MALMÖ, Sweden, July 27, 2023 (GLOBE NEWSWIRE) — Oatly Group AB (Nasdaq: OTLY) (“Oatly” or the “Company”), the world’s original and largest oat drink company, today announced financial results for the second quarter and six months ended June 30, 2023.
Jean-Christophe Flatin, Oatly’s CEO, commented, “In the second quarter, we continued to make progress towards our goal of achieving profitable growth in 2024. As expected, we continued our sequential improvement of gross margin and increased our advertising investments to continue to fuel growth. This progress is most evident in our EMEA and Americas segments, both of which continued to improve Adjusted EBITDA while increasing demand-generating investments.”
Flatin continued, “However, as Asia has transitioned to a post-pandemic era, consumers have behaved differently than we had originally expected, and we need to adjust. Similar to the improvement plans that we have been executing in EMEA and Americas, we have initiated a comprehensive improvement plan that will enable our Asia business to adapt to the evolving environment and strengthen the core business before building a significantly bigger business. We have also taken actions to further simplify our corporate functions and Americas segment overhead, which will lead to additional cost savings as well as increased focus and agility. While we are reducing our 2023 sales guidance, we continue to expect to achieve our fourth quarter gross margin target of the high 20%s, and we remain on-track for achieving positive adjusted EBITDA in 2024.”
The tables below reconcile revenue as reported to revenue on a constant currency basis by segment for the three and six months ended June 30, 2023 and 2022.
| Three months ended June 30, | $ Change | % Change | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | As reported | Foreign exchange impact | In constant currency | As reported | In constant currency | Volume | Constant currency price/mix | ||||||||||||||||||||||||||||
| EMEA | 96,989 | 82,485 | 96,989 | 30 | 96,959 | 17.6 | % | 17.5 | % | 7.2 | % | 10.3 | % | |||||||||||||||||||||||
| Americas | 61,832 | 51,775 | 61,832 | — | 61,832 | 19.4 | % | 19.4 | % | 1.7 | % | 17.7 | % | |||||||||||||||||||||||
| Asia | 37,166 | 43,698 | 37,166 | (1,840 | ) | 39,006 | -14.9 | % | -10.7 | % | -5.1 | % | -5.6 | % | ||||||||||||||||||||||
| Total revenue | 195,987 | 177,958 | 195,987 | (1,810 | ) | 197,797 | 10.1 | % | 11.1 | % | 3.4 | % | 7.7 | % | ||||||||||||||||||||||
| Six months ended June 30, | $ Change | % Change | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | As reported | Foreign exchange impact | In constant currency | As reported | In constant currency | Volume | Constant currency price/mix | ||||||||||||||||||||||||||||
| EMEA | 195,205 | 172,968 | 195,205 | (7,478 | ) | 202,683 | 12.9 | % | 17.2 | % | 6.8 | % | 10.4 | % | ||||||||||||||||||||||
| Americas | 125,873 | 98,792 | 125,873 | — | 125,873 | 27.4 | % | 27.4 | % | 4.1 | % | 23.3 | % | |||||||||||||||||||||||
| Asia | 70,554 | 72,384 | 70,554 | (3,806 | ) | 74,360 | -2.5 | % | 2.7 | % | 6.8 | % | -4.1 | % | ||||||||||||||||||||||
| Total revenue | 391,632 | 344,144 | 391,632 | (11,284 | ) | 402,916 | 13.8 | % | 17.1 | % | 6.0 | % | 11.1 | % | ||||||||||||||||||||||
Second Quarter 2023 Highlights
- Revenue of $196.0 million, a 10.1% increase compared to the prior year period; on a constant currency basis, revenue increased 11.1%.
- Gross margin in the quarter was 19.2%, an increase of 340 basis points compared to the prior year period and 180 basis points compared to the first quarter of 2023.
- Net loss attributable to shareholders of the parent was $86.7 million compared to net loss of $72.0 million in the prior year period.
- EBITDA loss of $63.0 million; Adjusted EBITDA loss of $52.5 million, which is a decrease of $0.9 million compared to the prior year period.
- Closed on all previously-announced financing transactions during the quarter, raising $465 million before fees and other related expenses.
- After the quarter ended, initiated a comprehensive improvement plan in the Asia segment, which includes increasing focus on the core business, a simplification of the product portfolio, and a reduction in operating costs.
- The Company has taken the necessary steps to further reduce its SG&A costs in both its Americas segment and its Corporate functions in order to further enhance the simplicity and agility of the organization. Collectively between the SG&A savings in the Asia segment, the Americas segment, and Corporate functions, the Company targets to achieve approximately $85 million of savings in 2024.
Second Quarter 2023 Results
Revenue increased $18.0 million, or 10.1%, to $196.0 million for the second quarter ended June 30, 2023, compared to $178.0 million for the second quarter ended June 30, 2022. Excluding a foreign currency exchange headwind of $1.8 million, revenue for the second quarter was $197.8 million, or an increase of 11.1%, on a constant currency basis. The increase was primarily driven by price increases implemented in EMEA primarily during the first quarter of 2023 and the Americas in the third quarter of 2022, in addition to continued volume growth for the Company’s products in each of the EMEA and Americas segments. Sold volume for the second quarter of 2023 amounted to 125 million liters compared to 121 million liters in the same period last year. Produced finished goods volume for the second quarter of 2023 amounted to 130 million liters compared to 124 million liters for the same period last year.
The Company experienced revenue growth in the retail and foodservice channels in the second quarter of 2023 compared to the second quarter of 2022.
Gross profit was $37.7 million for the second quarter of 2023 compared to $28.1 million for the second quarter of 2022, and $34.1 million for the first quarter of 2023. Gross margin in the second quarter was 19.2% compared to 17.4% in the first quarter. The quarter-over-quarter increase was primarily driven by cost improvements in the Americas supply chain, which were partially offset by increased inventory write-offs and co-manufacturer penalties in the Asia segment linked to the slower than expected post COVID-19 recovery.
Research and development expenses in the second quarter of 2023 decreased $0.4 million to $5.3 million compared to $5.7 million in the prior year period.
Selling, general and administrative expenses in the second quarter of 2023 increased $9.6 million to $106.7 million compared to $97.1 million in the prior year period. The increase was primarily due to $5.6 million in employee related expenses, $2.9 million in branding, advertising and marketing expenses, and a $3.7 million reduction in reimbursement from the depositary relating to the administration of the ADR program. The increase was offset by a decrease of $2.2 million in customer distribution costs.
Other operating income and expenses, net for the second quarter of 2023 decreased to an expense of $1.1 million compared to an income of $0.2 million in the prior year period, comprised primarily of a net foreign exchange loss.
In the second quarter of 2023, finance expenses were $11.5 million compared to $0.6 million in the prior-year period. The increase was primarily driven by expenses related to the Company’s recent financing activities.
Net loss attributable to shareholders of the parent was $86.7 million for the second quarter of 2023 compared to net loss of $72.0 million in the prior year period. The increase in net loss was almost entirely driven by the increase in finance expenses.
EBITDA loss for the second quarter of 2023 was $63.0 million, compared to an EBITDA loss of $62.6 million in the second quarter of 2022. The increase in EBITDA loss was primarily a result of higher selling, general and administrative expenses offset by higher gross profit.
Adjusted EBITDA loss for the second quarter of 2023 was $52.5 million, compared to a loss of $53.4 million in the second quarter of 2022, or essentially flat.
EBITDA, Adjusted EBITDA (Loss), and Constant currency revenue are non-IFRS financial measures defined under “Non-IFRS financial measures.” Please see above revenue at constant currency table and “Reconciliation of IFRS to Non-IFRS Results” at the end of this press release.
The following tables set forth revenue, Adjusted EBITDA, EBITDA and loss before tax for the Company’s three reportable segments for the periods presented.
| Revenue, Adjusted EBITDA and EBITDA | ||||||||||||||||||||||||
| Three months ended June 30, 2023 (in thousands of U.S. dollars) |
EMEA | Americas | Asia | Corporate* | Eliminations** | Total | ||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Revenue from external customers | 96,989 | 61,832 | 37,166 | — | — | 195,987 | ||||||||||||||||||
| Intersegment revenue | 359 | — | 1,696 | — | (2,055 | ) | — | |||||||||||||||||
| Total segment revenue | 97,348 | 61,832 | 38,862 | — | (2,055 | ) | 195,987 | |||||||||||||||||
| Adjusted EBITDA | 7,270 | (9,414 | ) | (21,900 | ) | (28,424 | ) | — | (52,468 | ) | ||||||||||||||
| Share-based compensation expense | 261 | (607 | ) | (1,291 | ) | (785 | ) | — | (2,422 | ) | ||||||||||||||
| Restructuring costs(1) | — | (2,407 | ) | (136 | ) | (5,429 | ) | — | (7,972 | ) | ||||||||||||||
| Costs related to the YYF Transaction(2) | — | (154 | ) | — | — | — | (154 | ) | ||||||||||||||||
| EBITDA | 7,531 | (12,582 | ) | (23,327 | ) | (34,638 | ) | — | (63,016 | ) | ||||||||||||||
| Finance income and (expenses), net | — | — | — | — | — | (11,512 | ) | |||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | (12,464 | ) | |||||||||||||||||
| Loss before tax | — | — | — | — | — | (86,992 | ) | |||||||||||||||||
| Three months ended June 30, 2022 (in thousands of U.S. dollars) |
EMEA | Americas | Asia | Corporate* | Eliminations** | Total | ||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Revenue from external customers | 82,485 | 51,775 | 43,698 | — | — | 177,958 | ||||||||||||||||||
| Intersegment revenue | 9,493 | 241 | 537 | — | (10,271 | ) | — | |||||||||||||||||
| Total segment revenue | 91,978 | 52,016 | 44,235 | — | (10,271 | ) | 177,958 | |||||||||||||||||
| Adjusted EBITDA | 5,313 | (19,584 | ) | (10,765 | ) | (28,331 | ) | — | (53,367 | ) | ||||||||||||||
| Share-based compensation expense | (1,433 | ) | (1,120 | ) | (1,842 | ) | (4,790 | ) | — | (9,185 | ) | |||||||||||||
| EBITDA | 3,880 | (20,704 | ) | (12,607 | ) | (33,121 | ) | — | (62,552 | ) | ||||||||||||||
| Finance income and (expenses), net | — | — | — | — | — | (593 | ) | |||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | (11,877 | ) | |||||||||||||||||
| Loss before tax | — | — | — | — | — | (75,022 | ) | |||||||||||||||||
| Six months ended June 30, 2023 (in thousands of U.S. dollars) |
EMEA | Americas | Asia | Corporate* | Eliminations** | Total | ||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Revenue from external customers | 195,205 | 125,873 | 70,554 | — | — | 391,632 | ||||||||||||||||||
| Intersegment revenue | 1,210 | — | 3,136 | — | (4,346 | ) | — | |||||||||||||||||
| Total segment revenue | 196,415 | 125,873 | 73,690 | — | (4,346 | ) | 391,632 | |||||||||||||||||
| Adjusted EBITDA | 13,854 | (19,720 | ) | (38,616 | ) | (57,859 | ) | — | (102,341 | ) | ||||||||||||||
| Share-based compensation expense | (761 | ) | (1,651 | ) | (2,702 | ) | (5,355 | ) | — | (10,469 | ) | |||||||||||||
| Restructuring costs(1) | (1,008 | ) | (2,594 | ) | (136 | ) | (5,429 | ) | — | (9,167 | ) | |||||||||||||
| Costs related to the YYF Transaction(2) | — | (375 | ) | — | — | — | (375 | ) | ||||||||||||||||
| EBITDA | 12,085 | (24,340 | ) | (41,454 | ) | (68,643 | ) | — | (122,352 | ) | ||||||||||||||
| Finance income and (expenses), net | — | — | — | — | — | (13,508 | ) | |||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | (24,697 | ) | |||||||||||||||||
| Loss before tax | — | — | — | — | — | (160,557 | ) | |||||||||||||||||
| Six months ended June 30, 2022 (in thousands of U.S. dollars) |
EMEA | Americas | Asia | Corporate* | Eliminations** | Total | ||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Revenue from external customers | 172,968 | 98,792 | 72,384 | — | — | 344,144 | ||||||||||||||||||
| Intersegment revenue | 24,539 | 813 | 537 | — | (25,889 | ) | — | |||||||||||||||||
| Total segment revenue | 197,507 | 99,605 | 72,921 | — | (25,889 | ) | 344,144 | |||||||||||||||||
| Adjusted EBITDA | (543 | ) | (41,597 | ) | (25,732 | ) | (56,884 | ) | — | (124,756 | ) | |||||||||||||
| Share-based compensation expense | (3,017 | ) | (2,412 | ) | (3,791 | ) | (10,002 | ) | — | (19,222 | ) | |||||||||||||
| EBITDA | (3,560 | ) | (44,009 | ) | (29,523 | ) | (66,886 | ) | — | (143,978 | ) | |||||||||||||
| Finance income and (expenses), net | — | — | — | — | — | 2,984 | ||||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | (22,608 | ) | |||||||||||||||||
| Loss before tax | — | — | — | — | — | (163,602 | ) | |||||||||||||||||
* Corporate consists of general overhead costs not allocated to the segments.
** Eliminations in 2023 refer to intersegment revenue for sales of products from EMEA to Asia and from Asia to EMEA. Eliminations in 2022 refer to intersegment revenue for sales of products from EMEA to Asia, from Americas to Asia, and from Asia to EMEA.
(1) Relates primarily to severance payments as the Company continues to adjust its organizational structure to the current macro environment.
(2) Relates to the closing of the Ya Ya Foods USA LLC Transaction.
EMEA
EMEA revenue increased $14.5 million, or 17.6%, to $97.0 million for the second quarter of 2023, compared to $82.5 million in the prior year period. The foreign exchange impact on revenue was minor for the period. The increase in revenue was primarily driven by price increases introduced at the beginning of the year as well as solid volume growth in oat drinks. Approximately 81.7% of EMEA revenue was from the retail channel for the second quarter of 2023 compared to 81.8% in the prior year quarter. The sold finished goods volume for the three months ended June 30, 2023 and 2022 amounted to 68 million and 64 million liters, respectively.
EMEA EBITDA increased $3.7 million to a benefit of $7.5 million for the second quarter of 2023 compared to a benefit of $3.9 million in the prior year period. The increase in EMEA EBITDA was primarily due to higher gross profit offset by higher operating expenses, primarily driven by higher branding and advertising expenses. Adjusted EMEA EBITDA was a benefit of $7.3 million compared to a benefit of $5.3 million in the prior year period.
Americas
Americas revenue increased $10.1 million, or 19.4%, to $61.8 million for the second quarter of 2023, compared to $51.8 million in the prior year period. This increase was primarily due to price increases across all customers and channels. Approximately 51.2% of Americas revenue was from the retail channel in the second quarter of 2023 compared to 55.3% in the prior year quarter. The sold finished goods volume for the three months ended June 30, 2023 and 2022 amounted to 36 million and 35 million liters, respectively.
Americas EBITDA improved $8.1 million to a loss of $12.6 million for the second quarter of 2023 compared to a loss of $20.7 million in the prior year period. The increase in Americas EBITDA was primarily due to higher gross profit driven by the price increases implemented in the third quarter of 2022. Adjusted Americas EBITDA, which excluded restructuring cost of $2.4 million and recurring share-based compensation expense of $0.6 million, was a loss of $9.4 million compared to a loss of $19.6 million in the prior year period.
Asia
Asia revenue decreased $6.5 million, or 14.9%, to $37.2 million for the second quarter of 2023, compared to $43.7 million in the prior year period. Excluding a foreign currency exchange headwind of $1.8 million, Asia revenue for the second quarter was $39.0 million, or a decrease of 10.7%. The Asia segment was impacted by a slower-than-expected post-COVID-19 recovery in China. Approximately 56.9% of Asia revenue was from the foodservice channel for the second quarter of 2023 compared to 58.3% in the prior year quarter. The sold finished goods volume for the three months ended June 30, 2023 and 2022 amounted to 21 million and 22 million liters, respectively.
Asia EBITDA decreased $10.7 million to a loss of $23.3 million for the second quarter of 2023 compared to a loss of $12.6 million in the prior year period. The decrease in Asia EBITDA was primarily due to lower gross profit and margin as our revenue and capacity utilization was impacted by the previously mentioned slower than expected recovery in China and higher operating expenses. Adjusted Asia EBITDA, which excluded recurring share-based compensation expense of $1.3 million, was a loss of $21.9 million compared to a loss of $10.8 million in the prior year period.
Corporate Overhead
Oatly’s Corporate overhead adjusted EBITDA, which consists of general overhead costs not allocated to the segments, in the second quarter of 2023 was $28.4 million, an increase of $0.1 million compared to the prior year period.
Balance Sheet and Cash Flow
As of June 30, 2023, the Company had cash and cash equivalents of $340.7 million, and total outstanding debt to credit institutions of $125.5 million. Net cash used in operating activities was $113.1 million for the six months ended June 30, 2023, compared to $127.3 million during the prior year period which was primarily driven by improved working capital. Capital expenditures were $39.5 million compared to $111.3 million in the prior year period and, in addition, proceeds from the sale of assets related to the YYF Transaction was $44.0 million for the six months ended June 30, 2023. Net cash from financing activities was $367.3 million reflecting the close on the previously-announced financing transactions.
As previously communicated, on May 9, 2023 the Company entered into an agreement with an affiliate of Hillhouse Investment Management Ltd. (“Hillhouse”) to sell an additional $35 million in Convertible Notes, resulting in approximately $34 million in financing after reflecting an original issue discount of 3% (the “HH Notes”). The purchase and sale of the HH Notes closed on May 31, 2023.
Outlook
The Company has initiated a comprehensive improvement plan in its Asia segment that the Company believes will enable it to adapt to the evolving post-pandemic consumer environment, and prepare it for profitable growth. The improvement plan includes increasing focus on the core business, a simplification of the product portfolio, and a reduction in operating costs.
The Company has also taken the necessary steps to further reduce its SG&A overhead costs in both its Americas segment and its Corporate functions. These reductions are expected to further enhance the simplicity and agility of the organization.
Collectively between the anticipated SG&A savings in the Asia segment, the Americas segment, and Corporate functions, the Company targets to achieve approximately $85 million of savings in 2024.
While the Asia improvement plans are in the early stages, changes in our structure, operations and business plan can be expected. The improvement actions, once fully determined, could result in an impairment charge of the Asia segment assets. The Company is unable to make a reasonable determination of an estimate of the severance and, if any, other costs and charges associated with its organizational improvement plans in Asia at this time and expects to communicate the outcome of such determination no later than the time at which it reports results for the third quarter of 2023.
Based on the Company’s assessment of the current operating environment, the Company is updating its revenue and capital expenditure guidance for the full year ending December 31, 2023 and maintaining its fourth quarter gross margin guidance. The Company now expects:
- Revenue growth on a constant currency basis in the range of 7% to 12% compared to full year 2022,
- Foreign exchange to reduce net sales by approximately 130 basis point for the year,
- Gross margin to improve sequentially quarter-over-quarter in fiscal 2023, reaching the high-20%s in the fourth quarter, and
- Capital expenditures between $110 million and $130 million.
Also the Company continues to believe this progress will enable it to deliver positive Adjusted EBITDA for the fiscal year 2024.
This outlook is provided in the context of significant volatility related to the COVID-19 pandemic and the transition to a post-pandemic environment, the war in Ukraine, macroeconomic uncertainty, and other geopolitical uncertainties.
The Company cannot provide a reconciliation of constant currency revenue growth or Adjusted EBITDA guidance to the nearest comparable corresponding IFRS metric without unreasonable efforts due to difficulty in predicting certain items excluded from these non-IFRS measures. The items necessary to reconcile are not within Oatly’s control, may vary greatly between periods and could significantly impact future financial results.
Conference Call, Webcast and Supplemental Presentation Details
Oatly will host a conference call and webcast at 8:30 a.m. ET today to discuss these results. The conference call, simultaneous, live webcast and supplemental presentation can be accessed on Oatly’s Investors website at https://investors.oatly.com under “Events.” The webcast will be archived for 30 days.
About Oatly
We are the world’s original and largest oat drink company. For over 25 years, we have exclusively focused on developing expertise around oats: a global power crop with inherent properties suited for sustainability and human health. Our commitment to oats has resulted in core technical advancements that enabled us to unlock the breadth of the dairy portfolio, including alternatives to milks, ice cream, yogurt, cooking creams, and spreads. Headquartered in Malmö, Sweden, the Oatly brand is available in more than 20 countries globally.
For more information, please visit www.oatly.com
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