Oatly AB: Reports First Quarter 2022 Financial Results

Malmö / SE. (oat) Sweden’s Oatly Group AB, the world’s original and largest oat drink company, announced financial results for the first quarter ended March 31, 2022. CEO Toni Petersson: «Given the challenging operating environment, we are pleased with our first quarter revenue results which exceeded our expectations. In March, we saw significant improvements in EMEA and Americas, with record revenue in EMEA and the largest production month ever for the Americas as the manufacturing challenges we experienced at the start of the year due to Omicron began to abate. In Asia, our business was impacted by zero-Covid policy restrictions and subsequent lockdowns, yet what remains consistent in 2022 is the global demand across sales channels and geographies for our products as we add production capacity to drive consumer conversion from dairy to plant-based products. Near-term margins and profitability have been impacted by the additional costs associated with scaling of our new facilities, and the inflationary environment, however, we continue to believe that we can achieve much better economies of scale and greater operating efficiencies through our more localized self-manufacturing, which will help us increase our growth while reducing our environmental impact and achieve profitability over the next several years.»

First Quarter 2022 Highlights

• Revenue of USD 166.2 million, an 18.6 percent increase compared to USD 140.1 million in the prior year period, which included a foreign currency exchange headwind of USD 5.1 million
• EMEA revenue of USD 90.5 million, a 10.9 percent increase compared to USD 81.6 million in the prior year period, which included a foreign currency exchange headwind of USD 5.5 million
• Americas revenue of USD 47.0 million, a 40.3 percent increase compared to USD 33.5 million in the prior year period
• Asia revenue of USD 28.7 million, a 15.3 percent increase compared to USD 24.9 million in the prior year period, which included a foreign currency exchange tailwind of USD 0.4 million

First Quarter 2022 Results

Revenue increased USD 26.1 million, or 18.6 percent, to USD 166.2 million for the first quarter ended March 31, 2022 compared to USD 140.1 million for the first quarter ended March 31, 2021. The revenue increase was primarily driven by additional supply from the Company’s new and existing facilities to meet the growing global demand for its products. This revenue growth was negatively impacted by several factors, including lower than expected production output as well as lower than expected sales in Asia, primarily in China, as a result of foodservice location closures due to the Covid-19 variants. The ramp-up of new facilities continued to be impacted by disruption of global supply chain flows and travel restrictions, specifically impacting Asia, Ogden, Utah as well as the Millville, New Jersey expansion, causing longer lead time to acquire production equipment and spare parts, difficulty in moving critical staff at these facilities during their construction and ramp-up phase, and labor absenteeism as a result of the Omicron variant. In addition, the Company’s suppliers experienced longer lead times for equipment and, recently, the situation with truckers in Canada and difficult weather conditions in North America impacted the timing of rail transportation of oat supply for our supplier to our U.S. manufacturing locations. Produced finished goods volume for the first quarter of 2022 amounted to 121 million liters compared to 90 million liters for the prior year period, an increase of 34.4 percent compared to the prior year period. There was a headwind to revenue from foreign currency exchange of approximately USD 5.1 million.

The Company experienced broad-based growth across retail and foodservice channels in the first quarter of 2022. The foodservice channel has rebounded with the continued reopening of on-premise outlets due to the relaxation of Covid-19 restrictions in the Company’s key Western markets, offset by the growth rate in China which was impacted by the implementation of various degrees of lock-down restrictions due to Covid-19 variants. In the first quarter of 2022 and 2021, the foodservice channel accounted for 33.8 percent and 30.1 percent of the Company’s revenue, respectively, and the retail channel accounted for 62.9 percent and 65.7 percent of the Company’s revenue, respectively.

Gross profit was USD 15.8 million for the first quarter of 2022 compared to USD 41.9 million for the first quarter of 2021. Gross profit margin decreased 2,040 basis points to 9.5 percent for the first quarter of 2022 compared to 29.9 percent in the prior year period. The primary reasons for the gross profit margin decline in the first quarter of 2022 as compared to the prior year period were:

• positive margin impact from higher share of self-manufacturing of 250 basis points, offset by
• short-term underutilization of new facilities due to supply chain challenges of 970 basis points primarily due to Covid-19 related impacts on labor absenteeism in Americas and lockdowns in China, and logistical constraints delaying the timely supply of raw materials and spare parts, all of which resulted in a lower production output
• higher raw materials, increased logistics and electricity expenses, primarily due to the inflationary environment, of 760 basis points,
• consolidation of the Company’s EMEA co-packer network resulting in an expense of 290 basis points, and
• 270 basis points of other items, net.

Research and development expenses in the first quarter of 2022 increased USD 1.2 million to USD 4.3 million compared to USD 3.1 million in the prior year period, primarily due to an increase of USD 0.6 million in employee related expenses, which include USD 0.4 million in costs for the Company’s Long-Term Incentive Plan («LTIP»), due to higher headcount driven by the Company’s continuous investments in our innovation capabilities.

Selling, general and administrative expenses in the first quarter of 2022 increased USD 37.3 million to USD 104.1 million compared to USD 66.8 million in the prior year period. The increase in expenses was primarily due to an increase of USD 20.5 million in employee related expenses, which included USD 8.6 million in non-cash costs for the LTIP, as a result of increased headcount as the Company continues to invest in its growth and comply with public company obligations. The Company also incurred USD 3.4 million in increased costs relating to external consultants, contractors, and other professional fees, net of USD 2.2 million in one-off costs incurred during the first quarter of 2021 related to the Company’s initial public offering (IPO). Customer distribution costs increased with USD 5.7 million mainly as a consequence of higher revenue, but also increased as a percentage of revenue from 6.8 percent to 9.1 percent, due to a number of factors including higher freight rates and mix of sales.

Other operating income for the first quarter of 2022 of USD 0.3 million included primarily a net foreign exchange benefit compared to other operating expenses in the first quarter of 2021 of USD 0.6 million comprising primarily of a net foreign exchange loss.

Net loss attributable to shareholders of the parent was USD 87.5 million for the first quarter of 2022 compared to net loss of USD 32.4 million in the prior year period.

First quarter of 2022 Ebitda loss was USD 81.4 million compared to an Ebitda loss of USD 24.7 million in the first quarter of 2021. The increase in Ebitda loss was primarily a result of lower gross profit, share-based compensation expenses of USD 10.0 million including social security-related benefits of USD 0.5 million, higher employee-related expenses, consultancy expenses, public company costs and customer distribution costs and other operating expenses as the Company scales its global operations to support growth across three continents.

Adjusted Ebitda loss for the first quarter of 2022 was USD 71.4 million compared to a loss of USD 22.5 million in the first quarter of 2021. The increase in Adjusted Ebitda loss was primarily related to lower gross profit, higher employee expenses, consultancy expenses, public company costs and customer distribution costs and other operating expenses as the Company scales its global operations to support growth across three continents.