Olvi Oyj Unsp/Adr

Welcome to our Q1 interim report. Another year has started and the first quarter is behind us. Before we get going, the usual disclaimer. We will be referring to future expectations and as we read in the papers on a daily basis that comes with certain uncertainties. So just a reminder of that. Many of you are already familiar with us. So I'm here with Tiina-Liisa Liukkonen, our CFO, and myself, Patrik Lundell, the CEO of the Olvi Group. We've started the year in a strong way. We're preparing for the season. We're stocking up to be able to service the demand that's ever increasing with weather improving. And we are working solidly on the integration of three of our acquisitions. We announced four acquisitions at the end of last year. Three of them have closed, and the integration is moving ahead swiftly. And also a new brewhouse investment in Iisami has been completed on schedule, and it's already up and running, operational. So that's a few key items worth mentioning. I'll cover a few of the highlights from Q1, and then I'll hand over to Tinli, who will take us through the numbers and go into the segments where there's, of course, a reporting change as well. As I already mentioned, the year has started well. Our volume is growing, our net sales is growing, and importantly, our gross profit has improved with 15%. You will, of course, also see that the results are slightly behind those of last year, when we look at EBIT. But the reason is very clear. There's two spaces that deliver this change or this negative delta if you like. It's on one hand Denmark Denmark in the market, we're still short of achieving the ambitions we have. We've walked away from some unhealthy business. We've also lost some business. So currently we're building the volume that we need to run the businesses effectively. And we're driving our two leading brands, Villamus and Jolli, in the market. But at the moment, the size of our volume is not sufficient to cover all our costs and hence this negative evolution. The delta or the comparison, the comps, if you like, will improve as we move further down the year, as those private label volumes that we had in the first quarter of 2025 will disappear from the competitive numbers. Then on the other hand, as I mentioned, we're working on these integrations. Three acquisitions have closed. There's a certain one, of course, associated with bringing new businesses on board. And then we have the amortizations and the cost allocations burdening a rather small quarter. Let's remember Q1 is only 50% of the year. But again, we're in a strong position. We go into the season with confidence. We have strong market shares. We've been able to improve them in many categories. We brought 228 new products to market for summer, meaning we're there to excite our consumers and our customers, driving profitable growth across categories. And in Finland, like you can see here on the table and on the screen, we've launched an entirely new soft drinks brand, entering both the cola segment and the flavor segments with a strong proposition that's scoring well in blind tasting, and we're investing a lot behind the brand to get it into the public domain in terms of awareness and trial. But the integrations are working, moving ahead according to plan, and we expect the synergies and the upside growth to start materializing towards the end of this year and into 2027. The brew house in Iisalmi I mentioned. So let me just pause on the daily news as it were. The situation in Iran is having a wide impact on our industry and all other industries. We are, however, very happy and proud of the the system we have in place for protecting ourselves and guarding ourselves for these types of inflationary pressures. So I'm referring to our hedging policy. It has worked well for us in the short term, but of course we expect the impact of this to be broader. So there will be a tail that probably brings us all the way into 2027. So some impact for sure, but for the moment we're in a steady pace and thereby we're very confident in our ability to deliver another strong year in 2026. But perhaps with those opening words, Tina-Liisa, I'll hand over to you to look at the numbers in further detail.

Thank you. Thank you, Patrik. So let's move forward and have a look at this whole kind of quarter one performance first. So sales volume increased by 3.1% and that was supported by acquisitions, novelties and strong March sales, which included the part of the Eastern sales this year. Last year that was in April. Then new businesses grew the total volume by 4.1%. And when we are referring to these new businesses, so we are referring to Sweden, Norway, Bosnia-Herzegovina, Serbia, and Latvia, where this Valmir-Muisa business is a new one. So that is kind of the new businesses referred. Then in Denmark, As said already, volumes declined significantly, but excluding Denmark, group total sales volumes grew by 7.7%. And then again, thanks to our strong local brands and new launches, market shares in the main product categories have remained at the previous year level, which is the kind of the good level. Then net sales growth exceeded the volume growth significantly as the average sales price grew in many markets and is higher in new markets than the old markets. EBIT declined by this 14.5%, which represents 1.8 million only. Cross-profit improved by 15.2% and was 42.3%. So that improvement is very good. The EBIT decrease was caused by bigger losses in Denmark due to the volumes. And then this purchase price allocation related depreciations linked to the new businesses. That was 700,000. But that is a little bit kind of... Higher in Q1, so the total year, this PPA-related depreciation will be 1.7 million for this acquisition confirmed. Also new businesses takeovers and integration incurred one of expenses. As said already, EBIT is traditionally lower in the volume wise, first quarter and then full year. And historically, January-March accounts for around 15% of the year result. Then the segments. There is now a segment change. We have added these new businesses to the former Baltic Sea region. We see that with this change, Finland and Belarus are clearly kind of separated as own market areas, but also these segments are representing by their nature and size kind of evenly our business. In Finland, we had good volumes and net sale development. We can see that the volumes grew 2.6% and then the net sales 3.4%. EBIT is at last year level and that is due to the higher marketing cost related to the brand launches like Juju. So we are preparing for the season with these launches. And then just one note also that what is happening in the quarter one. So we have launched sandals in the system. So that is also representing our new capabilities with our new brew house. So now we have a capacity to export our products too. Then this new rest of Europe segment. So there the volume declined 1.3%. New businesses increased the volume almost 11% and Denmark decreased due to this discontinued production of the private label products. Organic growth was minus 15.5% and without Denmark only 1.1%. Net sales grew clearly ahead in volumes thanks to the higher average sales price, as was earlier mentioned. EBIT percentage change seems dramatic, but we have to remember that this is only 1.6 million euros. And that is mainly because of the Denmark. Other organic business in Baltic improved their profitability. News subsidiaries and businesses as a whole remained negative due to the takeover and integration cost and also high cost level compared to the low quarter one sales figures. But as a kind of result of this takeover integration, for example in Latvia, we have been able to already implement our ERP system, changed our kind of logistics, integrated already that one. So a lot has happened also in the integrations. Then in Belarus, volume increased 8.5%. That is mainly coming from the non-alcohol that is growing in a total market. Then net sales is growing with the help of the higher average sales price. And also, there is a little bit help from the stronger currency also. So, the whole year of this quarter one result improved 6% in total. Then some financial KPIs or highlights from the quarter one. So our equity ratio is strong despite the increased debt level. So we have taken a new debt about 30 million euros to finance our brew house and then the acquisitions in this kind of small quarter one to kind of support the cash flow. In investments, we already have mentioned many times, this Iisalmi brew house that is up and running already in March. So we are ready for the season. And then we are building more warehouse capacities in Estonia and Lithuania. Earnings per share, that is due to the softer quarter one result, but there are also higher financial expenses and taxes than last year. This personal increase is coming from the new companies mainly, so that is kind of the explanation for that one. And the operating cash flow, that is driven by the net working capital improvement by inventory change. Inventories are at the last year level, but the change is smaller. Then in sustainability. All these climate targets have been approved under the science-based target initiative. The approval confirms that our emission reduction targets are aligned with the target of the Paris Agreement. And that was the first time we got this one. And in second time, we got this Gold EcoBuddies recognition. This is the evaluation measures company's environmental, social and ethical operating practices, as well as the sustainability of the supply chain. So we are very proud to have that in a second time in a row. But I think that was the financial part.

So then let's look at the near-term outlook and it remains unchanged. So we're still aiming to deliver between 84 and 92 million in terms of profit this year. I mentioned Iran, and that's included in our forward-looking forecast. So again, we've been able in our hedging policy to secure our near-term outlook. There will be some impacts already this year, again, some impacts on to next year, but those are considered in this estimate. And indeed, if you again look back at the performance of Q1, the track record is strong, volume is seeing growth, net sales is improving. the gross profit percentage is improving. So we're on the right path. And the Q1 burdened by these few items that Tinleisa called out, Denmark integrations are very clearly explaining that performance. So otherwise the business is moving very solidly in the right direction. And then in terms of focus for 2026, some of you are getting familiar with our strategy one pager. I won't dwell on that to a greater extent today, but I want to underline that we continue to deliver growth and we want to do it in a sustainable way, not only from an environmental perspective, but also considering our people, our products and indeed our profits. There are some items in the operating environment that are impacting us. We've touched on the geopolitical situation, its impacts on raw materials. Households and consumers remain under financial pressure or then they act cautiously. But the good thing is that the way in which you can perform in this type of market environment is by having a broad portfolio. And that's one of our strengths. We have a portfolio that talks to all need states, all occasions throughout your day, and even touching several price points. And that's evident in the increasing volumes and the strong market share. So again, our offering is both relevant and attractive and on a growth path. What will be key this year, critical, is to indeed unlock that growth through non-alcohol to this expanded reach to new consumers. Let's remember that we closed 2025 with operations in six countries. Now, if we include our sales team in Serbia, we're active in 10 countries today. We were able to address a local consumer base, which is twice the size of the one we had at the end of 2025. So there truly is tremendous growth opportunity in our expanding footprint. Well, we have to succeed by building strong, enduring brands. So that's one part. Let's invest in brands that can perform for the long term. On the development side, we continue the data journey. We continue to learn, evolve, and use our data more efficiently. We want to complete the integrations on time to make sure we can start unlocking those synergies and growth opportunities. And as a team, we're very much a growth mindset kind of organization where we continue to learn and develop. And finally, I'll close on the efficiency. We have to be efficient, cross-functionally. We have to collaborate more. We have to tease out savings where we can, and we have to be very diligent on our spend. So cost discipline is one of the themes that we follow throughout the year. For the long term, our ambitions, our targets remain the same. We want to be carbon neutral in our own brew houses by 2030. We want to make sure that we keep strengthening our competitiveness, that we look after our people, that they are safe and healthy. We keep investing in our development and importantly, we reach more and more consumption occasions each day. We're already at 7 million moments of enjoyment every day. So just a matter of time when we get to 10 million. But with those thoughts, I think we covered pretty much all that we wanted to say. And now we're very keen to take any of your questions. So we close here. Thank you. Please.

Thank you. It's from Nordea. Maybe as the first question, You mentioned that the gross profit increased quite significantly year on year. What drove the expansion of the gross margin? Was it mainly related to the average selling price increase?

So I'd point to the, Tina Lisa mentioned the average sales price, but how does that construct itself, it's through the portfolio play. So again, I mentioned that we were touching several price points on many occasions. So the key here is to make sure that we sell continuously a healthier composition of products. So I would speak also to the portfolio structure.

So as this average sales price, definitely the portfolio mix is the key. So as you have seen that in Denmark, for example, we have cleaned the portfolio and it's also that we have to kind of have a healthy portfolio in every country. But that's the portfolio and also kind of keeping that average sales price going forward. But also I think we have to mention that in Cox's part, we have been more efficient. So if we compare to last year, so that is something, the work that we are doing internally, the efficiency in the production, that is the key focus area to kind of remain in a competitive side. And also kind of all these actions like hedging and this kind of thing.

Thank you. Since you mentioned last year you had a quite promotional intensive focus in the Baltics here within the product mix and now it seems you're reaping the fruits of these measures at least partly. But how do you view going forward for 2026? Is there more to gain here within the product mix optimization or should this be seen as a new baseline for you?

I think for sure. We believe we're on a journey, and the work continues, as Tina-Liina pointed to, and what I referenced there in terms of efficiency, looking at cross-functional efficiency as a driver in our own operations. Then you've got the pricing element, then you've got the promotional spend, how much of your volume do you sell on deal, and the overall portfolio mix. There are several levers that we're working with and continue to work with. You brought up the Baltics specifically last year. We were quite ambitious in our planning and activations in the second quarter particularly. We succeeded in taking share, but the market itself was really low. So we haven't planned any weather impact into this year. So we're expecting kind of a comparable year. So there may be an upside, but we're quite confident there shouldn't be a major downside in terms of overall demand. But the consumer remains to be under pressure, so we don't see a huge improvement in overall demand as a trend per se, but we remain cautiously optimistic that this year will be at least as good as last year.

And I think we have a good position, even though last year, as those all actions mentioned, we were able to remain a good market shares or even grow those ones. So I think we are in a good position now, also including the portfolio mix kind of efforts and everything. So, yes, we believe that we are in a good position to heading to the season.

And the numbers demonstrate it. Again, if you look at the underlying numbers for Q1, they prove that we're on the right path.

All right, thank you. You mentioned that you already started integrating some of these companies through ERPs and logistics, but what are the next steps during this year for the integration?

Of course, in Q1, with these three acquisitions, we have concentrated very kind of basic things now, so that we are getting the operations, the takeover done, and then we are getting the data flowing and all these basic things. And now I think Onwards, we are focusing much more in the business. But as I said, we have already a great kind of result in Sweden, for example. We have this sundress in Systembolaget. We are putting all the beer in in June there, and there will come a new product. So yes, these business integrations are going forward, but we expected a kind of the real result end of the year or next year. And now we are focusing on this portfolio mixes and this multi-parallel strategy and all this, the core thing that we are doing in a business in general.

Great. I just want to underline the fact that we've had early successes, as you mentioned. And then when you think about next steps and you think, for instance, about the Balkan area, currently we're only selling a very tight range of beers. How can we quickly expand that offering into other categories? So the work continues.

And as we said that in a quarter one there where it is one of course related to this one so as we said that this kind of change in the logistics or implement the ERP so that is the kind of what we need to do and of course that will be the kind of the first part of the year and this year in the focus.

Thank you. Last question. What are your plans to recover Denmark's volumes as well as the profitability partly as a reason through that?

Yeah, great question. I think we need to be open. We haven't managed yet to achieve our ambitions in the market, but we've been saying constantly as well that our operations in Denmark are geographically well placed. So for sure we want to be relevant in the market, and we are already. We have Jollias, a relevant local soft drink offering that took, you know, three percent, not three percent, but three times larger share in the category last year. So we continue to build that. Willemus has a strong beer proposition, keeps growing. We're expanding the distribution of it. But then beyond the borders of Denmark, what can we produce at the site in our sense to support our new business in Norway and Sweden? How can we go further into Europe, considering the border trade? What additional products from the group might we choose to produce in Denmark for the benefit of the other market? So not only are we considering it a Danish operation, but really a catalyst for growth beyond the borders.

All right. Thank you. That's all for my part.

Thank you. And then I believe we have some questions online as well.

Yes, we have a few questions on the chat. First question. How do you think the shift in cola bottlers will affect you? What opportunities do you think it will bring?

Thank you. That's a big question. I think the big news of this week. I've had the pleasure myself to be in food and beverage for the last 25 years, and it's ever exciting. There's always something going on. On the other hand, we as all of you, we've been in business soon for 150 years. So we've also seen changes in the market. There's acquisitions, there's divestitures, and things are always happening. For us, of course, the primary thing is to keep focusing on building our own business, building it profitably into the future. When it comes to partnerships, that's also something we've called out in our strategy. We're open to partner with other companies. When it comes to this cola situation specifically, of course, there will be intensified competition now in the cola category. We expect both operators to do their most during the next two years until they then take on board new brands or launch new brands, whatever they intend to do, you'll have to talk to them. We'll keep performing, we'll remain open for opportunities. We see this as an interesting and significant change, but not something that changes our business model.

Thank you. Next question. Press release regarding the Verska acquisition was quite obscure and indicated some type of court issue. Could you please clarify the real issue and expect the timeline of the acquisitions?

Thank you for the question. Quite important. Sorry if it was ambiguous. We thought it was very clear. The competition authorities have approved the deal, so there's no question marks as to whether this should happen or not in the eyes of the competition board. There's a local operator who has challenged the decision, also something we expected. So this is something we're dealing with now in the court proceedings, and we expect to have clarity by summer. And we expect, of course, the competition board's decision to stand. So I hope that kind of clarified the status there.

Thank you. That was all the online questions.

Okay. Well, with that, we thank you, and we look forward to seeing you after Q2. And we'll keep building the business in the meantime. So we wish you a great spring and a long, warm summer. And please enjoy our beverages, regardless of what market you find yourselves in. Thank you.

Thank you.