Olvi Oyj Unsp/Adr

Welcome to our Q2 and a half year report. Before we get going, the usual disclaimer. So we'll be referring to future events and as such there is always some uncertainty with those statements. By now you're familiar with Tiina-Liisa, our CFO and CIO, and myself, Patrik, who has the pleasure to be the CEO of Olvi Group. We want to start by looking at the numbers and then reflect on our performance in further detail. So net sales, profit grew and accelerated during the second quarter. We're pleased with that. The volumes also grew during the whole first half year period and were boosted by the acquisitions, the three acquisitions that are included in H1 numbers. What I want to emphasize when it comes to our performance on both volume, net sales and EBIT or profit growth is that there's an organic element that's important to call out. We grew organically across all our markets except for Denmark. In Denmark the challenges continue as do our focus on improving our operations. We put in a lot of effort in making sure that we run the facility efficiently. We made some changes to our management and we're currently actively seeking more volume to use that excess capacity we have and to make sure that we can cover our overheads. Going back to the broader picture and the overall performance, we're very pleased with the fact that our mix is improving, our novelties have been really well received by consumers across our markets and there's a clear preference for our brands, which means that our shares are staying strong and our performance is solid. I mentioned already on the previous slide that the volume was boosted by acquisitions and by now all four acquisitions have closed. Also the most recent one, Värska, which is included from July numbers onwards. So for the first half it's three of the acquisitions and now for the balance of year we'll see all four companies included in the numbers. so we can expect some support there on net sales and volume from the acquisitions whereas the profit improvement will be more visible than in 27 after the synergies start to materialize this year the first year is all about integration and bringing the teams on board I also want to call out the fact that with these acquisitions, we've entered four new markets. We're now active in Sweden, in Norway, in Bosnia-Herzegovina and in Serbia. So we have our own businesses in these four countries now. And as such, we're able to service 25 million new local consumers. So it's quite a significant reach, improvement of our reach, extension of our reach, if you like. And another aspect I also want to call out is the balance of our portfolio. We are now with these four acquisitions in a position where half of our portfolio is non-alcoholic and the other half is alcoholic. So that gives us a great place from which to build future sustainable growth across our territories and beyond. So with those entry words, I'll hand over to Tiina-Liisa to take us through the numbers.

Thank you, Patrik. So, let's start going through the final cell performance. And we will start with the Quartal 2, so the latest three months. Volumes were 300 million liters in Quartal 2. Weather was quite normal and supporting that way the season start. So volumes grew 4.2%. If we exclude Denmark from these numbers, the volume grew by 8.4%, so double what we can see in the report. And in Denmark, we have to remember that the previous year's figures included a significant share of the private label production in Denmark, and that is causing the decline of the volumes. In channel-wise, the hotel and restaurant channel and export grew the most. In categories, mild alcoholic beverages grew the most with the emphasis on beer and mixed drinks. and there we have cocktails ready to drinks and also hard seltzer for example. New businesses also contributed and affected to the sales volume by 4.7%. And when we now refer to the new businesses, we are talking about this Latvia, Valmiarmuisa, then the new markets in Sweden, Norway, Bosnia, Herzegovina and Serbia. And as it was mentioned, Värska operating numbers are not included in In two numbers, but from quarter three onwards. Only balance sheet part is combined to quarter two numbers. And overall, the market shares have remained at a good level in this tight price competition. Net sales grew 15% and that's because the average sales price per liter increased through the optimization of our product portfolios, prices and range also. EBIT grew 21%. In gross margin level, profitability improved both in euros and in relative to net sales. So our gross margin percentage is now 42 compared to the 41 last year. And with that, we are covering growing fixed expenses and therefore able to improve the operating result. Successful launches of new products, Price and this product portfolio optimization and improved profitability especially in the Baltic countries and Belarus supported the profitability development. And then when we go to the segment level in Quartal 2. So in Finland we can see that our volume grew 5.8% and net sales 5.6%. So growth focused on the retail trade, while in the Horeca segment, the consumer's modest purchasing behavior continued still in Finland. All these market shares remained strong and also volume growth was achieved both in non-alcohol and in alcohol categories. And we can mention, for example, these hard sell shares where the growth is continuing very strongly and we are a market leader there. And this Jujunö soft drink brand is performing or started very well. So our own brand soft In EBITWISE in Finland, the growth was 1%. The strengthened product portfolio has supported the net sale growth, but increased price competition, higher retail sales weight, Then the impact of the cost inflation also accelerated by Iran war, particularly in freight and packaging materials. Then limited opportunities for price increases and investments in the marketing of own brands have made profit improvement not possible in quarter two. Then rest of the Europe, so volumes grew 2.7%, And then the organic sales volume decreased by 10% or 10.6%. And if we exclude Denmark, the organic sales volume remained at the previous year level. And new businesses increased the segment sales volume by almost by 12%. In net sales, the growth was 18%. And here the organic net sales declined by 2.8%. While excluding Denmark, organic net sales increased by 2.5%. So other companies than Denmark have been able to increase the average sales price. New businesses increased the segment's net sales by 19.2%. So the average price was increased by product portfolio optimization measures in several markets and the higher price point of the brands represented in Sweden and Norway. EBIT in rest of the Europe segment grew almost 11%. Baltic countries has improved significantly and the impact of the new businesses was already clearly positive in the second quarter. But we have to remember that the synergies will begin to materialize mainly in 27. And yes, Denmark is burdening the segment's profitability heavily by making losses. Then Belarus volume grew 5.6% and that its growth driver is there mainly non-alcoholic and soft drinks. Net sales grew 24%. and that is supported by price and product portfolio optimization measures mainly in beer and soft drinks, then successful launches of new products and improved delivery accuracy. EBIT 48% and the improvement in profitability was supported by the increased gross profit due to the improvement in the average price and in net sales as I explained. Then, when we checked the first half of the year in total, we can see that the volume grew totally 3.8% and was more than 500 million liters. The sales volume improved in the second quarter as we saw. The sales volume increased by 4.4% inorganically. and again excluding Denmark, the sales volume grew by 8.1%. Launches of the new products, strong local brands supported the growth in sales and keeping the market shares at the good level. Net sales grew by 13.5% following the new acquisition, improved portfolio mix and better average sales price. EBIT plus 9.6% and the profitability improved in Baltics and in Belarus is the main cause of that one and thanks to the more optimum product portfolio in general. and then shortly the first half of the year in segment wise in Finland we can see that the sales volume and net sales growth has been pretty similar so more than four percent both and EBIT wise the EBIT has been in the same level and that is because of the reasons that was explained when we discussed about the Quartal 2. Then the rest of the Europe, volumes plus 1% and the net sales 16.4%. So the average sales price has grown in many markets and the new businesses are contributing in the net sales more than to the volumes. EBIT decline was mainly due to the Denmark as mentioned before where the operating result is at loss due to the low sales volumes. The low capacity utilization rate and the cost associated with the ongoing development program increased the operating loss. But there are actions going on. On the other hand, profitability has been significantly improved in the Baltic countries through measures such as price and product portfolio optimization. The integration of the new subsidiaries has gone according to the plan, but takeover and Business development costs among other things are burdening profitability in 26. And then we are kind of heading to the 27 with all the developments. In Denmark to improve profitability efforts are focused on securing additional production volume and adapting operations to the changed volume level. Pellaras sales volume 6.7% plus, net sales 22% plus and EBIT 31% plus. What has caused this good development in Pellaras? The stable exchange rate, growing consumer purchasing power and the market growth, especially in non-alcoholic product categories have supported the overall market development. Local company has been able to strengthen also their branded sales and improve profitability in cross-margin level. Then the final is the KPI summary. So we can see that the equity ratio is a little bit lower than last year, but we remember that we have been financing now the Esalmi new brewery with the green loan, and also we have used short and long-term loans to finance our growth and the new acquisitions. Earnings per share a little bit higher than last year. Operating cash flow clearly better than last year and that's because of the better networking capital situation. Investments are in the high level or 24 million. And the main investments are still going in Iisalmi. We are finalizing our warehouse and inner logistic investment. And then we have started also in Lithuania new warehouse investment. So we are also investing in growth. Personal has increased mainly because of the new businesses. and in sustainability we are participating in United Nations Global Combat Beyond Basics program, which then deepens expertise in managing the human rights impacts of procurement. But I think those were the highlights of the finances.

Very good summary. Thank you. So with that, now that the half year is behind us, we're able to update our guidance and narrow the range. So the range that we're communicating and aiming for this year will be between 84 and 90 million in terms of EBIT operating results. But for the balance of year, of course, the year is not over. We're in the middle of August, so we consider it still summer. So summer is still here. We're going to keep pushing the business forward along with our chosen priorities. So this year has been about growth. It's been about development and efficiency. We will keep growing in our new markets and domestically, organically, especially also driven by non-alcoholic categories. These new markets and new consumers and new need states that we'll be approaching more on that later this year will also support our growth. And then we will, of course, focus on our own business, making our operations as efficient as possible, making sure we leave no stone unturned. But with that, we close and open for questions. Thank you. Maybe we start here in the room and then we go online if there are further. Please.

Yes, thank you. Maria Wikström from SCB. I first wanted to touch upon the new guidance. Of course, it's just like a small downgrade on the high end of the range. But given that you are already head of last year after the first half of the year, so why wouldn't you see this trend to continue so that you can get the range? And then as you write here that The estimate operating result has been updated based on the actual results of the first half of the year. So what did disappoint during the first half of the year?

Thank you. Good question. I'm sure Tiina-Liisa wants to elaborate, but maybe two things come to mind. And one is, of course, the impact of the situation there in the Strait of Hormuz, its impact on logistics costs and then packaging materials. So that was a change, a negative surprise, the continuation of that conflict. And then secondarily, I would probably call out the Värska deal. It closed later than we had expected. It's not closed, so it's good news and we'll carry on. But in our previous guidance, we expected it to close already in April, May time. So I would call those two out. Is there something additional?

Maybe to add that this iron war This thing is affecting and it's causing uncertainty. We have been able to offset the kind of the price increases mainly, but there is some uncertainties in some markets that can be fully. The whole year to offset these price increases and then also I think that as we have mentioned Denmark so to be kind of the acknowledge that unfortunately we have not been able to turn around the operations as we were hoping so there is also a slight deviation as you said it's a minor kind of change or specification in the guidance but we wanted to kind of the Make it now so that we are also kind of open what we think that these kind of things will affect on that.

You mentioned the Danish turnaround. So did the operating loss expand in the second quarter compared to the first quarter? And then I'm also interested in the measures to turn around the operations. Given that it has been going on for a few years now, that one starts to wonder if it's actually possible to turn around the Danish operations.

Thank you for the question. I understand your concerns. Indeed, what we have done is focused on our operations, making sure that we streamline it in line with the volumes as much as we can. The primary priority really is to find more volume. We're running the factory at very low capacity currently, meaning we were looking for volume not only in the Danish market, but also in other markets and across our business. That's always been So those I'd call out. I'd also say emphasize that we've made changes to management. where we have confidence in our ability to present more compelling cases both to local sales and then addressing those opportunities beyond. So that's a few things that we've done but we can't shy away from the fact that the volume we were looking for is not there at the moment so we need to continue pursuing that.

You asked if the situation has changed from Q1 to Q2. I think it's a pretty similar situation that we are doing these changes right now. But yes, as we said, the situation with the profitability has not improved compared to the last year.

Yes and then my final question is I'm interested in I mean what I would I mean defined organic volume growth so my interested like your volumes were up four percent in the quarter and if you would exclude the Danish portfolio changes it was up eight percent so how much would have the volumes been up Organically, so without these acquisitions and without the negative impact from the Danish portfolio changes.

Thank you for the question. I don't know if we can give an exact percentage, but in full transparency, we intend to clarify this point. We had some questions on that, so I don't have a percentage to give. We can confirm there is organic local domestic organic growth bar Denmark, so that we can confirm, but I can't give you a percentage because I simply don't have it.

But as you saw that in Finland, in Belarus, there was organic growth coming through. And also in Baltics, there is some organic growth also happening. So you remember that last year, the first or the second, the first half of the year was not easy that the weather was not that supporting. So that is also a little bit helping there.

And then finally wanted to ask I mean your views that now positively we have seen some signs of Finnish consumer confidence to pick up I mean during the summer months. So how do you expect this to impact your business during the second half of the year if the trends were continuing and the Finnish consumer would be more spirited than it has been over the last two and a half years?

Well, I guess that's what we've been waiting for and hoping for. Whilst we indeed read positive headlines, we see some positive underlying numbers, some of the retailers report positive figures. I think what still holds true is the price pressure, so consumers are still conscious as to what they spend. We don't see the premiumization kick in yet. We don't see that spilling over into the Horeca channels yet, but there are signals that that should come. And when we get there, we will be, of course, stronger than we've been before. We're sitting today here in Finland, and from that perspective, it's also interesting to point out an agreement with Perno Ricard to represent their portfolio in Finland, making us stronger in the Horeca trade. And then when the market recovers, we will place to take our share of that. but yes the signs are there and we're hopeful but we won't build our business on hope we'll keep performing regardless of the market situation.

And maybe one more as I just came from Anora's Q2 call and there the CEO said that it seems that the weather is favorable for extending enjoyable moments before they drink. So if we now look over to the some months of Q3, how does the weather look for you guys?

I'm glad that Anura seems to be referencing our moments of enjoyment and indeed we intend to deliver those. Again, we're not building the business on hope. I'm not able to predict the weather, but we will be here and we're ready to serve if there's a spike in demand for sure. Thank you for all your questions. Shall we see if there's something online?

Yes, there are a few questions in the chat. So first question. Is the seasonality in the new markets as heavily weighted towards Q2 to Q3 as it is in Finland?

Well, if you look at Sweden and Norway, the answer would be yes. Then in the Balkans, there is also seasonality, perhaps not as dramatic as in the north.

Thank you. Next question. Why don't you report AMET-A contribution anymore? It will be important to understand the underlying development, especially when Verska is included.

Thank you. Good question. And as already referenced here today, we intend to provide further clarity on that. It's an area of opportunity. Thank you.

Next question. As an early take, which one of your acquisitions has been the most positive surprise?

Well, I'm glad to say we haven't had many surprises. So they have delivered against expectations. But in any integration, in any acquisition, there are always learnings, important learnings. I think we're very pleased that we can confirm that all four deals have now completed. So that was important. And I think one of the aspects there, the key aspects was to expand our reach into new markets to service new consumers and look for growth there, both for the acquired business and then complementing that with group products. So that's all working well. and then indeed to up-weight the non-alcoholic part of our portfolio achieving what we now have which is a 50-50 split between non-alcoholic and alcoholic so these have all materialized.

Of course there are small examples. In Sweden we have been able to start Sandals beer sales and it has started quite well above the expectations. So I think that has been a positive surprise in a way and also that we have found a way to also widen the portfolio with our products in Norway and Sweden and other markets also in Bosnia and Herzegovina in Serbia quite quickly. So anyway, we have started the integration and preparing the synergies for 27. So at least those have been positive kind of surprises that our people are kind of working very heavily towards the targets.

Thank you. Was it a mistake to cut private label volumes in Denmark as you now lack scale?

Well, there's a two prone answer to that. There was part of the volume we wanted to get rid of, there was another part we wanted to have and we lost. So we're trying to recover some of that volume that has an economic justification. Thank you.

Thank you. What have you assumed for Värska in 2026 and is the EBIT contribution still less than 5% from AMET-A in 2026?

I believe it's too early to comment and we haven't so far, so we won't elaborate on the 5% that we mentioned previously, but thank you for your question.

Thank you. And last question. Did you lose market share in Finland in Q2?

We did not. Not on the major categories. Thank you. We performed better than market.

That was all the questions.

Thank you. Then with that, as we have answered all the questions. We thank you for your attention and wish you a nice weekend. It's Friday. Keep enjoying life. Thank you. See you next time.