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Confectionery fat destocking hits AAK, but healthy oils are on the up

By Caroline Scott-Thomas , 13-Aug-2009
Last updated on 13-Aug-2009 at 14:09 GMT2009-08-13T14:09:17Z

Specialty fats firm AAK has said it is benefiting from the trend for manufacturers to substitute more expensive fats with cheaper, healthier oils – but it has been hit by destocking of confectionery fats.

After a difficult year in 2008 on the back of high vegetable oil prices, the company reported operating profits of SEK146m (€14.31m) in its interim results for Q2 2009, although this was down from SEK171m (€16.77m) for the second quarter last year.

Profits from chocolate and confectionery fats declined by 48 percent compared to the same period last year due to lower sales volumes, particularly in Eastern Europe, and a trend towards running down stocks across the confectionery industry.

“Chocolate and confectionery fats continued to be affected by the world-wide recession,” it said. “The de-stocking has had an accelerated effect on the suppliers to the chocolate industry, including AAK. It has negatively affected AAK’s sales and operating result to a much greater extent than the lower consumption of chocolate in the retail sector.”

However, food ingredients did well, with operating profit up 22 percent.

“In the market there is a clear trend towards substituting more expensive products with more inexpensive, value-added vegetable oil solutions,” the company said in its financial results presentation. “This aligns very well with the AAK Group strategy and enhances growth opportunities.”

The company said it is optimistic about the future of its vegetable oils business, as manufacturers look to remove trans and saturated fats from their food products on the back of consumer demand, alongside increased demand from manufacturers who wish to quickly reformulate using cheaper ingredients.

AAK said that the driving force behind this is health, and added: “Vegetable healthy oils have an exciting future.”

The company has also been positively affected by ongoing insurance compensation of SEK70m, following a fire at the end of 2007.

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