Olvi Oyj (OLVAS) Earnings Call Transcript & Summary

Welcome. Welcome to our Q4 and full year '25 financial statements. Before we start, let's do the usual disclaimer. So today, we'll be referring to our expectations for '26. And of course, any references to the future comes with a degree of uncertainty. Many of you, I hope, have already gotten familiar with us. I've got Tiina-Liisa with me, who is our CFO; and I am Patrik, myself. I'll start by summarizing the year, some key highlights. A bit about our history as well in terms of performance over the last couple of years. Then Tiina-Liisa will take us through Q4 numbers, full year numbers, then we'll come to the guidance, and then will reflect on the key focus areas of 2026. And after this, is the questions. We'll have time for questions, and we ask you please to drop them in the chat. Today, we're in a studio, we're live, but there's no one here, but our assistant. So we'll take the questions and answer as many as we can live right now. And those questions that we won't have time to answer, we'll take them in writing later on. Thanks Tiina-Liisa for reminding me. So indeed, if we look at the full year as a whole, the results are strong. We were able to retain a high level of performance already achieved in 2024. And when I refer to sustainable growth, not only am I referring to the fact that we have been growing our EBIT and our net sales for a number of years already. But I'm also referring to the way in which we've done that. And we're exceptionally proud to be recognized secondary in a row by Times Magazine as one of the world's best companies. We're amongst the top 500 leading companies when it comes to sustainable growth. So this is a source of pride for our whole organization and something that both consumers and customers are recognizing. We've also invested in our data and our processes and competencies, and this is visible in the expanding margins. Of course, our team stands behind everything we do. Our people is a core asset, something we invest in. And we're glad to see that our People Power Index has retained its high level of AA+. Beyond the people, of course, it's about products. And our products to portfolio remains strong. Our brands are performing in our markets. Despite the challenges we've had, partly with weather, partly with some lost sales in Denmark. A much smaller market in Latvia. Our shares are strong. We've even taken share in our key categories, and we'll get back to that as well in some of our later remarks. And I want to close on perhaps the largest news of last year, which was towards the end of the year when we announced four acquisitions, three of these have now closed. And through these acquisitions, we're entering into three new countries and we'll get access to 26 million new consumers in these new home markets. Again, a topic we'll return to in just a bit. Disposing on the topic of sustainable growth. And 2025 was actually the tenth year, tenth consecutive year of EBIT and net sales growth. And this is something remarkable. I think it's a strong testimony to the work done by previous generations, the strength of our portfolio and our ability to scale up our operations both from a performance and a capacity perspective. So really, really strong performance. Now I'll let Tiina-Liisa talk to us through Q4 and the full year numbers in just a bit. But before that, passing on the acquisitions. So four acquisitions in total, three have closed. Starting from the left on your screen there with Valmiermuiza, this is a premium brewer in Latvia, one which will open up further. HoReCa growth for us will drive the premium part of our portfolio. The Valmiermuiza brands are not only beers. We have premium soft drinks there. So it's a balance between alco and non-alco. And these products are relevant across the Baltics. We've even seen them present in some of our other markets. So this is a great value-add premium part of our portfolio. Then the next is about Bosnia. Bosnia Herzegovina, to be specific, bringing us down to the Balkans. We're there in the West Balkans. Now if you combine the population of Serbia and Bosnia, we have a significant new consumer base there. If you take the whole of West Balkans, there's more than 20 million consumers there alone. So a very interesting. A new market opening also brings us closer to the Mediterranean, Thinking about the coast there in Croatia, Albania and so forth, supporting our export efforts, bringing production closer to the point of consumption. And then the third acquisition that also has closed is Brewery International. It's a company founded in Norway in 1992. They also have operations in Sweden. They import beers and wines, and through this acquisition, we have now access to all channels across Sweden and Norway. And then the final, Varska, a big mineral water producer in Estonia. And still, we expect to close finally before summer, and this will add to our non-alco volume, roughly 10%, bringing our total portfolio to balance. So we'll have 50% alcoholic beverages, and 50% nonalcoholic. So very exciting opportunities across the four acquisitions. So then closing here on the map. This is how our presence now looks like servicing all of Northern Europe being able to expand the reach of our own products to our new partners there in Sweden and Norway. Offering also access to all of these countries to our branded partners and then indeed extending our reach down to the Mediterranean, the Western Balkans through our new friends there in Bosnia and Herzegovina. With that, let's have a closer look at the numbers and then come back to some of our reflections for 2026, please, Tiina-Liisa.

Thank you, Patrick. So we will focus first in quarter 4. And there, as a total, the net sales continued to increase, thanks to the improved average sales price despite a small decline in the sales volumes. And as we stated lastly in October, it was planned and known that these expenses would be more focused in the second and third quarters of 2025. And therefore, profitability did increase significant 72.5% in quarter 4. to EUR 16.1 million. This was possible, as said earlier, due to the fact that costs were loaded in the earlier quarters compared to '24 as well as improved gross profit due to the impact of price and selection changes and production efficiency. Volumes grew in Finland and Belarus. A major part of the decline in Baltic Sea region came from Denmark. From sales channels, HoReCa was growing, which was positive to see. The earlier mentioned significant EBIT improvement came from all the segments. Costs were allocated to earlier quarter this year as the major sales and marketing inputs were made during the summer season, but also some cost-saving measures were taken to support overall efficiency and the profitability. Then the full year '25. Volume development was affected mainly due to the four things. First, change in consumer behavior towards non-alcoholic beverages, secondly, unfavorable weather in the summer season. Thirdly, the weak development of consumer purchasing power. And then finally, fourthly, the loss of private label agreements in Denmark. On a positive note related to volumes. Non-alco product category share of total sales increased according to strategy and was 43.6%. And mostly importantly, despite this intensified competition, market shares were maintained or even increased in all main product categories. Profitability was supported by 4.1%. Gross profit increased to 41.7% of net sales. And that is thanks to portfolio optimization measures, improved efficiency of our own operations, and then the stabilization of the increase in the cost of goods sold. On the other hand, logistics sales and marketing expenses were clearly higher level than last year. All this together, EBIT maintained in a good last year level, and improved slightly. Then what comes to the segments, segments in full year '25. In Finland, volumes remain in the last year level. This average sales price growth supported the net sales. In the second year in a row, we saw strong profitability improvement as the EBIT grew 15.4%. Last year, it was 47%. Supported by, for example, this improved production efficiency, delivery accuracy and improved product range. The biggest EBIT growth during the past 2 years has come from Finland. Then Baltic Sea region. Volume decline came from Denmark, and that's because this discontinuation of several unprofitable products and a lot of private label agreements. And then from Latvia, decline of the total market was the main reason. As a result of these market impacts and the greater investments in sales and marketing, as well as increased payroll expenses and logistics costs, EBIT for the Baltic Sea region decreased by 23% to EUR 17.9 million. Denmark is still making significant losses. And in Latvia and Lithuania increased competition caused by smaller-than-expected market burden at the profitability. But at the same time, the mentioned investments in brand visibility, campaigns, pricing, helped in maintaining and securing always competitive position and the market share. So even though the market has declined, we have kept the market share. And on a positive note, Estonia market was more resilient than other Baltic countries. Then in Belarus, in nonalcoholic product categories, sales increased in line with the strategic targets. Nonalcoholic beverage categories accounted for 62.9% of the sales volume. That's the highest in the group. In alcoholic products, sales of the largest product category, beer remained at the previous year level. And during the reporting period, greater inputs were made in the sales and marketing of these product categories than in the previous year. So EBITDA growth was 3.7%. There is no changes in general in Belarus situation. So there is nothing new to report on that one. Then if we check this full year other financial KPIs. So equity ratio has remained very strong level. We used EUR 8 million more in investments, almost EUR 29 million was related to the Finland. So we were able to finalize the high-bay warehouse house last year and increase the warehouse capacity. The brewhouse will be taken in use this year before the summer season. And also this inner logistics will be developed further during this year. Then about EUR 16 million of these investments were subsidiaries in the Baltic Sea region. And in Belarus, this replacement investments were done through the subsidiaries cash flow financing totaling about EUR 8 million. Net result improved to EUR 64.8 million, and that increased, of course, the earnings per share. And that was then over the EUR 3 this last year. Then in operating cash flow, there was a small decline because of the increased taxes and a smaller decrease in the net working capital. In sustainability, as said, recognition from the Time magazine as one of the world's most sustainable growth companies for the second consecutive year was a good accomplishment and demonstrated strong performance by reaching this A- level in the CDP assessment. And additionally, as you can see, our CO2 emissions in Scope 1 and 2 decreased by 4% -- and then some, of course, good news for the shareholders. The dividend will be distributed during the '26 from the '25. And the Board of Directors proposes to have a small increase in the dividend to EUR 1.35 per share, and this will be paid in spring time yes, in spring time and then second part will be then done in September. May and September, yes. But I think that was the financial part.

Yes. And then, of course, there's also interest on the future. So our near-term outlook, I'm sure is a point of curiosity. So indeed, we're providing a range again as we have done previous years. And range that we're looking to deliver this coming year or the year that has already started is between EUR 84 million and EUR 92 million in terms of EBIT. What's important to bear in mind, and hence, there's a bit more explanation on this slide than in the past is the impact of these newly acquired companies. Again, I want to repeat that three of them have closed. The fourth Varska, we expect to close by summer. So these companies are partly included in the estimates. However, we must remember that this is the first year. So there will be integration costs. And before we can fully benefit from the synergies, sometimes we'll have to pass. So we expect a greater impact in 2027 and onwards. This is really the year of integration and making sure that we capture the maximum value of what we have acquired. Hence, we estimate that the EBIT impact of these acquired companies during the year of 2026 will be less than 5%. So that gives you a bit of a guidance on the value of those businesses in the short term. And when it comes to '26 overall, a few things. We want to continue growing. We intend to keep developing our business, and we will seek out efficiencies. So the growth will come both from the non-alco part, as we have seen already during '25 and the previous years, strengthening our efforts there, expanding the reach of our own brands across new markets. And then also strengthening the overall portfolio of brands that we represent in our new and current countries. On the development side, on the other hand, we will continue our journey of learning around everything related to net revenue management and data and analytics, scaling up our competency. And that's based the integrations, as mentioned, a key item of focus. We must bring our new family members of whom there's nearly 500 on board to make sure that we start all working together towards the same objectives. So therefore, organizations and organizational learning is also a key source of development and focus. Then on the efficiency side, we've made significant investments in [indiscernible] as I mentioned the high bay warehouse. The Brewhouse is almost up and running, and they're already doing some test runs there in time and on schedule. We must make good use of our investments. So therefore, as we continue to invest in these areas that will drive long-term growth for us, we remain focused on disciplined cost management across the business. Our priority will be to ensure that spend aligns with our strategic objectives and that we continue to identify efficiencies across functions. And all of this will support the sustainable growth that we have already enjoyed for 10 years and enjoy -- intend to enjoy for a long time coming. So with those words, I believe we have covered the key messages we wanted to cover today. So now we'll turn to our support team for questions that you have placed online. But thank you for your attention so far. Please?

Yes. I have a few online questions here. The first question, can you give any indication of how much you made for all of these companies?

The purchase prices are not disclosed, so no.

Next question. Have you included all four acquired companies in your guidance or only the three approved ones?

Thank you. Good clarifying question. So again, three are closed, have closed during January, integrations are ongoing. One is still to be closed. We have considered all four, but in recognition of the fact that they are not fully on board since January 1 for the full 12 months. You can elaborate on that further?

Basically, the guidance is including the three acquisitions that are closed in the estimation, but then Varska has not closed it and kind of the estimation is that, that will be closed during the -- or before the summer. So naturally, that is not included the whole year in the estimation. Thank you.

Next question. Why was gross margin up 2.2 percentage points in Q4? Will gross margin continue to develop like this?

Yes. I think we made references to some of the portfolio changes, and we lost some volume. We also walked away from some volume. Then we've been focusing on strengthening our brands and the overall portfolio mix. So this is now flowing through, and that's what you see in our margins expanding. So we see it as a permanent improvement in terms of performance.

Yes. I think, of course, the intention is to keep this level and gradually to improve our efficiencies as we have been doing the whole time, developing the portfolio, using this net revenue management, see also the premiumization in the portfolio. So there is many things that are affecting that one.

Next question. You know that HoReCa outperformance in Q4. Is it possible to even deepen your on-trade performance and penetration, how sensitive on the HoReCa volumes to tourism?

Very good topic. So we've called HoReCa the source of growth in our strategy, and it's something that we are methodologically pursuing across our markets. And I mentioned, for instance, the Valmiermuiza acquisition is partly part of this journey where we look to strengthen our presence. This is an opportunity area for us. If you take our beer share across our markets, we're stronger in our global market share in each country than we are in the HoReCa trade. So we see opportunities to continue growing there.

Thank you. What worked well in your pricing and product mix actions? What products were successful in each market? And also, what gains do you expect from these actions in 2026?

That's a good question. Thank you, and it's a broad question and perhaps also a quite detailed question. We should bear in mind that our group represents more than 5,000 SKUs. So I won't be able to go into detail, obviously, on each, but I'll call out some territories, some spaces. One is the non-alco part. It's been a part of focus for a long while. We need to remember that Olvi in Finland, for instance, launched the first nonalcoholic beverages already in the 1,800. So it's not a new thing for us. It's a thing that's been constant in -- on our journey. That's what we call our such a multi-beverage operators. So continuing to drive growth there is one part of the equation. And then the other really links in with our strategy of being multi-local. We are really pushing to have the strongest local partnerships, the most relevant brands. We know our consumers. We know our customers, and this is a part of our strength that we're building on. And it's showing to be working really well in us keeping our market share as growing more on our branded side than on the store on brand side. So our portfolio balance is shifting in a healthier direction from gross profit perspective. I believe I have answered the question.

Next, here's a question. This is also a long one. What worked well in your pricing and product that was already here. Can you comment anything about the profitability levels on your recent acquisition? Where do you expect to gain synergies from?

Okay. Again, a good question, maybe touching on some of the -- the obvious ones in terms of logistics and customer management. Then I want to call out that we're talking about significantly different types of business. On one hand, we're talking about mineral water. On the other hand, we're talking about brewing. And on the third hand, we're talking about distribution business. So the margins and the contributions will be different. I don't know if we can go in much further detail on.

Yes, I think that we can then kind of discuss this more during this year when we are also kind of closing the integration plans and going forward. But I think that, as Patrick said, that there is a little bit different type of acquisitions. So those which are add-ons in the countries businesses like in Estonia and Latvia. Of course, the synergies are a little bit different. It comes from the product portfolio. It comes from the logistics and different kind of things. But then when we come to the new markets, so that's kind of different kind of synergy. So of course, we want to expand our reach as it was said earlier. And hopefully, we can then utilize our portfolio and the new part of the portfolio in our current markets and vice versa. So there are different kind of synergies naturally. And we think that this -- especially these new countries are also the platforms for the future development then.

Next question. When did the private label exits happen? When are we on normal comparison figures? What is the plan to stabilize Denmark and recover Baltic Sea regions profitability?

Sure. Good broad question. On private label, then now zooming on Denmark. The situation is stabilized. Now we're looking for growth, and we're also happy to work with the trade partners in Denmark on appropriate opportunities there under their brands. So that's been done, if you want to look at it from that perspective. Then in the Baltics we need to recall some of the messages that we've shared during Q2 and Q3 results reviews. We went into summer strong. We had really strong plans, both on marketing and product placement in store, some of which then were a bit too heavy versus the market that followed. We had challenging weather over summer and then in terms of the Latvian consumption. The market simply was much smaller. So that was a costly exercise. So therefore, we're going into this year with a more balanced plan and that in itself will, of course, support not to forget the acquisitions. We're getting new customers, new streams of revenue, new team members. They will always energize us and help us push for the next level of performance.

And I think that in general, for the '26 what comes to the Baltic Sea region, as Patrick said, of course, we kind of expect to have more stable here maybe in what comes to the market maybe changes and our own kind of performance. But I also want to highlight that this add-on -- we bought this [indiscernible] business 3, 4 years ago, and it has been a very good add-on there. So with this kind of development, we can improve the whole kind of situation in the market...

Next question. What is your consideration about the share buyback you started? Is this a signal that you will use share buybacks more actively -- actively in distribute profits going forward?

Maybe you want to take it. It was quite clearly spelled out in the announcement when we're doing it.

Yes, I think this payback approval that Board gave to the management that is targeted, and that is targeted for this performance programs that we have. So that is the reason for this payback.

And the amounts are small and it's not a strategic shift.

It's something that we've done before. 80,000 in total. So it's for our own rewarding program you use.

Thank you. I think that's all the questions we received now.

Wonderful. Well, thank you for your activity. Thank you for your interest. Thank you for being here. and we'll see you in a couple of months' time.

Yes. Thank you.

All the best.