Swedish oat milk and frozen dessert producer Oatly Group AB reported double-digit revenue growth during the second quarter, but a challenging global market has led the company to decelerate its capital expense plan and focus on meeting existing demand.
The company grew revenue 21.8% to $178 million in Q2, but updated its revenue guidance for 2022 from $800 million to $830 million, down from prior expectations of around $880-$920 million. According to CEO Toni Petersson, the new guidance reflects ongoing international headwinds, including the war in Ukraine, global currency inflation and shifting consumer behavior as the pandemic continues to impact the market.
Petersson said Oatly is now reducing its capital expenditure projections from $400-$500 million to $220-$240 million and stretching out its timeline for global plant expansions.
“Profitability metrics improved compared to the first quarter of 2022 and we expect this trend to continue in the second half of the year,” Petersson said in a statement. “As we expand and scale our more localized production footprint while remaining disciplined in our capital allocation, we are confident in our ability to achieve much better production economics and operating efficiencies, reduce our environmental impact, and achieve profitability. Global consumer demand remains as strong as ever and we have a proven multi-channel strategy that we believe positions us well for long-term growth and profitability.”
Revenue in the Americas was up 25.2% to $51.8 million, compared to $41.3 million in Q2 2021. Europe, Middle East and Africa (EMEA) grew 5% to $82.5 million. In Asia, the business was up 66.3% to $43.7 million.
Gross profit for the quarter was $28.1 million, a 15.8% margin, compared to a 26.4% gross margin of $38.6 million in the prior year. Net loss for the company was $72 million, up from $59.1 million last year. EBITDA loss was $62.6 million, versus a loss of $43.5 million in 2021.
During an earnings call yesterday, Oatly CEO Toni Petersson said Oatly is continuing to expand its shelf space in retail in Europe (which is 82% of the EMEA business), while in the U.S. – where oatmilk has grown to 22% market share of the plant-based milk category – Oatly grew its share to 5% in the quarter.
The company has now implemented a double-digit price increase, effective August 1, across all channels to address inflationary pressures. Petersson said the company expects to see positive margin contribution from the price hike in Q3 with full benefits to be realized in Q4.
Petersson also highlighted the company’s efforts to increase manufacturing, saying he has been “pleased” with the recent performance of its Ogden, Utah facility and that Oatly achieved record label production volumes in the quarter.
Worldwide, self-manufacturing grew to 34% of total volume, compared to 27% co-packing and 39% hybrid, headed. Total production volume was 124 million liters, up 17% from Q1. The company is now looking to accelerate production at its Singapore facility and expects to produce between 135 million and 145 million liters of oat milk globally in Q3. Petersson said expansion of Oatly’s Millville, New Jersey facility is a “near-term priority” that is expected to “produce initial routes in the fall of this year.”
“From a production standpoint, we achieved record level production volumes during the second quarter, with the continued ramp-up of Ogden and our new oat-based plant expansion is well underway [and] on track to start initial production runs in the fall,” he said. “As we increase our production capacity, [we have] significant distribution upside in the U.S. where we only have 38% ACV in retail. However, the focus in current is to close the existing fill rate gaps with current customers.”
“We have sufficient liquidity to fund the business now for the next 12 months,” CFO Christian Hanke said on the call. “So what we have done is provide ourselves with more flexibility in terms of timing to fund our growth and we’re still confident that we have multiple options to access capital.”
According to Seeking Alpha, reported revenue fell short of analysts’ predictions by about $5.5 million.
Credit Suisse noted that the results and revised guidance “underscore soft macros expectations that are unlikely to get better near-term,” but suggested that the “long-term vision for the business still holds but the timeline to reach targets has been pushed further out.”
The report highlighted reduced capital expenditure, stating it is “the right call” as “pushing out capacity plans is prudent given the lack of visibility but it also delays out-year revenue.” As a result, Credit Suisse lowered its 2023-2024 sales expectations for Oatly by about $200 million to $1-$1.3 billion.
“Even if the macro improves, there will be a catch-up period before Oatly can return to its original growth plan,” the report stated.