Deoleo defends unit margin and records 2023 EBITDA of €30 million
The group posted a net loss of €34M due to the impact of a major raw materials price crisis
Against such a challenging backdrop, the company has prioritised defence of gross unit margin, achieving a 1% increase in sales despite the gradual decline in volumes
EBITDA performance improved substantially during the second half of the year, registering a €5M rise to €17.6M, despite a more intense rise in raw material prices in this period.
In an exceptional and atypical market context, marked by high inflation and unfavourable olive oil harvest forecasts, the group has demonstrated the validity of its strategy based on its brands, protecting the value of the company’
Deoleo, the world’s number one olive oil company, reported a net loss of €34M in 2023, a year marked by the biggest rise in raw materials prices since records began in the sector, and by highly unfavourable forecasts, both in terms of quantity and quality, for the next harvest. Due to the inflationary context and high prices, volumes have gradually fallen, but the company has managed to slightly increase sales, thanks to defence of gross unit margin, achieving an EBITDA of €30M for the year.
Last year was characterised by high inflation at an international level, affecting the countries in which the group is present with a significant impact on the food sector, especially olive oil. In the Spanish market, as confirmed by the National Statistics Institute (INE), food was the group in which prices increased the most, with an annual rate of 11.7%, and olive oil was the processed food with the biggest increase, standing at 44.4%.
This increase is explained by lower production for the second consecutive year for the first time in history. In the European Union, the 2022/2023 harvest was down 40%, mainly due to the impact of low Spanish production (-55%), marked by lack of rain and episodes of extreme heat. This situation led to the increase in raw material prices, which hit record levels with the consequent impact on consumption. According to the Ministry of Agriculture, Fisheries and Food (MAPA), so far in the 2023/2024 season, average prices have risen by 69.1% compared to the previous season.
Despite the challenging environment, and thanks to the strength of the group’s brands as well as efficient commercial management and cost control, the company has been able to maintain gross unit margin. In fact, it has managed to slightly increase sales (1%) despite the gradual decline in volumes. These adjustments and optimisation of operating expenses resulted in an improvement in EBITDA compared to the first half of the year, with a €5M rise to €17.6M, despite the fact that the rise in raw material prices was more intense in this period. As a result, Group EBITDA ended 2023 at €30M, 30% down on the previous year.
Nonetheless, the extraordinary increase in financial expenses and the impact of impairments resulted in a net loss of €34M. Asset valuation reflecting more conservative financial projections, given the complex environment, impacted intangible assets with an impairment net of taxes of €18M, on deferred tax assets amounting to €2.6M and on materials (€1M). The total accounting impact of asset impairments (€22M) together with higher financial expenses related to debt contract novation (€4M), both extraordinary and without impact on cash flow, represent 76% of the met loss.
The impact of the negative context on consumer demand has been reflected in most of the countries where the group operates. As regards market shares, the sharp rise in prices mainly benefited own brands, leading to a slight decline in market shares in the US (-2.5 percentage points), Italy (-2.2 p.p.) and Spain (-1.7 p.p.).
Ignacio Silva, Chairman and CEO of Deoleo, said: “We have had an exceptionally challenging and highly volatile year, with two consecutive years of very poor harvests, both in terms of quality and quantity, and prices at historic levels. Despite this, we remained committed to defending our gross unit margin, which enabled us to maintain revenues and once again demonstrated the effectiveness of our strategy, based on our key pillars: quality, sustainability and innovation, which we pass on to consumers through our leading brands. Although we expect the current year to continue to be challenging, we are confident that the current situation will normalise and we will see a strengthened sector in the medium term. Our brands and the company’s fundamentals are well-placed to exploit a return to normal market conditions.”
Net financial debt, associated with the circumstances described above, rose 18.5% to €120M at the year end, an increase of only €19M, as most of the extraordinary impacts recorded in the 2023 net result are not cash consuming. In addition, the company continues to comply with all relevant covenants set out in the syndicated financing agreement and has repaid €20M of the senior tranche in the first quarter.
Firmly committed to the existing roadmap
The current financial year has begun with similar parameters to the previous one, which means it will again be a year marked by limitations in terms of both quality and quantity of raw materials. Despite this context, Deoleo will continue with the existing roadmap, based on marketing of its leading brands, and a firm commitment to the three pillars of the strategy (quality, innovation and sustainability). Sustainability will continue to be consolidated as a key pillar of group strategy, driving its differential value. In this regard, the company will present its first integrated sustainability report at the end of March.