Source: Oatly

Net losses at Oatly ballooned to $41.2m in the quarter, compared with $10.4m a year ago

Oatly has warned its growth will not hit the heights expected this year as the plant-based drinks group suffered from a number of issues, including the HGV driver shortage in the UK.

Revenues also missed analyst forecasts in the third quarter due to lower-than-expected production output at its Utah factory in the US, foodservice closures in Asia as the continent underwent a fresh wave of coronavirus lockdowns, and distribution delays for its products in the UK.

Shares in Oatly plummeted 20% to $9.43 as the NASDAQ opened in New York – a drop of more than 67% from the stock’s high of $28.73 in June following May’s blockbuster $10bn IPO.

Despite the problems, sales in the three months to 30 September increased 49% year on year to a record $171.1m (£127.4m) as Oatly expands across the world to meet growing consumer demand for plant-based milk alternatives.

However, net losses at Oatly ballooned to $41.2m (£30.7m) in the quarter, compared with $10.4m a year ago, as margins were squeezed by rising costs and expenses for consultants and financial advisors related to the IPO.

CEO Toni Petersson said the “robust” third-quarter revenue increase reflected “broad-based growth” across geographies and sales channels.

“We’re pleased with our ability to continue to be a leader in driving growth and sales velocity for the plant-based milk category within our key markets,” he added.

“This positive momentum was partially offset by temporary headwinds as we scale our global production capacity, particularly in Ogden, Utah, and as we manage through Covid-19 Delta-variant related restrictions and temporary foodservice closures in Asia. Despite this near-term variability, we remain very confident in our ability to meet the rapidly growing global demand for our products.”

Oatly guided that revenues would exceed $635m (£472.9m) in 2021, a rise of more than 51% compared with the previous year.

The figure is lower than previously expected, with Oatly warning of a potential “quality issue” at one of its factories, which would “probably result in the destruction of inventory and corresponding lost sales in the EMEA region”.

The new wave of Covid in Asia, as the Delta variant sweeps the region, has also harmed the group’s growing foodservice operation supplying its oat drinks to coffee shops, fuelled by a partnership with Starbucks. About 75% of revenues in Asia were generated from foodservice in the third quarter, with the channel accounting for 35.8% of total group revenues, climbing from 27.3% a year ago.

Petersson said: “What remains evident is the continued strong and growing global consumer demand for our products and the Oatly brand as reflected by our leading market share and velocity performance, as demonstrated by the syndicated sales data in our key markets. However, for 2021 we are updating our outlook to reflect the near-term factors in the operating environment.

“In EMEA, we are starting to build supply to meet consumer demand, but the pace at which we expected to increase revenue in new and existing retailers and to open new markets is slower than we anticipated as we navigate a dynamic Covid operating environment. We believe this is primarily a timing issue and in the first half of 2022, we expect to have an increased share of shelf space at retail given our strong velocities and current supply levels.”

He added: “Despite these temporary headwinds, we are continuing to drive conversion from dairy to the plant-based milk category, supporting our mission towards a more sustainable food system. As we scale our global operations, we may experience certain variability in our strong growth rates quarter to quarter, yet our confidence in the category opportunity and long-term trends and trajectory of our business have never been stronger.”