Earnings call transcript: Olvi Oyj A Q2 2025 sees stock dip despite steady sales

Olvi Oyj A reported its second-quarter earnings for 2025, revealing that net sales remained stable compared to the previous year, while volumes declined by 3.3%. Despite maintaining gross margins at a healthy 41.03%, the company’s operating results fell due to reduced volumes. Following the earnings announcement, Olvi’s stock price dropped by 5.78%, closing at $30.95, down from the previous close of $32.85. According to InvestingPro analysis, the company appears undervalued, trading at an attractive P/E ratio of 10.3x. The company’s EPS forecast for fiscal year 2025 stands at $3.77, reflecting analysts’ confidence in future growth.

Key Takeaways

• Net sales remained flat year-over-year, but volumes declined by 3.3%.
• Stock price fell 5.78% in pre-market trading.
• Non-alcoholic product sales grew by 5.8%.
• Investments totaled €21 million, focusing on Finland and the Baltic region.
• Market conditions were challenging, particularly in the Baltic Sea region.

Company Performance

Olvi’s Q2 performance showed resilience in maintaining net sales at last year’s levels despite a 3.3% drop in volume. The company’s gross margins were steady, but the operating result suffered due to lower volumes. Regionally, Finland saw a 4% decline in volume and a 2.3% decrease in net sales, while the Baltic Sea region faced challenging market conditions. In contrast, Belarus operations normalized.

Financial Highlights

• Net Sales: Stable year-over-year
• Volume Decline: 3.3%
• Gross Margin: Maintained
• Operating Result: Decreased due to lower volumes

Market Reaction

Following the earnings release, Olvi’s stock experienced a significant drop of 5.78% in pre-market trading. The stock’s decline contrasts with its 52-week high of $37.20 and low of $28.05, reflecting investor concerns over volume declines and challenging market conditions.

Outlook & Guidance

Olvi expects improved operating results in the second half of the year, aided by normalized summer weather and cost-saving initiatives. The company remains confident in its full-year guidance, with a continued focus on non-alcoholic product growth.

Executive Commentary

CEO Patrick Lundell expressed confidence in the company’s future performance, stating, "We remain very confident in our ability to deliver also in the future." CFO Tina Lisa Liukkonur highlighted the strength of Olvi’s brands, noting, "Our strong brands performed well."

Risks and Challenges

• Market demand reduction due to economic strain and consumer confidence.
• Intense price competition, especially in the beer category.
• Regulatory challenges related to packaging waste.
• Weather impacts affecting seasonal sales.
• Need for continued investment to maintain competitive positioning.

Q&A

During the earnings call, analysts inquired about the company’s strategies to address packaging waste regulations, product mix and margin strategies, and leadership changes in Latvia and Denmark. Olvi’s management also clarified cost perspectives related to marketing and logistics.

Full transcript - Olvi Oyj A (OLVAS) Q2 2025:

Patrick Lundell, CEO, Olavi Group: Welcome. Thank you for joining us for our half year report. Before we get to it, the usual disclaimer. So we’ll be referring to future events slightly, and there that always includes some uncertainty. You many of you are already familiar with us.

I have Tina Lisa Liukkonur, our CFO, with me and I’m Patrick Lundell, the CEO of Olavi Group. Before we get to the details, I just want to frame up the second quarter and indeed the first half of the year. So our investment that we made into our brands have held them really strong. We’ve invested in media. We’ve invested in store presence.

We’ve also had a particularly active period in terms of sales activations across our channels, and this has helped us to secure our strong market positions. We’ve even strengthened our share in many categories. The overall market demand was significantly below expectations, especially in the second quarter. So this has clearly eaten into our profits, as many of you have already seen in the numbers shared. So with that being said, we should also keep in mind that we are operating in a business that has a certain degree of seasonality involved.

Preparations for summer already start in Q1 actually. You start building stock. You start securing promotional slots. You start preparing the materials for indoor or in store execution and you secure media slots. All of this was done expecting an average summer at the least and with confidence in our both our brands and our actions.

We also invested in stock. As many of you know, we have a new High Bay warehouse in Isalmi. We invested in our brands. As I mentioned, we brought two twenty new products to market during the first half of the year. So we’ve really brought a lot to consumers to enjoy and, yes, celebrate around.

And despite the significantly smaller than anticipated market, we indeed kept our share. And as I mentioned, we grew To be more specific, in Finland, for instance, we took more than 2% share in the water category. And in Latvia, we grew our beer share with 2%, so significant improvements in terms of our position in the market on an already strong starting point. Our delivery accuracy was on a very good level.

In Finland, on a historically high level, we had 98.6 delivery accuracy throughout summer across our platforms. And we improved our mix, which you can see in the expanding margins. The weather and the consumer confidence worked against us. This drove the market down, especially in the beginning of summer. We have to remember that we’re overlapping a historically warm summer in 2024.

In May and June alone in 2024, we had 30 hot days. When I speak about hot days, it’s a translation from Finland, From the Finnish language, we’re referring to days where the average temperature was above 25. In 2024, we had 30 such days. This year, we had two. Also, the uncertainty in the environment generally and the economic strain that’s on households and consumers has impacted demand overall.

So the market, as such, was very much smaller than anticipated, and this has indeed resulted in detracting margins during the second quarter. But I want to close on emphasizing that our portfolio is strong. Our people are committed. We have improved the efficiency of our operations. And through that, we’ve demonstrated the resilience and the relevance of our proposition.

So we remain very confident in our ability to deliver also in the future and to have a stronger second half of the year. But with those introductory words, Tinlise, why don’t you go through the numbers for us?

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. Thank you, Patrick. So let’s start with the financial performance in quarter two. So as it was said, quarter two was behind our expectations, especially due to this cold weather in the early summer and this continued economical and political uncertainty, which then reflects in the consumer purchasing power. And that caused this volume decline of 3.3% in quarter two.

Still, we were able to maintain our market shares and expand also our margins despite overall significantly reduced volumes in the market and this intensified competition. The total net sales in quarter two remained in the previous year level, and we improved our average sales price as we can see from the figures. The profitability was affected by these decreased volumes, investments into the sales, marketing and pricing, then higher logistic costs and also business development measures. But I want to emphasize that our gross margin stayed in the previous year level, even though the EBIT declined. Then when we are looking at the segment performance in Partal two.

Even though the cold and rainy early summer weather affected the sales volume in all the segments, the net sales declined less than volume as the average price improved in all the segments. Then if we are looking for Finland, we can see that the volume decreased 4%, net sales 2.3% and the EBIT was in the last year level. What we want to emphasize from Finland is that our strong brands performed well. As Patrick referred, in Wothers, we were able to grow our market share over 2%, even though the overall market decreased in weather 16% in May and June. And also in beer, we kept leading the market with more than 50% share.

And also consumers chose Sandoz as the number one beer brand in one of the surveys. And in Finland, the total market in May and June in both nonalcoholic and alcoholic beverages declined by 10%. So we can see how this hot days really reflects on the market totally. Then when we are looking this Baltic Sea region. Additionally to the weather conditions, weak development of consumer purchasing power continued, and that tightened price competition in a slowing market.

In Latvia, the overall market in low alcoholic beverages like beer ciders declined 14% in May and June. And that is a quite big drop in one year. So this decline in market and then lower than expected sales volumes impacted the profitability, but together with higher marketing and sales expenses. The impact was heaviest in Denmark and in Latvia, but we can say that our investments in brands drove our Jolly soda market share to be triple compared to last year. And in our market share in Latvia and beer, that was 2% higher, as Patrick just mentioned.

Then Belarus. The weather also affected overall demand there, especially in beer and voiced categories. Our operations have developed according to the plan otherwise, but the increased costs and in Belarus, especially in logistic, weakened the profitability. And unfortunately, we have to inform that the restrictions on the payment of the dividends by Western owned companies has extended to the year 2026 or end of the year 2026. We haven’t changed our estimations.

The dividend, what can be distributed, is 1,000,000 to €3,000,000 per year. And we can still say that no effect this has no effect parent company’s ability to pay dividends. Other changes in Belarus situation, there is no. And then when we are looking at the whole year or the first half of the year. As we have been many times already stated, the whole year sales volumes were affected this continued weak consumer demand, the general market uncertainty, poor weather, especially in this early summer and this product portfolio optimization measures adopted in Finland and Denmark, which then again are also visible in the improved margins.

In line with our targets, we continue to improve the sales volumes in non alcoholic products and retained our market shares in all our main product groups. Also, our net sales remained at previous year level and was supported by this higher average sales price, thanks to better portfolio and also channel mix. We have been able to improve our Horeca sales, for example. Then the operating result in January, June was weakened by this increase and this first half of the year weighted sales and marketing activities, higher logistic costs, business development inputs in line with the strategy. The lower sales volumes reduced the sales margins in euros, even though the relative sales margin improved on year on year.

And then when we are looking at these segments for the whole reporting period, so January to June. In Finland, we can say that the operating result improved compared to last year, mainly as a result of improved production efficiency, the stabilization of the cost increases and changes in the product portfolio. What we want to also highlight is that the sales of hard seltzers and non alcoholic products continued to grow, and we maintained our strong market shares, as mentioned earlier, and even gained more in some categories. In the Baltic Sea region, the sales volume declined, as said, especially in Denmark and Latvia. And the net sales decreased, but not as much as volumes.

In the Baltic States, the continued weak development of consumer purchasing power was most pronounced in Latvia. So together with the tightening of the excise duty and alcohol legislation, price competition increased in the slowing market, especially in the beers. What we can say about the Denmark is that the sales volume was affected by this product range optimization, as we have stated earlier, but we were successful with this Jolly Cola brand, as saying that we were able to multiply the net sales, but wasn’t able to improve the result yet. In Latvia, the market decreased heavily and lower volumes with the greater investments to brand visibility, sales and pricing affected profitability significantly. In total, the Baltic Sea region, the market impacts, sales and marketing inputs and increased logistic costs decreased the operating profit.

Total market change was big and unexpected. So that lowered the gross margin in euros, which we didn’t cover so that we didn’t cover the fixed costs because of that. In Belarus, also weather affected overall demand, as said, especially in beer and quartz. And sales volume declined, but in non alcoholic product categories, the sales volume increased, in line with our strategic targets. And also in Belarus, the greater inputs were made in the sales and marketing than in the previous year that supported also the demand, especially in this nonalcoholic.

And net sales increased and the operating result remained at the previous year level. The relative decrease in the operating result was especially affected by significantly higher logistic cost. And then as a summary from this financial position,

Patrick Lundell, CEO, Olavi Group: we

Tina Lisa Liukkonur, CFO, Olavi Group: can say that the balance sheet and financial position are still strong. Cash flow development was affected by the increase in the inventories due to the weather conditions and the delivery accuracy improvements. So June, the inventories were higher. And then also the lower sales cost than lower accounts receivables. The cash flow from financing activities improved by the drawdown of long term green loan for the Brewhouse investment.

Then about the investments. So our extension and replacement investments were almost €21,000,000 so about EUR 6,000,000 more than last year. EUR 14,000,000 was related to Finland for this logistic warehouse and the Brewhouse investments. And those investments are going according to the plan and the budget. In Baltic Sea region, investments focused on the procurement of the sales equipment and the improved production conditions, and those were EUR 4,300,000.0.

In Belarus, those necessary replacement investments for the continuity of the production were made with the subsidiaries’ own cash flow financing, about EUR 2,500,000.0. And from sustainability, we can highlight that we got this A rating in the CDP’s value chain assessment. So CDP is an international nonprofit organization that helps companies and other organizations to disclose their environmental impact. And the A- is the second best rating. So I think those were the highlights from the financial part.

Patrick Lundell, CEO, Olavi Group: Yes. And the CDP is a great continuation on the recognition we got last year from Time Magazine, placing us amongst the top companies in the world. So that was a great achievement as well. Good. Yes.

Now then to the near term outlook. So we’ve updated our near term outlook based on the actuals from H1. Our strong market position normalized late summer weather conditions. The investments we’ve made in the first half of the year is why we expect a better half two or second half of the year. So we expect our operating results to improve from last year in line with the updated guidance.

Now then a short word on the strategy and our view on the future. Despite the setbacks in Q2, I emphasize the second quarter, our strategies work. We see our brands performing strongly with solid market shares, even growth in some categories. Our margins and the efficiencies of our operations are improving. So we continue to move forward and to execute our strategy with confidence.

But now let’s open the floor for questions, and we thank you for your attention and look forward to answering whatever you have in mind. So please, Janne, our colleague here, will coordinate things.

Janne, Colleague/Moderator, Olavi Group: Let’s start in the room. Yes.

Maria Wickstrom, Analyst, SEB: Maria Wickstrom from SEB. I had a few questions, starting from gross margin that was flat in the second quarter and you have seen an expansion in gross margin in many quarters ahead. So was the gross a flat gross margin as a result of a sales activation? So should we expect the gross margin expansion to continue in the second half? Or is there reasons, I mean, why we should expect, I mean, similar trend to continue in the second half?

Patrick Lundell, CEO, Olavi Group: We discussed this earlier with Tinlis, and you had a great way of summarizing the changes that happened last year in terms of underlying pricing and the comps there. So would you like to

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. Repeat So in overall, the gross margin improvements are related to the cost inflation earlier, which we were not able to adapt in the same time that the inflation came. So all this efficiency work and also price increases were a little bit delayed. So that’s why you have seen many quartals now, the improvements. Especially in Finland, we have to remember that last year, quarter one, our compare numbers didn’t include the price increase it made last year, April.

So that’s why in Finland, we cannot anymore see the profitability growth as much as we saw in the quarter one. So now we have kind of reached the point that where the major price increases has been implemented in the market to offset the inflations. But of course, we will continue to improve our product mix and then internal efficiencies to improve the gross margin. But the expectations to such kind of improvements that we have seen in many quarters is not kind of the case to expect.

Patrick Lundell, CEO, Olavi Group: Yes, precisely so. And I just repeat what I think is a key part of the message. Also something we indicated already, I think, at the end of last year, saying that the potential improvement will be less going into this year for precisely these reasons. But I emphasize improvement is yet to be delivered as well. We’ll continue our work internally on efficiencies and our portfolio and our pricing and increasing our analytics.

So all of the strategic work that we’re doing in house will enable us to continue to improve, but perhaps to a lesser potential degree than we have in the past.

Maria Wickstrom, Analyst, SEB: And then my second question will be on the profitability of the Baltic Sea region, which was one of the disappointments in Q2. And I think you pinpointed the deteriorating profitability to Latvia as well as to Denmark. Can we a little bit talk about the future in both of these markets? I mean how long lasting these I mean of course, I mean they are totally different operations, Denmark is a turnaround operation, but a little bit on the profitability aspects from going forward.

Patrick Lundell, CEO, Olavi Group: Yes. We haven’t in the past gone into great detail around specific markets, but as you see in our report today, we highlight indeed these two markets perhaps more than in the past. If we start from Denmark, as Tinlis shared and what was described here earlier, we have made investments behind our brands. And I think it’s strong evidence of the actions carrying results when you can talk about tripling your market share in the soft drinks category. Aioli brand is really performing well.

And now in terms of overall performance and profitability in the market, are not where we need to get to. So the work very much continues. But with the increased demand for YOLOLI, we are improving our relevance to trade and we’re having much stronger discussions around future collaboration and growth driving initiatives in the market than we did maybe six months ago. So it will be some time to come before where we need to be, but we’re not giving up and we have a line of sight of how to get that improvement through. And then in Latvia, think the theme that we’ve described, which holds true for all our markets in terms of going into summer, very well prepared with strong activations.

This holds true in Latvia as well. But I think in Latvia, what we saw was an even greater drop of demand and shrinking of the overall market, which clearly couldn’t carry the investments we’ve done. And you might be thinking, so why didn’t you react? Why didn’t you put the brakes on in the midst of May and June? The structure of our business is such that when you’ve agreed a campaign, when you put in media spend, when you’ve put your placements in store, you can’t really take them back and save any money.

Quite the opposite, you lose that opportunity that you invested in. So we see it very much as a situational, a moment in time whereby we are now enjoying 2% more market share. So now we will invest proportionately to the size of the market going forward, but off a higher base proportionately. So when the market returns, we’ll be in an even better position than we were going into summer. But is there something you’d like to extend on that?

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. Maybe to highlight that in Denmark, it is not a question that the profitability is significantly lower than last year. It is that it has not improved as we would, of course, like to. In Latvia, the case is that the profitability is lower, but we see that there are temporary reasons now why it is so. The lower demand, higher marketing and sales investments done to the summer, which kind of didn’t match that well.

But we can see that we have gained market shares, and we see that also this is long term investments that hopefully will pay off then in the later months that we are going forward. And also to remind that we have made this sales and marketing input in the market now that is weighted to the first half of the year.

Maria Wickstrom, Analyst, SEB: And finally, would ask on the Belarus, as you are generating more cash than this 1,000,000 to €3,000,000 that you are able to distribute, Is there any possibilities to invest the money on assets that are not quoted in Belarus Boon? Or are you forced to keep the money in your accounts? Or how does that work?

Patrick Lundell, CEO, Olavi Group: This is a tricky one to comment in detail. So the operating environment remains challenging. The necessity to seek approval for sales is still there. We haven’t received this approval. The market performs.

We’re investing in our own operations. We’re looking after the health of the business. This extension of one year is not a dramatic event in our minds. It doesn’t hinder our ability to pay dividends going forward. But it’s a continuation of the uncertainty in the market that we’ve seen for some time already.

Tina Lisa Liukkonur, CFO, Olavi Group: And of course, you asked that what will happen to the cash there. So naturally, there will be their own operations that we can support there. But then that naturally, we have said also that we are looking for different kind of options to the whole market situation, what we can do. And of course, we are still active to find different kind of solutions to the situation.

Patrick Lundell, CEO, Olavi Group: You for your questions. Please.

Anna Perala, Analyst, Nordea: It’s Anna Perala from Nordea. I’ll start with a question about your guidance and you lowered the upper end of the guidance range. And now after H1, your EBIT is 8% behind last year, but you’re still expecting to improve for the full year compared to last year. So how do you you already mentioned something, but could you just elaborate a little bit more on how do you aim to do this? Where should we see the most improvement in H2?

Patrick Lundell, CEO, Olavi Group: Yes. Thank you. Good question and great observation as well. As we’ve been already sharing, our plan for this year was a bit front loaded, so we went into summer with a strong plan. That’s there.

On the other hand, we already saw the slight softness in the market come through in Q1. So of course, we started to identify levers where we might be able to then execute some cost saving initiatives throughout the second half of the necessary. So these have now been activated. So we see us going into, as I’ve been describing, with a stronger position into the second half, and we’ve been able to then activate these initiatives that we identified already during the first half of the year. So that’s why we have confidence in the second half being better than the first half and our ability to indeed deliver growth versus last year as in line with our guidance.

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. And also we said in the report that the summer weather has normalized June and now when we are living already August at the moment. So we had the good heat days in July in Finland, but unfortunately, the weather conditions in Baltics and Belarus was not that good, but anyway kind of normalized, not that cold and rainy anymore. So that is also one reason that we believe that we have kind of normalized also the market conditions, which are not any more burdened so much with this cold and rainy weather.

Anna Perala, Analyst, Nordea: Yes. Thank you. That would be my second question, like how did July look like, but I think you already answered it. Then I would like to ask about your product mix in terms of like waters, beer, soft drinks. Did that change in Q2?

And does did it have a meaningful impact on earnings?

Patrick Lundell, CEO, Olavi Group: I’d say it’s part of the trend that we’ve seen for some time where our margins keeps expanding because we’re focusing on our own brands on one hand and then really the health of the portfolio overall. We also have a specific focus on nonalcoholic products, of course, always looking at our core, which is beer and our heritage and not abandoning that for a second. But adding on to that an emphasis on nonalcoholics because we see these categories growing for the long term. And that’s why we’re so pleased to share that we took share in these growth categories as well.

Anna Perala, Analyst, Nordea: All right. Then perhaps a follow-up. You mentioned price competition continuing in Q2. Which of these categories are the most affected by it?

Patrick Lundell, CEO, Olavi Group: Well, overall, I mean, competition is intense, but I think it’s fair to say, as a brewer, that beer is perhaps the category which is mainly in the spotlight of competition.

Tina Lisa Liukkonur, CFO, Olavi Group: And just to add what you asked earlier, so our kind of nonalcoholic product sales increased 5.8% more than the alcoholic sales. So that is, of course, changing all the time because the market growth is also there. But we are shifting or kind of changing our product portfolio to the when we are launching novelties, so you can see the average sales price increase. So that is also one method to kind of shape the portfolio to bring this more premium product in the portfolio.

Patrick Lundell, CEO, Olavi Group: Good adds. Thank you.

Anna Perala, Analyst, Nordea: Right. And then last one. You mentioned in the report that in Finland, product portfolio optimization measures had a negative effect on sales volumes in, yeah, in Q2. So could you elaborate a bit more what was done a year before and how did this impact sales in Q2?

Patrick Lundell, CEO, Olavi Group: Yes. Actually, that movement already started in 2023. So we took some choices or made some decisions on certain SKUs, beer SKUs in the Finnish market. And now we’re kind of seeing that decline or the impact of those decisions, which led into volume decline subside, but there’s still some of that as we overlap previous year’s stronger months. But that’s something that will neutralize.

So the effect of that should be going away. That’s all from me. You.

Matti Gora, Analyst, OP Markets: Matti Gora from OP Markets. First question a bit about this broader about the market. We’ve seen non alcoholic consumption increasing quarter after quarter. So I think that’s quite a big and long lasting trend. And if we we have seen the growth continuing as it has been recently, is it playing against you or in favor of you?

How is your kind of total non alcoholic share of the sales compared to alcoholic beverages?

Patrick Lundell, CEO, Olavi Group: Thank you. Great question. And I agree with your interpretation of the market. This is why we not only call ourselves a brewer, but a multi beverage operator. So when we refer to the strength of the portfolio, we talk about the breadth of the portfolio, not only beer, but also spring water, waters with carbonation, with flavor, with a bit of juice, soft drinks, energy drinks.

So we really have a broad portfolio of beverages. And in our strategy and equally in our long term targets, we’ve identified non alcoholic growth as one of the key focus areas. As Tinelese just mentioned, we see growth of non alcoholic volume growing faster than the rest of the portfolio. So we’re on that track because we see what you’re referring to. You also asked in terms of the weighting there.

So if you, for instance, refer to our 2024 report, you’ll see that roughly half of our volume is beer and the rest then other categories, one of the biggest being waters at roughly 25% of sales. And this is where, again, for instance, in the market of Finland, we saw ourselves taking significant share. So the focus is very much on this opportunity that you point to.

Matti Gora, Analyst, OP Markets: If you think about the margins with these alcoholic beverages and non alcoholic beverages, could you open up? Is it like this change in favor of you or against you?

Patrick Lundell, CEO, Olavi Group: Very good and detailed question. I’d like to emphasize the importance of, again, a portfolio and satisfying various needs. There’s a role for price fighting propositions, whether it’s a private label or a brand that fights in the everyday low price category. You need to have that as well as part of your offering. And then you need to have premium.

Of course, when you go to premium, then the volumes are less and everything in between. So the key thing is to manage the whole thing. And that’s what we’re referring to when we say that we’re trying to upskill ourselves in terms of analytics and getting more precise on how we optimize that complexity. Just to add a bit of color, in Isami, for instance, as one of our sites, we produce more than 400 different SKUs. So you would understand that we need to throw a bit of science at this to make sure that we price everything accurately.

But every proposition, every category has a role in the whole.

Tina Lisa Liukkonur, CFO, Olavi Group: And I think there is, of course, different kind of price mixes inside the product categories. But if you’re asking that is there a kind of major kind of differences between the product categories, so no. So it doesn’t mean that if we are selling more nonalcoholics, that our profitability would be lower. It doesn’t mean that.

Matti Gora, Analyst, OP Markets: Right. Thanks. That’s all from my side.

Jani Zandvoort, Analyst, Nordea: Jani Zandvoort from Nordea. Maybe one longer term question related to and I know that there could be changes still, but EU packaging and packaging waste regulation, it’s entering next year or adapting on this will start. So with the current knowledge, do you have any ballpark figure of the required investments on this? And then a follow-up question on this. Taken into account, let’s say, we have quite sophisticated, let’s say, management of recycled bottles and cans in Finland, how you see, let’s say, that the external competition in the Finnish market.

Are you, let’s say, benefiting from these changes? Or do you see it neutral for yourselves?

Patrick Lundell, CEO, Olavi Group: Good. This is a very big and broad question, so let’s take it together. But it’s also one of my favorite topics, so I might get even a bit red under the color as I talk about it because, unfortunately, from a Northern European perspective, where we have a well functioning deposit return system, more than 90% of all the packaging goes back into circulation as being repurposed as material, oftentimes into a new bottle or a dashboard in a car. So we’re not creating plastic waste in this region, which is one of the key objectives of the initiative of this PPWR to reduce plastic and plastic waste. We don’t have that problem.

Now then they introduced this legislation, which if and I emphasize if because we’re not giving up yet as to Nordic countries, we’re quite unified in our view on this topic. If that comes into play, it will mean several things that take us backwards on sustainability measures. We will have to drive those products twice. So there’s a double amount of trucks and lorries driving across The Nordics here in between people who live in a very scatteredly populated region. So a lot of more road hauling.

We will have to use a lot more water because these bottles need to be cleaned. So we will generate not only increased water usage, which is another directive on the table currently to manage water usage, but we will create wastewater because we will have to use strong detergents to clean those bottles. And we have to use a lot more energy because the washing machines for those bottles need a lot of energy, heat to function. So we’re going backwards on several, several key measures. So therefore, the idea is great for perhaps some countries where the problem persists, but not from a Northern European perspective.

So we’re trying to bring this message across to the legislators, also to the Finnish decision makers to make sure that we find the courage to object some changes that clearly take us backwards. What will happen? We’ll see. Now then to the practicality. The owners, the responsibility for managing this is actually with the seller, the person who sells it to the consumers, named it in a supermarket store, for instance.

They will have to handle the complexity of recycling bottles. We will have to have double systems in stores. Stores will have to be expanded. More heat will have to be consumed. So these operators are also with us in recognizing the challenges with the idea.

So then the law, as proposed today, suggests that we should have 10% of packaging return to the factory. That’s a quite small amount. It will create more hassle and complexity than actually benefits in the first stage. To achieve that, it’s not a major drama for us. We will have to reintroduce the washing machine that we had back in the end of 1990s when EU legislation changed kind of and pushing us towards the current system.

So we’re going back twenty years in time. We know how it works. And I don’t want to throw a number at it, but it’s not something from an investment perspective that we’re worried about. We’re just seeing the impact being contrary to the ambition, and that’s the part that we want to

Janne, Colleague/Moderator, Olavi Group: stop.

Patrick Lundell, CEO, Olavi Group: A lot. That’s all. You.

Janne, Colleague/Moderator, Olavi Group: And we have a few questions from the chat. So let’s start with the Q2 related questions. So even though we discussed the weather a lot and its effect, but one more time, like how much of the Q2 volume drop in general in the market do you estimate was due to weak weather? So how meaningful was the weather for Q2?

Patrick Lundell, CEO, Olavi Group: I’d say it’s clearly the major reason.

Tina Lisa Liukkonur, CFO, Olavi Group: Yes.

Janne, Colleague/Moderator, Olavi Group: Okay. Then we continue Q2. So why was working capital related to receivables so weak in Q2?

Tina Lisa Liukkonur, CFO, Olavi Group: It is just a direct cause of the sales. So we saw that the market dropped. So of course, our sales was impacted accordingly. And it also delayed the impact. And I think the major thing is if we compare last year and this year.

So the heat days last year was in the early summer, so we had higher volumes, higher sales. And now we had the lower sales. So I think it’s a comparison of that one.

Janne, Colleague/Moderator, Olavi Group: Okay. And then about the tax rate. So why was the tax rate so high in Q2? And will the full year 25% tax rate be above 24%?

Tina Lisa Liukkonur, CFO, Olavi Group: I think our expectation is not that the full year tax rate will be significantly different than last year. Our tax rate is affected when the, for example, subsidiaries are paying their dividends to us. So for example, in Latvia and Estonia, the tax rates are related to the dividend payments and the timing of that one.

Janne, Colleague/Moderator, Olavi Group: Thank you. And then about the product portfolio optimization, that was discussed earlier already a bit, but and you said the effect is going away. But will it have any effect still in the H2 in 2025? Or will it have effect in the next year, 2026?

Patrick Lundell, CEO, Olavi Group: Great question because I think we can correct one misunderstanding. We’re not saying it’s going away. We’re saying that the angle at which it grows is reducing. So if we had double digit potential improvements in previous quarters, we’re going to see a lesser improvement. So it’s not going away.

It’s becoming smaller. But this is really one of the big areas of opportunity that we have. Across our group, we have more than 5,500 SKUs. You can’t manage that with a pen and paper. Of course, we haven’t been doing it.

We have great technological systems in place. But this is where we have an opportunity yet to sharpen our focus on the overall portfolio optimization, whether it has to do with price elasticity or promotional pressures and demand planning and all of this, it will tease out further savings in our internal operations. This is an important part of our strategy and what we call data as an accelerator.

Janne, Colleague/Moderator, Olavi Group: Thank you. Then a couple of more questions. There has been some leadership changes in Denmark and Latvia. So what is expected from the new leadership?

Patrick Lundell, CEO, Olavi Group: Continued commitment and improvement. So we have Evia, who started on the August 1 in Latvia. She’s a local. She’s operated in grocery trade before, and she comes with high credentials. And working together with the other Baltic leaders, we’re confident that they will find a way to constantly improve.

And also in the market of Latvia, again, let’s remember, we’re talking about specifically a Q2 issue, The model is not broken. Then in terms of Denmark, we also have new resources there. We have a Chief Operating Officer, Nadia, that has started actually in spring, and she brings in a lot of international experience from working in large FMCG companies. She’s also a known person to us. She’s worked in the Olavi Group before.

She’s worked on various projects around net revenue management, for instance. So bringing in this competence and strength of strategic leadership will help us take these steps towards our targets.

Janne, Colleague/Moderator, Olavi Group: Thank you. And then the last question. So you were discussing that the investments into sales and marketing were more weighed on the H1, but they have been the expenses have been in logistics sales and marketing have been increasing for quite some time now. So how long will this continue?

Tina Lisa Liukkonur, CFO, Olavi Group: If I start, for example, we emphasized that the logistic costs were significantly higher in Belarus. So the inflation, what happened in Europe, is a little bit delayed in that market. So now we can see this year quite a big effect, for example, in logistics because of that reason that the inflation is now pushing through there. We do not expect this high inflation going forward a long time? Of course, we cannot predict that one for sure, but we are doing all our measures to get our own operations more efficient so that we can kind of handle the of this cost increases that is happening.

Patrick Lundell, CEO, Olavi Group: And yes, maybe touching on that marketing spend. So as mentioned, we came into this summer with an exceptionally strong package. It has carried dividends. We’ve taken market share, so it’s been a conscious choice to invest. We weren’t expecting the market to be as small as it was, hence, blip in terms of earnings in Q2.

The intention is not to overinvest. But if you look at the proportionality of our spend versus net sales, it is very modest still for a branded operator. So we’ve perhaps increased a bit, but we’re keeping a tight eye on our spend not to move away from our usual levels of profit and ability to pay dividends.

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. And if to summarize what we have discussed today. So we still believe very strongly this year. We know that it has been a little bit challenging now in a quarter or two, but that all the actions that are needed are now going forward so that we can balance the profitability situation. We will continue our kind of strategy implementation.

We believe that, that will help. And also kind of we know that the weight in the cost was in the quarter this H1. So I think we are very confident to go forward with our plans and hoping that also the weather conditions are not against us in this last part of the year.

Patrick Lundell, CEO, Olavi Group: They seem to have normalized already.

Tina Lisa Liukkonur, CFO, Olavi Group: Yes. So that’s good, too.

Janne, Colleague/Moderator, Olavi Group: Great. Thank you. That was all.

Patrick Lundell, CEO, Olavi Group: Thank you. All right. Thank you all for your activity. Thank you for those who took the time to join us in the room and for all of you online there for your active questions. And look forward to seeing you after the third quarter.

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