Oatly Group Third Quarter 2024 Earnings: EPS Beats Expectations

Oatly Group AB (OTLY), the world's original and largest oat drink company, reported its third quarter 2024 financial results on November 7, 2024, with earnings per share (EPS) beating market expectations. The company's strong performance was driven by solid execution, volume growth, and improved profitability across all segments. This article delves into the key factors contributing to Oatly's impressive earnings and its strategic initiatives that position the company for future growth.

Oatly's third quarter 2024 results demonstrated continued progress towards structural, consistent profitable growth. The company reported a 10.9% increase in revenue, with constant currency revenue growth of 9.6% compared to the prior year period. This growth was primarily driven by solid volume growth in each operating segment, with sold volume increasing 13.0% to 141.3 million liters. The company's gross margin improved significantly, increasing by 12.4 percentage points to 29.8% year-over-year, primarily due to improvements in supply chain efficiency and product mix.

Oatly's strategic shift towards an asset-light production strategy, announced in Q3 2023, has contributed to its improved profitability and adjusted EBITDA. By discontinuing the construction of third production facilities in EMEA and Americas, the company has reduced supply chain complexity, increased operational focus, and lowered capital expenditure requirements. This change has allowed Oatly to increase its confidence in longer-term margin targets and achieve sequential improvements in profitability across all segments.
The company's focus on reducing supply chain complexity and increasing operational focus has also contributed to its improved profitability and adjusted EBITDA. By expanding capacity at existing facilities in a more gradual manner, Oatly has been able to service growing demand more efficiently. This approach has resulted in an acceleration in constant currency revenue growth to nearly 10% year-over-year in the third quarter of 2024, with every segment driving volume-led growth.
Oatly's strategic reset in Asia has had a notable impact on its gross margin and overall financial performance. In Q3 2023, the company reported a gross margin of 17.4%, a 1470 basis points increase from the prior year, but a 180 basis points decrease from Q2 2023. The Asia segment's strategy reset contributed to a $6 million increase in cost of goods sold, reducing gross margin by approximately 320 basis points. To mitigate these costs, Oatly is focusing on reducing complexity in its supply chain by discontinuing construction on third production facilities in EMEA and Americas.
In conclusion, Oatly Group's third quarter 2024 earnings report demonstrates the company's strong performance and strategic initiatives that position it for future growth. The company's focus on solid execution, volume growth, and improved profitability, along with its asset-light production strategy, has contributed to its impressive earnings. As Oatly continues to drive the total business toward structural, consistent profitable growth, investors should remain optimistic about the company's prospects in the long term.