Oatly (OTLY) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - John Baumgartner
• Chief Executive Officer - Jean-Christophe Flatin
• Global President and Chief Operating Officer - Daniel Ordonez
• Chief Financial Officer - Marie-Jose David

TAKEAWAYS

• Revenue -- $243.1 million, representing a 9.1% increase driven by volume growth in the retail channel and expansion in international markets.
• Constant Currency Revenue -- 8.9% growth, excluding a $513,000 foreign currency exchange tailwind.
• Gross Profit Margin -- 34.1%, expanding 436 basis points due to supply chain efficiency improvements and productivity gains across all regions.
• Adjusted EBITDA -- $9.4 million, an improvement of $6.3 million compared to $3.1 million in the prior year period.
• Full-Year Adjusted EBITDA Guidance -- $16 million to $20 million, revised downward from the previous range of $25 million to $35 million due to North American logistics costs.
• Net Loss Per Share -- $0.04, narrowing from a $0.11 loss per share in the same quarter last year.
• Europe & International Revenue -- $147.2 million, growing 20.4% in constant currency behind 17.6% volume growth, primarily from Barista Edition products.
• North America Revenue -- $63.8 million, representing 2.9% constant currency growth driven by retail channel expansion despite macro challenges.
• Greater China Revenue -- $32 million, a 19.3% constant currency decline reflecting competition in the foodservice channel and a difficult comparison to the prior year.
• Sold Volume -- 156.9 million liters, a 4.2% increase compared to 150.6 million liters in the prior year period.
• North America Diesel Prices -- 70% increase since February 2026 and 40% since early July 2026, creating unoffset cost pressure in the third quarter.
• Free Cash Flow -- Negative $18.4 million, a decline from a $5.4 million outflow last year due to inventory building for product launches and capital expenditure timing.
• Available Liquidity -- 95 million, including undrawn bank facilities as of the end of the third quarter.
• Capital Expenditure Guidance -- $20 million to $30 million, with management expecting the final figure to align with the middle of that range.
• Europe & International Adjusted EBITDA Margin -- 21.4%, an expansion of 370 basis points year over year due to facility optimization and volume absorption.
• North America Market Share Gap -- 2 percentage points, narrowing from 8 percentage points in the summer of 2025 as the company pursues category leadership.
• Branding and Advertising Spend -- Grew at a double-digit rate, contributing to a $10.2 million increase in selling, general, and administrative expenses.
• Daily Fiber Intake Gap -- 10 grams per day below recommended levels in Europe, providing a growth opportunity for the company's new wellness platform.
• Out of Home Channel Volume -- 25% year-over-year growth in the third quarter, driven by expanded presence in coffee houses and commercial partnerships.
• Total Distribution Points -- 800 basis points increase, reflecting accelerated retail distribution growth without diluting product velocities.
• Year-to-Date Operating Cash Flow -- Negative $11.5 million, an improvement from negative $17.4 million in the same period last year.
• Greater China Strategic Review Costs -- $2.4 million, including noncash impairments related to an office exit and external consultant fees.

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RISKS

• Jean-Christophe Flatin stated, "the latest wave of logistics and fuel inflation in North America has finally exceeded our capacity to offset," noting that this pressure drove the downward revision of the full-year profit outlook.
• Jean-Christophe Flatin warned that management currently projects "2027 both on key cost of goods sold and logistic like items to be a little bit the worst off" compared to the 2026 fiscal year.

SUMMARY

Oatly Group AB (NASDAQ:OTLY) management reported that the business demonstrated resilience through top-line growth and adjusted EBITDA expansion despite inflationary pressures in logistics and energy. The company maintained its full-year constant currency revenue growth targets while lowering its profit outlook to account for accelerated fuel and freight costs in the North American market. Strategic initiatives included the introduction of a fiber-based wellness platform and an ongoing review of the Greater China segment, with the company prioritizing growth in North America and other international markets.

• Management announced the launch of a new fiber-based beverage platform intended to target wellness and gut health consumer occasions, starting in Europe and expanding to the U.S. in January 2027.
• CEO Jean-Christophe Flatin stated, "Our results exceeded consensus expectations despite this pressure," referring to the impact of tightening cost inflation during the quarter.
• The company plans to implement incremental pricing in North America effective in the first quarter of 2027 to protect profit margins against rising diesel and freight costs.
• A strategic review of the Greater China segment is expected to conclude by the end of 2026, with management evaluating options including a potential carve out of the business.
• The Barista Edition products continue to drive volume, and management reported that Oatly is growing at nearly double the rate of the overall oat milk category.
• CFO Marie-Jose David indicated that third quarter free cash flow was impacted by "unfavorable timing of capital expenditures" and inventory builds to support innovation launches.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-IFRS financial measure that excludes certain noncash and one-time items from earnings before interest, taxes, depreciation, and amortization.
• Constant Currency Revenue: A financial metric that eliminates the impact of foreign exchange rate fluctuations to show underlying business growth.
• TDP: Total Distribution Points, a measure of product availability across retail locations.
• GLP-1: A class of medications used for diabetes and weight loss that management believes is driving increased consumer interest in nutrient quality and fiber.
• Barista Edition: A specific line of Oatly products formulated for use in coffee and professional foodservice settings.
• RCF: Revolving Credit Facility, a flexible line of credit provided by banks.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Oatly Group Third Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a Q&A session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, John Baumgartner, Vice President of Investor Relations.

John Baumgartner: Good morning, and thank you for joining us today. On today's call are our chief executive officer, Jean-Christophe Flatin, our global president and chief operating officer, Daniel Ordonez, and our chief financial officer, Marie-Jose David. Please review the cautionary statement regarding forward looking statements and other disclaimers on slide 3. Which are integrated into this presentation, and include the Q&A that follows. Please also refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. Also on today's call, management will refer to certain non-IFRS financial measures.

Including adjusted EBITDA, constant currency revenue, and free cash flow. Please refer to today's release for a reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. In addition, OWI has posted a supplemental presentation on its website for reference. I would now like to turn the call over to Jean-Christophe.

Jean-Christophe Flatin: Thank you, John, and good morning, everyone. Slide 5 features our key messages. First, our third quarter tells the story of business resilience. Not only did we deliver strong top line growth, but we also delivered substantial growth in total adjusted EBITDA both year on year and sequentially, despite another quarter of elevated and tightening cost inflation. Our results exceeded consensus expectations despite this pressure. Second, in Europe and international, volume momentum remains robust. On-trend innovation drives growth. We believe that our new products are capturing incremental demand both for Oatly and the plant-based category, while attracting younger consumers.

In North America, where the macro backdrop remains challenging, we are activating on the controllables as we accelerate retail distribution goals, Now at the record-high number of distribution points, we continue to narrow the market share gap in pursuit of category leadership. Third, I am excited to announce our entry into the wellness space. Through our new platform of fiber beverages. Our first platform launch planned across both Europe and North America. 1 of the reasons that our founders chose Oates is for its nutritional power including the fiber naturally present in oats.

As many populations consume less fiber than recommended by dietary guidelines, creating what we refer to as being the fiber gap, our fiber platform is designed to offer consumers a convenient and delicious way to incorporate more fiber into their everyday diets. Our fiber line has launched in Europe and arrived in North America in January 2027. Fourth, our cost structure maintains strong resilience through the third quarter, including absorption of higher costs, related to the Middle East conflict. Both in Europe and international and North America. Which allowed us to deliver a strong Q3 performance. However, the latest wave of logistics and fuel inflation in North America has finally exceeded our capacity to offset.

For perspective, in the US, diesel prices have increased approximately 70% since the beginning of the conflict in the Middle East in February, and approximately 40% since early July. This unexpected and sharp acceleration during Q3 combined with broader logistics pressure, drives the downward revision to our full year adjusted EBITDA outlook. In response, we continue to engage key mitigation levers including continued cost efficiencies and product mix, we will implement incremental pricing effective in the first quarter of 27. Amid these volatile and challenging macro headwinds, we choose to protect our profit margins and resources to reinvest and fuel our growth. Despite these profit headwinds, we remain on a positive, structural trajectory of profitable growth.

Our reiteration of 2026 constant currency revenue despite more difficult year on year comparisons and macro consumer pressure. Reinforces our confidence and visibility into our demand generating growth strategy. Turning now to slide 6. Here, you can see our solid third quarter scorecard for important key performance indicators. Our revenue grew 9.1% and 8.9% in constant currency. Our gross profit margin reached 34.1%, an improvement of 436 basis points compared to last year. Our adjusted EBITDA was positive €9.4 million and 3.9% of net sales. An improvement of €6.3 million versus last year despite reinvestment and cost inflation.

Finally, our free cash flow in the quarter was a negative €18.4 million, a decline from last year outflow of €5.4 million and attributable to timing elements that MJ will detail in the finance section. Our year to date cash flow is evolving consistent with our expectations, and our business plan remains fully funded. We maintain focus on achieving positive free cash flow through continued improvement in the P&L growth in adjusted EBITDA, and working capital efficiencies. Slide 7 reiterates our focus areas for the rest of 2026. As Daniel will soon outline, not only do we maintain high conviction in the traction of our growth playbook on our existing portfolio.

Our combined taste and fiber products strongly position us to participate in more consumption occasions across more consumer segments as a full beverage company. In addition, we remain fully mobilized across all parts of the company to mitigate the continued macro volatility and cost headwinds to protect our profit margin and our ability to further fuel our growth momentum. Finally, as it pertains to Greater China, we expect to complete our strategic review by the end of this year as we evaluate a range of options including potential carve out. Our goal is to accelerate growth enhance operational focus, and improve our consolidated cash returns whilst maximizing the value of this business.

We view North America and other international expansion markets as our priorities for growth. And we commend our management team in Greater China for navigating challenging local headwinds in recent years. We will, of course, update the market on our progress as necessary. Slide 8. Summarizes our guidance. For full year 2026, continued execution of our growth playbook underpins our unchanged outlook for constant revenue growth of 8% to 10%. As discussed, the reduction of our adjusted EBITDA outlook from the prior lower end of €25 million to €35 million to a new range of €16 million to €20 million reflects incremental pressure from fuel and logistics in North America since the end of July.

With that, Daniel, over to you.

Daniel Ordonez: Thank you, JC, and good morning, everyone. I will start my discussion on slide 10. We are very pleased with our strong year to date performance from the deployment of our growth playbook. Which demonstrates Oatly's relevance in shaping the beverages culture. As I discussed last quarter, over the past 2 years, we have made substantial progress reducing the barriers to consumption and creating new occasions for consumers to enjoy the taste, functionality, and versatility of our oat drinks. We are encouraged by the growth in household penetration. Which we believe reflects growing consumer preference for Oatly as a full-on beverages company. As we close 2026, this approach is gaining momentum through new platforms and unique flavors.

Appealing to a much broader population. And anchored on taste, health, and with sustainability at the core. It is important to reflect on Oatly's ability to shape global beverages trends. So we captured the most prominent in the upcoming slides. In quarter 3, we strengthened our presence in the global phenomenon with monochrome events in Berlin, Toronto, and London as featured on slide 11. Our presence at the London Fashion Week reinforces Oatly's relevance at the intersection of beverages and culture. Which led to a high-profile London embassy event last week as featured on slides 12 and 13.

Following up to Taste in New York back in June, our London embassy event attracted media, influencers, and commercial partners to celebrate the collective momentum for beverages, and the launch of our latest trend setting recipe lookbook, Volume 4, and our future of taste report 2026. We hosted over 500 attendees on day 1 alone before it was open to the public. They experienced signature drinks, panel discussions exploring taste, trends, fiber, sustainability, and participated in hands on drinks master classes. As demonstrated in our future of taste report on slide 14, our ambition is to shape what is next on menus.

The insights that inform this work are collected from our very own beverage market developers based in each coffee capital of the world. As well as coffee houses, experts, and mixologists for more than 20 countries. And finally, validated by data identifying what is trending online. As traditional nightlife culture declines, cafes have become the hub where new ideas are cultivated and subcultures are formed. Oatly is uniquely positioned to offer our commercial partners the expertise into the trends shaping coffee culture and how these trends can be realized via our lookbook.

In this year's Future of Taste report, we explore the pharmacification of drinks, from fibers to ferments, with the expectation that functionality cannot come at the expense of taste. Emerging health trends including gut health, fiber maxing, fiber layering, and skin care, are increasingly delivered through drinks. slide 15 shows how the coffee menu is transforming. Fueled by customization and visual appeal. And moving away from the traditional offers of flat white and cappuccinos. As an example, we expect the Mont Blancs and Cold Foam to enter the mainstream. Oatly versatility is highly relevant for inclusion among these trends.

And we close 2026 more confident than ever before that Oatly provides the ultimate base for functionality, fun, and experimentation as captured in our lookbook. Through flavors and formats, we believe Oatly is strongly positioned to lead this new taste world order. This leads me to our next big announcement on slide 16. The launch of our new Fiber platform. I emphasize that the fiber range is not simply innovation. it is a natural evolution of who we are. Oatly is built on over 30 years of oat research and innovation, which provides unique legitimacy in the fiber space. Our fiber line complements our Tastemakers platform, as the breadth of our offering has significantly expanded over the last 3 years.

The fiber range is available in 2 options. A low calorie, no sugar option, well suited for use in shakes, and a low sugar barista for coffee and similar drinks. An approximate 250-ml serving, roughly equivalent to 1 oat latte provides 5 to 6 grams of fiber. So we expect that platform to accelerate Oatly's penetration in new consumer occasions. For example, Lo-cal is highly relevant for the world of wellness, fitness, and sports. Oatly Fiber can also be combined with protein powder. Bringing fiber and protein together in a creamy and convenient format. Making for a versatile base for shakes and other functional beverages.

Oatly Fiber has been designed to make it easier for consumers to incorporate more fiber into their everyday diet with particular focus on female consumers. Despite these benefits, the modern diet lacks fiber as seen on slide 17. Across Europe, the average daily fiber intake is approximately 10 grams below the 30 grams recommended by health authorities. Similar gaps exist across the world, including The US. We see consumer demand for fiber on the verge of a multiyear acceleration. And Internet search data indicates fiber is already closing the gap with protein. Fueled by the growing use of GLP 1 medications consumers are increasingly scrutinizing the quality and the quantity of nutrients.

And we expect these structural tailwinds to drive fiber demand and notably for oats. Nutrient dense, naturally rich in fiber, and containing beta-glucans. A type of natural soluble fiber shown to reduce blood cholesterol levels. We expect Oatly to be among the leaders in reducing the fiber gap through taste and our expertise in old processing. Which is an important part of our approach to developing fiber focused products. 11 markets in Europe by year end, and in the US beginning of January 27 in the new 48-ounce pack. And it will be supported with intention. Closing my discussion on innovation, slide 18 features our Oatly Barista Cold Foam. Which extends our presence into the refreshment occasion.

And is among the strongest trends in the out of home channel and, again, particularly relevant to the young consumer. Specially designed for out-of-home professionals and suitable for hot, and iced drinks, cold beverages, and cocktails. Our cold foam features a delicate vanilla note. it is lighter than classic whipped cream, and compatible with most professional equipment. As with fiber, we intend to develop it into a full global platform at speed. Turning to slide 19 on our Q3 performance. Europe and international delivered another very robust quarter. Constant currency revenue growth was 20.4%, including volume growth of nearly 18%. This is particularly impressive as we lapped volume growth of nearly 9% in last year's third quarter.

At the category level, Retail Takeaway growth for total plant based beverage has remained solid up high single digits driven by volume, while oat milk outgrows plant based up 9%. Oatly is growing at nearly double the rate of oat milk category. As shown on slide 20, growth in household penetration continues to enhance our results, including increasing relevance among younger consumers. Oatly demonstrates strong appeal across Gen Z and alpha, which underpins our encouraging long term growth potential. Expanding appeal is also evident in our volume acceleration across the out of home channel as seen on slide 21, including year on year growth of 25% in Q3. Across our expansion markets, the sales dynamic is nearly identical.

Oatly outperforms oat milk, and oat milk is outperforming overall plant based drinks. As shown on slide 22, we are accelerating our momentum and gaining critical mass. With the identical playbook curated for local relevance. It seems as if France, Spain, Belgium, Mexico, UAE, or Poland had been waiting for Oatly to arrive. Importantly, though, in addition to the accretive revenue growth from expansion markets, we are also adjusted EBITDA positive in these regions. As we leverage our established capacity and we observe a rigorous go to market approach. Time to turn our attention to North America on slide 23. Retail macros remain challenged. Consistent with recent quarters, category takeaway declined mid single digits.

We again outperformed with volume driven growth of 8%. This sustained momentum means we are quickly closing the market share gap nearing just 2 percentage points to take market leadership. Following a gap of nearly 8 percentage points in the summer of 2025. Overall, our North America segment grew in quarter 3 with constant currency revenue of 2.9% including positive price mix. This is net of the sales decline in the former largest customer, which is now significantly reduced but still meaningful in the year on year or quarter on quarter comparison. Our sales in out of home accelerated sequentially, and September was the second strongest month of the sales this year.

Looking ahead, we plan to further accelerate this momentum. Turning to slide 24. Our expectation for continued outperformance is underpinned by 2 catalysts. First, are growing retail distribution at an accelerating rate including benefits from a capillary consolidation around a more limited number of leading brands. Our distribution growth has accelerated throughout the year, including contribution from numerous leading retailers and importantly, without diluting velocities. This growth has been significantly driven by our Barista version shown on slide 25. By and large, a leading item in Europe, and I am glad to say is now gaining traction in North America led by our space strategy.

Connecting the out of home experience with the retail channel, both in chilled and ambient shelves and in multiple sizes for different shopper locations. Elevated visibility for Barista provides a foundational bridge to our second catalyst, the launch of Flavor Baristas. Including the likes of churros or popcorn. And the introduction of matcha, all of which are now underway. Collectively, expanded distribution is driving our sustained growth in market share. As featured on slide 26. And our larger market presence leads to the adoption of our increasingly diverse range of products as seen on slide 27. This more expansive portfolio enables a reframing of category to drive new consumer trial and ultimately repeat and velocity.

Shifting to Greater China on slide 28. Third quarter constant currency revenue declined 19.3% on lapping last year's difficult comparison of growth of 29%. Operating conditions remain consistent with recent quarters, including headwinds that persist in the foodservice channel and sustained strong performance of the new retail portfolio. As J.C. mentioned, we intend to complete the strategic review of our Greater China segment by the end of this year. To close my business update, I would like to focus on the trajectory of key business metrics on slide 29. We continue to deliver strong volume growth which is converting into operating leverage and gross margin expansion that fuels reinvestments.

In the third quarter, spending for branding and advertising again grew at a strong double digit rate relative to last year, and was among the main factors driving the year on year increase. In SG&A. As J.C. mentioned, this latest wave North America fuel and freight inflation since July has finally outpaced our ability to offset this incremental cost pressure. Similar with our peers in food and beverage. Which reduces our outlook for 2026 adjusted EBITDA. With the necessary objective to protect margins, we have already communicated a price increase to our customers effective in the first quarter of 27.

We are confident that the significant weight of relevant innovations taste, fiber, and importantly, the reframing with the 48 ounces pack for the innovations, not on 64 ounces any longer, together with strong distribution and velocity traction will help buffer volume. In Europe, our pricing is also under review. As the cost impact related to this year's Middle East conflict is proving stickier. We emphasize our decisiveness for the consolidation of profitability. From which we will reinvest to sustain the current cycle of demand growth in 2027 and beyond. And with that, I will now turn the call over to MJ.

Marie-Jose David: Thank you, Daniel, and good morning, everyone. Slide 31 summarizes our solid financial delivery for the third quarter. Constant currency revenue grew 8.9% against a more difficult prior year comparison. Maintaining the solid rate seen in Q2. Gross profit margin was 34.1%, an increase of 36-basis-points year on year. Net pricing and product mix offset cost inflation with nearly all pressure driven by conflict in the Middle East and trade expenses in North America. This offset drove the flow through of solid operating leverage from facility optimization volume absorption, and productivity improvements. Q3 adjusted EBITDA was a positive €9.4 million and improved €6.3 million relative to last year's quarter 3.

Delivery was consistent with our expectations for a ramp in second half profit contribution driven by gross margin expansion, some favorable expense phasing and SG&A leverage. Our brand investments have demonstrated strong returns which have been sustained despite this year's material cost inflation, and the underlying trajectory of structural profit improvement remains positive. I will now provide more details about our financial performance. slide 32 shows the bridging items of our revenue growth. Volume grew 4.2%, Price mix increased 4.7% and foreign exchange was a modest tailwind of 0.2%. Moving to slide 33. The year over year gross margin bridge shows the improvement of approximately 440 basis points.

This improvement is explained by 450 basis points from fixed cost absorption and supply chain efficiency, and 120 basis points from net pricing and product channel mix. These benefits were only partially offset by a negative impact from inflation of 110 basis points, including 90 basis points from the Middle East conflict and North America freight costs, and foreign currency headwinds of 20 basis points. slide 34 shows the quarter 3 year over year improvement in our adjusted EBITDA. Growth of €6.3 million was driven by a €16.6 million increase in gross profit, partially offset by a €10.3 million increase in SG&A and over.

Nearly half of this SG&A increase is driven by customer distribution costs, which are linked to sold volumes, and include increasing pressure from freight expense. Approximately 1-third of the SG&A increase is from selling expenses and largely increased branding and advertising. The remaining increase in SG&A is driven by general and functions. Excluding freight inflation related to macro factors, our underlying cost structure remains positioned to scale with volume growth. slide 35 shows segment level details. Europe and International grew net sales by 20.4% in constant currency. Despite continued cost inflation related to the Middle East. Adjusted EBITDA grew nearly €10 million year on year, from both gross margin expansion and operating leverage.

Adjusted EBITDA margin was 21.4% and expanded approximately 370 basis points year on year. North America constant currency revenue grew 2.9%. The segment's adjusted EBITDA increased by €1.6 million to €0.3 million, and a more moderate growth rate relative to last quarter from rising cost pressure from fuel and logistics. Adjusted EBITDA margin was positive at 0.5% and improved approximately 260 basis points year on year. Greater China constant currency revenue decreased 19.3%. The contraction is explained by the lapping of a challenge comparison with the prior year quarter, when constant currency revenue grew 29% and continued current year macro pressure in the out of home channel.

This segment reported an EBITDA of negative €1.9 million and softening of €3.5 million year on year. As J.C. mentioned, our strategic review is ongoing, and expected to conclude by year end. In our reported results for quarter 3, Greater China results include a noncash impairment charge of €1.6 million related to the exit of 1 office location, which is excluded from adjusted EBITDA. For quarter 3, corporate expenses was higher by €1.4 million on higher personnel costs. Turning to our cash flow on slide 36. I reaffirm that our business plan remains fully funded, and we remain focused on bringing the company to positive free cash flow following the positive inflection in our adjusted EBITDA.

In quarter 3, free cash flow was a net outflow of €18.4 million compared to an outflow of €5.4 million last year. The increased outflow results from 3 factors. First, is unfavorable timing of capital expenditures, which shift from Q2 into Q3. Second is increasing inventory to support our innovation launches and expanded distribution. Third, is the previously disclosed expected reversal of beneficial working capital phasing that enhance cash generation in Q2. Year to date cash from operating activities for quarter 3 is a negative €11.5 million, an improvement from last year outflow of €17.4 million.

Year to date, results are consistent with our expectations and at the end of quarter 3, total available liquidity was €95 million including undrawn bank facilities. Aside from the quarterly volatility in cash phasing this year, we see continued progress in our underlying cash drivers, and opportunities for further improvement across all levels of cash flow. We continue to expect that free cash flow will not be positive for the full year 2026. Specifically for quarter 4, we anticipate improved cash flow relative to quarter 3, and last year from multiple factors. First, timing considerations will result in CapEx not repeating at the same level as quarter 3.

Second, as we have already largely built inventory to support our innovation, we do not anticipate a repeat of the headwinds seen in Q3. Third, we also anticipate improvement in payables. Turning to our 2026 outlook on slide 37. As JC mentioned at the top of the call, we are maintaining our outlook for constant currency revenue growth at 8% to 10%. On a reported basis, considering recent FX rates, and assuming no change for the rest of the year, we estimate FX to add approximately 200 to 250 basis points to net sales. Consistent with our prior expectation.

For adjusted EBITDA, we are reducing our outlook from the prior low end of €25 million to €35 million to €16 million to €20 million. Year to date, the flexibility and resilience of our model absorb the cost impact of the Middle East conflict. However, similar to many of our peers in food and beverage, The latest increase in fuel and freight costs for North America has been larger than anticipated. Although we have mitigation efforts underway, the time lag of these levers will be unable to offset the incremental cost push in quarter 4, which we estimate will be in the low double digit percent in North America.

The net impact of this cost pressure results in our reduced outlook for adjusted EBITDA. As a reminder, our outlook is provided in the context of what we know today and set against elevated macro volatility. Our fundamentals remain strong. And we continue to execute against our growth playbook while maintaining agility to adapt to external factors. Lastly, our guidance for full year CapEx remains unchanged in the range of €20 million to €30 million and with a bias to the middle of this range. This concludes our prepared remarks. We will now hand it over to the operator for the Q&A.

Operator: Thank you. To withdraw your question, please press 11 again. 1 moment for questions. And our first question comes from Andrew Lazar with Barclays. You may proceed.

Andrew Lazar: Great. Thanks so much for the question and good morning. I guess I wanted to drill down a little bit on, some of the pricing commentary. Certainly, a number of packaged food peers have already discussed the likely need to take some pricing actions exiting this year into 2027. And those that have discussed it a bit more in a more detailed fashion have also talked about embedding greater than, let's say, historical or typical volume elasticity this time around, just given the consumer's under a bit more pressure than, let's say, the last time. Know, the industry had to enact quite a bit of pricing.

So I am trying to get a sense of is, you know, what type of elasticity are you embedding in North America? And I guess in Europe as well, it sounds like probably some pricing coming there also. Is it greater than, sort of what you have typically seen? In these types of situations?

Daniel Ordonez: Thank you, Andrew. Daniel here. I will take your call. Thank you for the question. Listen. Pricing, you got it right. We will do what we must do to protect margins since the cost inflation seems to be sticky. Before I dive into elasticity, I would like to say we are looking at, the 2 segments. Right? We talked about. You got it right as well. The North America price increases through and we are contemplating, but decisively as well in Europe as we speak. We need to look at things. The way we look at things is upon very strong velocities. We see at the moment strong velocities, market share momentum, significant market share momentum and building up.

And we show a consistent net gain from private labels. Andrew. So this is possibly significantly different to what other CPG peers could be seeing at the moment. So that demonstrates that our value equation is robust. How much are we going to increase price? The sufficient 1 to offset cost increase, so that gives you already the way we are directionally looking into 2027. Now, to frame this up, we do not see just a price increase. As we are implementing this, but primarily an innovation led price reframing. You see all the new items you see on taste.

On fiber, the reframing of the 64 ounces in the US to 48 ounces, all the innovation will come in 48. That you see on slide 27 for reference. Half of those items will be new. So when you see what consumers and shoppers are going to be seeing are not going to see a net price increase, that is it, but a lot of momentum happening on shelf. Elasticity, there will always be. We are building some, not much. And we expect the content to. the context to remain volatile. So. But on the whole, Andrew, we believe we are very well placed to minimize the elasticity. Got it. Thanks for that.

And then just curious on sort of as you think forward, the outlook on the oat milk category in North America, Sure. Once you lap the competitor leaving the space, which I am assuming, but maybe I am wrong, is what drove the oat milk category down some 12% in the quarter? Yeah. Listen. Andrew. You are right. If you look at what is happening with that you know, alleged concealed consolidation, we are clearly gaining more than our fair share, as you see on slide 24. Imagine we are 800 bps up in TDPs. So that is a lot and goes back to your previous question about strengths and velocities. Right?

So we are not diluting velocities, which gives us a lot of confidence that it correlates a lot with the household penetration gains we are seeing as well. it is not just about that consolidation. If you look at the other 2 shelves in which we are operating, creamers or ambient, the momentum keeps building. So it is not just a consolidation. Now as you rightly said, our focus is in driving category penetration. We are obsessed by it. With 70% of headspace of penetration in front of us, that is what we are doing. And then the rest is about executing the playbook and investing behind, the innovation, Andrew.

And really, we are really, really decisive and, optimistic about what fibers and functionality can do in The US. Your question was more towards The US activities. This could be the turning point that we are expecting for North America. Right. Thanks very much.

Operator: Thank you. Our next question comes from Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala: I guess the big question is trying to understand the logistics impacts on logistics into, you know, into 2027 as best as we can. It sounds like a little bit from your commentary that maybe it was a. It was it was obviously prices moved up very quickly, and they are hitting Q4 very substantially. But it also sounded like it is temporary in some way. So I am just kind of curious on is this a. Are some of these fees a catch up cost? Or something else going on? Or really, any insights that we can get into the beginning of 2027 related to what is happening with costs?

Jean-Christophe Flatin: Thank you, Kaumil. Jean-Christophe, I will take that. Allow me to start by unpacking your question on the why now? How much are we guiding revising, or guiding, and so what, including going into 2027. So first, why now? You are right. Up to quarter 3, we have demonstrated our resilience by our ability to absorb higher cost related to the Middle East conflict, mainly on logistic and packaging. And that resilience is what drove our robust delivery both in Q2 and Q3. Now, however, in the course of quarter 3, like many of our CPG peers, we have seen an additional and quite sudden inflation acceleration specifically in US freight and fuel. Let me just give 1 illustration.

The US diesel price increased by 23.8% just between Monday, October 26, and the last time we spoke on July 22. If I step back and look at the full year 2026, this latest diesel price point is 83% above what it was on January 5 and 2-thirds of this growth nearly happened after July. So, yes, it has been pretty sudden. So what this means is, first, our quarter 3 EBITDA would have been higher without this. And it also explained why this is this last wave of inflation that has now exceeded our capacity to offset, hence, the timing of our revised bottom line guidance into 2020, into the quarter 4.

So what is up for Q4, I think I already covered it, perhaps giving you 2 data points. It comes to the Middle East conflict cost pressure in E and I, it now represents more than 100-basis-points of our full year total company net adjusted EBITDA margin. that is data point #1. Data point #2, to illustrate our heightened fuel challenge in North America, we now expect our freight to customer per liter sold in The US to be in Q4, 12.5% higher than the average of H1 2026. So that gives you a little bit of what we are seeing. If I now go to your question on the beginning of 2027, specifically.

Honestly, we are informed and humbled by the 2026 journey. So we currently project 2027 both on key cost of goods sold and logistic like items to be a little bit the worst off. 2026. Reflecting both the latest energy, all the impact price increases, we have got, as well as the highest point of view and freight in The US. So to your point, are we planning or are we projecting an ease up of those cost inflation at the beginning of 2027? Not at all. And that is why we are taking prices in the way Daniel just described, which is selectively with innovation. Great.

Operator: Thank you very much. Thank you. Our next question comes from Max Gumport with BNP Paribas. You may proceed.

Max Gumport: Hi. Thanks for the So you continue to show that your growth playbook is really having success both in Europe and international and in North America. I am I am curious for your view on whether a lot of the growth you are getting from this playbook is 1 time in nature and presents tough comparisons versus how much of it is sustainable and how much of this growth rate that you are you are seeing both in Europe and North America could continue into 2027 at this very attractive rate. Thanks very much.

Daniel Ordonez: Thank you, Max. Good to hear you this morning. Very good question. I tell you how we are looking at this. We are looking generalized momentum. And, we are looking at this as we are only getting started. Why am I saying that? A couple of other data points that are not in the deck. If you look at our volume growth, year on year, for quarter 3, excluding China, we are growing 15%. If you are looking at volume growth excluding China, for the year today, we are growing at almost 10%. So there is something there that shows that we are gaining traction at that perfectly correlates with household penetration.

We are growing household penetration as you saw in the deck in all our markets and in both regions. That tells us that there are tailwinds that we are catching, but also we are generating. And as you know very well, household penetration is not something that goes in and out from a month to month basis. There are weights and there are trends. So when we will look at 70% headspace penetration in front of us, We like to think that we are here that this momentum will stick. On top of that, you add 2 incremental points, max, before going into some color on the segments.

Number 1, I am sure you see like us, there is industry generalized momentum for out of home. And you see how much we are growing in out of home at the moment. So that tailwind favors our strategy. that is #1. And #2, the innovation that you see here are not 1 hit wonders. Everything we have launched is speaking as the necessary velocity to stay and then continue to gain traction, it is the matcha range, the flavor baristas, and now the fibers. So all of that combined, makes us look with optimism of the category development in the future. You will would have heard us talking about us not positioning ourselves anymore as a as an alternative.

I think that what we hear from consumers today is that we are a choice and we are really moving away from these binary dairy versus plant based debate. And we are really, really moving into what is the right flavor, texture, performance, and nutrition for what people drink. Right? So that is, that is the way in which we see it generally. And we are not stopping until it will become the world's culturally favored drink. Max. that is what we are seeing in building a beverage company, which is the kind of lingo that JC and I like. Love using. Both regions, same thing.

Perhaps in the case of North America, in The US, I will need to double click on distribution. Right? There is a very, very significant distribution big to be gained still and the reconfiguration of the of the retail shelves. And we are only getting started there. So when you see 50% of the new, items going to heat shelves in the coming weeks it gives me hope that the shelves in the retail space in North America will look increasingly similar to the ones we can see when you go to London or Berlin. Great. Thanks very much for all the color. Then just turning back to pricing. Would it be possible to quantify specifically in North America?

Just be the magnitude of the price increase that you have communicated to your Customers already that will become effective in Q1. I can imagine a wide range of outcomes depending on how much of this outsized inflation you are looking to offset. Thanks very much. Yeah. Of course. I will. Sorry. I would sound like a scratch record here. The sufficient 1, Max, to cover for the cost inflation, of course, with and it depends. As JC alluded as well, it is selective. It is quite surgical. it is not a white canvas, price increase. And a lot is skewed towards the innovation and the reframing on pack.

So I hate to disappoint you, but I am not gonna give. Provide you a number. But it is it is material. it is not insignificant. Okay. Understood. I will pass it on. Thanks very much. Thank you so much, Max.

Operator: Thank you. Our next question comes from Thomas Palmer with JPMorgan. You may proceed.

Thomas Palmer: Good morning, and thanks for the question. I know inflation has been a big focus already, but I did have a follow-up When it comes to the Q4 COGS inflation, you. You have noted how much of that kind of reflects the full burden of elevated spot prices today for things like diesel and freight? Versus, say, contracts or hedges, delaying some of the step up into 2027.

Jean-Christophe Flatin: Thank you, Tom. Let me reiterate. it is the revised guidance is the combo of both the continued Middle East conflict impact on E&I as well as the very significant further logistic inflation in The US. Both freight and fuel. So it is not accumulated, As we said, we proudly strongly delivered in Q2 and quarter 3. Which shows the resilience of our business model, at the time where we are creating growth momentum So nothing accumulated. This is the tipping point of what has happened in US logistics over the summer, specifically after the month of July, And we are now also projecting that to continue for the beginning of 27 as I answered earlier. Okay. Understood.

Daniel Ordonez: And there was mention of pricing being under review in Europe. Maybe just a review of the conversation up to this point has been very US centric in terms of inflationary pressure. Maybe just a review of kind of what you are seeing when it comes to Europe on the inflationary front. And kind of how you think through pricing there if this kind of price pack architecture bent would also be more of the focus. Yeah. Thank you so much, Tom. I think you should be reading both regions in the same vein, perhaps there is an internal lag in the process, and they are very obvious thing that you all guys know.

I mean, we have a much bigger stronger, and more resilient business in Europe and international. Right? So in the mix of the way we see it internally, we are reviewing how to continue to strengthen the business. We are not ready to communicate in this call, but we have not communicated yet to customers. Right? But we will make no mistake. We will protect margins. And you can see from the color of this call what we are prepared to do. Understood. Thank you. Cool.

Operator: Thank you. Our next question comes from Dara Mohsenian with Morgan Stanley. You may proceed.

Dara Mohsenian: Guys. Just a bit more detail around cost and pricing. I know we have had a bunch of questions on it. But just to confirm, the revision to full year EBITDA this year, sounds like that is almost entirely driven by costs. So the €7 million revision at your midpoint that is just cost-related. Or are there any other puts and takes you would call out And as we think about next year, is that sort of a good run rate to think about for the first few quarters of next year? Until you cycle this? Just trying to get an understanding of it. Q4 cost pressure is sort of similar on a quarterly basis as we move in 2027.

And just on pricing, understand you will not quantify it for us exactly today, but is it designed to offset most of the cost increase? Is it designed to offset it on a dollar basis? Or a margin basis? Just conceptually help us understand how you are managing pricing relative to that cost. Understanding that the cost inflation is pretty volatile here. But how are you thinking about that conceptually? And then last, just. We have not heard a lot about incremental productivity. And you guys have made nice efforts on that front, over the last couple of years here.

So is there a renewed emphasis on productivity or new programs on that front that can help offset some of this cost pressure. Thanks.

Jean-Christophe Flatin: Thank you so much, Dara, for this sandwich multiple questions. So I will unpack it. So first of all, is the guide down fully related to cost? Answer is yes. There is nothing else that we have factored that in As I explained, it is really the sudden and abrupt US logistic inflation, specifically post August that is driving that, nothing else. Question #2 is help us look at how are you thinking of 2027. So, of course, a few preamble Number 1, as you know, we never guide on next year in our Q3 earnings call. I will not deviate from that. Number 2, you are spot on. The current business context remains super volatile and unpredictable.

So whatever I am about to say is with what we know today and only that, and we will need to continue to have a great deal of agility to navigate that. Now you allow me to reformulate your question into what are your key intents and assumptions as you start thinking about next year? Number 1, growth momentum is 1 of the scarcer assets in CPG right now, and Oatly has it. Currently. Our playbook is working. Our playbook is working. It will be further completed by the fiber launch. So what we intend to do in the coming quarters is to continue to fuel meticulously this growth momentum first because it is precious.

Number 2, because our D&A investment is working. So of course, we all need to keep in mind as you model that we will be lapping a much stronger 2026 campaign. So. But that, I do not need to tell you. Second, we will take pricing with innovation selectively. I will come back to that. Third, when it comes to the COGS and logistic cost assumptions, at the moment, as I said, history has told us and taught us in 2026 to be humble and conservative. So at the moment, what we are planning is the worst of 2026 going into 2027. So that is what we have.

Your third question was, how do you calibrate price increase specifically in The US? Because here, it is already out there. I will just repeat what Daniel very well said. it is designed to cover this cost inflation. No more, no less. So that is the way we look at that. And finally, I am super happy that you bring the productivity question. Allow me to step back first. When we reflect with Daniel and MJ, we are at the moment in our company history where we are creating growth momentum, and we are delivering now structurally profitable growth. And therefore, we view our job as accelerating this value creation despite the external challenging environment.

We passionately turn around this business, and we are not prepared to slow down the value creation journey we have initiated. So what does it mean? First of all, it means that we will continue to deliver COGS and supply chain cost progress. I think the last 3 years journey, we are kind enough to refer to as demonstrated our ability to do it, and we will continue it as a permanent. Second, when it comes to GNA, specifically, we are chasing productivity and overheads. We do that on 2 fronts.

First, we are currently decisively attacking all remaining inefficiencies in our organization, in the way we work, in anything that is not directly related to sales, consumer serving, customer serving, and being really at the forefront of delivering our mission. The second lever is continuing our duty to boost the impact of our investment. Every penny we invest is precious, and it is our job to maximize this investment. Beyond that, you will see us continue to very actively drive all mixed levers--channels, customer, portfolio, innovation. And as we said, we will implement pricing. So all of these combined you see us continuing decisively to fuel the pressured growth momentum we have created in order to accelerate our value creation.

Thank you, guys. Appreciate it.

Operator: Thank you. And as a reminder, to ask a question, please press Our next question comes from Samu Wilhelmsson with Nordea. You may proceed.

Samu Wilhelmsson: Hi. Thank you. Thanks for taking my question. Kind of 2 questions regarding the cash flow part of the business. You have not yet clarified wonderfully that you expect Q4 cash flow to improve a lower CapEx and no repeat of the inventory build and better payables. But are you able to quantify a bit more on the expected contribution from each of the 3 items? And maybe also that if the €18 million Q3 free cash out how much would you consider timing related for that versus underlying cash consumption that will not reverse? So that is the first question. We can take that first. Hi, Samu.

Marie-Jose David: This is, MJ speaking. So let me take. Can you hear me well? Just checking. Yeah. I can hear you. Perfect. So let me start with Q3. Right? So as you mentioned, a negative €18.4 million in free cash flow, but I am sure you noticed the nice progress in the cash management since 2023. And you can see that, by the way, in the deck. Right? Where Q3 23 was 49 million of cash burn, and 2024 was €27 million of cash burn. Also, if you recall, when we discussed back in July, we mentioned those phasings. So clearly, what you should recall into. Going into Q3 numbers is that most of it is a phasing impact.

And it is a phasing impact as we discussed, from CapEx timing shift, which we call in Q2 that we will see that going into Q3. Because do not forget, right, when we were in Q2, we told you that our free cash flow outflow was coming better than expected because of the timing. So 1 was driven by CapEx. The other 1, as we called in our preferred remarks, was driven by larger inventory, because we are building some innovation, some inventory in order to ship that in Q4 and later. And the last thing is the calendar switch that we had from a payable standpoint.

So most of the impact of the 18 are very much driven outside of the average that you should consider from the timing. Going into Q4, what we expect from an improvement standpoint? First, you should expect a year over year improvement, as well as a sequential improvement. Where this will come from? Smaller CapEx because, again, Q3 was higher than what we expected, and we do not expect that to repeat in Q4. The inventory build, as we just. As I just called, which was more than €11 million is not as well expected to be repeated in Q4. And that is the benefits of payables. We expect that to see in Q4.

So, again, what I want you to keep in mind is that cash management improvement year to date cash flow in line with our expectations, fully funded, confident towards our trajectory of free cash flow positive, total year impact and supporting the trajectory of EBITDA growth as well as we used to say, profitable growth in general. And I hope I answered to your Q3 and Q4 questions. Yes. Yes. Indeed. Thank you. Understood. Maybe just a follow-up. Gus, You ended Q3 with €23 million of cash. And then, obviously, the unused RCF. But I guess the free cash flow, by all means, also be negative for Q4 given your guidance.

So do you have any let's say, minimal liquidity level you would say comfortable operating with? And how much liquidity buffer you would expect to have before? Achieving that positive free cash flow. Thanks. So the. How much, Samu, I am not going to answer. If the question is, are you comfortable in order to operate with the cash you have in the bank? The answer is 100% yes. Okay. Alright. Wonderful. No other questions for me. Thanks. Thank you.

Operator: Thank you. I would now like to turn the call back over to John Baumgartner for any closing remarks.

John Baumgartner: Thank you, operator, and thanks, everyone, for joining today. Any follow-up feel free to reach out. Have a great day.

Operator: Thank you. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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