Shares in Oatly turn sour as losses widen

By John Reynolds on Tuesday 15 March 2022

Shares in Oatly turn sour as losses widen
Image source: Photo by Justus Menke on Unsplash
CommentaryAlternative proteinFoodTech InvestmentDairy Substitutes

Shares in Oatly fell 19 per cent to $4.99 in the week ending March 11; shares in Laird Superfood were down 36 per cent to $3.30; and shares in Balchem were down five per cent to $133.51.

Shares in Oatly fell 19 per cent to $4.99 in the week ending March 11, according to the Future Food Finance FoodTech Index in the week when it revealed fourth-quarter losses had more than doubled to $85m.

However, Oatly boss Toni Petersson said Oatly was prioritising “growth investment over profitability” as revenues swelled by 46 per cent to $185.9m year-on-year in the quarter.

Losses of $85m in the fourth quarter compared to losses of $36m the year before at the Swedish-based dairy alternative firm.

Oatly cited a raft of increased costs for the reason behind the widening losses in the quarter including $8.3m costs in share-based compensation expenses (equity ownership rights to employees); consultancy expenses and branding costs.

Oatly said its jump in revenues was primarily driven by additional supply from its new production capability at its plant in Vlissingen in the Netherlands and its plant in Utah in the US, helping meet heightened demand for its products.

But sales in Asia were lower than expected in the fourth quarter due to foodservice closures due to Covid-19 variants. 

However, in key western markets, foodservice sales hiked up, due to on-premise outlets re-opening following Covid, Oatly said.

Oatly has seen an uptick in restaurants and retailers partnering with it in recent months, as they want to offer vegan alternatives to customers. Oatly inked a significant agreement with Starbucks last year.

Oatly also reported full-year results for the year ending 31 December 2021, with revenues upping 53 per cent to $643m compared to the same period in 2020.

But full-year losses ballooned year-on-year from $58m to $215m, as it was blighted by production and supply chain issues during the year.

Petersson said: “2021 was a record year for Oatly, with revenue growth of greater than 50 per cent year-over-year fuelled by global demand for our products, despite ongoing Covid-19 variant-related challenges across the more than 20 countries in which we operate. 

“Our team added new production capacity at an unprecedented pace with the addition of three new manufacturing facilities to capitalise on the consumer appetite for our products as we convert traditional dairy users to plant-based milk consumers. 

“We have a proven, disciplined and thoughtful multi-channel strategy for growth that we believe sets us apart from the competition based on our success thus far in building our brand across three continents with a significant amount of whitespace to add new markets.”

Petersson added: “We continue to focus on prioritising growth investments over profitability to increasingly scale our operations to best position Oatly to serve customers and consumers, with the understanding that this creates some near-term margin headwinds. 

“While we experienced inflationary cost pressures and supply chain challenges in certain areas of our business during the fourth quarter, we continue to believe that by having more localised self-manufacturing production, we can achieve much better production economics and operating efficiencies, reduce our environmental impact, and increase profitability over the next several years.”

Looking ahead, Oatly said it was “well-positioned” for increased growth across regions and sales channels from retail, foodservice to e-commerce. 

It added: “In 2022, our global team continues to focus on the controllable aspects of our business while navigating a challenging operating environment that we believe will include Covid restrictions and lockdowns in certain countries, risk of Covid-related absenteeism in our production facilities, significant supply chain delays and disruptions, and increased inflationary pressures. 

“We are also closely monitoring the current conflict in Ukraine given the uncertainty this creates in Europe and more broadly. 

“We are consistently taking steps to position ourselves for an increased rate of growth as these macro headwinds subside. 

“What remains clear is the significant opportunity still ahead of us to continue converting dairy users into Oatly consumers.”

Wall Street is more upbeat on Oatly than plant-based burger maker Beyond Meat, which has been hit by a slowdown in sales.

"Beyond Meat has not meaningfully expanded distribution in the U.S. over the past year or so ... Oatly's sales growth is currently being driven by expanded distribution," CFRA Research analyst Arun Sundaram told Reuters.

Elsewhere, shares in Laird Superfood were down 36 per cent to $3.30 after it reported full-year losses had widened from $13m to $24m. 

Its fourth-quarter and full-year results can be read in full here.

“Fourth-quarter results were in line with the revised expectations that we shared with you at the end of January,” said Jason Vieth, president and CEO.

"Our net sales growth of 29 per cent reflects the continued progress across our multi-channel platform, and across our various expanding product lines.

“Over the past five weeks since I joined the company, our tea.m has been focusing on prioritizing strategies and tactics to accelerate our near-term growth and to shore-up our cost structure in this challenging supply chain environment. 

"We continue to identify opportunities across products and channels that we’ll begin to implement in the coming months to leverage our strengths and drive top-line gains in 2022 and also improve margins and profitability. 

“We remain well-positioned for significant long-term growth in sales and profitability on our journey to becoming a leading player in the natural food and beverage industry.”