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Olvi Oyj: Olvi Group's Interim Report, 1 January to 30 September 2020 (9 months)

OLVI PLC                INTERIM REPORT 29 OCT 2020 at 9:00 am


Interim Report in brief

Olvi Group's sales volume, net sales and operating profit developed favourably during the review period. In the third quarter, retail sales continued to develop well, and momentary lightening of corona restrictions brought the on-trade and cross-border sales volumes close to the previous year's figures. The financial standing and cash at hand remain at the previous year's good level.

Near-term outlook

Olvi's operating profit for fiscal year 2020 is expected to remain on the previous year's good level or increase slightly.

Consolidated key ratios

7-9/ 7-9/20 Change 1-9/ 1-9/ Change %/pp 1-12/ 2019
2020 19 %/pp 2020 2019
Sales volume, 212.6 194.1 9.6 595.5 559.1 6.5 718.3
Net sales, MEUR 116.3 113.6 2.4 321.9 315.1 2.1 408.7
Gross margin, 27.6 25.0 10.1 68.0 62.4 8.9 76.7
% of net sales 23.7 22.1 21.1 19.8 18.8
Operating 21.5 19.1 12.5 49.5 44.9 10.3 52.5
profit, MEUR
% of net sales 18.5 16.8 15.4 14.3 12.8
Net profit for 18.1 17.1 5.8 38.0 35.3 7.5 42.2
the period,
% of net sales 15.5 15.0 11.8 11.2 10.3
Earnings per 0.87 0.82 6.1 1.82 1.69 7.7 2.02
share, EUR
Investments, 6.2 5.9 4.5 25.2 24.1 4.5 31.0
Equity per 12.76 12.38 3.1 12.58
share, EUR
Equity to total 65.1 66.2 -1.1 66.4
assets, %
Gearing, % -11.3 -9.9 1.4 -11.6

Business development

Lasse Aho, Managing Director:

Olvi Group's business has developed well in the period under review. During the nine-month period, sales volume, net sales, and operating profit have improved in all of the main markets in Finland, the Baltic states and Belarus. Retail sales have continued on a strong track, on-trade and cross-border sales momentarily recovered to near-normal in July and August, and export sales have increased in Belarus and the Baltic states alike. Net sales have increased in all of Olvi Group's operating countries except Belarus. Operating profit has improved by more than 10 percent since the beginning of the accounting period. Temporary cost-saving measures have balanced the operations and maintained good earnings performance. Good business development continued in the third quarter.

However, outlook for the rest of the year has changed from September onwards. The intensifying corona pandemic is shifting the focus of sales to retail outlets again. The outlook for on-board and harbour sales in Tallinn, and on-trade sales in general, has weakened. Sales channel restrictions may have a negative impact on average price, even though sales volume development is expected to continue thanks to a strong market position in retail sales. Cost-saving measures to the same extent as seen last spring are not considered justifiable from the business development viewpoint. So far, the corona situation has not impacted Olvi's manufacturing operations, and the health situation among personnel has been good. Official recommendations for protection against the coronavirus have been observed across all of Olvi's operations.

In Finland, Olvi's sales volume in comparison with the previous year has increased every month since the beginning of this year. Sales volume, net sales and operating profit have clearly increased also in the third quarter. Delivery reliability has been good and increases in production capacity have enabled favourable sales development. Consumer demand balanced out between different sales channels during the summer season, and the average price normalised, which facilitated the development of net sales and operating profit. However, new corona restrictions effective in the autumn have deteriorated the outlook for cross-border and on-trade sales again. Consumer demand is expected to focus on retail sales for the rest of the year. Olvi's market position in retail sales has remained strong. 

In Estonia, business has been impacted by restrictions caused by the corona pandemic. Even though sales development started to recover in July and August thanks to more freedom of movement, new restrictions effective as of September rapidly impacted on-board and harbour sales as well as the on-trade market. Increased retail sales and exports have replaced the lost sales. Therefore, the sales volume and net sales for the entire period under review only fall slightly short of the previous year's level. Declined September sales volume together with the level of costs returning to normal had a negative impact on third-quarter operating profit.

In Latvia, stronger domestic demand has increased the company's sales volume by almost 9 percent in the third quarter. The sales increase focused on retail sales, but exports developed as well. Corona restrictions have still impacted the on-trade business where consumer demand has not recovered to the previous year's level, not even in the summer season. The fact that sales have focused on retail has caused a decrease in average price and thus impacted the development of net sales and operating profit.

In Lithuania, strong business development has continued in the third quarter, with sales volume increasing by almost 18 percent and net sales by 17 percent. Domestic sales were boosted, among other things, by the recovery of on-trade sales in the summer season to almost the previous year's level. Exports have also continued to develop well. Operating profit for the period under review has improved by more than 26 percent on the previous year.

In Belarus, business has developed well in spite of the prevailing political circumstances and the corona situation. Uncertainty has not affected the company's day-to-day operations. Domestic demand has remained on a good level in the third quarter, with on-trade sales and exports increasing as well. The decline in net sales is attributable to deterioration of the exchange rate. Net sales in the local currency increased by 21.8 percent in the third quarter and by 9.9 percent in the entire period under review. In addition to good sales development, the third-quarter operating profit improvement was affected by cost savings, particularly in marketing. So far, the unstable political situation of the country has not had any substantial effect on the company's business or consumer demand.

The Group has continued its investments as planned. In Finland, a new production line and juicing facility will be commissioned later this year, and the construction of a new production line in Belarus will continue. 

Seasonal nature of the operations

The Group's business operations are characterised by seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary according to the time of the year and the characteristics of each season.

Sales development

Olvi Group's sales volume increased in January-September by 6.5 percent to 595.5 (559.1) million litres. In July-September the sales volume increased by 9.6 percent to 212.6 (194.1) million litres. Sales figures increased clearly in all operating countries except Estonia.   

Sales volume, 7-9/ 2020 7-9/ 2019 Change % 1-9/ 2020 1-9/ Change
million litres 2019 %
Finland 63.7 59.4 7.3 182.2 165.9 9.8
Estonia 30.8 31.8 -3.1 85.8 86.2 -0.4
Latvia 21.0 19.3 8.7 57.0 56.0 1.8
Lithuania 35.1 29.8 17.7 95.4 82.3 15.9
Belarus 70.5 60.6 16.3 197.6 186.0 6.2
Eliminations -8.5 -6.8 -22.5 -17.5
Total 212.6 194.1 9.6 595.5 559.1 6.5

The Group's net sales in January-September increased by 2.1 percent and amounted to 321.9 (315.1) million euro. Third-quarter net sales increased by 2.4 percent. For the entire period under review, substantial deterioration of the local currency in Belarus has impacted the development of commensurate net sales.

Net sales, 7-9/ 2020 7-9/ 2019 Change % 1-9/ 2020 1-9/ Change
million euro 2019 %
Finland 48.7 46.1 5.7 135.4 127.9 5.8
Estonia 20.4 21.3 -4.4 55.8 56.1 -0.6
Latvia 11.3 10.8 4.7 30.2 30.7 -1.4
Lithuania 16.1 13.8 16.5 43.1 37.7 14.4
Belarus 23.7 24.7 -3.8 67.5 71.0 -4.9
Eliminations -3.9 -3.1 -10.2 -8.3
Total 116.3 113.6 2.4 321.9 315.1 2.1

Earnings development

The Group's operating profit in January-September stood at 49.5 (44.9) million euro, or 15.4 (14.3) percent of net sales. Operating profit in July-September stood at 21.5 (19.1) million euro, which was 18.5 (16.8) percent of net sales. From the beginning of the year, operating profit has improved by 10.3 percent on the previous year, and in the third quarter there was an improvement of 12.5 percent. Improved profitability is particularly attributable to increased net sales and the cost-saving measures that balanced the Group's operations during the corona situation.     

Operating 7-9/ 2020 7-9/ 2019 Change % 1-9/ 2020 1-9/ Change
profit, million 2019 %
Finland 8.3 7.3 12.7 18.9 16.2 16.6
Estonia 4.7 5.6 -15.8 11.5 11.9 -2.7
Latvia 1.5 1.5 -4.1 3.4 3.7 -9.2
Lithuania 1.9 1.6 22.4 3.9 3.1 26.3
Belarus 5.4 3.4 59.1 12.7 10.9 16.7
Eliminations -0.3 -0.3 -0.9 -0.8
Total 21.5 19.1 12.5 49.5 44.9 10.3

The Group's January-September profit after taxes amounted to 38.0 (35.3) million euro. The July-September figure was 18.1 (17.1) million euro.

Earnings per share calculated from the profit belonging to parent company shareholders in January-September stood at 1.82 (1.69) euro, and the July-September figure was 0.87 (0.82) euro.

Balance sheet, financing, and investments

Olvi Group's balance sheet total at the end of September 2020 was 410.7 (392.9) million euro. Equity per share at the end of September 2020 stood at 12.76 (12.38) euro. The equity ratio was 65.1 (66.2) percent and the gearing ratio was -11.3 (-9.9) percent. The current ratio, which represents the Group's liquidity, improved to 1.3 (1.2).

The amount of interest-bearing liabilities amounted to 3.5 (3.7) million euro at the end of September. Current liabilities made up 0.7 (0.8) million euro of all interest-bearing liabilities.

The Group's cash flow from operations stood at 44.4 (51.5) million euro. The most substantial factor affecting the change in consolidated working ...

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