MALMO, SWEDEN — Oatly Group AB’s strategic “resets” of its businesses in Europe, North America and China over the past few years are progressing and have set the company on a path toward profitability, according to management. 

While the company experienced another loss during the second quarter of fiscal 2024, volume growth across its three key regions and a reduced cost structure highlight some of the positive trends underpinning management’s optimism.

For the quarter ended June 30, Oatly recorded a loss of $30.4 million, an improvement over the same period of the year before when the company sustained a loss of $86.7 million.

Sales for the quarter rose to $202.2 million from $196 million the year before.

“We started our work with our Europe and international segment,” said Jean-Christophe Flatin, chief executive officer, during a July 24 conference call to discuss second-quarter results. “Our progress in Europe built our confidence in our approach. We then applied the same framework to our North America segment, and we gained further confidence. And one year ago, we began applying the framework to our Greater China segment.”

In the European and international business unit, Oatly has been focused on driving profitability by reinvesting in brand building and innovation.

“The next stage of this segment will be increasing demand generating investments to drive accelerated growth via new markets and new occasions,” Flatin said.

In 2023, Oatly transitioned to an asset-light manufacturing strategy in North America. The shift in strategy has allowed the company to focus on marketing and sales. During the quarter, North America sales rose 6% to $67.8 million compared with $61.8 million the year before.

Sold finished goods volume in North America rose to 39 million liters from 36 million liters the year before. The 8.3% increase was due to higher volumes across the retail and foodservice channels through expanded distribution and the launch of new products, according to the company.

“Our North America segment has been making continued progress, and I am pleased to report the North America segment reported its full quarter of profitable growth in the second quarter,” Flatin said. “This segment will continue to focus on driving awareness, trial and repeat purchases across all channels, while continuing to be disciplined on costs.”

In China, second-quarter sales fell 18.5% to $28.8 million from $35.4 million the year prior. The sales decline was driven by the company’s decision to focus on foodservice and discontinue the sale of certain products at retail. Offsetting some of the sales decline has been the introduction of Oatly products with a large coffee chain in China.

“… We have seen positive test results with China's largest coffee chain, which is helping us expand our reach in a disciplined manner,” Flatin said.

For the first six months of fiscal 2024, Oatly recorded a loss of $76.3 million, an improvement over the first six months of 2023 when the company incurred a loss of $162.3 million.

Sales for the period rose to $401.4 million from $391.6 million.

“Now that we have completed the first half of the year and slightly exceeded our internal expectations, we are increasing our guidance for our P&L (profit and loss) metrics and lowering our guidance for capex needs,” said Marie-Jose David, chief financial officer. “We expect constant currency growth in the range of 6% to 10% (compared to the previous range of 5% to 10%), and we continue to expect foreign exchange to have a minimum impact. We continue to expect the second half constant currency growth rate to be stronger than the first half.”

The company also expects its capital expenditures to be below $70 million for the year compared to the prior expectation of below $75 million.

During a question-and-answer period with securities analysts, Flatin declined to offer a timeframe for when Oatly will achieve profitability.

“We want to continue to make the right decisions day by day, one after the other, to bring this business to profitable growth as quickly as possible,” he said. “I want us to make this decision for what is right for the business and not to land on a specific date.”