Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oatly Group AB (OTLY, Financial) reported its best quarterly results for gross profit, gross margin, adjusted EBITDA, and free cash flow since its IPO.
- The company achieved a 9.2% volume growth in the first quarter, with strong performance in Greater China and solid growth in Europe.
- Oatly Group AB (OTLY) has made significant progress in cost efficiencies, reducing cost of goods sold per liter by 15% year-on-year.
- The company is expanding its presence in the coffee and beverage space, leveraging its Barista product line and collaborations like the one with Nespresso.
- Oatly Group AB (OTLY) is seeing positive momentum in Europe, with accelerated growth in key markets like Germany and the UK.
Negative Points
- Oatly Group AB (OTLY) faced a 0.8% revenue decline in the first quarter, with constant currency revenue growth of only 0.7%.
- The company continues to face challenges in North America, with a significant impact from changes in sourcing strategy at its largest customer and SKU rationalization in frozen items.
- Price mix was a drag on revenue growth, particularly in Europe, where it declined by 4%.
- The oat milk category in the US remains soft, and Oatly Group AB (OTLY) has not yet fully deployed its strategic playbook in this market.
- Despite progress, the company acknowledges that igniting category momentum and achieving full impact from brand investments will take time.
Q & A Highlights
Q: What's giving you confidence that your initiatives in Europe will also help Oatly in the US, given the soft oat milk category there?
A: Daniel Ordoñez, Global President & COO: In Europe, we're outperforming markets and competitors, and expansion markets like France and Spain are showing increased traction. While turning around category momentum won't happen overnight, the US has a significant distribution opportunity across all channels. We plan to deploy resources more in the second half of the year, aiming for steady, profitable growth.
Q: Can you provide an update on your gross margin outlook given the progress in supply chain improvements?
A: Marie-José David, CFO: We're not guiding to a specific number, but we expect gross margin to improve from the 28.7% reported in 2024. This will be driven by production optimization, supply chain efficiencies, and product mix management. Our long-term gross margin target remains 35% to 40%.
Q: What drove the larger-than-expected price mix drag in Europe, and what are your expectations for the rest of the year?
A: Daniel Ordoñez, Global President & COO: The 4% growth in volume was offset by price mix due to customer renegotiations at the start of the year. Most of these are behind us, and we expect the context to be manageable within our guidance for the rest of the year.
Q: How are you balancing improving sales trends with profitability in North America, given the loss of some food service business?
A: Daniel Ordoñez, Global President & COO: We see opportunities across retail, clubs, and food service. The new Barista 64 ounces chilled and creamers show promising velocities, and we expect to grow in share of shelf for drinks both in chilled and ambient categories.
Q: Can you elaborate on the timeline for US brand investments to start making an impact?
A: Daniel Ordoñez, Global President & COO: We plan to start deploying the new playbook in North America in the second half of the year. While we see promising signs in Europe, we don't expect a full category turnaround overnight. These investments will be balanced with our focus on margin and profit.
Q: What feedback are you receiving from food service operators regarding plant-based offerings?
A: Daniel Ordoñez, Global President & COO: Coffee is evolving from hot to cold beverages, driven by Gen Z. Small to medium food service customers are adapting faster to this trend. We offer a full service package, including brand and product, to capitalize on this shift.
Q: What other contributors are supporting the reduction in negative media for the plant-based category?
A: Daniel Ordoñez, Global President & COO: Consumers are getting tired of misinformation, and science-based data from nutritionists and dieticians is spreading. We're building alliances and engaging in public education efforts, including initiatives in schools.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
