From the CEO
CEO Pekka Tennilä in the Half-Year Report January-June 2020 (19 August 2020):
“Considering the exceptional conditions, I am proud to say that we are managing the COVID-19 crisis extremely well, and Altia has shown resilience. During the second quarter of 2020, COVID-19 impacted our business significantly and it brought uncertainties to our operating environment. We reacted quickly to keep our operations running efficiently and stayed active in the sales channels that remained open, while securing the safety of our employees. At the same time, we made an important contribution to society by meeting the high demand for denatured ethanol for hand sanitisers. To mitigate the impacts of COVID-19 we implemented remote and part-time work as well as temporary lay-offs and cost savings measures. I want to express my sincere thanks to all our skilled employees for their commitment and hard work during these challenging times.
In Q2, the important sales channels – travel retail, on-trade and exports - were closed and our beverage net sales decreased, but not in the extent that we expected in the Q1 report. With consumers shifting purchases to the monopolies, the volume growth in the monopolies has been at an all-time high. Our performance in the monopoly channel has been strong led by double-digit net sales growth in spirits in all monopoly countries. Net sales in the Finland & Exports segment declined due to sales in travel retail, exports and on-trade being close to zero. However, in Finland, sales growth in the monopoly and grocery trade channels, and our focus on revenue management increased total beverage sales and improved profitability. In the Scandinavia segment, the reported net sales decline was driven by lower sales in Denmark due to the new business model and the closing of on-trade. In Sweden, our overall sales grew with strong growth in spirits sales, supported by market share growth in the strategically important gin, rum and liqueur categories. In Norway, performance was strong across all categories and we have continued to gain market share.
In Altia Industrial, thanks to a strong commitment by our employees and a clear focus on production continuity, our operations have run without major disruptions during the crisis. In industrial products, our performance was solid, driven by strong ethanol sales partly due to the increased demand for hand sanitisers. On the contract manufacturing side, we have seen a decline in volumes due to COVID-19. We are, however, extremely pleased about the renewal of the Finlandia Vodka production agreement with Brown-Forman. The renewed agreement runs until 2035 and continues a long-lasting strategic collaboration between Altia and Brown-Forman, which began already in 2000.
In the first half of the year, our profitability improved significantly from the previous year and all segments improved in a tough environment. Altia Industrial’s strong result improvement is due to the normalised barley price and the high volumes of technical ethanol. In both consumer segments, strong sales growth in the monopoly channel, revenue management and cost savings measures implemented throughout the organisation have supported positive profitability development. Comparable Group EBITDA improved by 37% or EUR 5.1 million to EUR 18.8 (13.7) million.
Altia’s financial position strengthened further during the first six months with a solid 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 10.3 (-4.0) million at the end of the period. Also, the liquidity position of the Group has remained strong throughout the period.
Altia is a forerunner in sustainability in our industry. For us, sustainability is both a strategic priority and a key success factor in business. In April, our sustainability work was recognised with a Gold Medal in the EcoVadis Corporate Social Responsibility rating. More than 55 000 companies were rated by EcoVadis and Altia was ranked among the top 2%. We got positive feedback for our advanced management system in environmental topics.
Preliminary forecasts for the barley harvest have been published and based on these the barley crop this year is likely to be smaller than last year, but in line with the long-term average crop.
Guidance for the rest of the year remains suspended due to the prolonged uncertainties related to COVID-19. New guidance will be provided if the impacts of COVID-19 on the operating environment and business conditions can be assessed in a reliable manner.”