Business Context and Reporting Period
Oatly Group AB, a Swedish producer and distributor of oat-based dairy alternatives, filed its Form 20-F for the fiscal year ended December 31, 2021. The filing does not provide a standalone 2021 fourth-quarter income statement; the available figures are primarily full-year 2021 results compared with 2020.
Oatly sells oatmilk, yogurt, frozen desserts, cooking products, spreads and ready-to-go drinks through retail, foodservice and e-commerce channels across EMEA, the Americas and Asia. Oatmilk represented approximately 91% of 2021 revenue. The company operated six production facilities at year-end and had three additional facilities under construction or in planning.
Financial Performance and Position
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $643.2 million | $421.4 million | +52.6% |
| Gross profit | $155.0 million | $129.2 million | +19.9% |
| Gross margin | 24.1% | 30.7% | -6.6 percentage points |
| Operating loss | $213.7 million | $47.1 million | Worsened |
| Net loss | $212.4 million | $60.4 million | Worsened |
| Adjusted EBITDA | $(147.0) million | $(32.3) million | Worsened |
| Operating cash flow | $(213.8) million | $(44.3) million | Higher use of cash |
| Capital expenditures on property, plant and equipment | $273.8 million | $134.3 million | +103.8% |
Revenue growth reflected higher product availability and increased production. Finished-goods volume increased 57.0% to approximately 470 million liters. Retail accounted for 60.3% of revenue and foodservice for 34.7%, compared with 70.7% and 25.7%, respectively, in 2020. EMEA contributed 52.3% of revenue, the Americas 28.0% and Asia 19.7%.
Profitability deteriorated despite revenue growth. Cost of goods sold rose 67.1%, driven by logistics, freight, commodities, packaging and other supply-chain inflation. Selling, general and administrative expenses increased 110.9% to $353.9 million, reflecting headcount growth, public-company costs, branding and marketing, including a Super Bowl campaign. Adjusted EBITDA included $23.6 million of share-based compensation, $9.3 million of IPO costs, $1.7 million of product-recall expenses and $5.0 million of asset impairment charges.
At December 31, 2021, cash and cash equivalents were $295.6 million and short-term investments were $249.9 million. Oatly reported $391.1 million of undrawn bank facilities, substantially represented by its sustainable revolving credit facility. Total liabilities were $383.6 million, including $143.2 million of lease liabilities and $6.0 million of liabilities to credit institutions. The 2020 shareholder loans were settled through a $10.9 million cash repayment and conversion of the remainder into shares.
Material Changes Versus the Prior Comparable Period
- Revenue increased by $221.8 million, but gross margin declined from 30.7% to 24.1%.
- Net loss expanded from $60.4 million to $212.4 million, and adjusted EBITDA loss expanded from $32.3 million to $147.0 million.
- Operating cash use increased to $213.8 million from $44.3 million, while investing cash use increased to $544.3 million from $141.4 million.
- The May 2021 IPO generated approximately $1.04 billion of net proceeds. Financing cash flow was $955.8 million, compared with $273.9 million in 2020.
- Property, plant and equipment increased to $509.6 million from $237.6 million, reflecting manufacturing expansion.
- Employee headcount increased to 1,615 from 792. New facilities in Ogden, Singapore and Ma’anshan were ramping up but operated below expected output in 2021.
- One foodservice customer represented approximately 14% of 2021 revenue; no customer represented at least 10% of revenue in 2020.
Guidance, Outlook, Risks and Unusual Items
- Management expected 2022 net capital expenditures of approximately $400 million to $500 million, primarily for new production facilities.
- Management targeted approximately 900 million liters of finished-goods-equivalent oat-base capacity by the end of 2022 and approximately 1.3 billion liters by the end of 2023. These are targets subject to significant contingencies, not firm forecasts.
- Oatly expected higher oat, commodity, packaging, labor, energy and co-packing costs in 2022. Management stated that a poor Canadian oat harvest and geopolitical developments could further pressure costs.
- COVID-19 restrictions, especially in China, reduced foodservice demand and delayed construction, equipment delivery, facility ramp-up, product launches and employee travel. Management expected these effects and supply-chain disruptions to continue into 2022.
- The company initiated a precautionary recall in Sweden of approximately 500 units of vanilla sauce in November 2021. It reported no material revenue impact for 2021, but recall expenses of $1.7 million were included in adjusted EBITDA reconciliation.
- A $5.0 million impairment charge was recorded for production equipment and related lease assets at the Landskrona facility.
- Oatly had unremediated material weaknesses in information-technology access and change controls, documented processes and segregation of duties. Disclosure controls and procedures were therefore ineffective at December 31, 2021. Management expected remediation procedures to be completed during 2022.
- The sustainable revolving credit facility included tangible-solvency, minimum-EBITDA, liquidity and sustainability covenants. A March 2022 amendment deferred the minimum-EBITDA covenant to the second quarter of 2023, or the second quarter of 2024 if at least $400 million of capital was raised by December 31, 2022, and imposed additional restrictions on dividends.
- The company was defending consolidated U.S. securities class-action litigation and a separate New York securities action filed in February 2022. The filing states that the ultimate outcome and duration cannot be predicted.
- Oatly does not expect to pay dividends in the foreseeable future.
Most Important Facts for Investors to Verify
- Whether production capacity expansions reach targeted output and improve gross margin and supply availability.
- Whether revenue growth can continue while foodservice demand, particularly in China, remains exposed to COVID-19 restrictions.
- The sensitivity of margins and cash burn to oat, packaging, energy, labor, freight and co-packing costs, including the disclosed estimate that a 5% commodity-cost increase would have raised 2021 commodity costs by approximately $10.0 million.
- Projected 2022 capital expenditures of $400 million to $500 million and the resulting need for additional financing or capital raising.
- Compliance with the sustainable revolving credit facility’s financial and sustainability covenants, including the effect of the March 2022 amendment.
- Management’s remediation of material weaknesses and whether future filings report effective disclosure controls and internal control over financial reporting.
- The financial and reputational consequences of the pending securities litigation, product recalls, food-safety matters and sustainability-claims scrutiny.
- Customer concentration, particularly the foodservice customer representing approximately 14% of 2021 revenue, and continued dependence on oatmilk, which generated approximately 91% of revenue.