Oatly Group AB Q2 FY2025 earnings call

• Costs: Drove down cost of goods per liter by 10% in the first half, eighth straight quarter of year-on-year reductions; continued to reduce SG&A overhead expenses, identified additional SG&A efficiencies.
• Growth Playbook: Europe and International segment showed strong results with volume-led growth, expanded portfolio, attacked taste barriers, increased product availability. North America started rolling out growth playbook to attack conversion barriers. Greater China foodservice grew 12% in first half, retail volume at all-time high.
• Profitability: Adjusted EBITDA improved $7 million year-on-year in the quarter to minus $3.6 million, reaffirming adjusted EBITDA guidance of $5 million to $15 million.

Europe and International segment saw strong volume-led double-digit revenue growth in the quarter, with EBITDA margin moving from low double digits to north of 20% in Q2. North America faced headwinds but excluding certain one-offs, showed solid performance in a challenged market. Greater China foodservice grew 12% in the first half, and retail volume reached an all-time high in the quarter. Revenue in the quarter was up 3% but down 0.2% on constant currency basis. Q2 gross margin expanded 330 basis points year-over-year to 32.5%, and adjusted EBITDA was a loss of $3.6 million, in line with prior guidance.

• Expect constant currency revenue growth of approximately flat to plus 1%.
• Reaffirm adjusted EBITDA guidance in the range of $5 million to $15 million.
• Expect CapEx of approximately $20 million.
• Initiated strategic review of Greater China business to accelerate growth and maximize value.

• Soft macro environment in Greater China and slower-than-expected progress in North America impacting top line.
• Inflation impact on costs, mainly higher labor costs in European supply chain and certain inputs in North America; foreign exchange movements.

Q: Kaumil Gajrawala asked about the strategic review of China, including why now and optimal outcome.

A: Jean-Christophe Flatin said they believe in the future potential of the China business and are looking to maximize shareholder value, now is a good time as the business is leaner and stronger, considering options like carve-out.

Q: John Baumgartner asked about North America weakness and SG&A savings.

A: Daniel Ordonez said North America has solid performance in a challenged market with opportunity intact, and Marie-Jose David detailed SG&A savings coming from corporate indirect initiatives without hurting the business