Oatly Reports Strong Q1 Results, Boosting Investor Confidence - Trade Oracle

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Oatly Reports Strong Q1 Results, Boosting Investor Confidence

Oatly Group’s Q1 Financial Results

Oatly Group, the Swedish-based producer of dairy alternatives made from oats, has reported its Q1 financial results, which have exceeded expectations. Revenue for the quarter ending March 31, 2023, saw a year-over-year increase of 17.7%, or 23.5% on a constant currency basis, reaching $195.6 million. Additionally, the company has narrowed its net loss from $87.5 million in the same period last year to $75.6 million. These results have boosted investor confidence in Oatly and its future prospects.

Robust Volumes and Positive Sales Growth

Analysts at Barclays have praised the results, highlighting Oatly’s commentary on the robust volumes of sales despite recent pricing changes in several regions. The company has reported 1Q23 organic sales growth of 23.5% year-over-year, attributed to a 15% year-over-year pricing benefit and high single-digit volume growth. These figures suggest that Oatly’s brand equity remains solid, and consumers continue to see value in its products.

Margin Improvement and Supply Chain Stabilization

From a margin perspective, Oatly has continued to make progress towards achieving a positive adjusted EBITDA for the full year in 2024. The company has also gained improved visibility towards its high 20s fourth quarter 2023 gross margin target. Although Oatly’s 1Q23 gross margin of 17.4% was above consensus expectations, the company expects a much more substantial improvement in gross margin from 2Q23 to 3Q23, driven by improved plant utilization. The co-packer consolidation in the Americas is also expected to result in a significant step change in margin towards the high-20s range in 4Q23.

Barclays analysts also noted that the Q1 results marked the second consecutive quarter in which Oatly had made progress towards stabilizing its supply chain. This achievement is expected to enable the company to get back on the offensive with its merchandising and marketing spend. The company has already started to increase promotional rates in the last few weeks, and it has set expectations for promotional rates to continue to increase in the coming months.

Analysts Reiterate Overweight Rating

Barclays has reiterated its ‘Overweight’ rating on the stock and US$3 price target, representing an upside potential of 37%. Oatly’s US-listed shares rose 4.1% to US$2.28 in the early afternoon on Wednesday, following the release of the results.

Conclusion

Oatly’s Q1 results reflect the company’s continued growth and its ability to stabilize its supply chain. The results have increased investor confidence in the company’s future prospects. Oatly’s focus on improving its gross margin and achieving a positive adjusted EBITDA for the full year in 2024 is expected to boost profitability. The company’s ability to increase promotional rates in the coming months is also likely to drive sales growth. Overall, Oatly’s Q1 results demonstrate the company’s resilience and potential for future success.

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