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Olvi Oyj: Olvi Group's Interim Report, 1 January to 30 September 2021 (9 months)

OLVI PLC                Interim Report 2 November 2021 at 9:00 am

Olvi Group's Interim Report, 1 January to 30 September 2021 (9 months)

Interim Report in brief

Olvi Group's business development continued on a strong track in the third quarter. Sales volume, net sales, operating profit, and net profit increased clearly on the previous year. The Group's financial standing is good.

Near-term outlook

Olvi's operating profit for fiscal year 2021 is expected to remain on the previous year's good level or increase slightly. Good business development is estimated to continue but uncertainties can be seen for the remainder of the year, associated with the continuing corona pandemic, the availability of raw materials and packaging supplies, as well as increasing costs. 

Consolidated key ratios

7-9/ 7-9/ Change 1-9/ 1-9/ Change % / 1-12/ 2020
2021 % / 2021 2020
2020 pp
Sales volume, 247.3 212.6 16.3 661.0 595.5 11.0 765.9
Net sales, MEUR 134.3 116.3 15.5 351.6 321.9 9.2 414.9
Gross profit*, 58.2 52.0 11.9 150.2 139.4 7.8 178.0
% of net sales 43.3 44.7 42.7 43.3 42.9
Operating 23.6 21.5 9.7 52.3 49.5 5.5 56.4
profit, MEUR
% of net sales 17.6 18.5 14.9 15.4 13.6
Net profit for 20.8 18.1 15.3 42.7 38.0 12.3 40.9
the period,
% of net sales 15.5 15.5 12.1 11.8 9.9
Earnings per 0.99 0.87 13.8 2.04 1.82 12.1 1.96
share, EUR
Investments, 6.2 6.2 -0.5 23.4 25.2 -7.3 32.0
Equity per 13.94 12.76 9.2 12.81
share, EUR
Equity to total 59.5 65.1 -5.6 63.8
assets, %
Gearing, % -19.6 -11.3 8.3 -15.5

* Due to a change in the presentation of the income statement, gross profit is presented instead of gross margin.

Business development

Lasse Aho, Managing Director:

Olvi Group's third-quarter business development was good. Sales volume increased by 16.3 percent, net sales by 15.5 and operating profit by 9.7 percent. The heat wave in July brought a substantial increase in sales volume but sales development was also good in early autumn. Strong demand continued in the retail sector. Growth was seen in all product groups, with best sales development in non-alcoholic products, particularly waters. Exports continued to develop well, increasing by more than 40 percent in the third quarter.

The corona pandemic has still affected business operations in the third quarter. Among the different sales channels, HoReCa sales improved in comparison with the first half of the year, but sales are still lower than they were before the pandemic. Sales restrictions were in force in almost all markets. Furthermore, the volume of cross-border and harbour sales has remained low. Olvi's production has operated almost normally and there has not been any widespread virus exposure among personnel. There have been occasional difficulties in the availability of raw materials and packaging supplies, and there is substantial upward pressure in production costs. These may restrict production volumes, cause difficulties for deliveries, and have a negative impact on profitability during the rest of the year. However, the current outlook is that the impacts would be limited and manageable.

Business development in Finland continued on a strong track. Third-quarter sales volume increased by 8.5 percent, net sales by 8.6 and operating profit by 18.2 percent. The hot summer caused a high peak in overall demand. It was challenging to respond to this, and there were some delivery difficulties in waters, for example. Demand is also boosted by Olvi's improved market position in several product groups, thanks to our strong brands and versatile range of packaging. Market shares have improved particularly in beers and mineral waters. Profitability was affected by increased production efficiency as the sales volumes were high.

In Estonia, third-quarter sales volume and net sales were stimulated into growth by the summer heat wave, and preparations for the season went well. The market share remained strong.  Among the different sales channels, retail and export sales increased. Growth in HoReCa was moderate in comparison with the previous year. Cross-border and harbour sales were still impacted by travel restrictions. Third-quarter operating profit improved by 6.8 percent and accumulated profit was almost on a par with the previous year.

In Latvia, third-quarter sales volume increased by 10.1 percent and net sales by 6.5 percent. Domestic market demand improved. Price competition has still been intense in retail trade, and legislative changes with regard to mixed drinks in particular have hampered profitability. This has caused a decline in the company's operating profit. Operating profit declined by 13.6 percent. Sales of Piebalgas products have started strongly and the company's integration into the Latvian operations has proceeded according to plan. The company has acquired the Everest water brand in the beginning of October to strengthen the offering and sales of non-alcoholic products in Latvia.    

Business in Lithuania developed well. Third-quarter sales volume increased by 12.0 percent and net sales by 11.6 percent. Good net sales development was supported by the strong summer season, a more diversified product portfolio and increased market shares. Domestic retail demand was a driver for growth. Operating profit increased by 13.3 percent, which boosted full-year development to 22.0 percent.   

In Belarus, third-quarter sales volume increased by 23.0 percent and net sales by 30.2 percent. Sales have improved particularly well in non-alcoholic product groups, but two-figure growth figures can be seen across all product groups. Among the sales channels, growth in exports was excellent but domestic retail sales also developed well. Good development of net sales was partially attributable to the exchange rate, which has been improving since August. This evens out the poor foreign exchange development in the first half of the year; however, the accumulated figures are still impacted. Measured in the local currency, net sales have increased by 29.0 percent and operating profit by 9.3 percent since the beginning of the year. Operating profit measured in euro increased by 5.5 percent in the third quarter and the accumulated figure was -1.2 percent. Operating profit was impacted by an increase in logistics costs in line with sales volume, as well as marketing efforts to support the multi-beverage strategy. The company has been able to develop its business in spite of the situation in the country.

Strategic expansion has continued according to plan as the acquisition of the Vestfyen brewery in Denmark became effective on 1 September. Vestfyen has been consolidated with the Group since September, so the company does not yet have any major impact on the figures for the period under review. Integration has started according to plan. The objective is to gradually build up and grow the company in accordance with the focal points of Olvi's strategy.

Strategically important Group-wide development projects, such as digitalisation projects and the responsible management operating model have been substantially pushed forward during the year in order to ensure competitive ability in the future. Investments have been implemented as planned, supporting future sales growth, improving production efficiency, and promoting the achievement of responsibility targets with regard to carbon neutrality, for example. Investments since the beginning of the year amount to 23.4 million euro.

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 11.0 percent to 661.0 (595.5) million litres. In July-September the sales volume increased by 16.3 percent to 247.3 (212.6) million litres. Growth was seen in all of the operating countries.    

Sales volume, 7-9/ 2021 7-9/ 2020 Change % 1-9/ 2021 1-9/ Change
million litres 2020 %
Finland 69.1 63.7 8.5 197.0 182.2 8.1
Estonia 34.6 30.8 12.3 92.2 85.8 7.4
Latvia 23.1 21.0 10.1 59.8 57.0 5.0
Lithuania 39.3 35.1 12.0 101.4 95.4 6.2
Belarus 86.7 70.5 23.0 232.2 197.6 17.5
Eliminations -5.5 -8.5 -21.7 -22.5
and other
Total 247.3 212.6 16.3 661.0 595.5 11.0

The Group's net sales in January-September increased by 9.2 percent and amounted to 351.6 (321.9) million euro. Third-quarter net sales increased by 15.5 percent.

Net sales, 7-9/ 2021 7-9/ 2020 Change % 1-9/ 2021 1-9/ Change
million euro 2020 %
Finland 52.9 48.7 8.6 145.4 135.4 7.4
Estonia 22.9 20.4 12.2 59.8 55.8 7.2
Latvia 12.0 11.3 6.5 31.0 30.2 2.6
Lithuania 17.9 16.1 11.6 46.5 43.1 7.8
Belarus 30.9 23.7 30.2 77.4 67.5 14.6
Eliminations -2.3 -3.9 -8.6 -10.2
and other
Total 134.3 116.3 15.5 351.6 321.9 9.2

Earnings development

The Group's operating profit in January-September stood at 52.3 (49.5) million euro, or 14.9 (15.4) percent of net sales. Operating profit in July-September stood at 23.6 (21.5) million euro, which was 17.6 (18.5) percent of net sales. From the beginning of the year, operating profit has improved by 5.5 percent on the previous year, and in the third quarter there was an improvement of 9.7 percent. Operating profit is boosted by increased gross profit but hampered by increased costs of logistics, sales, and marketing in comparison with the previous year.

Operating 7-9/ 2021 7-9/ 2020 Change % 1-9/ 2021 1-9/ Change
profit, million 2020 %
Finland 9.8 8.3 18.2 21.5 18.9 14.0
Estonia 5.0 4.7 6.8 11.3 11.5 -1.8
Latvia 1.3 1.5 -13.6 2.8 3.4 -15.7
Lithuania 2.2 1.9 13.3 4.7 3.9 22.0
Belarus 5.7 5.4 5.5 12.6 12.7 -1.2
Eliminations -0.3 -0.3 -0.8 -0.9
and other
Total 23.6 21.5 9.7 52.3 49.5 5.5

The Group's January-September profit after taxes amounted to 42.7 (38.0) million euro. The July-September figure was 20.8 (18.1) million euro. Profit for the period is affected by decreased financing costs related to foreign exchange translation differences. 

Earnings per share calculated from the profit belonging to parent company shareholders in January-September stood at 2.04 (1.82) euro, and t...

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