Q3 2024 Oatly Group AB Earnings Call
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Speaker Change: As you can see in the quarter constant currency revenue growth accelerated to nearly 10% year over year with every segment driving volume led goals.
Speaker Change: Similarly, we have continued to drive significant progress on our adjusted EBITDA.
Speaker Change: Today, we are reporting a quarterly loss of just $5 million and our fifth consecutive quarter of sequentially improving adjusted EBITDA.
Slide seven goes one level deeper and shows that our profitability improvement has been driven by tools tanks tuning of our business.
Speaker Change: Just over one year ago on our second quarter 2023 earnings call I shared with you my deep belief that we must have a stronger business before we are able to have a significantly bigger business.
Speaker Change: I believe the data shown on this slide demonstrates that our business is much stronger than it was back then.
Speaker Change: Our volume growth accelerated to 13% year over year goals with each surgeon reporting solid growth this quarter.
Speaker Change: As our volume of God, we have captured the absorption, but if it's while relentlessly driving efficiency.
Speaker Change: This has enabled our gross margins to steadily improve.
Speaker Change: In fact, our third quarter gross margin is a full 27 percentage points higher than it was just two years ago.
Speaker Change: And we have growth ourselves and improved our gross margin.
Speaker Change: We have also continued to invest in branding and advertising in the mid to high single digits as a percent of net sales.
Speaker Change: We still have plenty of work to do to realize what we believe to be our full potential.
Speaker Change: But clearly we are making good healthy progress.
Speaker Change: Turning now to slide eight here.
Speaker Change: Our net pricing and product mix improved margin by 100 basis points.
Speaker Change: Army driven by mix improvement in greater China as part of its strategic reset.
Speaker Change: Foreign exchange increased our margin by 50 basis.
Speaker Change: And inflation was actually new truck market.
Speaker Change: Slide nine shows the year over year improvement in our adjusted EBITDA was driven primarily by a $29 5 million for infrastructure.
Speaker Change: Our SG&A savings program is now largely complete.
Speaker Change: As we move forward, while we have remained disciplined on SG&A cost control.
Speaker Change: For the fourth quarter in a row, there's some thought that.
Speaker Change: The adjusted EBITDA for the first segment less legacy.
Speaker Change: On top of that each of the three operating segments reported positive adjusted EBITDA in the quarter.
Speaker Change: Corporate expenses increased by $2 4 million a savings in personnel costs were more than offset by a foreign exchange headwind as well as increased global advertising spend that is recorded in corporate.
Speaker Change: On our last quarter.
Speaker Change: As you can see let's talk with these actions we have been taking archiving strong results.
Speaker Change: Turning to our balance sheet and cash flow on slide 31.
Speaker Change: Sure we remain fully funded.
Speaker Change: We ended the quarter with a strong liquidity position of 300.
Speaker Change: $22 million.
Speaker Change: Which is comprised of $119 million of cash and $210 million of our Undrawn credit facility, which are denominated in Swedish krona.
which are denominated in Swedish pronouns.
Speaker Change: Next.
Speaker Change: Our cash flow remains on track with our plans.
Next, our total cash flow remains contrast with our plans.
Speaker Change: Our profitability continues to improve we continue to optimize our capital expenditure and working capital.
Speaker Change: Our profitability continues to improve, we continue to optimize our capital expenditures and working capital, and our exits of UK and US plants remain on track.
Speaker Change: And our.
Speaker Change: You can use plans remain on track.
Speaker Change: Specific to the plants.
Speaker Change: We have a net 3 million cash inflow in the quarter, which brings the cumulative impact of 10 million cash outflow.
Speaker Change: We are on track to have no more than 20 million of course, our net cash outflow.
Speaker Change: Tommy.
Speaker Change: As you know I have repeatedly said that improving our cash flow is a priority and I'm pleased that this quarter free cash flow in the company's quarterly performance since our IPO.
Speaker Change: We have work to do both for our PLE in programs.
Speaker Change: Slide 42 shows our could you quantify that.
Speaker Change: We've just one quarter remaining in the year, we are refining our <unk> guidance.
Speaker Change: We expect constant currency revenue growth near or slightly below the low end of our kind of a range of 6% to 10% and.
Speaker Change: And we spoke to you may expect foreign exchange to have a minimal impact.
Speaker Change: For adjusted EBITDA, We expect to report a loss you have the suburb of our runs between legacy <unk> and legacy 50 million in 2024.
Speaker Change: Finally, we expect capex to be below 55 million cartons is plentiful.
Speaker Change: This concludes our prepared remarks.
Speaker Change: Operator, we are now prepared to take questions.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on you touched on telephone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question.
Speaker Change: Please press Star then two.
Speaker Change: At this time, we would call its momentarily to assemble our roster.
Speaker Change: The first question from Max Devin.
Speaker Change: With BNP Paribas. Please go ahead.
Speaker Change: Hi, This is Alex Hilson Roth on for Max.
Speaker Change: Thanks for the question.
Speaker Change: So guidance implies a slowdown in revenue growth to around 7% for Q4.
Speaker Change: What is driving the deceleration and how should we think about the exit rate going into 2025.
Speaker Change: Hi, Alex simply stopped thank you so much for the question Phil.
Alex: First let me give you the context as you know, we always strive to deliver on our commitments, but we think it's important to be opened.
Speaker Change: Do you have the situation. So the main element that has changed over the past three months since we last guided.
Speaker Change: As the company goes dynamics in Europe that Daniel mentioned in his prepared remarks, and most notably the in terms of category and sluggishness in the U K.
Speaker Change: As you have heard us multiple times the way. We work is we are really going to focus on controlling the controllable in this case, what we call. The comparables include the most.
Speaker Change: The most thoughtful and deliberate approach to consumer engagement and advertising, but then you heard us discuss so thats the way we look at it.
Speaker Change: Got it makes sense.
Speaker Change: And then just one more follow up.
Speaker Change: So 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.
Speaker Change: Thank you again, Alex and I'm sure there will be plenty of liquidity, but also have a question they want to ask about 2025. So.
Speaker Change: Let's go back now and tell you what we can tell you at this stage I propose that we stopped the Andover MJ.
Speaker Change: Rather than you see first of all let me remind achieving profitable growth is has been and remains our unique nonstop I am and we are fully committed to it.
Speaker Change: We're really pleased to see the significant social policies. We have made so far you can see the gross margin significantly increase you can see that in DSG recalibration that we highlighted in our prepared remarks, we are clearly moving in the right direction and we expect to continue making progress as we move forward.
Speaker Change: The way, we do that is by making the right decision day by day one after the other to bring this business to profitable growth as quickly as possible.
Speaker Change: Honestly, we are not going to give you any 2025 guidance today, but you should expect that our teams will continue to drive distribution gains market share improvements as well as category creation in expansion markets.
Speaker Change: At the same time, we will also remain disciplined on our cost and capital to ensure that all of the great things. We are doing to drive demand flows to improvements in the P&L and ultimately improvements in the cash flow.
Speaker Change: Jay manage Susie anything you want to add.
Susie: No may be just two 2 billion.
Speaker Change: You're going from a weekend, okay. We will give you structure a full outlook in our next call.
Speaker Change: However.
Speaker Change: Here are some high level thoughts.
Speaker Change: How we are looking at policy quantified it.
Speaker Change: On top line then you spoke about the momentum we have in building.
Speaker Change: We will look to build on that.
Speaker Change: From a mining perspective.
Speaker Change: Oh, there's greater China will anniversary this firstly as youre talking to.
Speaker Change: Oh.
Speaker Change: Our supply chain team will continue to drive efficiency.
Speaker Change: <unk> funds all of our productivity in coming months.
Speaker Change: We will continue to support our strategy to meet the demand for high speed branding and advertising investment.
Speaker Change: We will of course continue to stay Billy Johnson discipline on SG&A.
Speaker Change: And finally as we look for it we will continue Tom Brady a rigorous fact.
Speaker Change: And then our Capex.
Speaker Change: By the way, we expect most of them most of the majority of that to go through safety efficiency and sustainability projects within our existing sites.
Speaker Change: So that's the game we are sharing as much as we can at this stage.
Speaker Change: I talked at times.
Speaker Change: Yeah.
Speaker Change: Great. Thanks, so much I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Again, ladies and gentlemen, if you have a question. Please press Star then one.
Speaker Change: Yeah.
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Speaker Change: We have no further questions, ladies and gentlemen, I would like to turn the conference back over to Brian Kearney for any closing remarks over to you.
Speaker Change: Great.
Brian Kearney: There are no more questions in the queue, we will level on the call here. Thank you everybody for joining us feel free to reach out to me. If you have any questions and we can set up some time to check thanks, everybody and have a great day.
Speaker Change: Thank you.
Speaker Change: Conference has now concluded.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
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