From the CEO
CEO Pekka Tennilä in the Half-Year Report January–June 2018 (10 August 2018):
"We have had a financially stable first half of 2018. Our profitability improved in comparison to previous year despite a demanding operating environment with several external factors affecting Altia’s business, such as the continued unfavourable currency development as well as cost pressures on key raw materials.
In January–June reported net sales amounted to EUR 160.6 (164.6) million. Net sales were impacted negatively by EUR 2.9 million due to the weak Swedish krona and Norwegian krone, and by lower net sales in the Altia Industrial segment. Comparable EBITDA was EUR 13.8 (13.4) million.
In the first half of the year, the Finland & Exports segment has grown slightly driven mainly by the Finnish retail business and exports. The Scandinavia segment’s net sales were at last year’s level in constant currencies. In total, the sales of beverages (Finland & Exports and Scandinavia segments together) grew by 0.5% in constant currencies. Altia’s spirits sales have been impacted negatively by the generally lower volumes in the retail monopoly in Finland. The currency impact on the net sales of wine is considerable, but we have been able to gain market shares in the monopolies overall. In the Altia Industrial segment, the sales of industrial products are developing positively. However, lower contract manufacturing volumes due to continued phasing in the second quarter have decreased net sales. We expect contract manufacturing volumes to stabilise towards the end of the year.
Altia’s second quarter reported net sales were EUR 87.1 (91.3) million. The main reasons for the lower net sales in comparison to last year, are the timing of Easter in Q1 in 2018 and in Q2 in 2017, partner portfolio changes in Sweden, and the continued unfavourable currency development. The negative currency impact on net sales in the second quarter was EUR 1.6 million.
Based on Altia’s strategy we focus on our Nordic core brands which are performing well and growing. Further, we continue building distribution in Asia for Larsen Cognac and in the US for Koskenkorva Vodka and O.P. Anderson aquavit. Exports of Koskenkorva Vodka to Russia are progressing well. The addition of the new partner, Garcia Carrion, and their extensive wine portfolio, has improved our market position in the Swedish market. Altia’s own wine brand, Chill Out, has had a good first half of the year. We have revamped the Chill Out design to further sharpen its position in the market. In the Finnish retail channel, we have launched Chill Out wine spritzers, and additional launches include a sugar free Koskenkorva Vichy and a low-alcohol version of Fresita sparkling wine. We are pleased with our product offering in retail, and we will continue to work hard to materialise the retail opportunity in Finland.
I am happy to announce that during the summer, Altia entered into a distribution agreement with the Swedish gin distillery, Hernö Gin. Hernö Gin produces a variety of craft gins which have been nominated as the world’s best gin several times. The addition of one of the most aspirational gin brands in the world, as well as premium craft gins to our offering is the right step in developing our offering and partner business. The agreement covers the distribution of Hernö gins in the monopoly markets, the Baltic region and in travel retail. Following this and the addition of the Garcia Carrion portfolio, we have a considerably stronger portfolio in Sweden which will help us to mitigate the unfavourable currency development.
The exceptionally dry and warm summer in Finland is expected to have some impact on the barley harvest. Despite demanding conditions, the volume forecast from Natural Resources Institute Finland (Luke) for the barley crop is -13% in comparison to last year which is far more better than other grain forecasts. However, the extent of the impact on the yield and quality is to be seen during the third quarter. In any case, to ensure the efficiency of the Koskenkorva plant, we are preparing for alternative solutions where possible.
For different businesses we have different pricing mechanisms to take into account raw material price changes. Naturally in these circumstances, there is more pressure on pricing in beverages and industrial products, while we will continue a strict cost control and focus on further efficiency improvements."