AAK: Yog(hurt)

Research evidence excerpt

AAK: Yog(hurt)

Estimates/Valuation

Following a disappointing Q2 result, we are cutting our EPS forecast by 4-5% across

2026-28 which leaves us a similar order of magnitude below the latest (pre result)

consensus. Recent weakness of the SEK provides some relief (as does more share

repurchases from the buyback given the lower share price) but the main revision stems

from our more conservative EBIT/kg assumptions given acknowledgement of price

competition. We now forecast 2% profit growth at constant currency in 2026, improving

to 6-7% in the future years. This is below guidance of 10% and a track record between

2012-25 of 13%. Management has not given any specific guidance for 2026, but after a

strong start to the year (+11% at CC), Q2 saw profits -6%; albeit closer to -3% excluding

a prolonged production outage. We assume some acceleration in cost savings in H2.

We have reduced our price objective from SEK330 to 270. To reflect an arguably more

commoditised profile given the influence of relative commodity prices, we have lowered

our target multiples. We now use 17x 27E P/E (vs 22x prior), 11x 27E EV/EBITDA (vs 14x

prior), 4x p/book (vs 5x prior) and unchanged 4.5% FCF yield. We believe AAK can grow

at least as fast, if not faster than ingredient peers given its track record, with a

comparable return on capital in the mid teens. The company does admittedly have a

more concentrated category exposure which could increase volatility versus its more

diversified ingredient peers. The other consideration is a lack of track record in M&A,

which is part of the stated strategy, but we are reassured by the discipline that has so

far been demonstrated.

Exhibit 1: Valuation multiples

Balance sheet offers flexibility for further distributions and/or investments