 18, looking at the cash flow guidance. We are estimating in 2022 to have a capital expenditure of around SEK 330 million compared to SEK 306 million in 2021. The priority is to facilitate further the cost of growth in ready-to-eat. And we're also starting a 3-year rollout of a new ERP system. We're expecting to spend around SEK 100 million for this in 2022. The European investment is aiming to drive efficiencies throughout our entire value chain with harmonized processes and also an increased degree of automization to the group, setting a new foundation for us. Since there are also new accounting principles relating to investments in cloud-based solutions, this may lead to a portion of the ERP investments to be expensed. You can see more details on this in the appendix. The paid interest is still estimated to be around 3% to 3.5% of the average EBIT and the blended effective tax rate is about 21%. In terms of dividend, in order to ensure future financial flexibility, the Board has resolved to not propose any dividend for the fiscal year of 2021, but the overall dividend policy remains the same to be at around 60% of net earnings over time. Finally for me, we look on Page 19 at a summary of our sustainability KPIs. In terms of animal welfare leading indicators, the Foot pad score , we are very pleased with the development and improvement for this last year. And as Otto mentioned, this is at market-leading levels. In terms of antibiotic use, you here seen a very good improvement versus last year, where there's been another major step taken in Ireland. In terms of CO2 emissions, they have been slightly reduced versus last year. This is below our ambitious target and was negatively affected by the very cold weather we saw in both Q1 and Q4 of this year. However, as Otto also mentioned, in terms of worker safety, which we measure in lost time in us, he had very unacceptable results, and we are addressing this forcefully now, as Otto mentioned. And with that, I'd like to hand back over to Otto.

[Otto Drakenberg, Interim MD & CEO]

Thank you, Julia. And then we are on Page 21. And to conclude, I believe that we have reached very good progress in all our work streams in the group-wide improvement program that was launched last year and that we have now laid the foundation for a gradual recovery for Scandi Standard during 2022. We -- the majority of planned price increases that we planned for in the end of last year are agreed and under implementation. We are already planning another round of price increases to counter further inflation. The turnaround plan in our RTC Denmark business is under full implementation during the first half of 2022, and the strengthening of our production processes will be finalized during this first half year. In addition, to tackle the short-term challenges, we're also focused on developing the basis for profitable growth over time. We have taken forceful measures to strengthen the organization, and we're changing our ways of working and will dedicate strong focus in improving sales and operation planning. Overall, we are increasingly also emphasizing margins over growth, and I'm encouraged by the strong commitment to this change journey from the Scandi Standard team across all our markets. From the 1st of April, I will hand over the reins of Scandi Standard to the new permanent CEO, Jonas Tunestal, who will then take over. I am confident that we, over the last 9 months have made a solid foundation to position us for profitable growth in the longer term. And I'm proud to have been part of this team for these months. It has been a fantastic journey and there is so much more of that journey to come. Thank you very much And with that, I open up for questions and answers.

[Operator]

[Operator Instructions] And our first question today comes from Daniel Schmidt of Danske Bank.

[Daniel Schmidt, Research Analyst]

I hope you can hear me. So a couple of questions. And you stated also that sort of the majority of the price renegotiations has been agreed upon. And of course, that will have an effect as we go into this year. But you also stated a majority, not fully, it sounds like. And you also say that there's been sort of further cost inflation increases that accentuates more price negotiations. So what should we -- how should we look at this? Is the thing -- is the situation basically just slightly better now versus the autumn? Or where are we in the sort of catch-up game?

[Otto Drakenberg, Interim MD & CEO]

Good question. So we all know that we and many other FMCG suppliers have experienced significant cost inflation over the last year. We have taken price increases towards our customers, not only once, but we initiated and completed 2 rounds of pricing last year.We have a strong track record also within Scandi also before I joined of passing through cost inflation through to the customers. And when I say that we have already completed the majority of the negotiations that were initiated in quarter 4, that is absolutely a majority. I will not give you a number, but it's a majority with an exclamation mark. And I want, of course, not -- don't want to be mentally dishonest and say that everything is done, but not everything is done, but we work vigorously with the price increases. And I think price adjustments as a reflection here has to be and will be a part of the dynamics, the reoccurring dynamics between us and our customers over many periods to come. So it's not going to be an ad hoc thing. It's going to be a regularly recovering feature, and we're becoming very good at it. So the majority of the price increase is done. We're planning for more and we're becoming very good at it.

[Daniel Schmidt, Research Analyst]

All right. But would you say that if you were sort of -- if you were 3 steps back during the second half of last year, you made sort of 2 rounds of price negotiations and you entered this year sort of 1 step back and then we've seen cost inflation taking off again. So we've sort of taken another half step back. Is that how we should view it? And then we'll sort of try to get back to square one during Q1? Should we anticipate that you will be in full compensation when it comes to cost inflation as we enter Q2 there?

[Otto Drakenberg, Interim MD & CEO]

When we initiated the second round of price negotiations of last year, we, of course, anticipated also that there would be cost inflation this year. So a significant amount of what we are seeing this year. We've already taken hike for and are compensating in the negotiations that mostly have been filled and some, of course, are still under negotiation. But yes, there is coming more inflation, and I think that will be that for a number of periods to come. But we, of course, anticipate that, that would come. So my answer to that would be we are absolutely on top of the game. I'm not going to overpromise here, but we are on top of the game and making -- taking pricing is, of course, one measure, and then we have other measures to also counter cost inflation, which is a significant part or an important part of the group-wide improvement program. So I feel confident with the statement that we are making that we will have a gradual recovery of our performance and financials throughout 2022, even with the new inflation taken into account.

[Daniel Schmidt, Research Analyst]

All right. And then just moving on to ready-to-cook in Denmark, which, of course -- or not of course, but have seen sort of an unchanged development, I would say, during 2021 with quite heavy losses, and you're taking a lot of actions, as you say, when it comes to personnel and so on. But given the significant losses that did occur in 2021 over SEK 200 million, has never been on the table just to close the production down or close that sort of entire arm down?

[Otto Drakenberg, Interim MD & CEO]

I think every sound business person always have to look at your business from different angles. And especially if things are not going the way they should. We are spending a significant amount of time not only within the Danish management team but also at the headquarter here reviewing what it takes to get Denmark profitable again, but of course, considering other options. Our decision, and that's also supported by the Board is that we now have a very strong improvement plan in place and underway. That must be our main focus to implement that and any other short -- or route to pursue, all of those would necessitate that we first implement this current recovery program. So that's where we put our energy now. But a sound business people, we never exclude anything, and we look at options.

[Daniel Schmidt, Research Analyst]

Yes. And would -- just hypothetically, if you would divest that entity or close it down, would there have been any ripple effects on the rest of the business, negative ripple effects, so to speak?

[Otto Drakenberg, Interim MD & CEO]

Yes. From...

[Daniel Schmidt, Research Analyst]

Any bit of losses? Which is good, of course. But just understanding...

[Otto Drakenberg, Interim MD & CEO]

Were you done? Sorry, am I interrupting you?

[Daniel Schmidt, Research Analyst]

Yes. No, no, no, go ahead. Sorry. Go ahead.

[Otto Drakenberg, Interim MD & CEO]

Yes. Okay, thanks. So we're looking at our business and especially the one in Denmark, where we have a significant RTC but also significant RTE business. There are no silos because we work intimately between our different business segments to optimize the business. So you cannot easily detangle our various business segments. And we are -- I think we are confident, you could say that we're going to improve Denmark as a whole. And with that, both sides, RTC and RTE are dependent on each other, and that's why it's so important to pursue the recovery program now, and that is the best way forward, regardless of what the end game will be for Scandi Standard and Denmark.

[Daniel Schmidt, Research Analyst]

Yes. And just a final question then maybe the ERP system that you now sort of implementing and investing in. You said that it's going to be over 3 years. And if I got it right, you said that SEK 100 million investment for 2022, what is the full amount you think? And you're also right that part of this might be expensed? Any guidance on that?

[Otto Drakenberg, Interim MD & CEO]

Before I let Julia in on answering on the numbers, let me just take this opportunity and say that this is a significant investment for the group. And I'm very excited. This was one of the things that came on to my table already a few days after starting to work with Scandi. And we're very excited by the ERP or we actually call it the BPE project, the business process enhancement project because this is one of our best bet to improve and harmonize the way we work across our functions but also across our countries. And we look forward -- of course, it's a long-term project, but we really look forward to reaping the benefits of this significant investment. So for us, this is not a defensive investment to keep things running. This is mostly one of the levers we use to take Santi Standard to the next level. Now that's my overall strategic perspective on this significant investment. Do you want to add some flavor then to the numbers part?

[Julia Lagerqvist, Chief Financial Officer]

Yes. So you are correct, Daniel, that we estimate it to be around SEK 100 million in 2022 in total investment. The accounting for this has not been completely finalized, and we will inform the market when ready most likely in the first quarter.

[Daniel Schmidt, Research Analyst]

And the full sort of investments over 3 years? Do you have any amount on that?

[Julia Lagerqvist, Chief Financial Officer]

We don't want to go into the details on that one. We are looking into the first year now and see where that will take us.

[Daniel Schmidt, Research Analyst]

All right. And maybe just one more on export prices in bird flu. Now that sort of coveted subsiding, hopefully, which has had an impact on the export market as well as I understand it, even though you had this breakout outbreak has been a continuous outbreak. It looks like in Europe when it comes to bird flu, which in my knowledge is a little bit unusual, but it seems to be going on. Is there a yet another -- is there still sort of any easening when it comes to export prices as of late? Or are they still weak?

[Otto Drakenberg, Interim MD & CEO]

Well, export for us is roughly 2 things. One is, of course, the export that we do to mainly the Asian markets and Korea, that's where bird flu has, during 2021, put a big stopper to that because of the long regulatory time lag that needs to pass between the outburst of bird flu and until we can start exporting. So that's one. And that's an export that we want to continue with. It's a healthy margin. A lot of work is being done between European and Asian authorities to make sure that both the time span that is now in place, this 3 to 6 months, is being shorted. There is no decision yet, but there's work going on in that area. And the second thing is that we hope and we work towards a regionalization. That means that if you have a bird flu outbreak in one part of the country, for instance, Sweden or Denmark, that means -- that should not mean that the whole country is closed down for export. So that's a perspective on that part. The other part of export, which has to do with exporting excess capacity or excess inventory in our local markets. There, we, of course, have seen a price pressure throughout the pandemic. That is now being lifted and we see both decreased supply in Europe mainly of chicken. And also since the export -- as the COVID restrictions are being lifted, we are looking forward to an increased demand also and therefore, the general export prices are likely to improve during this year. So those are the 2 different things. The regulatory virtual related Asian exports, where we still see some delays in opening up, and we wait for regulatory improvements of the more permanent nature. And the other one is the improvement of the supply and demand seen mainly in Europe, where we already now see indications of a lift up. So those are the 2 dimensions I would like to comment on when it comes to our export.

[Daniel Schmidt, Research Analyst]

That was very clear. But just a follow-up on that and maybe the negative impact that you have seen from these 2 factors, have they been equal in weight?

[Otto Drakenberg, Interim MD & CEO]

Okay. Well, I will not give you a specific number. I have given some numbers in the presentation, but not the comparison. Bird flu, of course has been a substantial number, as I said earlier this morning. So I would say that, that's probably the biggest effect in 2021, but that also depends from time to time how much excess stock of normal poultry do you have. If you manage your inventory well, then the Asian export will be the dominating factor and then bird flu will, everything else equal, be the biggest barrier. If you have a lot of excess capacity, then, of course, the European market and the price situation in Europe will be the dominating market. So it really depends on the inventory level. But my reply for 2021 would have been -- would be that the bird flu was the biggest issue for us on the export arena.

[Daniel Schmidt, Research Analyst]

All right. Very clear.

[Operator]

Our next question comes from Christian Nordby of Kepler Cheuvreux.

[Christian Olsen Nordby, Equity Research Analyst]

I have a question regarding the inventory situation that you briefly touched upon. Do you have an unusual high growth inventory at the moment? Or do you see that the inventory asset, which put sort of a lid on the margins in the sort of, say, 2022 picture?

[Julia Lagerqvist, Chief Financial Officer]

Sorry, could you repeat the question? I didn't catch the midpart.

[Christian Olsen Nordby, Equity Research Analyst]

Yes. I mean do you have an abnormal high amount of frozen inventory at the moment, which causes potential problems for you in terms of pricing and stuff?

[Julia Lagerqvist, Chief Financial Officer]

We have -- it's a little bit elevated in some countries at the moment, but it's a continuous flux, I would say, and it's not the old inventory. So from that sense, it doesn't create a problem for us at the moment. We just need to make sure we can match the supply and demand going forward.

[Christian Olsen Nordby, Equity Research Analyst]

Okay. That's clear. And in terms of the ERP system, will this mean that it's unlikely that we will get to sort of if everything goes according to plan to around the, say, 4% EBIT margin levels in '23? Or is that sort of something we shouldn't expect now to do that? Or does it not have that big impact?

[Julia Lagerqvist, Chief Financial Officer]

It depends. We don't have that clear picture yet.

[Operator]

We have a follow-up from Daniel Schmidt from Danske Bank.

[Daniel Schmidt, Research Analyst]

All right. Hope you can hear me again. Just a follow-up on Sweden. And you're right, and you talked about the strengthening of the competitiveness when it comes to sort of the production irregularities that were the evident in 2021 and, of course, probably had an impact, a negative impact on the perception of the brand for the Swedish consumer. Can you say anything more what exactly you are doing in order to sort of change that perception?

[Otto Drakenberg, Interim MD & CEO]

To change the consumer perception that we saw was weakened in the second half of last year. Well, I think all of this has to start at the beginning. So what we are doing, we are, of course, improving the areas in our production processes where we feel that improvement was needed. It's, however, important to state that animal welfare, the way we measure it and also consumer or food safety towards consumers was never in jeopardy. However, processes had to be tightened up, and we got media attention because we didn't have these processes sufficiently in place. So that's really one area to start. And we are not taking that ad hoc approach to that, and that would also further have damaged otherwise the brand equity of our Swedish brand and the Swedish business. But we're taking a continuous approach to that. So we have implemented not only a group-wide review but also a continuous monitoring process to ensure that any critical item before it becomes critical or deviation is being picked up and addressed forcefully not only in Sweden, but we have implemented the same monitoring system throughout. So that's really a starting point, not only being very good in animal welfare and food safety and so on, but also making sure that we always comply and strive to was compliance towards regulatory demands. Then moving over to supply to consumers and really consumer benefits and consumer needs should be what drives us always, of course, the rest are hygiene factors. We are now looking at a couple of things to forcefully strengthen the perception of Kronfagel, our Swedish local brand, but also chicken as a category because it was really a category hurt that we could see in the fall since our Swedish brand is such a big player in the marketplace. So we're doing a couple of things there. We are increasing our offering, the number of SKUs in terms of product innovation that will come. I will not go more specifically into that now. We want to tell our customers first. We are looking at going out again, communicating towards our consumers in various forms and shape. But of course, media is one important way to do that, to talk again about chicken, Kronfagel our offering and all the benefits and taste that we bring to the party. So product innovation and media communication towards consumers will be very important parts now in -- throughout 2022. So housing order, making sure that the authorities and we see these things the same way and have a good dialogue, a good proposition towards our customers and consumers. Those are the steps we are taking. And I look very positively to rebound of this business. And again, I will state it for the last time in this question, animal welfare and food safety was never according to our standards in jeopardy, but we are very assured that we have had to make improvement in our processes, and we are happy where we are and the progress that we have done so far.

[Daniel Schmidt, Research Analyst]

Yes. All right. Good. Sort of a follow-on on that topic, sort of -- and also coming back to price renegotiations. And you haven't been at the company that long, but I guess, speaking to others in the company, have those negotiations become more difficult given what happened at least in -- according to Swedish media, even though I hear what you're saying, of course, and that's also what you said back in May and June. I guess the damage was already, to some degree, done, maybe wrongfully so, but do you believe that, that has impacted your ability to hike prices.

[Otto Drakenberg, Interim MD & CEO]

Well, I will say at a sufficiently high level here and not disclose too much of what goes on in the negotiation room with our customers. That must be a sort of a confidential matter. But I can tell you this much, one of the things that the Swedish team, and also before I joined, have done well is to keep the key customers close. That's, of course, always a good normal process, but also that has been the case throughout the media term on that we experienced in end quarter 2 and quarter 3. I would say that the customers that we have in Sweden have been very interested and very understanding. They are, of course, demanding to a very understanding of our view on the situation, out of the big potential for our category that is still to significant extent unfulfilled. If you look at Nordic and Swedish consumption, we have such a long way to go before we are at European levels of consumption. So this is a high interest category for our customers. We have, of course, a homework to do, and we have done a lot of that now to make sure that we have everything in place. And our customers understand this journey and supports us. So I would say with very productive discussions also around pricing, and they have not to some significant extent, being hampered, that's at least my assessment. We rather look to the future together with the customers. And now with the strengthened management in our Swedish team, I'm very encouraged by the signals I get from them when they talk to both current and also new customers on the Swedish market. So I would say the opposite. I'm very excited even when pricing is on the table.

[Daniel Schmidt, Research Analyst]

All right. Okay. Good. And maybe a final one on that one. There's been no further sort of termination of contracts, that was out in the news in that turmoil, that a Norwegian customer, I think, decided to terminate the contract.

[Otto Drakenberg, Interim MD & CEO]

Yes. So let me be try to be super clear here. There were no recurring customers that terminated contracts with our Swedish business and NPC last year. The customer you referred to the Norwegian customer, they bought a spot opportunity part of our inventory that we decided to sell out. So that was never intended to be anything else than a one-off deal with that Norwegian customer. So no Swedish customer of any significance have walked away during the media turmoil and the attention that Kronfagel got last year. And instead, they have been, of course, eager to understand how we look at the situation, what we're doing about those things where we haven't had all -- where we have had deviations, and they stayed on and show us a lot of confidence, which, of course, is a tremendous responsibility, and we are facing that.

[Daniel Schmidt, Research Analyst]

Okay. Very clear.

[Operator]

Nothing further in the queue at present. [Operator Instructions]. As we have no further questions, I'll hand back to the management team for any closing remarks.

[Otto Drakenberg, Interim MD & CEO]

Yes. Well, this is my last -- at least to my knowledge, last quarterly report session with all of you attending this call today. And as I said when I summarized half an hour ago or so, it's been fantastic to be part of this shorter part of the Kronfagel and Scandi Standard journey. It's been super exciting. And I wish the team all good progress and good fortune. I'm a happy shareholder. I will continue to be a shareholder, of course, and it's all been fantastic. I also want to thank those of you shareholders, not only those on the call here, but those who are hanging on to Scandi Standard as much as I do also, and I look forward to following the company, although from an outside. And lastly, thank all employees for hanging in there. This being a sweaty ride, isn't it fantastic? Thank you, and thank you all for listening in today.