UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2023
Commission File Number: 001-40401
Oatly Group AB
(Translation of registrant’s name into English)
Ångfärjekajen 8
211 19 Malmö
Sweden
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ |
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Form 40-F ☐ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
On May 3, 2023, Oatly Group AB (the “Company”) published its Swedish statutory Annual Report for 2022 ("Annual Report"), a copy of which is furnished as Exhibit 99.1. The Annual Report is also available on the Company’s website at https://investors.oatly.com/financial-information/annual-reports.
EXHIBIT INDEX
Exhibit No. |
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Description |
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99.1 |
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Annual Report for 2022 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Oatly Group AB |
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Date: May 3, 2023 |
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By: |
/s/ Christian Hanke |
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Christian Hanke |
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Chief Financial Officer |
1
Annual Report
and
Consolidated Financial Statements
for
Oatly Group AB (publ)
559081-1989
Financial year
2022
The Board of Directors and Chief Executive Officer (“CEO”) of Oatly Group AB (publ) (the “Parent Company” or the “Company”) hereby present the annual report and consolidated financial statements for the 2022 financial year (the “Annual Report”).
The consolidated financial statements have been prepared in U.S. dollars (“USD” or “$”), and all amounts are in thousands of U.S. dollars (TUSD) unless otherwise specified. The Annual Report for the Parent Company has been prepared in Swedish kronor (“SEK”), and all amounts are in thousands of Swedish kronor (TSEK) unless otherwise specified.
Administration report
Information regarding the operations
The Group’s CEO is employed by Oatly Group AB (publ) and handles the administration of the Group and its financing. The major operations in the Group take place in underlying companies, primarily in Oatly AB. Oatly AB is an innovative company operating within sustainable nutritional health. The Company develops, produces and sells oat-based dairy substitute products, primarily under its own brand, Oatly. The goal is to be an international lifestyle company which is world-leading in its technological area and drives the change toward more plant-based consumption.
The Company’s registered office is in Malmö, Sweden.
Ownership
Nativus Company Limited owns 45.9% of Oatly Group AB (publ)’s ordinary shares. None of the remaining shareholders own more than 10%. Oatly Group AB (publ) is listed on the Nasdaq Global Select Market, US.
Significant events during the financial year
Revenue increased by $79.0 million, or 12.3%, to $722.2 million for the year ended December 31, 2022, net of sales discounts, rebates and trade promotions, from $643.2 million for the year ended December 31, 2021, which was primarily a result of the additional supply coming from our existing and new facilities and also a result of implemented price increases in EMEA and the Americas. This revenue growth was negatively impacted by several factors during the twelve months ended December 31, 2022, including slower production capacity scale up in Asia and the Americas partially due to COVID-19 related factors, the complex macro environment in EMEA and the U.S., as well as lower than expected sales in Asia, primarily in China, as a result of foodservice location closures due to the spread of COVID-19 variants. The ramp-up of our production facilities has similarly been impacted by disruption of global supply chain flows and travel restrictions during the twelve months ended December 31, 2022, specifically impacting our expansion in Asia and the Americas and causing longer lead time of production equipment and spare parts and a difficulty of moving critical staff needed to the facilities during the construction and ramp-up phase as well as labor absenteeism as a result of the spread of COVID-19 variants.
In order to support the growth of the business, our employee headcount has increased compared to prior year although strategic actions have been taken in the fourth quarter of 2022 to simplify our organizational structure adjusting to the macro environment which has led to an impact of approximately $4.4 million in severance related charges during 2022.
We announced several strategic actions at the time of our third quarter earnings release on November 14, 2022. The strategic actions were initiated to adapt our supply chain network strategy and simplify our organizational structure in order to position us for our next phase of growth. We believe these actions will increase the agility of our organization and drive profitability with a more asset-light strategy.
The framework for the supply chain network strategy is centered on focusing investments on Oatly’s proprietary oat-based technology and capacity, which is expected to reduce the capital intensity of future facilities and positively impact our cash flow. The Company is also actively pursuing manufacturing partnerships to create a more hybrid production network across select geographies. This is in addition to the phasing of its production footprint expansion due to the current operating environment, the continued ramp-up of the Company’s production facilities and the localization of production, which have already had a positive impact on the Company’s cash flow.
We have also implemented strategic actions to simplify our organizational structure with a view to driving more balanced growth and profitability in the future. We have reviewed the organizational structure to adjust the fixed cost base globally including professional services and other related costs. The majority of the identified gross expense savings will be reinvested in the business to support business growth and market expansion activities.
We operate production facilities in Landskrona, Sweden, Millville, New Jersey, Vlissingen, the Netherlands, Ogden, Utah, Ma’anshan, China and Singapore. During 2022, a lease agreement commenced for an additional building at the Ogden production facility. Three
2
additional facilities respectively in Peterborough, U.K., Fort Worth, U.S., and China (Asia III) are currently under construction or in the planning stage and are expected to be completed between 2024 and 2026. We have an agreement with a co-packer, Ya YA Foods, for a joint operation of our Ogden, Utah facility and the construction of a facility in Dallas Fort Worth, Texas. We also have an ongoing expansion project in Millville, New Jersey.
The COVID-19 pandemic has had, and we expect it will continue to have, certain negative effects on our operations that could have a material negative impact on our financial position and earnings. The COVID-19 pandemic impacted our business operations, results of operations and cash flows during 2022, particularly in China. In 2022, the foodservice channel in China was negatively impacted as a result of the closure of certain store locations by our foodservice customers due to imposed lockdowns and other restrictions and we expect that it will continue to slow our planned expansion into the retail channel in China.
The Group has previously taken several risk-reduction measures to limit the impact that COVID-19 has had on the operation. Our priority during the COVID-19 pandemic has been, and continues to be, to protect the well-being and safety of our employees. Every production facility has, when necessary, taken measures to be able to work in shifts, and each work crew has been isolated to minimize the spread of the virus among production staff.
In addition to overall cost inflation, the Russian invasion of Ukraine in February 2022 has caused a negative impact on the global economy, driving further increases to, among other things, the cost of transportation, energy and materials. Higher transportation costs are a result of increased fuel prices, a short supply of truck drivers worldwide and increased freight costs, make it more expensive for us and our partners to deliver products to our customers. We do not directly procure goods or services from Russia or Ukraine. However, these two countries are large exporters of farm produce and fertilizer. This has indirectly impacted the supply and pricing of certain ingredients for our products. We also have experienced an impact on supply chains due to the ongoing war and, for example, have removed rail transport to Asia through Russia.
During the financial year, a number of amendments to the Group’s revolving credit facility agreement (the “SRCF Agreement”) were implemented. In March 2022, the SRCF Agreement was amended with the aim of e.g. (i) postpone the application of the financial covenant regarding EBITDA, (ii) lower the minimum levels for the financial covenant regarding solvency and (iii) introduce more restrictive contractual limitations regarding the possibility for Oatly Group AB (publ) to implement dividends. In June 2022, the group established a conditional incremental credit facility of SEK 850 million (equivalent to $81.3 million) under the SRCF Agreement, the terms of which were further adjusted in December 2022. In November 2022, the SRCF Agreement was amended in order to further postpone the application of the EBITDA covenant.
In November 2022, the Group’s indirect subsidiary Oatly Shanghai Co., Ltd. entered into a RMB 150 million (equivalent of $21.6 million) working capital credit facility with China Merchants Bank Co., Ltd. Shanghai Branch (the “CMB Credit Facility”). Individual utilizations under the CMB Credit Facility are subject to the lender’s approval. As of December 31, 2022, there were no outstanding borrowings under the CMB Credit Facility.
On December 30, 2022, the Group and its wholly owned subsidiary, Oatly US Operations & Supply Inc., entered into an asset purchase agreement with YYF (as defined below), whereby Oatly sells the Facilities and establishes a strategic partnership pursuant (see Significant events after the end of the financial year). As of December 31, 2022, these assets met the criteria for classification as held for sale. As part of the transaction and reclassification to held for sale, an impairment of $38.3 million was recognized to reduce the carrying amount of the assets to their fair value less costs of disposal. The impairment was recognized as other operating expenses in the consolidated statement of operations.
Our primary requirements for liquidity and capital are to finance working capital, capital expenditures, to invest in our organizational capabilities to support our growth and for general corporate purposes. We are using this combination of financing to fund our continued expansion. Our primary sources of liquidity are our cash and cash equivalents and our credit facilities.
Parent company
Customary group management functions and group wide services are provided via the parent company. Net revenues for the parent company during the year were 341.5 (395.0) MSEK with profit before tax amounting to 2,079.7 (1,169.6) MSEK.
Significant events after the end of the financial year
On January 25, 2023, a consent letter was entered into in connection with the SRCF Agreement pursuant to which the lenders under the SRCF Agreement agreed that the YYF (as defined below) transaction shall constitute a permitted disposal for the purposes of the SRCF Agreement.
3
On March 1, 2023, the Group and its wholly owned subsidiary, Oatly US Operations & Supply Inc., completed the sale of its manufacturing facility in Ogden, Utah (the “Ogden Facility”) and the manufacturing facility being constructed in Dallas-Fort Worth, Texas (the “DFW Facility” and, together with the Ogden Facility, the “Facilities”) to Ya YA Foods USA LLC, a Delaware limited liability company (“YYF”) in connection with the establishment of a strategic manufacturing alliance with YYF, pursuant to the terms of that certain asset purchase agreement (the “Asset Purchase Agreement”) with YYF and its parent company Aseptic Beverage Holdings LP, a Delaware limited partnership (“Buyer Parent”), dated December 30, 2022 (collectively, the “Transaction”). Pursuant to the terms and conditions of the Asset Purchase Agreement, YYF acquired a majority of the assets that are used in the operation of the Facilities and assumed the Company’s obligations arising under the real property leases and certain contracts for and related to the Facilities. The Company continues to own all intellectual property related to production of oat base, the Company’s principal, proprietary ingredient for all Oatly products, and the Company continues to own and operate its own equipment, fixtures and supplies associated with its production of oat base at the Facilities. In connection with the Transaction, YYF and the Company also have entered into a contract manufacturing agreement pursuant to which YYF will manufacture certain finished products for the Company, using oat base supplied by Oatly (the “Co-Pack Agreement”).
As consideration for the Transaction, the Company received an aggregate purchase price of approximately $102.6 million. Of this aggregate purchase price, $86.5 million is attributable to the Ogden Facility, of which (a) $72.0 million was paid to the Company through a combination of $52.0 million cash and $20.0 million in the form of a promissory note from the Buyer Parent to the Company, and (b) $14.5 million is in the form of a credit toward future use of shared assets at the Ogden Facility. The remaining $16.1 million of the aggregate purchase price is attributable to the DFW Facility, of which (a) $13.6 million is a credit toward future capital expenditures associated with completion of oat base capacity at the DFW Facility, and (b) $2.5 million is in the form of a credit toward future use of shared assets at the DFW Facility. As part of the consideration for the Transaction, the Buyer Parent issued a promissory note for $20 million to the Company due May 1, 2028 (the “Note”). The interest rate of the Note begins at 8% and escalates an additional 2% each year. The Note is guaranteed by the founder and chief executive officer of the Buyer Parent. The Buyer Parent’s obligation under the Note may be offset by amounts owed to YYF under the Co-Pack Agreement only if such amounts are not paid in accordance with the Co-Pack Agreement. The Note also contains other customary terms and conditions.
On March 6, 2023, the Company held an extraordinary general meeting at its headquarters in Malmö, Sweden. The extraordinary general meeting resolved to revoke the previously given authorization and to authorize the board of directors, on one or more occasions during the period until the next annual general meeting, to resolve on new issue of shares, warrants and/or convertible bonds, corresponding to, in total, an amount of maximum $300 million at the time of the issuances. The new issue of shares, warrants and/or convertible bonds were permitted to be performed with or without deviation from the shareholders’ preferential rights.
Further, the extraordinary general meeting resolved to amend the articles of association, subsequently, the limits in the Company’s articles of association regarding share capital and number of shares increased to a maximum of SEK 3,400,000 and 2,000,000,000, respectively.
On March 23, 2023 and April 18, 2023 we issued $300 million aggregate principal amount of 9.25% Convertible Senior PIK Notes due 2028. The Convertible Notes (as defined below) were issued in two tranches that have substantially identical economic terms. Certain of the Company’s existing shareholders, Nativus Company Limited, Verlinvest and Blackstone Funds, purchased $200.1 million aggregate principal amount of the Convertible Notes (the “Swedish Notes”) and other institutional investors purchased $99.9 million aggregate principal amount of the Convertible Notes (the “U.S. Notes” and, together with the Swedish Notes, the “Convertible Notes”). The investors paid an aggregate purchase price of $291 million, reflecting an original issue discount of 3%.
The Convertible Notes bear interest at a rate of 9.25% per annum, payable semi-annually in arrears in cash or in payment-in-kind, at the Company’s option, on April 15 and October 15 of each year, beginning on October 15, 2023. The Convertible Notes will mature on September 14, 2028, unless earlier converted by the holders or required to be converted, repurchased or redeemed by the Company. The Convertible Notes are convertible at the option of each holder at an initial conversion price of $2.41 per Ordinary Share or per American Depositary Share (“ADS”), subject to customary anti-dilution adjustments and a conversion rate reset on March 23, 2024 and March 24, 2025 if the average of the daily volume- weighted average prices of the ADSs for the 30 consecutive trading days immediately preceding March 23, 2024 and March 23, 2025, respectively, is below a specified price. The Company may require conversion of the U.S. Notes and the Swedish Notes if the last reported sale price of the Company’s ADSs equals or exceeds 200% of their conversion price on any 45 trading days during any 90 consecutive day period beginning on or after the third anniversary of the issuance of the U.S. Notes and the Swedish Notes, respectively. The Convertible Notes benefit from the same covenants as are contained in the Term Loan B Credit Agreement.
On April 18, 2023, the SRCF Agreement was amended and restated whereby, among other things, (i) the term of the SRCF Agreement was reset to three years and six months, with a one year uncommitted extension option, (ii) the lender group under the SRCF Agreement was reduced to JP Morgan SE, BNP Paribas SA, Bankfilial Sverige, Coöperatieve Rabobank U.A. and Nordea Bank Abp, filial i Sverige and the commitments under the SRCF Agreement were reduced to SEK 2,100 million (equivalent of $201.0 million), with an uncommitted incremental revolving facility option of up to SEK 500 million (equivalent of $47.9 million), (iii) the initial margin was
4
reset at 4.00% p.a., (iv) the tangible solvency ratio, minimum EBITDA, minimum liquidity and total net leverage ratio financial covenants were reset, (v) the existing negative covenants were amended to further align with those included in the Term Loan B Credit Agreement (as defined below), including in relation to incurrence of indebtedness, and (vi) the debt under the SRCF Agreement rank pari passu with, and share in the same security and guarantees from, material companies in the group as, the EIF Facility and the Term Loan B Credit Agreement (as defined below) by way of the Intercreditor Agreement (as defined below).
On April 18, 2023, we entered into a Term Loan B Credit Agreement (the “Term Loan B Credit Agreement”) with, amongst others, Silver Point Finance LLC as Syndication Agent and Lead Lender, J.P. Morgan SE, as Administrative Agent and Wilmington Trust (London) Limited as Security Agent, including a term loan facility of $130 million. The term of the Term Loan B Credit Agreement is five years from the funding date of the term loan facility, and the term loan facility is subject to 1% amortization per annum paid in quarterly instalments. Borrowings carry an interest rate of Term SOFR plus 7.5% or Base Rate plus 6.5%. Under the Term Loan B Credit Agreement, we are subject to ongoing covenants such as minimum EBITDA, total net leverage ratio and liquidity requirements. The Term Loan B Credit Agreement also contains certain negative covenants, including but not limited to restrictions on indebtedness, limitations on liens, fundamental changes covenant, asset sales covenant, and restricted payments covenant. The debt under the Term Loan B Credit Agreement ranks pari passu with, and shares in the same security and guarantees from material companies in the group as the EIF Facility and the SRCF Agreement by way of the Intercreditor Agreement (as defined below).
On April 18, 2023, we entered into an Intercreditor Agreement (the “Intercreditor Agreement”) with, amongst others J.P. Morgan SE, as Senior Secured Term Facilities Agent, Wilmington Trust (London) Limited as Senior Secured Revolving Facilities Agent, Wilmington Trust (London) Limited as Common Security Agent and U.S. Bank Trust Company, National Association as trustee in respect of certain Convertible Senior PIK Notes. The Intercreditor Agreement includes customary ranking, enforcement and turnover provisions intended to govern the relationship between the creditor groups.
Expected future development and significant risks and uncertainties
The plant-based category is continuously growing strong at a global level, and in 2023 the Group will continue its efforts to establish and grow its operations in several of the world’s largest markets, including focusing on expanding our production capacity to manage the demand for our products.
As indicated under “Significant events during the financial year,” the COVID-19 pandemic impacted our business operations, results of operations and cash flows during 2022, particularly in China, and it is expected that this trend will continue throughout the first quarter of 2023 and beyond. We continue to maintain a global focus on the controllable aspects of our business while navigating a challenging operating environment that we believe will include COVID-19 restrictions and lockdowns in certain countries, risk of COVID-related absenteeism in our production facilities, significant supply chain delays and disruptions, and increased inflationary pressures.
Furthermore, we expect cost inflation to continue to have a negative impact on our results of operations for the remainder of 2023. The current macroeconomic environment has, and may continue to, negatively impact our supply chain and operations, including our capacity expansion projects in Dallas, the U.K. and Asia III in China as a result of distribution and other logistical issues; longer lead times for equipment; continued supply chain disruptions, including with respect to raw materials, resulting in higher inflationary pressure; and impact to our facility operations or those of our suppliers, co-manufacturers or co-packers due to COVID-19.
As indicated under “Significant events during the financial year,” the Russian invasion of Ukraine in February 2022 has caused a negative impact on the global economy. Oatly does not directly procure goods or services from Russia or Ukraine. Further sanctions, bans or other economic actions in response to the ongoing conflict in Ukraine or in response to any other global conflict could result in an increase in costs, further disruptions to our supply chain, and a lack of consumer confidence resulting in reduced demand. While the extent of such items is not presently known, any of them could negatively impact our business, results of operations, and financial condition.
Three additional facilities respectively in Peterborough, U.K., Dallas-Fort Worth, U.S., and China (Asia III) are currently under construction or in the planning stage and are expected to be completed between 2024 and 2026. We have entered an agreement with a co-packer, YYF, for a joint operation of our Ogden, Utah facility and the completion of construction of a facility in Dallas-Fort Worth Texas. We also have an ongoing expansion project in Millville, New Jersey.
We expect our net capital expenditures for 2023 to be in the range of $180 million to $200 million, related primarily to investments in our production facilities. The amount and allocation of our future capital expenditures depend on several factors, and our strategic investment priorities may change. Any delays in our expected increase in production capacity, including as a result of the COVID-19 pandemic and other macroeconomic factors, could delay future capital expenditures. We believe that our sources of liquidity and capital will be sufficient to meet our existing business needs for at least the next 12 months.
5
Innovation
Oatly works extensively with innovation. Since inception, our innovation goal has been to build the best possible form of milk and other dairy products for humans and our planet. Our approach is to not mimic traditional forms of milk, but to create a better nutritional profile designed for human needs. Through our more than 25-year history of making oat products, we have developed a deep expertise around oats and production craftsmanship. We believe we are well positioned to leverage science to address key societal problems and maintain our market leadership in plant-based dairy.
Today, we have a global food innovation team with a central technology development team in Sweden, and globally-led but regionally-executed product development teams in the Americas, EMEA and Asia. As of December 31, 2022, we had more than 100 employees in our innovation management and research and development teams. To further strengthen our capabilities, we are establishing a Research and Innovation Center in Sweden to partner with leading scientists and industry experts to ensure we stay at the forefront of oat expertise and human health. The Research and Innovation Center is expected to be finished in 2023. Through this set-up, we are efficiently building deep technological know-how and expertise, as well as ensuring that our products are developed close to consumers, according to locally relevant consumer preferences. Given one of our key focuses is building a broad and relevant product portfolio within plant-based dairy, we continuously explore and entering new product categories, making the change to plant-based easy for the consumers. We strive to create great, sustainable, delicious and nutritious food with optimal taste, functionality and texture.
Financial risk control and use of financial instruments
Through its operations, the Group is exposed to various financial risks attributable to primarily cash, short-term investments, trade receivables, trade payables and liabilities to credit institutions. The financial risks are market risk (mainly interest risk and currency risk), credit risk, liquidity risk and refinancing risk. The Group strives to minimize potential unfavorable effects from these risks on the Group’s financial results. See Note 3 for further information on the Group’s management of financial risks.
Other non-financial disclosures
The Group works actively on systematic and practical occupational health and safety activities and the goal is a safe workplace with a high level of employee attendance and zero accidents. The Group also works actively on equality and issues of equal treatment together with an updated equal treatment policy. In Sweden, there are collective agreements signed with Livsmedelsföretagen and Livsmedelsarbetareförbundet, Unionen, Sveriges Ingenjörer and Ledarna.
Operations subject to permits
Our operations in Landskrona, Sweden are licensable under the Environmental Assessment Ordinance (SFS 2013:251): 15.90-i and 90.15-i. The B license becomes mandatory when production exceeds 75,000 tons per calendar year and for the handling of treatment for the operation’s process wastewater. Since December 2020, we have used the existing license to conduct existing and expanded operations in the form of 200,000 tons of product per calendar year. The license also covers the construction and operation of a waste treatment plant for the operation’s process wastewater. The license includes a right to discharge process wastewater to the municipal treatment plant through December 31, 2021. Since December 22, 2022 process wastewater is treated in the Company’s own waste treatment plant and then discharged into the Lundåkra basin in accordance with the existing license. The previously submitted application to conduct an existing, expanded and partially supplemented operation for up to 500,000 tons of product per calendar year has been withdrawn, and the Skåne County Administrative Board made a decision to dismiss the case on December 21, 2022. During a limited period of 24 months thereafter, the operations have certain limited thresholds for its waste treatment plant. These limited thresholds have been monitored through the date of this report.
Further, the Group has operations subject to permits related to the production sites in the U.S., the U.K., the Netherlands, Singapore and China.
In 2022, all operating licenses, permits, and other authorizations are approved for current operations in Millville and Ogden. Ogden has the necessary FDA Food Facility Registration, FCE (Food Canning Establishment) registration number and the Certificate of Registration for Food Establishment from the Department of Agriculture and Food, State of Utah. For 2023, Ogden will keep these registrations and Ya YA Foods will apply for their own relevant registrations from the FDA and the State of Utah.
In Millville, the plant already has the wastewater permit and the air permit for the new silo. Millville has applied for an updated “Air Permit License”. Ogden has a wastewater permit that allows for expanded volume. As of March 1, 2023, Ya YA Foods will be responsible for maintaining the required wastewater and air permit licenses for Ogden and Oatly will not maintain any such permits or licenses.
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Millville completed its BRC unannounced audit for 2022 without any non-conformance. Ogden completed its BRC audit for 2022 with four minor non-conformances that have subsequently been remedied. In 2023, Millville completed its BRC unannounced audit in February 2023 with one non-conformance (with an AA+ rating) and Ogden completed its BRC audit in January 2023 with four minor non-conformances (each with an AA rating).
Landskrona and Vlissingen have licenses, permits and other authorizations necessary to support current operations and anticipated growth. A new BRC for Landskrona was obtained in March 2022 and next audit will be performed in April 2023. The current certificate expires May 27, 2023. Vlissingen renewed its BRC certificate in July 2022 and will have the next unannounced audit in March-July 2023. Its current certificate expires August 23, 2023.
In addition, the permit process is ongoing at the U.K. site and is going according to plan with a target date in 2025.
The Singapore factory obtained its production permit in March 2021, which is renewed annually according to government requirements. The BRC certificate was issued in January 2022 and renewed in December 2022. A halal certificate was obtained in January 2022, renewed in December 2022, and expires in January 2024.
The Ma’anshan factory obtained its production license in September 2021, which is effective for five years. In February 2023, the factory passed its BRCGS and FSSC22000 renewal audit.
Environmental impact
Sustainability is at the core of our business. Our vision is to be a company that leads a global movement to reduce human consumption of cow’s milk by half. In general, oatmilk leads to fewer greenhouse gas emissions compared to cow’s milk. Specifically, based on certain product-level calculations we have commissioned in Europe and on additional studies, we generally see that oatmilk products have a significantly lower climate (CO2equivalent) impact relative to comparable dairy products.
Sustainability report
A sustainability report is separately published at www.oatly.com.The report gives an account of our overall work on pursuing a greater transformation of society, linked above all to production and consumption of plant-based food and drink.
Sales, earnings and financial position, Group
Group (TUSD) |
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2022 |
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2021 |
|
|
2020 |
|
|||
Revenue |
|
|
722,238 |
|
|
|
643,190 |
|
|
|
421,351 |
|
Loss before tax |
|
|
(397,394 |
) |
|
|
(215,048 |
) |
|
|
(57,950 |
) |
Total assets |
|
|
1,225,197 |
|
|
|
1,628,912 |
|
|
|
678,929 |
|
Equity/asset ratio* (%) |
|
|
64.6 |
% |
|
|
76.4 |
% |
|
|
48.0 |
% |
Average number of employees |
|
|
1,880 |
|
|
|
1,280 |
|
|
|
623 |
|
* Total equity as a percentage of total assets.
Proposed appropriation of profits
The Board of Directors proposes that profits available for disposal (SEK) |
|
|
|
|
Share premium reserve |
|
|
13,126,053,252 |
|
Retained earnings |
|
|
2,078,292,949 |
|
Profit of the year |
|
|
219,665,653 |
|
|
|
|
15,424,011,854 |
|
|
|
|
|
|
be appropriated as follows to be carried forward |
|
|
15,424,011,854 |
|
The Group’s and Parent Company’s results and financial position in general are shown in the following income statements, balance sheets and cash-flow statement with associated Notes.
7
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31 (in thousands of U.S. dollars) |
|
Note |
|
|
2022 |
|
|
2021 |
|
|||
Revenue |
|
|
5 |
|
|
|
722,238 |
|
|
|
643,190 |
|
Cost of goods sold |
|
|
|
|
|
(642,211 |
) |
|
|
(488,177 |
) |
|
Gross profit |
|
|
|
|
|
80,027 |
|
|
|
155,013 |
|
|
Research and development expenses |
|
|
|
|
|
(22,262 |
) |
|
|
(16,771 |
) |
|
Selling, general and administrative expenses |
|
|
|
|
|
(412,799 |
) |
|
|
(353,929 |
) |
|
Other operating (expenses) and income, net |
|
10 |
|
|
|
(40,951 |
) |
|
|
1,944 |
|
|
Operating loss |
|
6,7,8 |
|
|
|
(395,985 |
) |
|
|
(213,743 |
) |
|
Finance income |
|
11 |
|
|
|
15,256 |
|
|
|
14,435 |
|
|
Finance expenses |
|
11 |
|
|
|
(16,665 |
) |
|
|
(15,740 |
) |
|
Loss before tax |
|
|
|
|
|
(397,394 |
) |
|
|
(215,048 |
) |
|
Income tax benefit/(expense) |
|
|
13 |
|
|
|
4,827 |
|
|
|
2,655 |
|
Loss for the year, attributable to shareholders of the parent |
|
|
|
|
|
(392,567 |
) |
|
|
(212,393 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Loss per share, attributable to shareholders of the parent, basic and diluted |
|
|
33 |
|
|
|
(0.66 |
) |
|
|
(0.39 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Weighted average common shares outstanding, basic and diluted |
|
|
33 |
|
|
|
592,031,935 |
|
|
|
549,080,310 |
|
8
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
For the year ended December 31 (in thousands of U.S. dollars) |
|
2022 |
|
|
2021 |
|
||
Loss for the year |
|
|
(392,567 |
) |
|
|
(212,393 |
) |
Other comprehensive income/(loss): |
|
|
|
|
|
|
||
Items that may be reclassified to consolidated statement of operations in subsequent periods (net of tax): |
|
|
|
|
|
|
||
Exchange differences from translation of foreign operations |
|
|
(96,997 |
) |
|
|
(71,961 |
) |
Total other comprehensive income/(loss) for the year |
|
|
(96,997 |
) |
|
|
(71,961 |
) |
Total comprehensive loss for the year |
|
|
(489,564 |
) |
|
|
(284,354 |
) |
Loss for the year and total comprehensive loss are, in their entirety, attributable to shareholders of the parent |
|
|||||||
9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31 (in thousands of U.S. dollars) |
|
Note |
|
|
2022 |
|
|
2021 |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|||
Non-current assets |
|
|
|
|
|
|
|
|
|
|||
Intangible assets |
|
|
15 |
|
|
|
127,688 |
|
|
|
145,925 |
|
Property, plant and equipment |
|
|
16 |
|
|
|
492,952 |
|
|
|
509,648 |
|
Right-of-use assets |
|
|
17 |
|
|
|
108,598 |
|
|
|
158,448 |
|
Other non-current receivables |
|
|
18 |
|
|
|
7,848 |
|
|
|
5,534 |
|
Deferred tax assets |
|
|
13 |
|
|
|
5,860 |
|
|
|
2,293 |
|
Total non-current assets |
|
|
|
|
|
742,946 |
|
|
|
821,848 |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|||
Inventories |
|
|
20 |
|
|
|
114,475 |
|
|
|
95,661 |
|
Trade receivables |
|
|
21 |
|
|
|
100,955 |
|
|
|
105,519 |
|
Current tax assets |
|
|
|
|
|
243 |
|
|
|
435 |
|
|
Other current receivables |
|
|
22 |
|
|
|
17,818 |
|
|
|
32,229 |
|
Prepaid expenses |
|
|
23 |
|
|
|
23,413 |
|
|
|
27,711 |
|
Short-term investments |
|
|
19 |
|
|
|
— |
|
|
|
249,937 |
|
Cash and cash equivalents |
|
|
24 |
|
|
|
82,644 |
|
|
|
295,572 |
|
|
|
|
|
|
|
339,548 |
|
|
|
807,064 |
|
|
Assets held for sale |
|
|
35 |
|
|
|
142,703 |
|
|
|
— |
|
Total current assets |
|
|
|
|
|
482,251 |
|
|
|
807,064 |
|
|
TOTAL ASSETS |
|
|
|
|
|
1,225,197 |
|
|
|
1,628,912 |
|
|
EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|||
Equity |
|
|
25 |
|
|
|
|
|
|
|
||
Share capital |
|
|
|
|
|
105 |
|
|
|
105 |
|
|
Treasury shares |
|
|
|
|
-0 |
|
|
|
— |
|
||
Other contributed capital |
|
|
|
|
|
1,628,045 |
|
|
|
1,628,103 |
|
|
Foreign currency translation reserve |
|
|
|
|
|
(171,483 |
) |
|
|
(74,486 |
) |
|
Accumulated deficit |
|
|
|
|
|
(665,524 |
) |
|
|
(308,423 |
) |
|
Total equity attributable to shareholders of the parent |
|
|
|
|
|
791,143 |
|
|
|
1,245,299 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|||
Lease liabilities |
|
|
17 |
|
|
|
82,285 |
|
|
|
126,516 |
|
Liabilities to credit institutions |
|
|
26 |
|
|
|
2,668 |
|
|
|
— |
|
Deferred tax liabilities |
|
|
13 |
|
|
|
— |
|
|
|
2,677 |
|
Provisions |
|
|
27 |
|
|
|
7,194 |
|
|
|
11,033 |
|
Total non-current liabilities |
|
|
|
|
|
92,147 |
|
|
|
140,226 |
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|||
Lease liabilities |
|
|
17 |
|
|
|
16,823 |
|
|
|
16,703 |
|
Liabilities to credit institutions |
|
|
26 |
|
|
|
49,922 |
|
|
|
5,987 |
|
Trade payables |
|
|
|
|
|
82,516 |
|
|
|
93,043 |
|
|
Current tax liabilities |
|
|
|
|
|
5,515 |
|
|
|
567 |
|
|
Other current liabilities |
|
|
29 |
|
|
|
11,823 |
|
|
|
9,614 |
|
Accrued expenses |
|
|
30 |
|
|
|
123,037 |
|
|
|
117,473 |
|
Provisions |
|
|
27 |
|
|
|
3,800 |
|
|
|
— |
|
|
|
|
|
|
|
293,436 |
|
|
|
243,387 |
|
|
Liabilities directly associated with the assets held for sale |
|
|
35 |
|
|
|
48,471 |
|
|
|
— |
|
Total current liabilities |
|
|
|
|
|
341,907 |
|
|
|
243,387 |
|
|
Total liabilities |
|
|
|
|
|
434,054 |
|
|
|
383,613 |
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
|
1,225,197 |
|
|
|
1,628,912 |
|
|
10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
Attributable to shareholders of the parent |
|
|||||||||||||||||||||||
(in thousands of U.S. dollars) |
|
Note |
|
Share |
|
|
'Treasury shares |
|
|
Other |
|
|
Foreign |
|
|
Accumulated |
|
|
Total |
|
||||||
January 1, 2021 |
|
8, 25 |
|
|
21 |
|
|
|
— |
|
|
|
448,251 |
|
|
|
(2,525 |
) |
|
|
(119,661 |
) |
|
|
326,086 |
|
Loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(212,393 |
) |
|
|
(212,393 |
) |
Other comprehensive loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(71,961 |
) |
|
|
— |
|
|
|
(71,961 |
) |
Total comprehensive loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(71,961 |
) |
|
|
(212,393 |
) |
|
|
(284,354 |
) |
Bonus issue |
|
|
|
|
64 |
|
|
|
— |
|
|
|
(64 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issue of shares |
|
|
|
|
12 |
|
|
|
— |
|
|
|
1,099,684 |
|
|
|
— |
|
|
|
— |
|
|
|
1,099,696 |
|
Transaction costs |
|
|
|
|
— |
|
|
|
— |
|
|
|
(62,371 |
) |
|
|
— |
|
|
|
— |
|
|
|
(62,371 |
) |
Conversion of shareholder loans |
|
|
|
|
1 |
|
|
|
— |
|
|
|
104,107 |
|
|
|
— |
|
|
|
— |
|
|
|
104,108 |
|
Exercise of warrants |
|
|
|
|
7 |
|
|
|
— |
|
|
|
38,496 |
|
|
|
— |
|
|
|
— |
|
|
|
38,503 |
|
Share-based payments |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,632 |
|
|
|
23,632 |
|
Balance at December 31, 2021 |
|
|
|
|
105 |
|
|
|
— |
|
|
|
1,628,103 |
|
|
|
(74,486 |
) |
|
|
(308,423 |
) |
|
|
1,245,299 |
|
Loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(392,567 |
) |
|
|
(392,567 |
) |
Other comprehensive loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(96,997 |
) |
|
|
— |
|
|
|
(96,997 |
) |
Total comprehensive loss for the year |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(96,997 |
) |
|
|
(392,567 |
) |
|
|
(489,564 |
) |
Issue of shares |
|
|
|
|
0 |
|
|
|
(0 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0 |
|
Redemption of warrants |
|
|
|
|
— |
|
|
|
— |
|
|
|
(58 |
) |
|
|
— |
|
|
|
— |
|
|
|
(58 |
) |
Share-based payments |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35,466 |
|
|
|
35,466 |
|
Balance at December 31, 2022 |
|
|
|
|
105 |
|
|
|
(0 |
) |
|
|
1,628,045 |
|
|
|
(171,483 |
) |
|
|
(665,524 |
) |
|
|
791,143 |
|
11
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31 (in thousands of U.S. dollars) |
|
Note |
|
|
|
2022 |
|
|
2021 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
|
|
|
|
(392,567 |
) |
|
|
(212,393 |
) |
|
Adjustments to reconcile net loss to net cash flows |
|
|
|
|
|
|
|
|
|
|||
Depreciation of property, plant and equipment and right-of-use assets and amortization of intangible assets |
|
15, 16, 17 |
|
|
|
48,315 |
|
|
|
27,222 |
|
|
Impairment of property, plant and equipment and right-of-use assets |
|
16, 17 |
|
|
|
285 |
|
|
|
4,970 |
|
|
Impairment related to assets held for sale |
|
|
35 |
|
|
|
38,293 |
|
|
|
— |
|
Impairment loss/(gain) on trade receivables |
|
|
21 |
|
|
|
3,088 |
|
|
|
(253 |
) |
Write-down of inventories |
|
|
20 |
|
|
|
28,839 |
|
|
|
5,081 |
|
Share-based payments expense |
|
|
9 |
|
|
|
35,466 |
|
|
|
23,632 |
|
Movements in provisions |
|
|
27 |
|
|
|
3,800 |
|
|
|
— |
|
Finance income |
|
|
11 |
|
|
|
(15,256 |
) |
|
|
(14,435 |
) |
Finance expenses |
|
|
11 |
|
|
|
16,665 |
|
|
|
15,740 |
|
Income tax (benefit)/expense |
|
|
13 |
|
|
|
(4,827 |
) |
|
|
(2,655 |
) |
(Gain)/loss on disposal of property, plant and equipment and intangible assets |
|
15, 16 |
|
|
|
(932 |
) |
|
|
422 |
|
|
Other |
|
|
|
|
|
(226 |
) |
|
|
(138 |
) |
|
Interest received |
|
|
|
|
|
2,145 |
|
|
|
1,740 |
|
|
Interest paid |
|
|
|
|
|
(12,875 |
) |
|
|
(9,237 |
) |
|
Income tax paid |
|
|
|
|
|
(2,960 |
) |
|
|
(2,734 |
) |
|
Changes in working capital: |
|
|
|
|
|
|
|
|
|
|||
Increase in inventories |
|
|
|
|
|
(55,018 |
) |
|
|
(63,688 |
) |
|
Decrease/(increase) in trade receivables, other current receivables, prepaid expenses |
|
|
|
|
|
6,991 |
|
|
|
(79,278 |
) |
|
Increase in trade payables, other current liabilities, accrued expenses |
|
|
|
|
|
31,828 |
|
|
|
92,172 |
|
|
Net cash flows used in operating activities |
|
|
|
|
|
(268,946 |
) |
|
|
(213,832 |
) |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|||
Purchase of intangible assets |
|
|
15 |
|
|
|
(4,510 |
) |
|
|
(7,838 |
) |
Purchase of property, plant and equipment |
|
|
16 |
|
|
|
(201,655 |
) |
|
|
(273,760 |
) |
Investments in financial assets |
|
|
|
|
|
— |
|
|
|
(1,162 |
) |
|
Proceeds from financial instruments |
|
|
19 |
|
|
|
— |
|
|
|
5,720 |
|
Purchase of short-term investments |
|
|
19 |
|
|
|
— |
|
|
|
(385,165 |
) |
Proceeds from short-term investments |
|
|
19 |
|
|
|
240,959 |
|
|
|
117,877 |
|
Net cash flows from/(used in) used in investing activities |
|
|
|
|
|
34,794 |
|
|
|
(544,328 |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
|
|||
Proceeds from issue of shares, net of transaction costs |
|
|
|
|
|
— |
|
|
|
1,037,325 |
|
|
Proceeds from liabilities to credit institutions |
|
26, 32 |
|
|
|
47,850 |
|
|
|
118,005 |
|
|
Repayment of liabilities to credit institutions |
|
26, 32 |
|
|
|
(1,032 |
) |
|
|
(212,913 |
) |
|
Payment of loan transaction costs |
|
|
|
|
|
— |
|
|
|
(4,900 |
) |
|
Repayment of lease liabilities |
|
17, 32 |
|
|
|
(10,899 |
) |
|
|
(9,282 |
) |
|
Proceeds from exercise of warrants |
|
|
|
|
|
— |
|
|
|
38,503 |
|
|
Repayment of shareholder loans |
|
28, 32 |
|
|
|
— |
|
|
|
(10,941 |
) |
|
Cash flows from financing activities |
|
|
|
|
|
35,919 |
|
|
|
955,797 |
|
|
Net (decrease)/increase in cash and cash equivalents |
|
|
|
|
|
(198,233 |
) |
|
|
197,637 |
|
|
Cash and cash equivalents at January 1 |
|
|
|
|
|
295,572 |
|
|
|
105,364 |
|
|
Exchange rate differences in cash and cash equivalents |
|
|
|
|
|
(14,695 |
) |
|
|
(7,429 |
) |
|
Cash and cash equivalents at December 31 |
|
|
24 |
|
|
|
82,644 |
|
|
|
295,572 |
|
12
Notes to the consolidated financial statements
These financial statements are consolidated financial statements for the group consisting of Oatly Group AB (publ) and its subsidiaries (collectively, the “Group”). A list of the principal subsidiaries is included in Note 13 Investments in subsidiaries.
Oatly Group AB (the “Company”, the “Parent Company” or the “Parent”) is a public limited company incorporated and domiciled in Malmö, Sweden. The Company’s registered office is located at Ångfärjekajen 8, Malmö, Sweden. The Parent Company is listed on the Nasdaq Global Select Market in the U.S., and its American Depositary Shares are traded under the ticker “OTLY.”
The Group manufactures, distributes and sells oat-based products.
These consolidated financial statements were authorized for issue by the Board of Directors on April 28, 2023. The Consolidated Income Statement and Consolidated Balance Sheet and the Parent Company will be submitted to the Annual General Meeting on May 25, 2023, for approval.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated. The consolidated financial statements are presented in USD, which is the Group’s selected presentation currency. All amounts are in thousands of U.S. dollars unless otherwise stated.
The functional currency of the Parent Company is SEK. All amounts are in thousands of SEK for the financial statements of the Parent Company unless otherwise stated. All references in these financial statements to “$” or “USD” are to U.S. dollars, all references to “SEK” are to Swedish Kronor, all references to “€” or “EUR” are to Euro and all references to “CNY” are to Chinese Yuan.
The consolidated financial statements of Oatly Group AB (publ) have been prepared in accordance with the Swedish Annual Accounts Act, RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board and International Financial Reporting Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) as endorsed by the European Union.
The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4 Significant accounting judgments estimates and assessments. The consolidated financial statements have been prepared using the cost method except for short-term investments, derivative instruments, and contingent consideration measured at fair value.
New and amended standards and interpretations
See below for the amended standards that are effective starting on January 1, 2022 but had either no impact or an immaterial impact on the Group’s financial statements. Certain other new accounting standards and interpretations have been issued by the International Accounting Standards Board but are not yet effective for the December 31, 2022 reporting period and have not been adopted early by the Group. These standards are not expected to have a material impact on the Group in the current or future reporting periods nor on any foreseeable future transactions.
Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
An onerous contract is a contract under which the unavoidable cost of meeting the obligations under the contract (i.e., the costs that the Group cannot avoid because it has entered into the contract), exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services including both incremental costs (e.g., the costs of direct labor and materials) and an allocation of costs directly related to contract activities (e.g., depreciation of equipment used to fulfil the contract and costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. These amendments had no impact on the consolidated financial statements of the Group.
13
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 Property, Plant and Equipment
The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. In accordance with the transitional provisions, the Group applies the amendments retrospectively only to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment (the date of initial application). These amendments had no impact on the consolidated financial statements of the Group as proceeds from all sales of such items were recognized in the consolidated statement of operations.
IFRS 9 Financial Instruments – Fees in the ‘10 per cent’ test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and Measurement. In accordance with the transitional provisions, the Group applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment (the date of initial application). There were modifications of the Group’s financial instruments during the period. See Note 3.1.3 Liquidity risk. The Group concluded the amendment had no material impact on the consolidated financial statements of the Group.
Subsidiaries are all companies over which the Group has control. The Group has control over a company when it is exposed to or has a right to variable returns from its participation in the company and has the possibility to influence the return through its participation in the company. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to recognize the Group’s business combinations. The acquisition price is the consideration paid for a subsidiary and comprises the fair value of the sum of the assets transferred and the liabilities incurred by the Group to the previous owner of the company. The consideration also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.
Intercompany transactions, balances and unrealized gains and losses on transactions between Group companies are eliminated.
The operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The CEO is the chief operating decision maker and evaluates financial position and performance and makes strategic decisions. The CEO monitors the Group’s performance from a geographic perspective through the reportable segments EMEA, Asia and the Americas. No operating segments have been aggregated to form the reportable segments.
The CEO primarily uses a measure of earnings before interest, tax, depreciation and amortization (“EBITDA”), and earnings for the period attributable to shareholders of the parent adjusted to exclude, when applicable, income tax expense, finance expenses, finance income, depreciation and amortization expense, share-based compensation expense, restructuring costs, asset impairment charge and other costs related to assets held for sale, and initial public offering (“IPO”) preparation and transaction costs (“Adjusted EBITDA”), to assess the performance of the operating segments.
Functional currency and presentation currency
The entities in the Group have the local currency as their functional currency, as the local currency has been defined as the primary economic environment in which each entity operates. The Group’s presentation currency is U.S. dollars (USD). The Parent Company’s presentation currency is Swedish krona (SEK).
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Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the transaction dates. Foreign exchange rate profits and losses from the settlement of such transactions and the translation of monetary assets and liabilities in foreign currencies using the exchange rates prevailing at the reporting date are recognized in operating loss in the consolidated statement of operations.
Foreign exchange rate profits and losses attributable to the financing of the Group are recognized in the consolidated statement of operations as finance income and finance costs. All other foreign exchange rate profits and losses are recognized under other operating (expenses) and income, net.
Translation of foreign group companies
The results and financial position for all companies with a functional currency other than the presentation currency are translated into the Group’s reporting currency. Assets and liabilities are translated from the foreign operation’s functional currency to the Group’s reporting currency using the exchange rates prevailing at the reporting date. Income and expenses for each consolidated statement of operations and consolidated statement of comprehensive loss are translated to USD using the average exchange rate for the period. Foreign exchange differences arising from the currency translation of foreign operations are recognized in other comprehensive loss. Goodwill and fair value adjustments arising from the acquisition of foreign operations are treated as assets and liabilities in these operations and are translated to the reporting currency using the exchange rate at the reporting date.
In the consolidated accounts, exchange rate differences attributable to monetary items that form part of the net investment in foreign operations are recognized in other comprehensive loss and are reclassified from equity to the consolidated statement of operations when the foreign operation is divested in whole or in part.
The Group’s principles for recognition of revenue from customer contracts are presented below.
Sale of goods
Revenue from contracts with customers consists of sales of goods. Revenue from the sale of goods is recognized at the point in time when control of goods has transferred to the customer, being when the products are delivered to the customer, the customer has full discretion over the channel to sell the goods, and there is no unfulfilled obligation that could affect the customer’s acceptance of the goods. Delivery occurs when the products are shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer and either the customer has accepted the products in accordance with the sales contract or the Group has objective evidence that all criteria for acceptance have been satisfied.
Revenue from contracts with customers is measured at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods. Presented revenue excludes VAT and other sales taxes. The Group considers if contracts include other promises that constitute separate performance obligations to which a portion of the transaction price needs to be allocated. The Group considers the effects of variable consideration in determining the transaction price. The Group is acting as principal in its revenue arrangements because the Group maintains control of the goods until they are transferred to the customers.
Variable consideration and other consideration
The transaction price is adjusted for estimates of known or expected variable consideration, which includes but is not limited to, trade promotion activities, slotting and listing fees, cash discounts, product returns and allowances such as coupons. Variable consideration is recorded as a reduction to revenue based on amounts the Group expects to be liable for. Estimates of variable consideration are based on a number of factors, including current contract sales terms, estimated units sold, customer participation and redemption rates. Estimates are reviewed regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified.
The Group accounts for consideration payable to a customer as a reduction of the transaction, unless the payment to the customer is in exchange for a distinct good or service that the customer transfers to the Group.
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Contract costs
The Group incurs expenses for sales commissions to third parties to obtain customer contracts. Sales commissions are recognized in the consolidated statement of operations, in selling, general and administration expenses. The Group applies the practical expedient that permits the Group to expense the costs to obtain a contract as incurred when the expected amortization period is one year or less.
Interest income
Interest income is recognized with the application of the effective interest method.
Financing components
The Group does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.
Cost of goods sold
Cost of goods sold consists primarily of the cost of oats and other raw materials, product packaging, co-manufacturing fees, direct labor and associated overhead costs and property, plant and equipment depreciation. Our cost of goods sold also includes warehousing and transportation of inventory.
Research and development expenses
Research and development expenses consist primarily of personnel related expenses for our research and development staff, including salaries, benefits and bonuses, but also third-party consultancy fees and expenses incurred related to product trial runs. Our research and development efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new products.
Selling, general and administrative expenses
Selling, general and administrative expenses include primarily personnel related expenses, brand awareness and advertising costs, costs associated with consumer promotions, product samples and sales aids. These also include customer distribution costs (i.e. outbound shipping and handling costs for finished goods), and other functional related selling and marketing expenses, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. Customer distribution costs for the year ended December 31, 2022 amounted to $61.3 million, compared to $49.4 million for the year ended December 31, 2021. Selling, general and administrative expenses also include auditor fees and other third-party consultancy fees, expenses related to management, finance and accounting, information technology, human resources and other office functions.
Other operating (expenses) income and, net
Other operating (expenses) and income, net consists primarily of impairment charges related to assets held for sale and net foreign exchange gains/(losses) on operating related activities.
Finance income and (expenses), net
Finance income and (expenses), net primarily consists of interest expense related to loans from credit institutions, interest expense on lease liabilities and foreign exchange gains and losses attributable to our external and internal financing arrangements.
Income tax benefit/(expense)
Income tax benefit/(expense) represents both current and deferred income tax expenses. Current tax expenses primarily represent income taxes based on income in multiple foreign jurisdictions.
The Group presents assets and liabilities in the consolidated statement of financial position based on current/ non-current classification. An asset is current when it is:
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