• Revenue Growth: 5.1% reported growth; 4.8% constant currency growth for the full year.
• Gross Margin Expansion: 930 basis points increase for the full year; 540 basis points increase in Q4 year-over-year.
• Adjusted EBITDA: Loss of $6.1 million in Q4; loss of $35.3 million for the full year, at the favorable end of guidance.
• Volume Growth: 9.9% in Q4; 8.8% for the full year.
• Cash and Credit Facilities: $99 million in cash; $186 million available in credit facilities.
• Free Cash Flow: $156 million use of cash for 2024; $23 million use of cash in Q4, best quarterly performance since IPO.
• Capital Expenditures: Expected range of $30 million to $35 million for 2025.
• Employee Reduction: Approximately 1,500 employees, down 500 over the past two years.
• Manufacturing Plants: Five global plants with no additional plants being built; closure of Singapore facility and discontinuation of second Chinese facility construction.

• Warning! GuruFocus has detected 2 Warning Signs with OTLY.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Oatly Group AB (NASDAQ:OTLY) reported a significant transformation over the past two years, resulting in a healthier business with stronger margins and improved profitability.
• The company achieved a 99% customer fill rate in 2024, highlighting the benefits of a more focused supply chain.
• Oatly Group AB (NASDAQ:OTLY) reported a gross margin expansion of 930 basis points for the full year, driven by supply chain improvements and cost efficiencies.
• The company posted a 14% revenue growth versus 2022, with each of its three operating segments improving adjusted EBITDA by over $70 million in the past two years.
• Oatly Group AB (NASDAQ:OTLY) expects to enter a profitable growth era in 2025, with anticipated constant currency revenue growth of 2% to 4% and adjusted EBITDA in the range of $5 million to $50 million.

Negative Points

• Oatly Group AB (NASDAQ:OTLY) reported that its 2024 topline results came in below guidance, with constant currency revenue growth at 4.8% versus the expected 8.8%.
• The company faced a 300 basis point impact on its goals due to a change in sourcing decisions by its largest US customer.
• Oatly Group AB (NASDAQ:OTLY) experienced sluggish category growth, which impacted its revenue performance.
• The company is dealing with misinformation about the nutritional value of oat milk, which could affect consumer perception and sales.
• Oatly Group AB (NASDAQ:OTLY) has discontinued construction of its second Chinese facility and closed its Singapore plant, indicating potential challenges in its expansion strategy.

Q & A Highlights

Q: Can you break down the drivers within the gross margin that will help achieve profitability in 2025? A: Marie-Jose David, CFO, explained that the improvement in gross profit is expected from optimizing the production footprint, maximizing global sourcing resources, and managing the product mix. The company aims to progress towards a long-term gross margin target of 55% to 40%.

Q: What is causing the recent spike in promotional activity in the US, and is this a short-term trend? A: Daniel Ordonez, COO, noted that there has been volatility in recent scanner data. The main drivers are new distribution hitting later than last year and a short-term drag from discontinued older innovations. However, core portfolio velocities remain solid, and upcoming distribution gains are expected to maintain growth.

Q: How much control does Oatly have over improving the category growth, and what are the main challenges? A: Daniel Ordonez, COO, emphasized that Oatly has previously driven category growth and plans to do so again. The main barriers are taste preconceptions and misinformation about nutritional value. Oatly is focusing on breaking these barriers with targeted marketing and product innovation.

Q: With the decision to discontinue the second China plant, has the market opportunity outlook in China changed? A: Jean-Christophe Flatin, CEO, confirmed that Oatly's business in Greater China is showing positive trends, with profitable growth since Q3 2024. The decision to focus on existing sites is strategic, allowing for better execution and efficiency.

Q: How confident is Oatly in its EBITDA guidance for 2025, considering the need for reinvestment in marketing and distribution? A: Jean-Christophe Flatin, CEO, and Daniel Ordonez, COO, expressed confidence in the guidance, highlighting structural progress in gross margin and SG&A recalibration. The focus is on precise resource allocation and maintaining a strong efficiency mindset.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.