And there it is, the report.
Rough Google Translate into English:
Q2 Lohilo Foods AB (publ): Profitability improved despite weaker growth and major external impacts
April–June 2022
Net sales decreased by -9.4 percent to SEK 67,175 thousand (74,133). Adjusted for the effect of Nick’s terminated agreement, the decrease in the second quarter is -6.1 percent.
As a result of increased product and shipping costs, currency fluctuations, and price increases that did not take full effect during the quarter, gross margin weakened to 29.9 percent (30.9) compared to the second quarter of 2021.
Sales of proprietary ice cream brands declined by -8.7 percent
Following the implemented cost-saving program, other external costs fell by 22.2 percent to SEK 16,990 thousand (21,735), and personnel expenses decreased by 28.9 percent to SEK 8,678 thousand (12,210)
Operating profit before depreciation and amortization (EBITDA) was SEK -3,835 thousand (-8,156)
Operating profit was SEK -6,053 thousand (-10,334)
Profit for the period after tax was SEK -5,428 thousand (-6,600)
Earnings per share were SEK -0.24 (-0.44)
Cash flow for the period was SEK -676 thousand (1,033)
January–June 2022
Net sales fell by -4.6 percent to SEK 125,787 thousand (131,822). Adjusted for the effect of Nick’s terminated agreement, growth in the first half of the year was 2.9 percent.
Gross margin weakened slightly as a result of rising raw material costs compared to the first half of 2021, landing at 32.6 percent (33.1). Compared to the full year 2021, however, this was an improvement of 2.5 percentage points from 30.1 percent.
Growth in Lohilo’s proprietary ice cream brands was 6.5 percent
Operating profit before depreciation and amortization (EBITDA) was SEK -1,132 thousand (-15,460)
Operating profit was SEK -5,570 thousand (-19,318)
Profit for the period after tax was SEK -5,941 thousand (-15,765)
Earnings per share were SEK -0.31 (-1.05)
Items affecting comparability amounted to SEK 6,250 thousand in the first half of the year. The item relates to the settlement with Nick’s and is recognized in other income. The compensation was paid at the end of March.
Profit before tax for the period excluding items affecting comparability was SEK -13,053 thousand (-19,831)
Cash flow for the period was SEK 3,252 thousand (-945)
Cash and cash equivalents, including granted credit facilities, amounted to SEK 19,447 thousand (5,972) on the balance sheet date
Significant events during the second quarter of 2022
During the period, the company’s suppliers implemented significant cost increases due to higher raw material and freight costs, as well as the development of the krona against the euro and the dollar.
The Chinese market remains under lockdown, which affects the company’s planned exports to the region.
Dutch listings for 2022 expanded for LOHILO ice cream from 300 to 600 stores in the Albert Heijn supermarket chain. Deliveries began in June, and initial sales figures show strong progress.
In June, the company conducted an audit in accordance with BRC Storage & Distribution, in which we achieved an A grade.
Events after the balance sheet date
During July, the company implemented price adjustments on the majority of products, which will continue through August and is expected to have a positive impact on product margins.
In August, Lohilo signed a distribution and cooperation agreement with Fuud AB with a sales value of at least SEK 50 million. The agreement is signed for 24 months and can be extended by 24 months.
In August, Lohilo signed a distribution agreement with Sproud International AB to develop sales of Sproud’s vegan pea-based drinks. Sales under Lohilo’s management will begin in October 2022.
CEO Statement
We are significantly improving our results during the second quarter. The reason we did not achieve a positive result is due to sharp price increases in raw materials, transportation, and a weakened krona. During July–August, we finalized the price increases announced to our customers. Additional price increases are expected to be implemented at the turn of the year. We streamlined the organization and substantially reduced our fixed costs during the quarter, which supports the company’s path to future profitability.
It is also exciting to present two new distribution agreements. We are further growing our net sales and margin gross profit by improving cost efficiency.
The agreement with Fuud represents net sales growth of at least SEK 20 million already in 2023 at an average gross margin on par with our current level. Our shared goal is to strengthen Fuud’s products in Swedish grocery retail, but also to identify opportunities for cooperation outside of Sweden. With this agreement, we gain a wider and broader portfolio while also reaching new customer groups in convenience stores and fitness centers. This means our proprietary brands will also benefit from the collaboration.
The agreement with Sproud is based on Lohilo handling the sales execution and direct sales for Sproud’s products in Swedish grocery retail. We are reinforcing our dry goods portfolio, allowing us to expand our presence across our entire ambient range. Sproud is a food tech brand that truly strengthens our portfolio.
I hope that going forward we can also secure more external agreements and grow alongside them. Over the long term, a larger and stronger sales force will be established across grocery retail, convenience retail, fitness centers, cafes, and restaurants. We are exceptionally strong in sales and distribution, and with these new agreements, we can create a robust and efficient organization in Sweden to drive growth and profitability.
To streamline and improve our distribution, as of June we have supplemented our direct distribution with a new logistics solution in collaboration with Stockfiller and Frigoscandia. The solution is based on consolidated distribution to achieve more environmentally friendly and cost-effective delivery to an increasing number of stores.
During the spring, we worked on recertification for BRC Storage & Distribution. Following the audit in early June, we are proud to announce that we achieved an A grade. Lohilo’s objective is to be at the forefront of product development in our categories. The company’s quality work aims to create satisfied and secure customers. Lohilo should be associated with high quality in products, customer service, and logistics.
Demand for our hero product LOHILO ICE (Lohilo’s ice cream brand) is growing steadily, and we are increasing our market share. LOHILO ICE grew by 7.3 percent in the first half of the year. Overall, the LOHILO brand grew by 4.4 percent compared to the previous year. The weaker performance in the second quarter is due to sharply increased prices in Swedish grocery retail as well as consumer uncertainty stemming from high inflation, rising interest rates, and electricity prices. This has led to a general downturn in grocery retail, negatively impacting our premium brands.
During the autumn, we are launching several new products within LOHILO ICE and Alvestaglass. We are also working on redesigning our existing products to further strengthen our brand distinctiveness.
An exciting development is that even healthcare has recognized the benefits of healthier ice cream products. In a pilot project with a Swedish region, we have developed a unique LOHILO ice cream, which, if successful, will be launched early next year.
Performance in Export Markets
In the first quarter, we had very strong growth compared to the previous year. In the second quarter, we faced tough comparative figures from 2021, when launch quantities and pipeline filling took place in Finland. This means we had negative development during the quarter, but overall growth for the half-year.
In the second quarter, we have positive news across several markets, and although progress is not as rapid as initially forecasted, we have strong confidence that the actions taken on the export side will yield positive results moving forward.
Our established export markets, such as Finland, continue to show stable sales for the LOHILO brand. At the same time, during June we were informed that our products will be introduced to the Albert Heijn supermarket chain in the Netherlands. Our products will initially be sold in approximately 600 stores. In the second half of the year, we will intensify marketing and promotional campaigns to significantly drive consumer adoption.
China has continued its extensive lockdowns due to COVID-19, and management now estimates that we will see very low sales figures in China during the second half of 2022.
Financing and Liquidity
During the summer and autumn, management is implementing additional measures to strengthen our sales, improve our gross margins, and reduce administrative and selling expenses.
The previously announced cost-cutting program and factory relocation are now largely completed and will have a positive impact on liquidity thanks to reduced capital tie-up. This will be reinforced in early autumn through additional actions to boost sales, improve gross margins, and cut overhead costs.
Outlook 2022
During the autumn and winter, we carried out major restructuring initiatives, the benefits of which are visible in the form of significant cost savings during the first half of 2022. Furthermore, additional savings will materialize during the second half of the year.
We see that we are now on track to strengthen our margins through the price increases that will take full effect in the third quarter. The temporary volume drop in Swedish retail caused by increased consumer prices is expected to be offset by new volumes from Fuud and Sproud.
During the first half of the year, our staff—now considerably downsized—has made an outstanding contribution to our transformation journey. We look forward to continuing our work developing product segments and offering nutritious and sustainable products to more and more consumers on store shelves in Sweden and abroad.
Växjö, August 2022
Richard Hertvig
), but somehow its visibility has significantly decreased since then. You can probably find products in stores by searching the freezers. Lohilo was hyped by these “influencers” on various social media platforms, but nowadays, a large part of them have switched to drinking Nocco.
