Risks
AAK’s operations are constantly exposed to risks,
threats and external factors with an impact on the
company. Through a proactive approach to business
intelligence, the company aims to anticipate changes
in factors affecting operations. Plans and policies are
adjusted continuously to counteract potential negative
effects. Active risk management, such as hedging raw
material prices and currencies, reduces the risks that
the company faces.
Raw materials
+DUYHVWVDUHZHDWKHUGHSHQGHQW:KLOHD\HDURISRRU
harvests drives up prices, a year of successful harvests
reduces them. Most of our raw materials are traded on the
international world market, where they are purchased in
IRUHLJQFXUUHQFLHV7KLVHSRVHVXVWRVLJQL¿FDQWFXUUHQF\
and raw material price risks.
Our strategy of active risk management means that, as
soon as a sales contract is signed, we hedge the equivalent
currency and raw material price exposure. This safeguards
margins against price risks on agreed sales contracts.
Since many raw materials are produced at a considerable
distance from our production plants and markets, transport
costs are an important factor. Particularly the potential
impact on margins from the growing demand for environmentally
acceptable transport methods has to be taken into
FRQVLGHUDWLRQ&RPSHWLWLRQLQFRPPRGLWLHVLV¿HUFH
The processing industry
AAK is part of the processing industry. Improvements in
results are achieved through organic volume growth and by
increasing sales of speciality products with higher margins
relative to lower-margin bulk products.
Capacity expansion aimed at increasing total volumes in
order to meet growing demand has a relatively long planning
horizon. AAK must analyze potential growth in good time. In
the meantime, it is possible to balance production between
RXUSODQWVWRHQDEOHSURFHVVLQJRIVSHFL¿FSURGXFWVFORVHU
to their markets and accommodate swings in supply and
demand. Key speciality products are produced at dedicated
plants, where problems with machinery can have a major
impact.
Political instability
Operating globally always carries risks, but it can also be a
stabilizing factor. Although AAK largely operates in mature
markets in the US and Europe, much of company growth is
generated in developing markets, which are vulnerable to
political instability that can impact currencies and exchange
rates. We also operate in Eastern Europe, the Middle East,
Asia, Africa, and South America, where instability may arise.