Olvi Oyj Unsp/Adr

Welcome. Thank you for joining us for our half-year report. Before we get to it, the usual disclaimer. So we'll be referring to future events slightly, and that always includes some uncertainty. Many of you are already familiar with us. I have Tina-Liisa Liukkonen, our CFO, with me, and I'm Patrik Lundell, the CEO of Olvi Group. Before we get to the details, I just want to frame up the second quarter and indeed the first half of the year. So our investment that we made into our brands have held them really strong. We've invested in media, we've invested in store presence. We've also had a particularly active period in terms of sales activations across our channels, and this has helped us to secure our strong market positions. We've even strengthened our share in many categories. However, However, the overall market demand was significantly below expectations, especially in the second quarter. So this has clearly turned into our profits, as many of you have already seen in the numbers shared. So with that being said, we should also keep in mind that we are operating in a business that has a certain degree of seasonality involved. Preparations for summer already start in Q1 actually. You start building stock, you start securing promotional slots, you start preparing the materials for indoor or in-store execution, and you secure media slots. All of this was done expecting an average summer at the least and with confidence in both our brands and our actions. We also invested in stock. As many of you know, we have a new high bay warehouse in Iisalmi. We invested in our brands, and as I mentioned, we brought 220 new products to market during the first half of the year. So we've really brought a lot to consumers to enjoy and celebrate around. And despite the significantly smaller than anticipated market, we indeed kept our share. And as I mentioned, we grew in some. And to be more specific, in Finland, for instance, we took more than 2% share in the water category. And in Latvia, we grew our beer share with 2%. So significant improvements in terms of our position in the market on an already strong starting point. Our delivery accuracy was on a very good level. In Finland, on a historically high level, we had 98.6% delivery accuracy throughout summer across our platforms. And we improved our mix, which you can see in the expanding margins. The weather and the consumer confidence worked against us. This drove the market down, especially in the beginning of summer. We have to remember that we're overlapping a historically warm summer in 2024. In May and June alone, in 2024, we had 30 hot days. When I speak about hot days, it's a translation from Finland, from the Finnish language, we're referring to days where the average temperature was above 25. In 2024, we had 30 such days. This year, we had two. Also, the uncertainty in the environment generally and the economic strain on households and consumers has impacted demand overall. So the market, as such, was very much smaller than anticipated. And this has indeed resulted in detracting margins during the second quarter. But I want to close on emphasizing that our portfolio is strong. Our people are committed. We have improved the efficiency of our operations. And through that, we've demonstrated the resilience and the relevance of our proposition. So we remain very confident in our ability to deliver also in the future and to have a stronger second half of the year. But with those introductory words, why don't you go through the numbers for us?

Yes. Thank you, Patrik. So let's start with the financial performance in the quarter two. So as it was said, quarter two was behind our expectations, especially due to this cold weather in the early summer and this continued economical and political uncertainty, which then reflects in the consumer purchasing power. And that caused this volume decline of 3.3%. in Q2. Still, we were able to maintain our market shares and expand also our margins despite the overall significantly reduced volumes in the market and this intensified competition. The total net sales in Q2 remained in the previous year level and we improved our average sales price, as we can see from the figures. The profitability was affected by these decreased volumes, investments into the sales, marketing and pricing, then higher logistic costs and also business development measures. But I want to emphasize that our gross margin stayed in the previous year level, even though the EBIT EBIT declined. Then when we are looking at the segment performance in Q2. Even though the cold and rainy early summer weather affected the sales volume in all the segments, the net sales declined less than volume as the average price improved in all the segments. Then if we are looking for Finland, we can see that the volume decreased 4%, net sales 2.3%, and the EBIT was in the same last year level. What we want to emphasize from Finland is that our strong brands performed well. As Patrick referred, in Wathers we were able to grow our market share over 2%, even though the overall market decreased in Wathers 16% in May and June. And also in beer, we kept leading the market with more than 50% share. And also consumers chose Sandels as the number one beer brand in one of the surveys. And in Finland, the total market in May and June in both non-alcoholic and alcoholic beverages declined by 10%. So we can see how these hot days really reflect on the market totally. Then when we are looking at this Baltic Sea region, Additionally to the weather conditions, weak development of consumer purchasing power continued and that tightened price competition in a slowing market. In Latvia, the overall market in low alcoholic beverages like beer, ciders declined 14% in May and June. And that is quite a big drop in one year. So this decline in market and then lower than expected sales volumes impacted the profitability, but together with higher marketing and sales expenses. The impact was heaviest in Denmark and in Latvia, but we can say that our investments in brands drove our Jolly Soda market share to be triple compared to last year. And in our market share in Latvia and beer, that was 2% higher, as Patrick just mentioned. Then Belarus, the weather also affected overall demand there, especially in beer and kvass categories. Our operations have developed according to the plan otherwise, but the increased costs and in Belarus, especially in logistics weakened the profitability. And unfortunately, we have to inform that the restrictions on the payment of the dividends by Western-owned companies has been extended to the year 26, or end of the year 26. We haven't changed our estimations that dividend, what can be distributed is one to three million per year. And we can still say that no effect, this has no effect parent company's ability to pay dividends. Other changes in the Belarus situation, there is none. And then, when we look at the whole year, or the first half of the year, As we have been many times already stated, the whole year sales volumes affected this continued big consumer demand, the general market uncertainty, poor weather, especially in this early summer, and this product portfolio optimization measures adopted in Finland and Denmark, which then again are also visible in the improved margins. In line with our targets, we continue to improve the sales volumes in non-alcoholic products and retain our market shares in all our main product groups. Also, our net sales remained at previous year level and was supported by this higher average sales price. Thanks to better portfolio and also channel mix, we have been able to improve our Horeca sales, for example. Then the operating result in January-June was weakened by this increased and this first half of the year weighted sales and marketing activities, higher logistic costs, business development inputs in line with the strategy. The lower sales volumes reduced the sales margins in euros, even though the relative sales margin improved on year on year. And then, when we are looking at these segments for the whole reporting period, so January to June, in Finland, we can say that the operating result improved compared to last year, mainly as a result of improved production efficiency, the stabilization of the cost increases, and changes in the product portfolio. What we want to also highlight is that the sales of hard seltzers and non-alcoholic products continue to grow and we maintained our strong market shares, as mentioned earlier, and even gained more in some categories. In the Baltic Sea region, the sales volume declined, as said, especially in Denmark and Latvia. And the net sales decreased, but not as much as volumes. In the Baltic states, the continued weak development of consumer purchasing power was most pronounced in Latvia. So, together with the tightening of the excise duty and alcohol legislation, price competition increased in the slowing market, especially in the beers. What we can say about Denmark is that the sales volume was affected by this product range optimization, as we have stated earlier. But we were successful with this Jolly Cola brand as saying that we were able to multiply the net sales, but wasn't able to improve the result yet. In Latvia, the market decreased heavily. and the lower volumes with the greater investments to brand visibility, sales and pricing affected profitability significantly. In total, the Baltic Sea region, the market impacts, sales and marketing inputs and increased logistic cost decreased the operating profit. the total market change was big and unexpected. So that lowered the gross margin in euros, which we didn't cover, so that we didn't cover the fixed costs because of that. In Belarus, also weather affected overall demand. As said, especially in beer and kvass and sales volume declined, but in non-alcoholic product categories, the sales volume increased in line with our strategic targets. And also in Belarus, the greater inputs were made in the sales and marketing than in a previous year that supported also the demand, especially in this non-alcoholic. And net sales increased and the operating result remained at the previous year level. The relative decrease in the operating result was especially affected by significantly higher logistic cost. And then as a summary from this financial position, we can say that the balance sheet and financial position are still strong. Cash flow development was affected by the increase in the inventories due to the weather conditions and the delivery accuracy improvements. So end of the June, the inventories were higher. And then also the lower sales cost, then lower accounts receivables. The cash flow from financing activities improved by the drawdown of long-term green loan for the brew house investment. Then about the investments, so our extension and replacement investments were almost 21 million, so about 6 million more than last year. 14 million was related to Finland for this logistic warehouse and the brew house investments. And those investments are going according to the plan and the budget. In Baltic Sea region, investments focused on the procurement of the sales equipment and the improved production conditions, and those were 4.3 million. In Belarus, those necessary replacement investments for the continuity of the production were made with the subsidiary's own cash flow financing, about 2.5 million. And from sustainability, we can highlight that we got this A rating in the CDB's value chain assessment. So CDB is an international non-profit organization that helps companies and other organizations to disclose their environmental impact. And the A- is the second best rating. So I think those were the highlights from the financial part.

And the CDP is a great continuation on the recognition we got last year from Time magazine. Yes. Placing us amongst the top companies in the world. So that was a great achievement as well. Yes. Good. Now then to the near-term outlook. So we've updated our near-term outlook based on the actuals from H1. Our strong market position normalized late summer weather conditions. The investments we've made in the first half of the year is why we expect a better half too, or second half of the year. So we expect our operating results to improve from last year in line with the update guidance. Now then a short word on the strategy and our view on the future. Despite the setbacks in Q2, I emphasize the second quarter, our strategy is working. We see our brands performing strongly with solid market shares, even growth in some categories. Our margins and the efficiencies of our operations are improving. So we continue to move forward and to execute our strategy with confidence. But now, Let's open the floor for questions, and we thank you for your attention and look forward to answering whatever you have in mind. So, please. And Janna, our colleague here, will coordinate things.