CEO’s Review Q3/2023

CEO’s Review Q3/2023

Esa Mäki, CEO:

“In the third quarter, Apetit’s operating profit improved year-on-year. Both businesses improved their results. In Oilseed Products, positive profit performance was boosted by successful raw material sourcing. The operational efficiency of the bioenergy plant at the Kantvik vegetable oil milling plant has improved. In Food Solutions, positive profit performance resulted from good development in sales and price adjustments made in order to respond to the general rise in costs.

We upgraded our profit guidance for 2023 for operating profit from continuing operations. Apetit expects the full-year operating profit from continuing operations to clearly improve year-on-year. In Oilseed Products, raw material sourcing has been successful throughout the year. International crush margins have been at an elevated level during the entire calendar year, and stabilisation of margins is not expected to happen during the remaining financial year. In Food Solutions, the sales have developed favourably. The impact of inflation, which has limited profit development, has successfully been moderated. The harvesting season, which is a key profit driver for Food Solutions, has progressed in a way that limits the risk during the current financial year from previous estimate.

In October, we announced that we are building the new bottling line in the Kantvik vegetable oil milling plant. With this approximately EUR 4.5 million investment, we take the supply chain more firmly into our own hands. Investing in a new bottling line follows Apetit’s strategy of speeding up growth and provides opportunities for the development of products with a higher degree of processing in the vegetable oil business. On the new line, vegetable oils can be bottled in plastic and glass bottles. It is estimated that the new line will become operational during the second half of 2024.

The abundant rainfall in August and September posed challenges for harvesting. Weather in the autumn can have a negative impact on the quality of root vegetable crops. Regardless, the harvest-time production of root vegetables has been fairly good as a whole. The processing of root vegetable crops will continue to the next calendar year. The volume and quality of autumn spinach crops were impaired by the abundant rainfall.

We have launched several delicious new products during the autumn. Our new soup ingredients for traditional salmon soup and borsch soup introduced the Apetit brand in a new product category. These products contain soup ingredients for making a filling soup easily. Another new product of this autumn, Mashed potato with carrots, makes daily life much easier. The frozen pizza product family expanded to family-size pizzas when Superior Grande pizzas were introduced to the market. These new pizzas increase the range of Apetit’s frozen pizzas, which was renewed a year ago and received a warm welcome among consumers. The new products introduced this autumn are an excellent complement to our range of products. Apetit’s product selection is a good match for the current situation, in which consumers prefer affordably priced products.

Important steps forward have been taken in the work to commercialise the rapeseed protein ingredient BlackGrain. This year’s efforts have been associated with the development of the production process. During the summer and the autumn, we have achieved desired results in process-related details, contributing to starting the commercial scale production. “More domestic plant proteins” is one of Apetit’s strategic focus areas.

We have launched a project to produce Finnish pea protein. In this strategically important project, we explore, in the entire value chain, the opportunities to produce Finnish pea protein. We have many advantages here: strong value chain insight, expertise in plant-based raw materials and long-term cooperation with domestic primary production. The pea is one of our most used plant proteins worldwide, but thus far we have relied on imported raw materials.

During the review period, Apetit decided to establish its own sales organisation in Sweden. The decision strengthens our position and promotes exports. Apetit’s product selection has achieved a strong foothold in the Swedish retail trade and it has grown even stronger with the expansion of the distribution channels. Export demand for peas continues to be strong.

Apetit’s production facilities have gone through an energy transition and, as a result, the share of renewable energy of all energy used by the Group has grown approximately eight-fold. Wind power is now used in all production facilities. The Kantvik bioenergy plant and the Säkylä plant’s new energy solution have increased the use of domestic renewable energy. Apetit’s emission targets will be reached ahead of the planned schedule. The target set by Apetit is to reduce energy-related emissions by 75 per cent by 2025.”

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CEO's Review Q1/2025

"Apetit Group’s operating result for the first quarter declined from the comparison period. The result of Food Solutions improved, but the operating result of Oilseed Products decreased from the strong result of the comparison period. In Food Solutions, both net sales and sales volumes were on a par with the comparison period. Retail sales increased slightly year-on-year. The result of Food Solutions was boosted by the harvest season production that continued until 2025 and was record-long. The weak performance of Oilseed Products was particularly attributable to anticipated expensive raw material items timed during the reporting period. The prolonged collective bargaining negotiations between the Finnish Food and Drink Industries' Federation and the Finnish Food Workers’ Union had a negative impact on Apetit’s operations during the first quarter. The ban on overtime and shift changes weakened Apetit’s delivery reliability in both businesses. The volatile global political and economic situation causes uncertainty for Apetit’s operations and reduces predictability. The effects may be reflected in the market prices of oilseed plants in particular. No short-term impact is expected due to frontloaded raw material purchases. Work on strategically important projects has continued as planned. The ERP system upgrade is progressing according to schedule. The new ERP system for Oilseed Products is scheduled to be deployed towards the end of the year. Work with rapeseed powder BlackGrain From Yellow Fields and Finnish pea protein also continues. In the autumn, we will launch a product based on textured plant protein (TVP) processed from BlackGrain in the Food service channel. The patty with BlackGrain TVP and pea protein has an excellent taste and texture – and it is a great example of the synergies between Apetit’s two businesses. The sowing season for field vegetables is expected to begin earlier than usual as fields are quickly becoming ready for sowing. During the coming harvest season, we will further increase the area used for contract farming of frozen peas. Harvesting and the from field to freezer chain ran smoothly in last year's record-large area. As a new crop, we will contract grow Finnish onions for the first time. There has been commendable willingness to grow onions. Onion is an important crop in our products: both Finnish onion cubes and the potato-onion mix are important products in the frozen vegetable and frozen potato product categories. The domestic spring rapeseed cultivation area is expected to increase by 37 per cent in the Finnish Cereal Committee VYR’s* planting intention survey. The milder and less snowy winter than usual was favourable for autumn oilseed crops in large parts of the country. There may be regional differences in the success of the wintering of autumn rapeseed, but little winter damage has been reported and autumn rapeseed in particular looks good. We will continue to invest in promoting Finnish agricultural research in both of our businesses. Diverse experimental activities of the RypsiRapsi forum and the VARPS project aimed at increasing the cultivation reliability and volume of rapeseed continued. Variety tests of autumn and spring oilseed plants will be further established in different parts of Finland, and cultivation method experiments will be continued, for example, with plant protection alternatives and new establishment methods. Among other things, the Räpi experimental farm is participating in a project to investigate the use of side streams from the food industry as soil improvement products or recycled fertilisers. Early this year, we launched new products that fit perfectly with the food trends. A new flavour was made available for the Crispy Chick patty, which has become a favourite in Apetit’s Kasvisjauhis vegan mince product range. The sales of Apetit’s plant-based patties and balls as well as the Kasvisjauhis Crispy Chick patty have developed steadily. Crispy Chick in particular has established a solid position in shop freezers: the sales of the Crispy Chick patty have been increasing for five years and more than doubled over that time. Other new products early in the year included a new flavour in the Uuni- ja grillikasvikset frozen vegetable mix and Finnish potato slices to complement Apetit’s product range of frozen potatoes. Apetit celebrated its 75th anniversary in March. Operations began as Länsi-Suomen Sokeritehdas in 1950. Today, Apetit is at the heart of food trends and nutrition recommendations: its range of plant based frozen vegetables and foods and vegetable oils is aligned with prevailing food trends, responsible eating and nutrition recommendations.” Esa Mäki, CEO

CEO’s review Q4/2024

Esa Mäki, CEO: “The full-year operating result from Apetit’s continuing operations improved from the comparison year. Food Solutions achieved a clear improvement in profit performance and Oilseed Products was slightly behind the comparison year’s result. The profit improvement in Food Solutions reflects the systematic work to improve profitability. Product portfolio management and product group-specific sales development have contributed to this profit improvement. The success of from field to freezer chain and harvest season production strengthened the result of Food Solutions. One factor behind the decline of the operating result in Oilseed Products was the decrease of market prices. The Group’s full-year net sales decreased clearly from the comparison year due to the decline in oilseed product market prices. In Food Solutions, net sales grew slightly from the comparison period. In both businesses, sales volumes declined mainly due to normal yearly fluctuations. Food Solutions performed more strongly than expected in the fourth quarter. Also Apetit’s operating result in the final quarter of the year improved from the comparison period. During the year under review, we promoted several strategically significant projects. The update of the Group’s ERP system progressed on schedule; deployment of the system in Food Solutions was carried out at the turn of September and October 2024. The project continues towards deployment of the ERP system in Oilseed Products during the second half of 2025. Deployment in Food Solutions was carried out successfully thanks to competent personnel and good planning. The bottling line at the Kantvik vegetable oil milling plant became operational as planned. With the new line, we are taking the supply chain of vegetable oils firmly into our own hands. In addition, the bottling line makes it possible to develop products with a higher degree of processing. The bottling line investment was realised as budgeted, amounting to approximately EUR 4.5 million. Thanks to the new bottling line, we have been able to reduce the amount of plastic we use in vegetable oil bottles by 41 per cent on average. One of Apetit’s strategic focus areas is More domestic plant proteins. We have taken steps in the commercialisation of our BlackGrain rapeseed powder. Development work has focused on improving the production process. We have started analysing different options for the production of BlackGrain plant protein. The analysis assesses potential partnerships and the organisation of production either through making an investment in the Kantvik vegetable oil milling plant or with purchased services. The analysis is expected to be completed in late 2025. The Finnish pea protein project is continuing as planned. In 2024, we conducted small-scale testing with Finnish raw materials to produce pea protein. Work carried out in the project has focused on trial runs and technology comparison to consolidate the competitive advantage. Increasing food exports and strengthening our position in Sweden is also one of our strategic focus areas. In order to achieve this goal, we established our own sales organisation in Sweden at the beginning of 2024. The strengthening of Apetit’s position in Sweden progressed. Besides retail, we have now expanded to Food service sector. We are pleased with the Finnish harvest season for both businesses. The frozen pea harvest from a record-large contract farming area was largely in line with expectations and the field-to-factory process ran smoothly. The root vegetable growing season was long, thanks to the warm autumn, and the quality and quantity of the harvest were mainly in line with the targets. According to the Natural Resources Institute Finland’s harvest forecasts, the total Finnish rapeseed harvest increased by more than a fifth. With regard to oilseed plants, things are developing in the right direction and we at Apetit are working to increase the cultivation of domestic oilseed plants. In both of our businesses, we want to use as much domestic raw materials as possible. Increasing the cultivation area of frozen peas and domestic oilseed plants is one of our strategic focus areas. The price increase of food stopped in 2024, but the higher price level is still reflected in consumer purchasing behavior. The new national nutritional recommendations published in the autumn recommend a varied diet with plenty of vegetables and adequate use of vegetable oils. Apetit focuses on domestic and plant-based raw materials as well as products that promote well-being and sustainable consumption. The cornerstones of Apetit’s product selection are relatively affordable and in many respects meet the requirements of consumers today: they are a responsible choice that supports people’s well-being and suit their budget in daily life. We expect demand to remain high in Apetit’s various product categories. At the beginning of the strategy period 2023–2025, we set the following financial objectives: operating result (EBIT) of more than EUR 9 million and return on capital employed (ROCE) of more than 8 per cent. By the end of 2024, we achieved the financial objectives set for the period. We will continue to develop Apetit in line with our vision: Growing and profitable market leader in plant-based products. I would like to take this opportunity to warmly thank all Apetit employees for the year 2024 and the owners, customers, contract growers and other partners for their cooperation.”

CEO's review Q3/2024

Esa Mäki, CEO: “Apetit’s operating result in the third quarter improved from the comparison period. In Food Solutions, operating result grew clearly year-on-year and the result of Oilseed Products was at the same level as last year. One of the factors behind the improvement in Food Solutions was the normal seasonal fluctuation between quarters. The Group’s net sales increased slightly from the comparison period. In Food Solutions, net sales grew especially in retail trade. Also in the Food service sector, development continued to be strong. In Oilseed Products, net sales were on a par with the comparison period. Apetit Group’s operating result in January–September improved from the comparison year and both businesses are ahead of the result for the comparison period. We continue to maintain our profit guidance, according to which the Group’s operating profit is estimated to be at the same level as in the comparison period. In the strategically important ERP project, the production implementation for Food Solutions was carried out successfully as planned. The critical production and order-delivery system functions were successfully deployed at the turn of September and October. Important support systems also came into use at the same time. The ERP project will continue according to the planned schedule until the second half of 2025, proceeding to the production implementation phase in Oilseed Products. The bottling line at the Kantvik vegetable oil milling plant has become operational as planned. The line will be up and running at full capacity in late 2024. The first new Apetit Kotimainen Rapeseed Oil bottles have been produced on the line, and they will gradually be rolled out to retail stores during the rest of the year. The bottling line enables a production method that significantly reduces the amount of plastic as well as logistic load associated with empty bottles. From now on, our plastic use will decrease on average by 41 per cent, taking into account all three sizes of Apetit’s rapeseed oil plastic bottles. The bottles receive their final shape only when they are on the bottling line, which significantly reduces the space required at all stages of the logistics chain. In addition to the new shape, all bottles have a new look and feel and are now part of the Apetit Kotimainen product family. The commercialization of BlackGrain rapeseed powder is progressing. Over the past year, work with BlackGrain has focused on developing the production process and starting production on a commercial scale. In addition to developing the production process, we have, for example, invested in developing the product's various use cases, both internally at Apetit and together with customers. The harvest season for field vegetables has progressed well. For domestic frozen peas, the harvest season was successful as a whole. We processed more frozen peas than in previous years and the field-to-factory process ran smoothly. For root vegetables, the situation looks good – the long, warm autumn contributed to their growth. Harvest-time production has proceeded as planned. The success of the harvest season will be ultimately determined by the harvest conditions in late autumn and preservation of processability until freezing. According to the harvest estimate of the Natural Resources Institute Finland*, the domestic turnip rape and rapeseed harvest is expected to increase by more than 40 per cent from last year, to 58 thousand tonnes. If the estimate is realised, the harvest would reach its highest level since 2018. The direction is good, but we hope that the turnip rape and rapeseed cultivation area and harvest volumes will continue to increase. The current level is not enough to cover Apetit’s targeted annual quantity of domestic raw materials. The sustainable cultivation level of domestic oilseed plants is also important for the security of supply. In the autumn, we launched new products into retail stores. In addition to the new rapeseed oil packaging, we are introducing a new Kotimainen Wok Vegetables mix, spicy Falafel Harissa balls and a hot Nduja Pepperoni pizza. We are also renewing our frozen soup selection, introducing a tomato and lentil soup that is perfectly suited to the new nutritional recommendations. Product development and the continuous renewal of the product selection play an important role in commercial success, alongside classic products.” *Natural Resources Institute Finland, harvest estimate 16.9.2024