Olvi Group’s Interim Report, 1 January to 31 March 2021 (3 Months)

OLVI PLC                Interim Report 29 April 2021 at 9:00 am

Olvi Group’s Interim Report, 1 January to 31 March 2021 (3 Months)

Interim Report in brief

Olvi Group’s first-quarter sales volume, net sales and operating profit increased on the previous year. Easter sales fell into the first quarter and exports increased; this boosted the Group’s overall development. The Group’s financial standing remained on a good level.

Near-term outlook

Olvi’s operating profit for fiscal year 2021 is expected to remain on the previous year’s good level. Second-quarter earnings development will still be affected by sales channel restrictions due to the corona pandemic, as well as weather conditions in the upcoming summer season.

Consolidated key ratios

* Due to a change in the presentation of the income statement, the previous term of gross margin was replaced by gross profit.

Business development

Lasse Aho, Managing Director:

Olvi Group’s business development was good in comparison with the previous year. Sales volume, net sales and operating profit improved, with the strongest boost coming from Finland. Sales volume increased by 7.0 percent. Factors behind the growth include consumer demand focusing on retail sales, Easter sales taking place in March, as well as good development of exports. Net sales increased by slightly less than one percent. Operating profit increased by 2.7 percent. Olvi Group put a lot of effort into launching new products for the upcoming season according to plan.

Restrictions put in place due to the corona pandemic had a substantial impact on sales channels in Olvi’s market areas in the first quarter. In almost all of Olvi’s operating countries, the HoReCa sales channel was totally closed or operated partially. Cross-border and harbour sales remained at a low level. Within Olvi Group, this is reflected as a loss of sales between Estonia and Finland. However, retail sales continued on a strong track, and this compensated the other sales channels. Exports increased as well. Production facilities have operated normally. 

Business in Finland continued on a strong growth track. Sales volume, net sales and operating profit have clearly increased on the previous year. Olvi has been successful in increasing the sales volume in Finland despite the corona pandemic, thanks to its strong brands and versatile range of packaging. The demand for beer in particular has continued on a strong growth track, but an upward trend can also be seen in non-alcoholic products such as mineral waters. Olvi will increase its capacity in the water business by acquiring a spring water bottling plant and its equipment, which was agreed at the end of the quarter. Olvi increased its capacity in the water business through an agreement to acquire a spring water bottling plant and equipment, which was signed at the end of the quarter. Operating profit improved by 27.3 percent thanks to increased sales volume and production efficiency.

In Estonia, first-quarter sales volume declined by 1.6 percent due to strict restrictions associated with the corona pandemic. The restrictions impacted cross-border and harbour sales as well as the HoReCa market in particular. However, domestic retail sales improved on the previous year, and there was a continuing growth trend in exports. Operating profit in proportion to net sales remained at a high level of 12.8 percent, even though the operating profit in euros dropped by some 13 percent from the previous year.

The business in Latvia was substantially impacted by restrictions in the HoReCa segment. Overall market demand also declined in the first months of the year but upward signs were seen in March. Increased exports have replaced the drop in domestic demand to some extent. Sales volume declined by 5.6 percent in the first quarter. In addition to the drop in litres sold, the corona situation has made price competition more intense. Due to this, net sales declined by 9.4 percent and operating profit by 66.3 percent. Olvi invested in future competitive ability in Latvia by acquiring the Piebalgas Alus microbrewery. This was announced in a release on 8 March 2021. The acquisition improves Cesu Alus’s position particularly in HoReCa and premium products. According to its 2020 accounts, Piebalgas produced 2.7 million litres and made 4.2 million euro in net sales. The competition authorities have approved the acquisition, and Piebalgas will become a part of the Latvian business in the second quarter.

The sales volume and net sales in Lithuania remained almost on a par with the previous year even though HoReCa sales came to an almost total halt in the first quarter. Sales have remained profitable through the development of premium products and package sizes for beers in particular. The market position has also continued to become stronger. Operating profit developed well, showing growth of 36.1 percent.

In Belarus, business development in the first quarter was good. Sales volume increased by almost 13 percent, thanks to domestic demand as well as increased exports. Even though the country imposed no official restrictions due to the corona pandemic, HoReCa sales have dropped somewhat due to consumer behaviour. Comparable net sales declined by 5.2 percent due to the weakened exchange rate. Net sales in the local currency increased by almost 20 percent; this was achieved through a more versatile product portfolio, among other things. Operating profit in euros declined by 17.7 percent but in the local currency there was an increase of some 4 percent. 

Investments have been completed as planned during the review period. The amount of investments amounted to 7.8 million euro and was focused on improving production efficiency and capacity.

Seasonal nature of the operations

The Group’s business operations are characterised by seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary according to the time of the year and the characteristics of each season.

Sales development

Olvi Group’s sales volume in January-March increased by 7.0 percent to 163.9 (153.2) million litres.

Sales volume development focused on Finland and Belarus, while consumer demand in the Baltic states declined due to substantial restrictions associated with the corona pandemic.

The Group’s net sales in January-March increased by 0.9 percent and amounted to 85.3 (84.6) million euro. Growth was focused on Finland.

Earnings development

The Group’s operating profit in January-March stood at 8.1 (7.8) million euro, or 9.4 (9.3) percent of net sales. In the first quarter, Finland and Lithuania in particular were able to substantially improve their operating profit in comparison to the previous year.

The Group’s January-March profit after taxes amounted to 6.9 (5.4) million euro. The previous year’s result was hampered by exchange rate losses.

Earnings per share calculated from the profit belonging to parent company shareholders in January-March stood at 0.33 (0.26) euro per share.

Balance sheet, financing and investments

Olvi Group’s balance sheet total at the end of March 2021 was 442.4 (398.5) million euro. Equity per share at the end of March 2021 stood at 12.05 (12.36) euro. The equity ratio was 57.1 (65.0) percent and the gearing ratio was -21.7 (-3.6) percent. The current ratio, which represents the Group’s liquidity, was 1.1 (1.2). The equity ratio was affected by a change in Finnish taxation; the payment period for excise taxes is now one month later. Also, the dividend liability arising from the Annual General Meeting was now recognised in March, not in April as in the previous year. These changes increase the amount of interest-free current liabilities substantially in comparison to the previous year.

Interest-bearing liabilities amounted to 3.4 (13.5) million euro at the end of March. Current liabilities made up 1.0 (11.1) million euro of all interest-bearing liabilities. Interest-bearing liabilities consist mostly of leasing liabilities.

Olvi Group’s investments in extensions and replacements from January to March amounted to 7.8 (9.2) million euro. The companies in Finland accounted for 2.4 million euro, the Baltic subsidiaries for 3.7 million euro and Lidskoe Pivo in Belarus for 1.7 million euro of the total. Olvi Group has continued investments according to plan in increasing and diversifying its production capacity, as well as the modernisation of production facilities.

Personnel

Olvi Group’s average number of personnel in January-March was 1,923 (1,871). The Group’s average number of personnel increased by 52 people or 2.8 percent.

Olvi Group’s average number of personnel by country:

Board of Directors and management

There have been no changes in Olvi plc’s Board of Directors or management during the review period. The Annual General Meeting was held on 31 March 2021. The decisions taken and the effects on the composition of the Board of Directors are described below.

Other events during the review period

Annual General Meeting

Olvi plc’s Annual General Meeting of 31 March 2021 adopted the financial statements and granted discharge from liability to the members of the Board of Directors and Managing Director for the accounting period that ended on 31 December 2020.

In accordance with the Board’s proposal, the General Meeting decided that a dividend of 1.10 (1.00) euro be paid on each A and K share for the accounting period 2020. The dividend according to the resolution accounts for 56.2 (49.6) percent of Olvi Group’s consolidated earnings per share. The dividend will be paid in two instalments. The first instalment of 0.55 euro per share will be paid on 20 April 2021 to shareholders registered in the register of shareholders held by Euroclear Finland Ltd on the record date 6 April 2021. The second instalment of 0.55 euro per share will be paid on 3 September 2021 to shareholders registered in the register of shareholders held by Euroclear Finland Ltd on the record date 27 August 2021.

The General Meeting decided that the Board of Directors shall have six (6) members. Pentti Hakkarainen, Lasse Heinonen, Nora Hortling, Elisa Markula and Päivi Paltola were re-elected to the Board of Directors. Juho Nummela was elected as a new member of the Board of Directors.

The authorised public accounting firm Ernst & Young Oy was re-elected the company’s auditor, with Elina Laitinen, Authorised Public Accountant, as auditor in charge.

All decisions made at the General Meeting can be found in the bulletin released on 31 March 2021.

Organisation of the Board of Directors

At its organising meeting held on 31 March 2021, the Board of Olvi plc elected Pentti Hakkarainen as the Chairman of the Board and Nora Hortling as the Vice Chairperson of the Board.

The Audit Committee consists of Lasse Heinonen, Nora Hortling and Juho Nummela, while Pentti Hakkarainen, Elisa Markula and Päivi Paltola are members of the Remuneration Committee.

Changes in corporate structure

There were no changes in Olvi’s holdings in subsidiaries in January-March 2021. On 8 March 2021, Olvi announced the acquisition of the entire stock of Piebalgas Alus, a microbrewery in Latvia. The company will become a subsidiary of Cesu Alus. The competition authorities approved the acquisition in April, and Piebalgas will become a part of the Latvian business in the second quarter.

Olvi Group’s share-based incentive plan for key personnel, the performance period of which was from 1 February 2019 to 31 January 2021, has expired. At its meeting of 1 February 2021, the Board of Directors of Olvi plc decided on three new share-based incentive plans for the Group’s key personnel: a performance-based share plan for 2021–2025, a matching share plan for 2021–2022 and a restricted share plan for 2021–2025. Detailed information on the incentive plans and the associated share repurchases is provided in Table 5, Sections 4 and 5 of the tables attached to this interim report.

Business risks and their management

The corona pandemic still imposes uncertainty on business operations. Business development is difficult to predict as the scope and time of government-imposed restrictions to contain the corona pandemic cannot be sufficiently estimated. In addition to overall demand, such restrictions have an effect on the distribution of sales between different channels. Olvi has drafted several scenarios and made preparations for responding to changing situations through a variety of measures, for example if the crisis is prolonged.

The crisis has brought challenges in the availability of some production items such as beverage cans. There is also global upward pressure in the prices of raw materials, including packaging. However, the production materials required at Olvi are currently in good supply. Production has operated almost normally and there has not been any widespread virus exposure among personnel. Olvi has made preparations for production disruptions and drafted contingency plans concerning the availability of personnel and raw materials, among other things. In Belarus, further uncertainty is present due to potential continuation of the exchange rate downtrend; this is associated with the political and economic situation in the country.

A more detailed description of normal business-related risks is provided in the Board of Directors’ report and the notes to the financial statements, as well as in the Investors/Corporate Governance section of the company’s Web site.

Events after the review period

There have been no significant reportable events after the review period.

OLVI PLC
Board of Directors

Further information: Lasse Aho, Managing Director, Olvi plc, phone +358 290 00 1050 or +358 400 203 600

TABLES:
- Statement of comprehensive income, Table 1
- Balance sheet, Table 2
- Changes in shareholders’ equity, Table 3
- Cash flow statement, Table 4
- Notes to the interim report bulletin, Table 5

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media
www.olvi.fi

Other reserves include the share premium account, legal reserve and other reserves.

OLVI GROUP                                                    TABLE 5

NOTES TO THE INTERIM REPORT

The interim report has been prepared in accordance with IAS 34, applying the same accounting policies as for the financial statements of 31 December 2020, with the exception of the presentation of the income statement. From now on, the income statement is based on the function of expenses. The comparison data has been adjusted to correspond to the new presentation.

The information in the interim report is presented in thousands of euros (EUR 1,000). For the sake of presentation, individual figures and totals have been rounded to full thousands, which causes rounding differences in additions. The ratios are calculated from exact amounts in euros. The information disclosed in the interim report is unaudited.

The registered share capital on 31 March 2021 totalled 20,759 thousand euro.

4. SHARE-BASED PAYMENTS                

Olvi Group’s share-based incentive plan for key personnel, the performance period of which was from 1 February 2019 to 31 January 2021, has expired. The target group of the plan included approximately 60 people, and in accordance with the terms and conditions of the plan, rewards were paid in Olvi plc Series A shares and partially in cash. A total of 36,200 Series A shares were handed over as share-based rewards.

At its meeting of 1 February 2021, the Board of Directors of Olvi plc decided on the terms and conditions of three new share-based incentive plans for the Group’s key personnel: a performance-based share plan for 2021–2025, a matching share plan for 2021–2022 and a restricted share plan for 2021–2025. Among these incentive plans, the performance-based share plan for the performance periods 2021–2022 and 2021–2023 started on 15 February 2021. The target groups include approximately 18 people, including the Managing Director of the Group, the Managing Directors of the subsidiaries outside Finland, the members of Olvi plc’s Management Group and the Sales Directors of subsidiaries outside Finland. The rewards are based on the Group’s accumulated operating profit in euros and the increase of non-alcoholic sales volume. Net rewards payable for the performance period 2021–2022 amount to an approximate maximum of 6,100 Olvi plc Series A shares, and for the performance period 2021–2023, approximately 10,000 Olvi plc Series A shares.

The objective of long-term rewards is to support the achievement of the company’s targets, make key personnel committed to the company and offer incentive plans based on earning the company’s shares. The rewards are payable partially in Olvi plc’s Series A shares and partially in cash. The cash proportion is intended to cover taxes and tax-related costs arising from the rewards to the employees involved. As a rule, no reward will be paid if employment or service ends before the reward payment. Under the scheme, the target group is able to earn Olvi plc Series A shares based on performance. The Board of Directors shall decide on the earning criteria and the targets for each of these at the beginning of the performance period. Any rewards from the scheme shall be paid after the end of each performance period.

The Board of Directors has set an upper limit for the gross total rewards payable to each person in a calendar year. The limit applies to all gross rewards payable under long-term incentive schemes. Any member of Olvi’s Management Group has to hold at least one-half of the shares received as net rewards from the new incentive plans until the value of the member’s holding in the company equals at least one-half of their annual salary for the previous year. These Olvi plc Series A shares have to be held for as long as the person is a member of the Management Group.

In the period under review, costs associated with the plan were recognised for a total of 63.5 thousand euro. Olvi Group does not have any other share-based plans or option plans.                                           

5. TREASURY SHARES           

At the beginning of January 2021, Olvi plc held 11,549 of its own shares as treasury shares. Olvi plc continued its share repurchase plan in January. The plan started on 5 November 2020 and ended on 15 January 2021. The shares shall be acquired for the purpose of financing or executing any upcoming corporate acquisitions or other arrangements, implementing the company’s incentive schemes or for other purposes decided upon by the Board of Directors.

On 19 February 2021, the Board of Directors of Olvi plc decided to initiate a scheme of acquiring treasury shares based on the authorisation issued by the Annual General Meeting on 8 April 2020. On this basis, the Board will repurchase a maximum of 10,000 Series A shares. The repurchase of treasury shares is based on the new share-based incentive plan for the Group’s key personnel announced on 2 February 2021. The acquisition of shares started on 25 February 2021 and ended on 1 March 2021.

At the end of the review period, Olvi plc holds a total of 20,899 of its own Series A shares. The total purchase price of treasury shares was 988,962.12 euro. Treasury shares held by the company itself are ineligible for voting. Series A shares held by Olvi plc as treasury shares represent 0.10 percent of all shares and 0.02 percent of the aggregate number of votes. The treasury shares represent 0.12 percent of all Series A shares and associated votes.

On 31 March 2021, the General Meeting of Shareholders of Olvi plc decided to revoke any unused authorisations to acquire treasury shares and authorise the Board of Directors of Olvi plc to decide on the acquisition of the company’s own shares using distributable funds. The authorisation is valid for one year starting from the General Meeting and covers a maximum of 500,000 Series A shares.

The Annual General Meeting also decided to revoke all existing unused authorisations for the transfer of own shares and authorise the Board of Directors to decide on the issue of a maximum of 1,000,000 new Series A shares and the transfer of a maximum of 500,000 Series A shares held as treasury shares.         

During January-March 2021, Olvi has not received any flagging notices in accordance with Chapter 2, Section 10 of the Securities Markets Act.

12. CALCULATION OF FINANCIAL RATIOS
 

In the summary of financial indicators (page 1), the Group presents figures directly derived from the consolidated income statement: net sales, operating profit and profit for the period, the corresponding percentages in proportion to net sales, as well as the earnings per share ratio. (Earnings per share = Profit belonging to parent company shareholders / Average number of shares during the period, adjusted for share issues.)

In addition to the consolidated financial statements prepared in accordance with IFRS, Olvi Group presents Alternative Performance Measures that describe the financial development of its business and provide a commensurate overall view of the company’s profitability, financial position and liquidity.

The Group has applied the ESMA (European Securities and Markets Authority) new guidelines on Alternative Performance Measures that entered into force on 3 July 2016 and defined APMs as described below.

As an APM supporting net sales, the Group presents sales volumes in millions of litres. Sales volume is an important indicator of the extent of operations generally used in the industry.

Equity per share = Shareholders’ equity held by parent company shareholders / Number of shares at end of period, adjusted for share issues.

Equity to total assets, % = 100 * (Shareholders’ equity held by parent company shareholders + non-controlling interests) / (Balance sheet total).

Gearing, % = 100 * (Interest-bearing debt – cash in hand and at bank) / (Shareholders’ equity held by parent company shareholders + non-controlling interests).