Oatly’s shares tumbled yesterday (27 July) after the alt-dairy group slashed its sales outlook for the remainder of the year due to its Asian market struggles post-pandemic.
The oat drink major has cut its sales growth forecast for the year to a range of 7% to 12% year-on-year. In the group’s opening quarter results in May, Oatly predicted revenue growth of between 23% and 28%.
The Sweden-based company’s shares plummeted as much as 29% in New York trading, the most since the stock began trading in May 2021.
Oatly announced a new “improvement” plan for its business in Asia that will increase the focus on the core business, simplify the product portfolio and reduce operating costs.
Speaking to analysts at the earnings call, Jean-Christophe Flatin, Oatly’s recently appointed CEO, stated: “We are refocusing on our core business, which means foodservice and very few key retail partners only on key cities. Rationalise our portfolio, we had far too many SKUs, most or some of the SKUs were margin dilutive and they were not filling our factories. We are sorting out all of that. And, finally, recalibrating our cost structure, as you can imagine, to be in line with the business we have today.”
Also speaking after posting the group’s first-half results, Oatly chief operating officer Daniel Ordoñez said the company had positioned itself for a large post-pandemic tailwind which never came.
“So, we need to adjust to the current reality of how consumers are behaving, and we need to improve the fundamentals of our business before we’re able to meaningfully accelerate growth. We cannot continue to distract ourselves and we cannot continue to justify these significant investments with uncertain payoffs. This is why we have initiated the strategic reset plan for Asia.”
Flatin added approximately two-thirds of the annual revenue growth reduction has been driven by Asia with the remainder being driven by a more conservative outlook for the Americas.
“We saw too many activities that started becoming distractions, too many unprofitable activities, and finally activities that were not fully leveraging our asset base, neither our great people nor the production facility we had,” he added.
For the six months ended 30 June, Oatly generated revenue of $196m, which marked a 10.1% increase compared to the prior year period.
However, the group’s adjusted EBITDA continued to show a loss, this time reaching $52.5m, a $0.9m decrease year-on-year. Meanwhile, there was a net loss attributable to shareholders of the parent of $86.7m compared to $72m previously.
Oatly announced better-than-expected annual figures in March, as it insisted it was making headway on speeding up sales and improving its profitability.
The group’s CEO added at the call yesterday (27 July): “While we are reducing our 2023 sales guidance, we continue to expect to achieve our fourth quarter gross margin target of the high 20%s, and we remain on-track for achieving positive adjusted EBITDA in 2024.”
