Deoleo earns €7.4m in first quarter of ’21, up 65.5% from Q1 2020
Sales volume rise 11%, comparing favourably to strong sales month last March when health crisis triggered client and consumer stockpiling
Sales revenues up by 17%, boosted by volume growth and higher retail prices associated with increased raw-material costs, which are expected to continue to rise throughout the year
Positive business performance also reflected in continued improvement in Deoleo brands’ market share during the quarter, up 1.1 percentage points in US, 2.9 in Italy. 2.2 in Germany
Deoleo, the world’s leader in producing and distribution olive oil, maintained in the first quarter of 2021 the positive trend begun last year. The group recorded a consolidated net profit of €7.4m – 65.5% more than in the same period of the previous year – driven by solid performance in sales.
Despite comparison with a quarter being marked by large-scale product stockpiling by clients and consumers in March last year because of the health crisis, sales volume maintained double-digit growth, up 11% compared to the first quarter of 2020. Sales revenue increased by 17% to €177.8m as a result of the strong performance in volume and also to an increase in sales prices in that period.
The positive volume performance offset the increase in raw-material costs that has been occurring since the second half of last year, enabling Deoleo’s gross margin to grow 2% in the first quarter to €35M, despite a negative exchange rate impact, especially the United States and European Union, and the fact that the first quarter of last year was exceptionally strong.
EBITDA in the first quarter of the year was €15.4M, 5% lower than in the same quarter last year, as a result of a 30% increase in advertising expenditures on the group’s brands (totalling €1.2M).
The Group’s market shares continued to increase in the first quarter compared to the same period last year. According to data provided by IRI and Nielsen, an increase of 1.1 percentage points was recorded in the United States, 2.9 points in Italy and 2.2 points in Germany. In Spain, the share remains stable.
The company generated positive cash flow of €0.5M as of March 31, 2021, compared to the €12M reduction recorded in the same period last year, and did so after boosting working capital to €16M, which is 23% more than at the end of 2020. The Group’s new financial structure has also enabled it to reduce debt interest payments by 65%. As a result, Deoleo has solid cash levels, amounting to €79M (+€6M) at the end of the quarter.
Ignacio Silva, Chairman and CEO of Deoleo, said: “In the first quarter of the year, the business continued to show evidence of strength, in line with the positive performance seen in previous quarters. Deoleo’s results are highly significant, especially if we take into account that we are comparing against a period that was exceptionally impacted by the effect of stockpiling; an effect that will increase in comparisons for the coming quarters, since, from the second quarter of last year, there was an exceptional increase in olive oil demand resulting from higher household consumption due to the restrictions imposed. Although this situation has been evolving progressively over the last few months, it has yet to normalise.
“In any event, and beyond the comparative effect with respect to last year, which was already factored into projections for 2021” he continued, “we expect a complicated year, especially in the second half, due to increasing raw material prices which in some countries will be difficult to pass on to the consumer.”
The challenges ahead
Deoleo is expecting a complicated scenario for this year due to the increase in raw-material prices, a trend that is due to a combination of lower supply at the global level and sustained growth in consumption. In this first quarter, it has been necessary to lower the global production estimate for the 2020-2021 season, which, according to the latest data released by the European Union, will be 3% lower than the previous season, standing at 3.1 million tonnes. At the same time, during the first months of the year, there has been a continued increase in overall consumption. Together, these two factors are consolidating the price rise that has been occurring since the beginning of the season and which, at the end of March, came to an average of 34%, according to a price bulletin from Spain’s Ministry of Agriculture, Fisheries and Food.
Looking ahead in 2021, Deoleo will make a significant additional investment aimed mainly at digital transformation and implementing transversal work models in which processes and tools will be integrated in the commercial, planning, finance, purchasing, quality and industrial areas.