Oatly AB: Reports Second Quarter 2021 Financial Results

Malmö / SE. (oat) Sweden’s Oatly Group AB, the world’s original and largest oat drink company, announced financial results for the second quarter and six months ended June 30, 2021. CEO Toni Petersson said, «2021 represents the most transformational year in our Company’s history with the completion of our successful IPO in May, which has provided us with the capital to fuel new production capacity globally as we scale our business across three continents to meet the robust consumer demand for our leading oat-based brand. We are incredibly proud of our global team’s execution with strong growth in new and existing customers, the opening of two new facilities in Ogden, Utah and Singapore, as well as doubling production capacity at our facility in Vlissingen, Netherlands.»

Petersson continued, «Our record second quarter revenues were in-line with our expectations and demonstrate broad-based growth across geographies and sales channels, despite certain Covid-19 and start-up related manufacturing headwinds we experienced in the quarter. We’re continually expanding global production capacity to support our long-term growth and launching key partnerships and distribution agreements with prominent customers globally. We’re excited about the addition of our second manufacturing facility in Asia, which remains on-track to open in the second half of 2021, providing a second new source of local production to the region. Our new and existing production capacity gives us confidence in our ability to achieve an accelerated revenue growth rate in the second half of this year, while also extending our core values and mission for a more sustainable food system.»

Successful Initial Public Offering

On May 24, 2021, the Company completed its initial public offering, in which it sold 64,688,000 American Depositary Shares («ADSs»), each representing one ordinary share, and the selling shareholders sold an aggregate of 32,344,400 ADSs, including 12,656,400 ADSs sold by the selling shareholders pursuant to the underwriters’ over-allotment option. The ADSs began trading on the Nasdaq Global Select Market on May 20, 2021. The ADSs were sold at an initial public offering price of USD 17.00 per share for net proceeds to the Company of approximately USD 1,037.3 million, after deducting underwriting discounts and commissions of USD 52.2 million and offering expenses of USD 10.1 million payable by the Company. The Company continues to expect to use the net proceeds from the IPO for working capital, to fund incremental growth, including planned capacity expansion, and other general corporate purposes. On June 30, 2021, subsequent to the IPO, there were 599,901,777 fully diluted ordinary shares outstanding.

Second Quarter 2021 Highlights

  • Revenue of USD 146.2 million, a 53.3 percent increase compared to USD 95.3 million in the prior year period; as expected there was a benefit to revenue from foreign exchange, the benefit was approximately USD 10.2 million
  • Gross profit of USD 38.6 million, or a 26.4 percent gross profit margin, compared to USD 30.8 million, or a 32.3 percent gross profit margin, in the prior year period
  • Launched new geographies: Switzerland and Ireland
  • Opened Oatly’s first-ever end-to-end self-manufacturing production facility in the Americas at the Ogden, UT estimated to produce 150 million liters of annual finished goods equivalent of oat base capacity at full production
  • Announced Fort Worth, Texas as the location of the Company’s third U.S.-based manufacturing site, targeted to open in 2023
  • Launched distribution in convenience channel via a partnership with 7-Eleven in the Americas
  • Expanded soft serve frozen dessert distribution through partnerships with several professional baseball teams and 16 Handles in the Americas
  • Opened Singapore manufacturing facility, estimated to produce 75 million liters of annual finished goods equivalent of oat base capacity at full production
  • Expanded presence with McDonald’s in Mainland China to a national level
  • Launched partnership with KFC in China
  • Launched nationally in Walmart and Metro Cash + Carry in China
  • Expanded distribution nationally in Greater China with 7-Eleven at retail and café counters

Six Month 2021 Highlights

  • Revenue of USD 286.2 million, a 59.4 percent increase compared to USD 179.6 million in the prior year period; as expected there was a benefit to revenue from foreign exchange, the benefit was approximately USD 19.4 million
  • Gross profit of USD 80.5 million, or a 28.1 percent gross profit margin, compared to USD 58.1 million, or a 32.4 percent gross profit margin, in the prior year period
  • Made strategic investments to double capacity in Vlissingen, Netherlands from 150 million to 300 million liters of annual finished good equivalent of oat base capacity at full production
  • Launched brand partnership and nationwide distribution with Starbucks in the Americas during the first quarter of 2021
  • New distribution in Ahold in the Americas during the first quarter of 2021
  • Launched with Yonghui supermarket and Sam’s Club in the club channel and 7-Eleven convenience channel in China Eastern region during the first quarter of 2021

Second Quarter 2021 Results

Revenue increased USD 50.8 million, or 53.3 percent, to USD 146.2 million for the second quarter ended June 30, 2021, compared to USD 95.3 million for the second quarter ended June 30, 2020. The revenue increase was primarily driven by additional supply coming from the Company’s existing production facilities and, to a lesser extent, the Company’s new facilities, to meet the growing global demand for its products. This growth was partially offset by Covid-19 and start-up related manufacturing delays which impacted sales by approximately USD 12 to USD 14 million in the second quarter of 2021. Produced finished goods volume for the second quarter of 2021 amounted to 106 million liters compared to 74 million liters for the same period last year, an increase of 43.2 percent. As expected there was a benefit to revenue from foreign exchange, the benefit was approximately USD 10.2 million.

The Company experienced broad-based growth across retail and foodservice channels in the second quarter of 2021. The foodservice channel contribution increased in the second quarter of 2021 compared to the prior year period with the continued reopening of on-premise outlets upon the lifting of certain Covid-19 restrictions in the Company’s key markets. In the second quarter of 2020, the retail channel experienced a significant increase in sales, more than offsetting the decline in the foodservice sales channel, which was primarily noticeable in the Americas as a result of Covid-19-related restrictions. Second quarter of 2021 and 2020, the foodservice channel accounted for 33.2 percent and 21.6 percent of the Company’s revenue, respectively, and the retail channel accounted for 61.5 percent and 74.5 percent of the Company’s revenue, respectively.

Gross profit was USD 38.6 million for the second quarter of 2021 compared to USD 30.8 million for the second quarter of 2020. Gross profit margin decreased 590 basis points to 26.4 percent for the second quarter of 2021 compared to 32.3 percent in the same period last year. The gross margin decline in the second quarter of 2021 compared to the prior year period was primarily due to higher logistics expenses in EMEA and the Americas as well as higher container rates for shipments from EMEA to Asia, a change in regional, channel and customer mix, a higher share of co-packing production and minor negative effect from foreign exchange.

Research and development expenses in the second quarter of 2021 increased USD 2.6 million to USD 4.0 million compared to USD 1.3 million in the prior year period.

Selling, general and administrative expenses in the second quarter of 2021 increased USD 49.8 million to USD 83.1 million compared to USD 33.3 million in the prior year period. The increase in expenses was primarily due to an increase of USD 22.3 million in employee related expenses, which include USD 4.0 million in non-cash costs for the Company’s Long-Term Incentive Plan («LTIP») due to increased headcount as the Company continues to invest in its growth and added headcount associated with being a public company. The Company also incurred USD 12.5 million in increased costs relating to external consultants, contractors, and other professional fees due to the growth of the business and costs associated with being a public company, of which USD 7.1 million were non-recurring costs related to the Company’s initial public offering, and USD 5.3 million were a result of increased branding and marketing expenses as compared to lower branding and marketing activities in the prior year second quarter due to the Covid-19 pandemic. As noted above, SG+A included non-recurring costs related to the Company’s initial public offering and non-cash LTIP charge for a combined total of USD 11.1 million. Customer distribution costs increased with USD 4.7 million mainly due to higher revenue.

Other operating income for second quarter of 2021 included a net foreign exchange gain of USD 0.3 million compared to other operating expense in the second quarter of 2022 that included a net foreign exchange loss of USD 0.5 million.

Net loss attributable to shareholders of the parent was USD 59.1 million for the second quarter of 2021 compared to net loss of USD 4.8 million in the prior year period.

Second quarter of 2021 Ebitda loss was USD 43.5 million, compared to a loss of USD 1.2 million in the second quarter of 2020. The increase in Ebitda loss was primarily a result of non-recurring IPO charges of USD 7.1 million, share-based compensation costs of USD 6.6 million including social security-related expenses of USD 2.1 million, higher employee related expenses, public company costs and other operating expenses as the Company scales its global operations to support growth across three continents. These costs were partially offset by higher gross profit.

Adjusted Ebitda loss for the second quarter of 2021 was USD 31.9 million, compared to a loss of USD 1.2 million in the second quarter of 2020. The increase in Adjusted Ebitda loss was primarily related to higher employee expenses, public company costs and other operating expenses as the Company scales its global operations to support growth across three continents. These costs were partially offset by higher gross profit.

Second Quarter 2021 Results by Region

EMEA

EMEA revenue increased USD 18.8 million, or 31.6 percent, to USD 78.5 million for the second quarter of 2021 compared to USD 59.7 million in the prior year period. This increase was primarily due to higher production compared to the same period prior year, with growth in foodservice and retail channels across oatdrink, oatgurt and other food product offerings, partially offset by lower fill rates due to the robust consumer demand and continued capacity constraints. As expected there was a benefit to revenue from foreign exchange, the benefit was approximately USD 8.4 million.

EMEA Ebitda decreased USD 2.8 million to USD 6.0 million for the second quarter of 2021 compared to USD 8.8 million in the prior year period. This decrease in Ebitda was primarily due to higher operating expenses as the Company scales its operations for future growth. Included in Ebitda is a new recurring share-based compensation expense of USD 0.7 million. Adjusted Ebitda was USD 6.7 million compared to USD 8.8 million in the prior year period.

Americas

Americas revenue increased USD 16.3 million, or 65.0 percent, to USD 41.3 million for the second quarter of 2021 compared to USD 25.1 million in the prior year period. This increase was primarily due to higher production compared to the same period prior year with growth in both new and existing foodservice and retail channels across oatdrink, oatgurt and frozen product offerings, partially offset by lower fill rates due to the robust consumer demand and continued capacity constraints.

Americas Ebitda loss increased USD 8.0 million to a loss of USD 9.8 million for the second quarter of 2021 compared to a loss of USD 1.8 million in the prior year period. The increase in Ebitda loss was primarily due to higher operating expenses as the Company scales its operations for future growth as well as new recurring share-based compensation expense of USD 0.6 million. Adjusted Ebitda was a loss of USD 9.2 million compared to a loss of USD 1.8 million in the prior year period.

Asia

Asia revenue increased USD 15.7 million, or 148.6 percent, to USD 26.3 million for the second quarter of 2021 compared to USD 10.6 million in the prior year period. This increase was primarily due to higher production compared to the same period prior year with growth in both new and existing foodservice and e-commerce channels as well as in the retail channels across oatdrink offerings, partially offset continued capacity constraints. As expected there was a benefit to revenue from foreign exchange, the benefit was approximately USD 1.8 million.

Asia Ebitda loss increased USD 4.2 million to a loss of USD 4.4 million for the second quarter of 2021 compared to a loss of USD 0.2 million in the prior year period. The increase in Ebitda loss was primarily due to higher operating expenses as the Company scales its operations for future growth as well as new recurring share-based compensation expense of USD 0.8 million. Adjusted Ebitda was a loss of USD 3.6 million compared to a loss of USD 0.2 million in the prior year period.

Corporate Expense

Oatly’s corporate expense, which consists of general overhead costs not allocated to the segments, in the second quarter of 2021 was USD 35.2 million, an increase of USD 27.2 million compared to the prior year period. This increase was driven by continued investments in organization, including IT operations, to support the Company’s growth and transition to being a public company as well as new recurring share-based compensation expense of USD 2.3 million and non-recurring IPO expenses of USD 7.1 million. Adjusted Ebitda was a loss of USD 25.8 million compared to a loss of USD 8.0 million in the prior year period.

Balance Sheet and Cash Flow

As of June 30, 2021, the Company had cash and cash equivalents of USD 524.2 million, USD 322.7 million in short term investments and total outstanding debt to credit institutions of USD 7.0 million. Net cash used in operating activities was USD 72.5 million for the six months ended June 30, 2021, compared to USD 20.1 million during the prior year period. Capital expenditures were USD 134.4 million for the six months ended June 30, 2021, compared to USD 52.0 million in the prior year period. Cash flow from financing activities was USD 960.9 million reflecting the proceeds from the IPO net of repayments of liabilities to credit institutions and repayment of the shareholder loan. The Company invested a portion of the IPO proceeds in short-term investments as noted above.

Americas Self-Manufacturing Capacity Expansion

The Company also announced today in a separate press release an increase in oat base capacity at its Ogden, Utah facility in the Americas region to support an acceleration in consumer demand. In the second half of 2021 the Company will start construction to add 75 million liters of finished goods equivalent oat base capacity. Total production will increase from an estimated 150 million liters annually at full production to an estimated 225 million liters annually to support the Company’s growth in 2022 and beyond. This will increase the Company’s total estimated capacity by the end of 2022 from 1,000 million to 1,075 million liters and from 1,400 million to 1,475 million liters of finished goods equivalent oat base capacity by the end of 2023. The Company expects its EMEA manufacturing combined with its two facilities in the Americas and two in Asia to create more than a 200 percent increase in its production output by the end of 2022 from the end of 2020. The Company will execute this capacity expansion within its stated plan for capital expenditures provided at the time of the IPO.

Outlook

For fiscal year 2021, the Company expects:

  • Revenue to exceed USD 690 million, an increase of greater than 64 percent compared to fiscal year 2020 with accelerating growth across regions. This revenue outlook assumes very nominal contribution from the Company’s Maanashan, China facility that is on-track to open later this year. Any upside to the Company’s outlook will be a result of its ability to ramp production at a faster rate than anticipated. Assuming no significant changes from foreign exchange rates this week, the Company expects the second half of 2021 exchange rates to be a single digit tailwind on a percentage basis compared to the second half of 2020.
  • Capital expenditures at the low end of between USD 350 million and USD 400 million as previously communicated at the time of its IPO, including the new Ogden, Utah self-manufacturing capacity expansion announced this week
  • Production capacity to be approximately 600 million liters of finished goods at the end of the year

Long-term, the Company expects:

  • To generate gross margin of greater than 40 percent and Ebitda margin approaching 20 percent – as it benefits from a much larger self-manufacturing footprint globally, greater economies of scale and continued strong revenue growth

The Company cannot provide a reconciliation of Ebitda guidance to the corresponding IFRS metric without unreasonable efforts, as we are unable to provide reconciling information. These items are not within Oatly’s control, may vary greatly between periods and could significantly impact future financial results.

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