Oatly Group AB Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Continued solid progress toward structural and consistent profitable growth, with each operating segment driving profitable growth in the quarter.
• Refined full year guidance: constant currency revenue growth near or slightly below 6%-10% range, adjusted EBITDA near favorable end of -$35M to -$50M, CapEx below $55M.
• Europe and International: Solid results with broad-based strength, retail and foodservice growth, and ongoing international expansion efforts. Advertising campaigns targeting tea in U.K. and blind taste tests in Germany to recruit new consumers.
• North America: Solid revenue and adjusted EBITDA growth, strong retail distribution gains, and expansion with existing customers like Walmart and Kroger.
• Greater China: First quarter of profitable growth due to strategic reset and focus, with momentum in oat milk-based cold drinks despite macro challenges.
• SG&A cost savings program largely complete, with exits of U.S. and U.K. manufacturing facilities on track and evaluation of Asian supply chain options ongoing.

Segment Performance

• Europe and International: Reported 6% revenue growth (4% constant currency), 5.4% volume growth, and 46% year-on-year increase in adjusted EBITDA. Retail volume grew 5% and foodservice by 7% year-on-year. Established markets grew 5%, European expansion markets had 25% volume growth, while international expansion markets saw 4% volume decline.
• North America: Reported 18.1% revenue growth, driven by 17.6% volume growth. Retail and foodservice channels both saw strong growth, with significant retail market share gains and retail distribution points up 45% year-on-year.
• Greater China: Reported first quarter of profitable growth with 12.4% constant currency growth, adjusted EBITDA of $2 million (an $18 million year-on-year improvement). Saw momentum in oat milk-based cold drinks, though still in test phase in China's largest coffee chain and facing challenging macro environment.

Guidance

• Constant currency revenue growth expected near or slightly below the low end of previously provided range (6%-10%).
• Adjusted EBITDA expected near the favorable end of previously provided range (-$35M to -$50M).
• Capital expenditure expected to be below $55M, below prior expectation of below $70M.

Risks

• Competitive environment in Southeast Asia impacting international expansion markets.
• Category sluggishness in the U.K. affecting European performance.
• Challenging macro environment in Greater China impacting business momentum.

Q: Guidance implies a slowdown in revenue growth to around 7% in 4Q 2024. What is driving the deceleration?

A: The main factor is category sluggishness in Europe, particularly the recent sluggishness in the U.K., with a focus on thoughtful consumer engagement and advertising as controllables.

Q: Given the progress on EBITDA with all three segments turning positive, are there any factors to consider that would prevent the company from achieving positive adjusted EBITDA in 2025?

A: Committed to profitable growth as the North Star. Progress made in gross margin and SG&A recalibration, but will continue to focus on distribution gains, market share improvement, category creation in expansion markets, and disciplined costs and capital; full 2025 outlook to be provided in next call with focus on building on momentum, supply chain efficiency, branding investments, and disciplined SG&A and CapEx.