Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oatly Group AB (OTLY, Financial) reported profitable growth across all three operating segments for the third quarter.
- The company achieved a significant milestone with a 10.9% year-over-year revenue growth and a 9.6% constant currency revenue growth.
- Gross margin improved by 1,240 basis points compared to the previous year, demonstrating operational and financial discipline.
- The North America segment showed strong performance with an 18% revenue growth and a significant improvement in adjusted EBITDA.
- Greater China reported its first quarter of profitable growth, with a 12% sales increase on a constant currency basis.
Negative Points
- Oatly Group AB (OTLY) revised its full-year guidance, expecting revenue growth to be near or slightly below the low end of the previously provided range.
- The company reported a quarterly adjusted EBITDA loss of $5 million, despite improvements.
- The international expansion markets, particularly Southeast Asia, experienced a 4% volume decline due to increased competition.
- The sluggish growth of the plant-based milk category, especially in the UK, poses a challenge to revenue growth.
- Despite improvements, the company still faces challenges in realizing its full potential and achieving consistent profitability.
Q & A Highlights
Q: Guidance implies a slowdown in revenue growth to around 7% in Q4 2024. What is driving the deceleration, and how should we think about the exit rate going into 2025?
A: Jean-Christophe Flatin, CEO: The main factor affecting the slowdown is the sluggish category growth dynamics in Europe, particularly in the UK. We are focusing on controlling what we can, such as consumer engagement and advertising. We remain committed to achieving profitable growth and will continue to drive distribution gains and market share improvements.
Q: Given the progress on EBITDA with all three segments turning positive, are there any factors that might prevent the company from achieving positive adjusted EBITDA in 2025?
A: Jean-Christophe Flatin, CEO: Achieving profitable growth remains our primary goal. We are making significant structural progress, as seen in our gross margin and SG&A recalibration. We will continue to make strategic decisions to drive profitable growth. While we are not providing 2025 guidance today, we expect to continue improving distribution, market share, and cost discipline.
Q: Can you provide more details on the strategic initiatives for 2025?
A: Marie-Jose David, CFO: We are still finalizing our budget, but we plan to build on the momentum in Greater China and other regions. Our supply chain teams will focus on efficiencies, and we will continue to invest in branding and advertising. We will maintain discipline in SG&A and focus on safety, efficiency, and sustainability in our CapEx projects.
Q: How is the company addressing the competitive environment in Southeast Asia?
A: Daniel Ordonez, COO: While Southeast Asia has become more competitive, we are focusing on strengthening our presence in established markets and expanding in new ones. We are leveraging our strong brand presence in the coffee space and introducing new products to drive growth.
Q: What are the key drivers behind the improved gross margin?
A: Marie-Jose David, CFO: The 12.4 percentage point year-over-year gross margin expansion is primarily due to absorption and supply chain improvements, including better inventory management and optimized production. We do not expect efficiencies to drive this level of margin improvement going forward, but we will continue to focus on operational discipline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
