Deoleo leverages its solid strategy and margin defense in the face of the most challenging context in recent years
In a high-complexity scenario for the sector with historically high prices, the group has prioritized profitability defense, relying on the strength of its brands and protecting its unit margins.
Despite the scarcity of raw materials, sales have remained stable, with a decrease in volumes in line with the global consumption reduction due to high olive oil prices.
EBITDA has been impacted, standing at €12.7 million at the end of the semester.
The decline in commercial margins, along with higher financial expenses resulting from the rise in interest rates and the costs of the company’s debt refinancing, have led the group to report net losses of €9.7 million.
Despite the challenges, the company has continued to advance in its roadmap in terms of investment in sustainability, quality, and innovation.
Deoleo has faced one of the most challenging semesters in the recent history of the sector. In this context, it has focused its efforts on defending its unit margins and continuing the roadmap outlined in its strategy, relying on the strength of its brands and investment in sustainability, quality, and innovation, in the face of the constant rise in raw material prices in a context of inflation and continuous increases in interest rates.
The results are in line with the estimated figures for the period. The company has prioritized the defense of unit margins, which have slightly increased, also allowing for a 0.6% increase in sales on a year-on-year basis. This has been possible thanks to the partial transfer of the price increases experienced throughout the chain to customers, as well as the strength of the group’s brands and the efficiency shown by the company’s entire supply chain.
However, the price escalation has affected olive oil consumption, resulting in a 21.9% reduction in sales volumes compared to the previous year. The drop in volumes has affected the market share of the brands in favor of private labels.
This volume decrease has caused an erosion in margins that could not be offset by price increases, also impacting EBITDA, which stood at €12.7 million, a 43% decrease on a year-on-year basis. On the other hand, both the rise in interest rates and the costs of the company’s debt refinancing have resulted in an additional €8 million in financial expenses during the period. This has led to reported net losses of €9.7 million.
In the words of Ignacio Silva, President and CEO of Deoleo: “Throughout this first half of the year, we have faced a historic context due to the complexity of events. Despite the challenges, at Deoleo, we have reacted with agility, defending our margins and relying on the resilience of our iconic brands. We have also continued to prioritize and promote sustainability, quality, and innovation, strategic pillars to which we are firmly committed. In the face of the challenging context in the second half of the year, we will continue to advance our roadmap from our leadership position in the sector. Our reference shareholders, CVC and Alchemy, are calm and satisfied with the company’s progress and trust that the work done will yield results once the market returns to normalcy.”
Historically Challenging Context
Both the lack of rain and episodes of extreme and prolonged heat have led to a low availability of raw materials, resulting in a historic rise in prices of over 90%. The low production has affected both quantity and quality, causing high-quality oils to be sold at very high prices.
This scarcity has led the group to use its purchasing power to acquire larger volumes of stocks to ensure both product quality and availability.
The rise in raw material prices has also affected consumption, especially in mature markets like Spain and Italy, with a year-on-year consumption decrease of over two digits in both countries. In the United States, where demand remains strong, the reduction has been practically nonexistent at the end of the semester.
A Firm Commitment to the Roadmap
In summary, the sector will continue to face a context of uncertainty marked by both a lack of quality and quantity with high prices. The group will prioritize the roadmap outlined in its strategic plan, focusing on sustainability, quality, and innovation.
Outlook: Similar Trends Towards the End of the Year
The second half of the year will be even more challenging. The latest EU estimate for the current olive oil harvest forecasts a global production of 2.5 million tons, a 27% decrease compared to the previous campaign and 24% lower than the average of the last five previous campaigns. This decline is concentrated in the European Union countries, where a 40% decrease is estimated, while for other producer countries, the expected decrease is 1%.