Oatly has trimmed its full-year guidance following a less-than-expected quarterly revenue loss. The oat milk brand, which went public in May of last year, is now planning to slash its staffing levels and expects to achieve annual savings of up to US$25 million from its reorganization strategy.
“Third quarter financial results were below our expectations, largely driven by COVID-19 restrictions in Asia, production challenges in the Americas and continued foreign exchange headwinds,” explains Toni Petersson, Oatly’s CEO.
“However, we continue to see strong velocities, year-over-year sales volume growth and minimal price elasticity globally, demonstrating the brand’s power and resilience. We have taken decisive and strategic actions to improve our operational efficiencies in a volatile macroeconomic environment with an even more focused allocation of resources and capital.”
According to Petersson, these actions will “simplify its organizational structures and the execution of its supply chain network expansion,” as the company employs a more asset-light strategy into the future.
Oatly’s Q3 highlights
In the three months to September 30, Oatly recorded revenue of US$183 million, 7% higher than the same period last year. The company has adjusted EBITDA losses widened from US$27 million a year ago to US$82.7 million.
Oatly estimates its 2022 revenues will be between US$700 million and US$720 million, an increase of 9% to 12% compared to 2021 but well below the guidance put forward in early August of US$800-830 million, which was itself a reduction of as much as US$90 million compared to the prior forecast.
In EMEA, the company made a revenue of US$255.5 million, a 3.2% increase compared to US$247.6 million in the prior year period. In constant currency, EMEA revenue increased 15.6% year-over-year to US$286.2 million.
Oatly’s Americas revenue of US$159.5 million is a 28.3% increase compared to US$124.3 million in the prior year period.
In Asia, the company reported a revenue of US$112.1 million, a 31.4% increase compared to US$85.4 million in the prior year period.
The company continued to experience revenue growth across the retail and foodservice channels in the third quarter of 2022. In the third quarter of 2022 and 2021, the retail channel accounted for 57.7% and 59.5% of its revenue, respectively.
Oatly expects that the improved ramp-up of its production facilities in Q4 should result in improved fixed cost absorption as well as a better sales mix, and the implementation of pricing actions will drive gross profit margin expansion.
Adapting to the next phase of growth
The company is reviewing its organizational structure to adjust the fixed cost base globally.
To start, Oatly will execute a headcount reduction impacting up to 25% of the costs related to the group’s corporate functions and regional EMEA layers.
By doing this, the plant-based milk player expects annual savings of up to US$25 million from the reorganization, which will take effect starting in the first quarter of 2023.
As part of this review, Jean-Christophe Flatin, global president, has assumed oversight of the worldwide supply chain network following the departure of Oatly’s chief supply chain officer.
Meanwhile, Daniel Ordonez, chief operating officer, has assumed leadership of the EMEA markets following the release of the company’s EMEA president.
COVID-19 pressures sales in Asia
Regarding the company’s outlook, Petersson explains: “For fiscal 2022, we are lowering our outlook primarily to reflect COVID-19 pressures negatively impacting sales in Asia, operational challenges in the Americas which limits our ability to accelerate sales momentum, and continued foreign exchange headwinds.”
He believes these challenges are “transitory and that we have significant opportunities for growth as these headwinds subside.”
In the meantime, Oatly has adjusted its supply chain network strategy and simplified its organizational structure for a more balanced growth equation moving forward.
The company’s outlook anticipates the appropriate containment of COVID-19-related infection rates globally, including no further major lockdowns in Asia for the remainder of the year.
