Ölgerðin Q2 2025 slides: Revenue grows 2% while profits decline amid rising costs

Introduction & Market Context

Ölgerðin Egill Skallagrímsson (ICEX:OLGERD), Iceland’s long-established beverage company dating back to 1913, reported its second quarter 2025 financial results on October 9, 2025. The company posted modest revenue growth of 2% while facing profit pressure from rising operational costs and challenges in its export business. The stock closed at 17.85 ISK on October 10, down 2.52% following the results presentation.

The company, with a market capitalization of approximately 421 million USD, continues to demonstrate strength in its domestic alcoholic beverage segment while navigating headwinds in its international operations, particularly with its Iceland Spring water brand.

Quarterly Performance Highlights

Ölgerðin reported Q2 2025 revenue of 13.0 billion ISK, representing a 2.0% increase compared to the same period last year. However, EBITDA declined by 2.7% to 1.6 billion ISK, and profit fell by 5.9% to 0.9 billion ISK. The company’s gross profit margin improved to 34.1%, an increase of 1.4 percentage points year-over-year.

As shown in the following financial highlights for Q2 2025:

For the first six months of 2025, revenue reached 24.6 billion ISK, up 2.7% from the same period in 2024. EBITDA for the half-year period was 2.6 billion ISK, representing a 4.8% decrease, while profit declined more significantly by 11.1% to 1.3 billion ISK. The six-month gross profit margin improved to 34.2%, up 0.8 percentage points.

The company’s product categories showed mixed performance, with beer sales growing impressively by 9% in the first half of 2025 compared to the same period in 2024. Toiletries saw the strongest growth at 32%, while water sales increased by 8%. However, sports and energy drinks experienced a significant decline of 12%. The following chart illustrates the sales performance across product categories:

Detailed Financial Analysis

A closer examination of Ölgerðin’s financial performance reveals that while overall revenue increased, the company faced significant cost pressures. Salary and related expenses rose by 11.1% in the first half of 2025 compared to the same period in 2024, driven by wage agreements (4.2%) and an increase in full-time equivalents (7.2%).

The income statement for the first six months of 2025 and Q2 2025 shows the impact of these rising costs on profitability:

When analyzing performance by business unit, it becomes clear that the alcoholic beverage segment is driving growth, with revenue increasing by 4% and EBITDA surging by 28% compared to the first half of 2024. Meanwhile, the export division suffered significantly, with EBITDA swinging from a positive 251 million ISK in 2024 to a loss of 69 million ISK in 2025, representing a 127% decline.

The EBITDA bridge analysis below illustrates how domestic operations contributed positively to EBITDA (+134 million ISK), while Iceland Spring (-158 million ISK) and Collab Export (-106 million ISK) negatively impacted the consolidated results:

Competitive Industry Position

Ölgerðin maintains a strong position in the Icelandic beverage market, with own brands accounting for 54% of product margin. The company’s product portfolio is well-diversified, with alcohol representing 43% of sales, non-alcoholic beverages 27%, coffee and food 25%, and special products 5%.

As shown in the following product category breakdown:

The company’s sales channel distribution has evolved significantly over the past decade. Comparing 2015 to 2025, there has been a notable shift toward alcohol stores and duty-free (from 18% to 27.3%) and hotels and restaurants (from 14% to 19.1%), while supermarkets have declined in importance (from 42% to 37.1%):

Strategic Initiatives

Despite the challenging profit environment, Ölgerðin continues to invest in growth opportunities. The company reported investments of 846 million ISK in the first half of 2025, slightly below plan, but maintains its full-year investment target of 2,626 million ISK.

Ölgerðin is pursuing strategic acquisitions, with deals to purchase Gæðabakstur and Kjarnavörur expected to close in late November and December. According to the presentation, these acquisitions align with the company’s strategy and core strengths, offering opportunities for brand building and product development. The companies collectively own approximately 8,000 square meters of facilities with building rights for an additional 3,000 square meters.

The Iceland Spring water export business faced challenges during the period, impacted by tariffs, a customer bankruptcy, and the strong Icelandic króna. Despite these setbacks, the product maintains distribution in major U.S. retail chains, including 7-Eleven (9,340 locations), CVS/pharmacy (9,967 locations), Walgreens (9,277 locations), and Whole Foods Market (500 locations).

Forward-Looking Statements

Management reported that sales have increased by 13% in the early part of the third quarter, with continued growth in alcoholic beverages and the HORECA (Hotel/Restaurant/Café) segment. The company maintains its EBITDA guidance for fiscal year 2025 at 4.8-5.2 billion ISK, excluding acquisitions and including a 354 million ISK investment in Collab exports.

The domestic EBITDA bridge below shows how increased production product gross margin (+446 million ISK) has helped offset rising salary costs (-266 million ISK) and other expenses:

Ölgerðin’s balance sheet remains relatively strong with an equity ratio of 48.7%, though this represents a slight decrease of 0.6 percentage points. The company’s net interest-bearing debt stands at 5,956 million ISK, with average interest rates on ISK loans at 9.2% as of August 31, 2025.

While Ölgerðin faces near-term profitability challenges from rising costs and export difficulties, the company’s strong domestic performance in alcoholic beverages and strategic acquisitions position it for potential long-term growth. Investors will be watching closely to see if management can successfully navigate the cost pressures while executing on its expansion plans.

Full presentation:

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