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Oatly shares fall 12% as firm loss widens amid manufacturing points at US manufacturing facility and COVID lockdowns in Asia

Oatly Group AB shares fell on Monday after the Swedish oat-based dairy maker reported a bigger-than-expected third-quarter loss and income, nicely beneath estimates, and provided steerage who have been additionally behind the consensus.

The OTLY pressure,
-10.82%
final fell 12% to mark its largest one-day proportion drop since July 1. The corporate went public in 2021 at $22 a share and now trades simply above $2, or 91% beneath its IPO value.

“Third quarter monetary outcomes have been beneath our expectations, largely on account of COVID-19 associated restrictions in Asia, manufacturing points within the Americas and continued headwinds in overseas change markets,” stated chief govt Toni Petersson in an announcement.

The corporate had a technical drawback at a plant in Ogden, Utah, Petersson informed analysts on the corporate’s convention name. It believes that these points are transitory and that the underlying demand for its merchandise stays strong.

“I’m upset with our capability to translate this third quarter gross revenue margin and sequential EBITDA enchancment on account of our shortcomings in operational execution,” the chief stated, in accordance with a FactSet transcript.

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The corporate posted a web lack of $107.9 million, or 18 cents per share, within the quarter, greater than the lack of $41.2 million, or 7 cents per share, within the interval of the earlier 12 months. Income reached $183 million from $171.1 million a 12 months in the past.

The FactSet consensus predicted a lack of 10 cents and income of $210 million.

The corporate now expects annual income of $700-720 million, nicely beneath the consensus of $793.20 million.

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Oatly is taking strategic steps to adapt its provide chain community and simplify its construction with the purpose of utilizing an asset-based method to enhance profitability. This could considerably scale back capital expenditure sooner or later.

The corporate can also be searching for manufacturing companions to create a hybrid manufacturing community in sure areas. It plans to scale back overhead and headcount to scale back prices associated to group enterprise capabilities and EMEA regional layers by as much as 25%, looking for as much as $50 million in annual financial savings by the primary semester 2023.

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Mizuho stated the numbers are exacerbating liquidity points and retaining him on the sidelines.

“Macro pressures from COVID lockdowns in Asia and a weakening
The European backdrop is important and the continuing challenges of ramping up the brand new Utah facility stay of specific concern,” stated John. J. Baumgartner, managing director of analysis, wrote in a observe to purchasers.

“A workforce reorganization and different efficiencies goal $50 million in annualized financial savings by 1H23, however are greater than offset by income and money move points.”

Mizuho has a impartial ranking on the inventory and is sticking to its value goal of $3.50.

However CFRA stated it’s sticking to its purchase ranking, whereas reducing its value goal to $3.50 from $5.00.

“Whereas the third quarter outcomes and outlook have been clearly disappointing, the constructive is that OTLY doesn’t seem to have a requirement drawback. As a substitute, we consider gross sales progress is primarily pushed by manufacturing capability, which is anticipated to extend within the fourth quarter and into 2023,” stated analyst Arun Sundaram.

He hailed the corporate’s “main pivot” to an asset-light mannequin, which ought to speed up the trail to profitability, though “it is going to doubtless have implications for its long-term gross margin goal of no less than 40%. %”.

Oatly shares have fallen 76% because the begin of the 12 months, whereas the S&P 500 SPX,
+0.21%
fell 16%.

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