Despite a “dynamic operating environment,” Oatly CEO Jean-Christophe Flatin claims the company remains on track to deliver its first full year of profitable growth since going public in 2021, highlighting recent supply chain and overhead structure efficiencies in its Q1 2025 earnings report today.
Oatly’s supply chain improvements are driving significant margin gains: In the quarter ending March 31, gross profit margin climbed 449 basis points to 31.6%, with gross profit up to $62.3 million ($53.9 million in Q1 2024) – the company’s best quarter since its IPO.
The results reflect the company’s rightsizing of its supply chain in 2024, including the closure of its Singapore manufacturing facility in December. The move took approximately 240 basis points, or just under half of the supply chain-driven margin expansion. Over the past few years, the company has reduced its production locations from six facilities with three in development to just three operating today.
“The biggest takeaway from today is that we are making progress toward our north star of structural, consistent, profitable goals. We [made] a significant transformation over the past two years, and with the progress in Q1, our financial results came in largely as expected,” said Flatin.
In Oatly’s North America segment, gross profit gains helped improve adjusted EBITDA to a profit of $1.1 million compared to a loss of $0.4 million in the prior year period. The results build on the improvements in margin and cost savings in the previous quarter.
However, according to Flatin, “there is plenty of work still to do,” as the Swedish oat milk producer saw revenue dip 0.8% year-over-year to $197.5 million, with North America contributing $59.9 million (down 10.6%) to that total. North America volume sales slipped 10.9%, attributable to expected reductions in sales at the segment’s largest foodservice customer, SKU rationalization on certain frozen items and consumer “preconceptions on taste” and “misinformation on health.”
One bright spot in Oatly’s North America segment was its outperformance of the plant-based and oatmilk categories in retail. Additionally, the company expanded the distribution footprint of its core portfolio during the quarter.
“Our lineup of creamers and other coffee complements, which include a variety of flavors and pack sizes, has been performing well with solid velocities. We continue to pursue additional distribution opportunities in measured and non-measured channels,” said COO Daniel Ordonez.
“While we made good progress and even outperformed our expectations, we continued to face some challenging dynamics in North America, where we have not yet fully deployed resources to ignite positive momentum,” added Flatin. “We believe the investments we are making will enable us to accelerate total company goals later this year.”
Looking ahead, the company will execute on three pillars: increasing relevance to shoppers, tackling barriers to conversion (including preconceptions on taste) and expanding the availability of its products, occupying more use locations, channels and price points.
Oatly’s relevance does not start and stop with its products, according to executives. Rather, the company seeks to maintain a cultural edge with Gen Z through activations on a global scale, including its recent collaboration with Nespresso on a branded Virtuoso pod. The company has yet to achieve 50% household penetration, so to drive more purchases, it plans to launch activations across digital and real-life platforms.
Unlike PepsiCo, Conagra and General Mills – all of which recently slashed their full-year outlooks – Oatly is reaffirming its 2025 guidance. The company expects constant currency revenue growth between 2% and 4% and positive adjusted EBITDA between $5 million and $15 million.
Notably, executives did not address the potential impact of looming tariffs on the company until the Q&A portion of the call.
“[There are] variables that could influence where we will exactly land. That could be our self-guidance range, that could be our customer mix, that could be potentially further development on the tariff situation,” said Flatin. “Our plan is to continue towards our long-term growth margin target of 35% to 40%.”