Olvi Oyj Unsp/Adr

Welcome to our third quarter interim report. Thank you to those who are joining us here in the studio and for all of you online. Before we get to the actual contents, let's remind ourselves of the disclaimer and the fact that we'll be referring to future events, which always include a certain level of uncertainty. Most of you would know us by now by the means of introductions. I'm joined here by Tiina-Liisa Liukkonen, our chief finance and information officer, and then myself, Patrik Lundell, the CEO. Let's get to it. So the third quarter results are in, and we're in for the final stretch of 2025. The market has been softer than anticipated throughout the summer period. Consumer confidence and spending remain under pressure, all of which is visible in our results. But despite this challenging operating environment, we've been able to keep our shares. We haven't lost our strong market shares. Quite on the contrary, we've even been able to gain some shares in many pockets across our business. And additionally, we've been able to expand our margins. So let's have a look at some of the highlights of the third quarter here. So as I mentioned, the weather at the end of summer throughout the third quarter remained unstable, affecting the overall market demand. We did enjoy a three-week spell of sunny weather in Finland, which increased demand there in the local market. But especially across the Baltics, we had a long, rainy summer, and this impacted the demand directly. So despite the challenging environment and the smaller than anticipated market, we kept investing. We invested in our brands, in our own operations to ensure that we remain competitive and that we come out of this cloud stronger than before. We kept our shares and we even grew shares, as I mentioned. Now, for instance, if we go to Latvia, where we communicated during Q2 that the market was much smaller than last year, the same applies for the third quarter. But despite that, we took 3% market share in the beer category in Latvia. So that's a clear demonstration of our actions actually carrying dividends. And more broadly, across many of our markets, we took share in the non-alcohol category, for instance, mentioning waters and Finland specifically. So we've been working on our portfolio, developing it both through innovation and by managing the mix, and this is now visible in the margin expansion. But in addition to managing and maintaining our profitable core business, we're also pursuing growth now through acquisitions. And we'll come back to this at the end of the presentation, but we've made acquisitions or communicated our intent to bring on board three companies now, two in our domestic current markets and one that brings us into completely new territory. So with all of this being said, we come out of summer stronger than before, and we remain confident in our ability to deliver a strong first quarter, and we do not see any issues with our operating model overall. But with those intro words, Tina-Liisa, please, why don't you share some of the numbers with us?

Yes, thank you, Patrick. And hello from my side too. So let's start with the Q3 results. Our net sales and sales volume remained at the previous year's level. So in total, Q3 was behind our expectation. As said, especially due to the rainy weather in the late summer in the Baltics and also in Belarus. This economic and political uncertainty has continued, and that's reflected in the consumer's purchasing power in all of our markets. Despite of the challenging market and intense competition in Q3, we were able to maintain our shares and expand our margins, which is a good achievement in challenging market conditions. Even though profitability improved as measured by cross-margin percentage, overall profitability measured by EBIT declined almost 10%. There are a few reasons. It was affected by decreased volumes or not that high volumes that we expected, investments into the sales, marketing, and pricing, higher logistic cost, and then business development measures. But then let's have a look at the segments in quarter three, and there were differences between the business segments. In Finland, we can see good growth in quarter three. As mentioned, July's three-week heat wave significantly boosted demand and ensured a good third-quarter sales for Finland. Our strong brands performed well. For example, non-alcohol and hard seltzer categories continued to grow, and hard seltzer turned five years this year, and we have kept our position as a market leader all this time. Strong own brand sales and very good delivery accuracy thanks to the new investments in Iisalmi boosted the sales and profitability. And especially in July during the high demand when we performed very well. Now then, in Baltic Sea, rainy and unfavorable weather conditions together with the weak development of consumer purchasing power, tight price competition and decrease in the consumption of alcohol products in general impacted the profitability together with these high expenses, especially in the marketing and sales. Sales volumes declined, especially in Latvia and Denmark. In Latvia, the overall retail market continued to decline, but the good news is that we achieved growth in Horeca sales. In Denmark, our soft brand Jolly's sales was significantly better than last year, but this gain did not offset the impact of lost private labor leaders. However, always market shares have mainly remained at the level of the previous year or even improved in the Baltic countries. So even the market has been softer we have performed in this market condition. EBIT declined almost 25% and the effect was due to the decreased volumes from Latvia and Denmark. But also Lithuania's profitability was affected significantly in Q3 by the tight price competition in the summer season. And then in the Belarus, there was the cold weather in the late summer, and that affected the overall demand. But the good news is that the sales of this non-alcoholic product grew, as it is a strategic target for us. In profitability, we see a decline, and that is because there has been higher fixed costs, and especially, for example, logistics costs have been higher than last year. Then the whole year until the September. As said, the whole year sales volumes were affected by continued peak consumer demand, then general market uncertainty and this unstable summer weather. And the quarter three sales were weaker than expected, especially in the Baltic Sea segment. In Finland, we got this heat season in July, but that we didn't saw in the Baltic Sea region or in the Belarus. Net sales grew, and that is thanks to the higher average sales price. But despite this challenging market asset, we retained our market shares in all our main product groups, and our net sales remained at the previous year level. Profitability-wise, has set the relative gross margin improved year on year, and that was 41.7%. We are happy that we have been able to improve this relative profitability measured by gross margin, as that is the base for sustainable, profitable growth in the future. EBIT decreased due to strategic investments in business development and growth, including costs associated with these announced acquisitions and the modernization of information systems. as well as the increased sales and marketing activity and higher logistic costs. For example, in this example of this modernization information system, we are renewing our ERP system and also putting effort on our demand and campaign planning. Then the whole year by segments. In Finland, in terms of these product categories, as I said, sales of hard-sales and non-alcoholic products continue to grow. And even though there is a change in consumer behavior, slightly reduced to the overall demand for alcohol products, the most significant change in the sales volume was due to the optimization measures taken in the beer range in 24, which has a negative effect on the sales volume compared last year. The operating result improved almost 9% compared to last year. And that is mainly as a result of the sales volume growth due to the sales peak caused by the heat in July, improved production efficiency, the stabilization of cost increases, and changes in the product range. So many things has affected. Market position remained strong, as said. But then Baltic Sea region. Price competition has continued intensive and sales volumes declined to the consumer week. Purchasing power, weather conditions and lower consumption of alcoholic products. This we have already mentioned. We have managed the market decline quite well. As always, market shares have mainly remained at the previous year level or even improved. As mentioned, sales volumes declined, especially in Denmark and Latvia, but the reasons are same as mentioned in the Quartal 3. Profitability has not developed according to our plans in Baltic Sea region. EBIT decline is 31%. We saw that in Quartal 3 it was less, but in overall it is 31%. And the decline comes from Denmark, Latvia and Lithuania. In Denmark, the process of changing the focus of business operations from private labor manufacturer to own brand business is in progress, but we have not yet made our operations profitable. In Latvia and Lithuania, intensified price competition caused by big consumer demand during the summer season, especially in summer season, together with the significantly higher investments in brand visibility, campaigns and pricing weakened our profitability due to the smaller than expected market. But at the same time, this helped maintaining our competitive position. Profitability drop in Latvia and Lithuania is expected to be temporary, as profitability has already improved in September compared with the previous months. Then in Belarus, we see that the sales volumes and net sales are in the last year level, or the sales volumes are in the last year's level, and then net sales has improved, and that is because the average sales price has also improved. In overall, EBIT has declined, and that is because there has been more fixed costs. The gross margin has been in a good level, but there is a bigger amount of fixed costs, and especially the logistics cost has been growing this year quite significantly. Then financial summary, so some of the highlights from here. As overall, our balance sheet and financial position are strong. As announced together with the acquisitions, we are planning to finance these acquisitions by operating cash flow and also utilizing existing short-term finance instruments. In sustainability side, in 25 reputation trust survey done in Finland at the end of the quarter two, we received a good rating in all areas and excellent in the products and services among the both general public and investors. Among the general public, our results were the best in the measurement history and among the investors, the second best. And we are especially proud of this good result in product and services, because that is the core of our business. Then investments, the total investments are 10 million more than last year. And the main part is coming from Finland. Finland investments have proceeded on schedule. This new high bay warehouse has significantly improved the delivery accuracy. And we will see the proof of that one in the moment in the video. So I think that now we can go and see what has happened in Iisal.

The expansion project of our high bay warehouse here in Iisalmi has been completed in schedule and within budget. Construction work was finalized already during the springtime and the warehouse was fully operational for high season 2025. The modern automated warehouse strengthens our delivery accuracy and effectively supports growing demand. As a result, we are able to serve our customers with even greater flexibility and speed with our high quality products. Our new state-of-the-art brew house is being built as we speak. The project is processing in time and within the budget. The new brew house will be ready for 2026 high season. With this new brew house we get new growth opportunities in our current categories as well as new ones. The increased capacity of the new brew house will allow us to broaden our selection and offer an even wider range of products to meet the needs of customers and our consumers. With the added capacity and modern technology, we will be able to expand into new non-alcoholic categories and offer more special and seasonal brews while continuing to produce our classic, most popular Olvi products. These investments are not just for efficiency, automation and new technology. These are investments for our future, for our people, for our working environment and for our customers, so we can serve them even better than today. They will improve our service level and enhance our agility, enabling us to respond more effectively to future demand.