Oatly Group Ab ((OTLY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call from Oatly Group AB displayed a company making significant strides towards improved profitability and operational efficiency. Despite strong volume growth and gross margin expansion, the company faces challenges in meeting revenue growth expectations and addressing category sluggishness, especially in the U.S. and China.
Volume Growth and Profitability
Oatly reported an impressive volume growth of 8.8% in 2024 compared to the previous year. Although the company did not meet its topline guidance, it achieved adjusted EBITDA at the favorable end of the guidance range, showcasing improvements in profitability.
Gross Margin Expansion
The company saw an 18 percentage point expansion in gross margin compared to the previous year. This improvement was primarily driven by enhancements in the supply chain and better cost management.
Expansion in Food Service
In North America, Oatly experienced double-digit revenue growth in retail, with food service sales growing by 22%, excluding the largest customer. This indicates a strategic diversification effort in the food service sector.
Free Cash Flow Improvement
Oatly reported a remarkable $319 million improvement in free cash flow since 2022, marking its best financial performance since its initial public offering.
Efficiency and Cost Reduction
The company successfully reduced its employee count by 500 over two years and achieved a 19% reduction in cost per liter, reflecting its strong emphasis on efficiency and cost reduction.
Revenue Growth Below Guidance
Despite efforts, 2024’s topline results were below guidance at 4.8% constant currency revenue growth, impacted by sluggish category growth, which remains a challenge for Oatly.
Impact of Sourcing Changes
Looking ahead, revenue growth for 2025 is expected to be impacted by 300 basis points due to sourcing decisions by the largest U.S. customer, a factor that may adjust the guidance range.
Challenges in China
Oatly encountered challenges in China, with the discontinuation of the second Chinese facility’s construction, reflecting difficulties in expanding production capabilities in the region.
Category Sluggishness
The oatmilk category is experiencing sluggish growth, and Oatly is facing challenges in igniting category momentum and converting traditional dairy consumers.
Forward-Looking Guidance
For 2025, Oatly expects constant currency revenue growth between 2% to 4%, factoring in a 300-basis-point impact from sourcing changes. The company projects adjusted EBITDA of $5 million to $15 million and capital expenditures between $30 million to $35 million. Oatly aims to continue driving profitable growth by leveraging its brand, enhancing efficiencies, and maintaining a leaner overhead structure.
In conclusion, Oatly Group AB’s recent earnings call highlighted its efforts towards profitability and operational improvements, despite facing challenges in revenue growth and category expansion. The company is focused on strategic initiatives to enhance growth and efficiency, with a cautious outlook for 2025.
