In this analysis of Olvi Plc, we will review what they do, their finances, and some of their strengths and weaknesses as of today.
About Olvi Plc
Olvi is an older company that has been selling beverages since 1878. They have a product portfolio in Finland, Denmark, and the Baltic states. Personally, I am familiar with their products in Latvia and Estonia and am quite satisfied with what was offered.
After traveling around Estonia, I felt that the brand LE COQ was everywhere, and a quick look shows that they have a market share of over 90% of beer sales in Estonia. A true giant in the local area.
Cēsu, which belongs to Latvia (where I have lived), delivers good products and has a market share of around 30% of the Latvian market.
Olvi's product portfolio often includes beer and spirits, but that’s not all they do. They work hard to develop other areas such as wine, cider, nectar, soda, and water.
In general, I am positive about the stock because it seems that Olvi itself goes for products that are well-liked and have a long local history.
Sales Information from Q1-Q3 2023
Olvi exports to 69 different countries and sells a total of 530 million liters of beer.
Their area with the most growth, "soda," sold 140 million liters (highlighted in CPM).
In the image above, you can see that Olvi envisions a decline in beer sales in the future, with an increase in both non-alcoholic and cider products.
Strategy
Olvi aims to build a relationship with customers so they can consistently use products from their brands. The idea is straightforward: they want high-quality products for most daily routines (like juice for breakfast and beer for the evening).
They will continue to focus strongly on areas such as cost control, quality, and reputation.
Regarding Olvi's reputation, I believe their strong local history gives their brands an edge and makes it easier to maintain market shares.
They not only strive for local quality in their products but also implement decentralized management outside Finland with the idea that "one knows their own market best." This approach allows different markets to have the best knowledge of their own area and work on developing and producing the best possible products internally.
This helps increase quality and tailor products more closely to their internal market.
Some thoughts on this: it might make the products less appealing for export, but this is something they are also working on as an opportunity.
They aim to improve exports as less than 5% of revenue comes from exports.
Another area they want to become more available in is the HoReCa industry (hotel, restaurant, café). They feel this visibility will make Olvi much more accessible and specified in CMD (Capital Markets Day) to Olvi that this is something they will focus on.
Financial Overview
In my analysis of Olvi, it's not all smooth sailing; there are some underlying shadows.
The stock's value is quite high based on the risks associated with their Belarusian company, for example.
Their focus on cost control looks promising for Q1 2024, although I found it somewhat disappointing.
Olvi is clear that they are not chasing top-line growth but are focused on maintaining overall healthy finances.
As you can see, Q1 is not very strong, even though they have performed better than in 2022.
Statement
With significant top-line growth, it is clear that Olvi has been pursuing top-line growth, especially since the results in 2022 and 2023 were very weak.
The results for these years have been severely affected by their Belarusian assets, and they are currently unable to sell the company.
There were significant write-downs in 2022, and they are experiencing poor FX values from this company.
Overall, I have to say that the results are disappointing, with a decline in margins since 2020 and results that do not meet the requirements for positive growth. If you exclude the last two years, they were close to being within the acceptable range, but still not showing strong growth.
With low margins and what appears to be weak cost control, I hope the renewed strategy will help Olvi in these areas in the future and that the uncertainty stemming from Belarus will soon be resolved.
INCOME | EBIT | RESULTS | EBIT margin | MARGINS | |
2014 | 320785 | 41000 | 33100 | 12.78% | 10.32% |
2015 | 310494 | 38157 | 22200 | 12.29% | 7.15% |
2016 | 320683 | 40445 | 32800 | 12.61% | 10.23% |
2017 | 345185 | 44747 | 36100 | 12.96% | 10.46% |
2018 | 384302 | 50150 | 41100 | 13.05% | 10.69% |
2019 | 408706 | 52514 | 42200 | 12.85% | 10.33% |
2020 | 1005101 | 56435 | 40916 | 5.61% | 4.07% |
2021 | 1069260 | 59439 | 48361 | 5.56% | 4.52% |
2022 | 1253782 | 22364 | 7526 | 1.78% | 0.60% |
2023 | 1326568 | 54918 | 38473 | 4.14% | 2.90% |
Balance
For me, the balance sheet is one of the most positive aspects you can find in Olvi. They have very low interest-bearing debt, and they have spent time paying down what they had.
This results in weaker figures in key ratios like ROA (Return on Assets) and ROE (Return on Equity), but it provides us shareholders with solid security. With little debt and strong liquidity (even though it has declined due to weak cash flow in 2023), I feel that Olvi stands firm with both feet on the ground and is in a strong position.
Debt-to-EBITDA Ratio | Interest | Equity | Cash | ROA | ROE | |
2014 | 1.10 | 61692 | 192539 | 4382 | 9.95% | 17.19% |
2015 | 0.86 | 46862 | 186665 | 12786 | 7.06% | 11.89% |
2016 | 0.42 | 24640 | 203549 | 20297 | 9.98% | 16.11% |
2017 | 0.14 | 9302 | 216987 | 28625 | 10.66% | 16.64% |
2018 | 0.07 | 4721 | 237178 | 18520 | 11.25% | 17.33% |
2019 | 0.05 | 3662 | 263869 | 33832 | 10.62% | 15.99% |
2020 | 0.06 | 3636 | 268132 | 58741 | 9.73% | 15.26% |
2021 | 0.05 | 3185 | 297624 | 45096 | 9.86% | 16.25% |
2022 | 0.05 | 4147 | 281745 | 61207 | 1.54% | 2.67% |
2023 | 0.09 | 7006 | 289338 | 31458 | 7.85% | 13.30% |
Cash flow
When I look at the operating results, Olvi had very strong growth up until 2021.
2022 and 2023 were considerably weaker, but I expect this will be resolved over time.
In general, I think the cash flow looks strong. They provide good dividends and have managed to pay down debt over time.
The past two years have shown signs of weakness, and this is something that needs to be monitored going forward.
Cash Flow | Investment | Finance flow | Dividends | |
2014 | 46349 | -43953 | -5423 | -13531 |
2015 | 61668 | -24867 | -28450 | -13514 |
2016 | 61234 | -17813 | -36006 | -14529 |
2017 | 57080 | -20771 | -27050 | -15574 |
2018 | 63042 | -46578 | -26139 | -16587 |
2019 | 67312 | -29732 | -22412 | -18787 |
2020 | 65796 | -29833 | -23447 | -20754 |
2021 | 89607 | -41275 | -35050 | -23240 |
2022 | 67163 | -36919 | -26232 | -23267 |
2023 | 27954 | -27655 | -27531 | -25339 |
Key ratios
When reviewing key metrics, Royal Unibrew appears to be stronger, but it is important to note that Olvi has no debt, whereas RU has a substantial amount of debt. This significantly impacts the risk profile.
Conclusion
Operating Performance: Olvi had strong growth up until 2021, with weaker performance in 2022 and 2023. However, there is an expectation that these issues will be resolved.
Cash Flow: The cash flow remains strong, with good dividends and a consistent reduction in debt over time.
Balance Sheet: Olvi’s low interest-bearing debt and strong liquidity provide a solid financial foundation, offering security to shareholders despite weaker ROA and ROE figures.
Key Metrics Comparison: While Royal Unibrew shows stronger metrics, Olvi’s lack of debt offers a more conservative risk profile.
Overall, Olvi presents a stable investment opportunity with a strong balance sheet and potential for future growth, despite recent challenges.
margin Royal Unibrew | margin Kopparbergs | margin Olvi | |
2014 | 10.31% | 5.79% | 10.32% |
2015 | 11.79% | 7.97% | 7.15% |
2016 | 12.36% | 8.60% | 10.23% |
2017 | 13.01% | 6.64% | 10.46% |
2018 | 14.25% | 7.07% | 10.69% |
2019 | 14.82% | 7.12% | 10.33% |
2020 | 16.38% | 5.74% | 4.07% |
2021 | 14.84% | 7.55% | 4.52% |
2022 | 12.98% | 4.85% | 0.60% |
2023 | 8.47% | 2.61% | 2.90% |
ROA Royal Unibrew | ROA Kopparbergs | ROA Olvi | |
2014 | 8.89% | 11.33% | 9.95% |
2015 | 10.54% | 15.63% | 7.06% |
2016 | 12.90% | 14.21% | 9.98% |
2017 | 12.25% | 11.48% | 10.66% |
2018 | 12.90% | 12.57% | 11.25% |
2019 | 13.43% | 12.40% | 10.62% |
2020 | 14.42% | 9.38% | 9.73% |
2021 | 11.89% | 12.15% | 9.86% |
2022 | 10.30% | 8.50% | 1.54% |
2023 | 6.16% | 5.37% | 7.85% |
ROE Royal Unibrew | ROE Kopparbergs | ROE Olvi | |
2014 | 22.15% | 34.36% | 17.19% |
2015 | 24.24% | 37.52% | 11.89% |
2016 | 26.92% | 35.10% | 16.11% |
2017 | 29.54% | 26.16% | 16.64% |
2018 | 35.76% | 26.06% | 17.33% |
2019 | 36.71% | 23.74% | 15.99% |
2020 | 35.95% | 19.20% | 15.26% |
2021 | 38.84% | 22.40% | 16.25% |
2022 | 28.91% | 14.97% | 2.67% |
2023 | 19.05% | 9.30% | 13.30% |
Strengths of the Stock
Established Quality Brands: Brands that people have lived with for a long time.
Low Debt: Minimal interest-bearing debt.
Dividends: Consistent dividends ranging from 3-5%.
Export Potential: Good potential for exports to countries with strong beverage markets.
Weaknesses of the Stock
Belarus Risk: The situation in Belarus presents a significant risk.
Recent Weaknesses: Significant weaknesses have emerged over the last couple of years.
Limited Growth: Limited growth since 2014 in terms of net income and recent years in cash flow.
Small, Less Diversified Markets: Operations are concentrated in a few countries with low population diversity.
Key Factors to Monitor
Developments in Belarus: Keep an eye on the situation in Belarus.
Cash Flow Improvement: Monitor if cash flow improves, especially in terms of receivables.
Export Growth: Watch for increases in export activities.
Margin Improvement: They need to improve margins soon; margins have been too low since COVID-19.
Summary
I personally own shares in the company because I am very fond of several of their products, and the lack of debt significantly reduces the risk.
Q1 is stronger this year compared to last year, and I am eagerly waiting to see what happens with LIDSKOE PIVO (Belarus). There is a shadow over the company, and I hope they come out of it relatively well.
I hope they will manage to penetrate the HoReCa market better and increase exports. However, I feel that the company currently carries a fair amount of risk.
From my perspective, I find it challenging to set a price on the company due to the underlying risk. If one decides to invest in Olvi, they should be aware that they are investing in a company with a long history, low debt, well-liked products, but also underlying issues related to performance and risks associated with certain parts of the business.
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