From the CEO
CEO Pekka Tennilä in the Q3 January-September2020 (6 November 2020):
“I am pleased to see such strong results in the third quarter with both net sales and profitability improving from last year. We have continued to manage these exceptional times very well and the strong results reflect the resilience of our business and employees. I want to thank all employees for their hard work and commitment during these unusual times.
During the third quarter, we have seen changing COVID-19 restrictions in our home markets. Following the rising number of COVID-19 cases towards the end of the third quarter, new restrictions were imposed, and this immediately impacted us as well. However, we have activated our brands and we have succeeded in keeping our production running without major disruptions. Our highest priority continues to be the safety of our employees.
In the monopolies volumes have remained at record-high level as consumers have continued to shift purchases from travel retail and on-trade to the monopolies. In the Finland & Exports segment, we saw a momentary recovery of travel retail and on-trade, while the monopoly channel continued to grow during the third quarter. In the Scandinavia segment, Norway continued its strong performance in both wines and spirits. In Sweden, spirits continued their strong growth and we gained market share in the strategically important gin, liquour and rum segments. In Altia Industrial, net sales growth was driven by the sale of cognac inventory and the growing but stabilising demand for ethanol during the quarter. Contract manufacturing and starch volumes continued to be negatively impacted by COVID-19.
Despite the challenging market and operating environment, profitability improved in all three segments during the first nine months of the year. Comparable EBITDA improved by 33.1%, or EUR 8.3 million to EUR 33.4 million. The drivers for the solid profitability improvement were the Altia Industrial segment, strong sales and continued revenue management in the monopolies, as well as Group-wide cost savings measures.
Altia’s financial position has strengthened further during the first nine months with a positive development of net cash flow from operations. The improvement of EBITDA and the positive development of net working capital contributed to the development, and net cash flow from operations totalled EUR 5.9 (-0.8) million at the end of the period. The liquidity position of the Group has also remained strong throughout the period.
During this year, our innovations for our spirits brands have been very successful in international competitions. The most recent acknowledgement and a true testament for our innovation work is the award for the “Vodka Producer of the Year” by the International Spirits Challenge. This further strengthens our position as the Nordic innovation role model in the beverage industry. We are also continuously working on developing our digital platforms, viinimaa.fi and folkofolk.se. The user traffic on these platforms has been growing constantly, and the platforms are playing an increasingly important role in connecting consumers with our brands and products.
Altia is a forerunner in sustainability in our industry. In our sustainability roadmap, packaging plays an important role and we aim for 100% recyclable packaging. PET bottles are a sustainable choice as their carbon footprint is 60% lower than that of a glass bottle. Within PET bottles, our aim is to increase the content of recycled plastic to 100% by 2030 compared to the EU requirement of 30% by 2030. During the quarter, we have launched our first products packed in rPET bottles which include recycled plastic.
In September, we announced the merger of Altia and Arcus to form a leading Nordic wine and spirits brand house – ANORA GROUP. Altia’s Board of Directors has convened an Extraordinary General Meeting to make a decision on the merger on 12 November 2020. In addition, customary regulatory approvals are needed before the completion of the merger, which is expected to take place during the first half of 2021.
Towards the rest of the year, the uncertainties related to COVID-19 have escalated and the negative impacts on Altia’s last and most important quarter are expected to be substantial. The restrictions on social gatherings will limit the festive season and hence impact negatively the Christmas sales. Especially in Scandinavia, the sales volumes of glögg and aquavit are expected to be lower than in the previous year. Further, the significant negative impact on sales in travel retail is expected to continue.
In Altia Industrial, the escalated uncertainties relate to the decreased demand for starch, the tight situation on the ethanol market, the lower contract manufacturing volumes and the expected higher cost base due to increased barley cost.
Despite the uncertainties in the fourth quarter, we are providing an updated guidance for 2020. Following the strong profitability development during the first nine months of the year, we expect comparable EBITDA for 2020 to be higher than in 2019.”