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Making fat profits from vegetable oils

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All that glistens on toasted bread isn’t butter.


That is, there is some threat to the idea of a continued squeeze on dairy fats from plant-based alternatives.


While many consumers seem newly remarried to the likes of butter, and nothing else, some demand does seem to being switched from milk-based products to those derived from vegetable oils, results from AAK show.


‘Strong trend’


The Swedish-based group, which also makes plant-based alternatives to the likes of cocoa fats, revealed a booming trade at its “dairy” division in the July-to-September quarter.


The unit “continued the strong trend from 2016 and once again reported high double-digit organic volume growth”, AAK said.


“All regions showed very strong growth,” except that is the home Nordic market “where the development was modest”.


(Are Nordics more fussy on dairy provenance than other consumers?)


Fat profits


AAK noted a strong performance in its chocolate and confectionery fats business too, reporting a 9% rise in like-for-like sales volumes, to 100,000 tonnes.


“There was continued strong organic volume growth for both speciality and semi-speciality products, with several showing exceptional volume growth – in mature as well as in emerging markets,” the group said.


(Remember, while cocoa bean prices have been pretty miserable, those of cocoa fats have been relatively strong, supporting strong margins for bean processors, and the elevated grinding data reported from most geographies of late.)


Palm up


There is, however, a fly in AAK’s ointment. (It makes cosmetics too.)


And that is the rising prices of its raw materials too, with the group flagging higher values of palm and rapeseed oils.


“We have started to see a modest increase in raw material prices since some months,” AAK activing chief executive Fredrik Nilsson said.


Indeed, he flagged that a rise in raw material prices of “roughly speaking 10% since some months ago”, a factor which “we should expect… [to] have a negative impact during the first 6 months in 2018”.


Still, AAK investors did not seem too deterred, sending the group’s shares up 1.9% to SEK653.50, their best finish in four months.

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