Oatly Group AB

Good day and welcome to the Oatley Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Brian Carney, VP of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us today on OLE's fourth quarter 2023 earnings conference call. On today's call, our Chief Executive Officer, Jean-Christophe Platon, our Chief Operating Officer, Daniel Ordonez, and our Chief Financial Officer, Marie Jose W. Before we begin, please review the disclaimer on slide three. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results of operations and financial position, industry and business trends, business strategy, market growth, and anticipated cost savings. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, please note on today's call, management will refer to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, constant currency revenue, and free cash flow. While the company believes these non-IFRS financial measures will provide useful information, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. In addition, OLE has posted a supplemental presentation on its website for reference. I'd like to now turn the call over to Jean-Christophe.

Thank you, Brian, and good morning, everyone. Slide five has the key messages that I want you to take away from today's presentation. First, 2023 was a pivotal year for the company where we focused on stabilizing and recalibrating our business. We have achieved a lot last year, including fully funding our business plan by raising $465 million, transitioning our senior leadership team, taking actions to right-size our SG&A structure, doubling down on our asset life supply chain strategy by entering a long-term strategic partnership with Yaya Foods, as well as discontinuing the construction of the production facilities in the U.S. and the U.K., both of which will help us better focus our operations while having appropriately timed expansion and capital efficiency. And we also increased our focus on the most profitable parts of our business to ensure that our goals will be profitable and sustainable. We did this all while improving our financial profile, and we ended 2023 with a solid fourth quarter where both top and bottom line results exceeded our expectations. As we look forward to 2024, our financial guidance reflects solid top-line growth while delivering significant bottom-line improvement as we maintain our focus on driving this business toward profitable growth. Specifically, for the full year 2024, we are guiding to the following. Constant currency revenue growth in the range of 5% to 10%. and adjusted the BDA loss in the range of $35 to $60 million, and for capital expenditure to be below $75 million. Slide 6 gives you an overview of the progress that we have been making on moving each region towards consistent, profitable growth. You may recall that we began with the EMEA segment, where we prepared for growth by setting clear strategies for our teams. We also increased the simplicity of the region by reducing the spans and the layers in order to enable them to move quickly. Now, the business is driving consistent, profitable growth while reinvesting behind the brand building and innovation. We have since applied the same simple framework to the Americas and Asia, setting clear strategies and right-sizing these organizations in order to increase focus and agility. These two regions have improved their profitability through this combination of cost discipline and mix management. And I am happy to report that the America segment reported its first month of positive adjusted EBITDA during the fourth quarter, and that the Asia segment is making very good progress. We have still a lot of work to do in order to get them both to consistent profitable growth, which is why those segments do not yet have their last check marks on our dashboard slide. On slide seven, you can see the financial results of our actions. Both our gross margin and adjusted EBITDA have improved as we have moved through the year. Just as one example of how much progress we have made in such a short amount of time, the midpoint of our guidance range for the full year 2024 adjusted EBITDA is better than what we reported in the second quarter of 2023 alone. We are clearly making good progress. Now that we believe a big part of the heavy lifting of recalibrating and stabilizing our business is behind us, our teams are excited to refocus their energy on growing the business and continuing to drive results. In 2024, our top priority remains driving towards profitable growth. The entire organization is focused on driving the business towards structural, consistent, profitable growth. We have made progress on improving our profitability, and we will continue to do so. To drive towards profitability, we must bring the Oatly magic to more people. We have a terrific brand that resonates with consumers around the world, and we believe our products are second to none. In 2024, we will be stepping up our efforts to bring the Oatly magic to even more consumers. Each region will execute this slightly differently, but whether we are launching new products, expanding with new channels, or activating the brand in our unique Oatly voice, The overall goal is to bring our products to more consumers. Next, we must continue to work on the calibration of our resources. This calibration includes work on our supply chain as well as support functions. On the supply chain, this includes completing our work on discontinuing the construction of our Americas and EMEA production facilities, as well as the valuation of our AGM supply chain. On the support functions, this includes delivering on our SG&A cost reduction program, which remains on track. Finally, the entire organization will also continue to focus on strong execution to ensure that we meet the expectations of our customers and consumers. As we execute in 2024, we will be true to our mission and keep our eyes on our long-term opportunity. The World Meteorological Organization confirmed that 2023 was the warmest year in history. Given that our food systems are responsible for one-third of total human-caused global greenhouse gas emissions, we as a society need to drive a shift in our food system. And we at Oatly intend to lead that shift by making it easier for consumers to make more sustainable choices. The opportunity is massive. Global dairy retail sales were nearly $660 billion in 2023. And food service sales would make that number even bigger Converting consumers from dairy products to oat milk products will drive a reduction in carbon emissions and we are working to convert those consumers to our products as well as reduce the carbon footprints of our own products. Sustainability sits at the heart of Oatly and is a core component of our mission. Recently, We have made some modifications to our organization in order to bring our sustainability experts closer to the business in order to increase their impact. As part of this evolution, I will be assuming the responsibilities of being the company's chief sustainability officer. We also know that we must continue to balance purpose and performance as individuals. Whilst I believe performance without purpose is meaningless, I also know that purpose without performance is not possible. As an illustration of Oatly's purpose and performance working hand-in-hand, we see a massive opportunity to continue to expand our margins as a lever to fuel our company's purpose of converting consumers to our products. Our full year 2023 gross margin is approximately half of our long-term target of 35% to 40%. As we grow our volumes, leverage our assets, and drive additional efficiencies, we expect our margins to expand so that we can expand our impact. With that, I will now turn the call over to our Chief Operating Officer, Daniel Ordonez.