Altia Plc  Stock Exchange Release  6 November 2020 at 8:30 am EET 

Altia Plc Q3 2020 Business Review: Strong third quarter, guidance updated 

This release is a summary of Altia Plc's Business Review January-September 2020. The complete report is attached to this release and is also available on the company website at www.altiagroup.com/investors.  

January–September 2020 compared to January–September 2019  

• Reported net sales decreased by 5.5% to EUR 235.9 (249.5) million  

• In constant currencies net sales decreased by 4.7%  

• The Finland & Exports segment’s net sales were EUR 82.8 (90.9) million 

• The Scandinavia segment’s net sales were EUR 77.5 (76.3) million; in constant currencies net sales grew by 4.1%  

• Altia Industrial’s net sales were EUR 75.5 (82.4) million 

• Comparable EBITDA was EUR 33.4 (25.1) million, 14.2% (10.1%) of net sales  

• Items affecting comparability were EUR -6.6 (-1.8) million  

• Reported EBITDA was EUR 26.8 (23.3) million, 11.4% (9.3%) of net sales  

• Net cash flow from operating activities was EUR 5.9 (-0.8) million 

• Net debt / comparable EBITDA (rolling 12 months) was 0.7 (2.0) 

July–September 2020 compared to July–September 2019  

• Reported net sales increased by 2.5% to EUR 86.6 (84.5) million  

• In constant currencies net sales grew by 2.5%  

• Comparable EBITDA was EUR 14.6 (11.4) million, 16.9% (13.5%) of net sales  

• Items affecting comparability were EUR -5.9 (-1.6) million mainly relating to the merger plan of Altia and Arcus  

• Reported EBITDA was EUR 8.8 (9.8) million, 10.1% (11.6%) of net sales  

• Altia’s guidance for 2020 was suspended on 29 April 2020 due to the uncertainties related to the COVID-19 pandemic. Despite the uncertainties in the fourth quarter, Altia is providing an updated guidance for 2020. Following the strong profitability development during the first nine months of the year, Altia expects comparable EBITDA for 2020 to be higher than in 2019 (2019: EUR 44.8 million).  

• Altia and Arcus merger to form a leading Nordic wine and spirits brand house was announced. 

This is not an interim report as specified in the IAS 34 standard. The company complies with half-yearly reporting, in accordance with the Finnish Securities Markets Act and discloses business reviews for the first three- (Q1) and nine-month (Q3) periods of the year. The figures in the review are unaudited. Reconciliation of alternative key ratios to IFRS figures is presented in the appendix on page 12.  

For important information for U.S. shareholders, please see “Important Information” on page 11. 

Key figures 

CEO Pekka Tennilä:  

“I am pleased to see such strong results in the third quarter with both net sales and profitability improving from last year. We have continued to manage these exceptional times very well and the strong results reflect the resilience of our business and employees. I want to thank all employees for their hard work and commitment during these unusual times.  

During the third quarter, we have seen changing COVID-19 restrictions in our home markets. Following the rising number of COVID-19 cases towards the end of the third quarter, new restrictions were imposed, and this immediately impacted us as well. However, we have activated our brands and we have succeeded in keeping our production running without major disruptions. Our highest priority continues to be the safety of our employees. 

In the monopolies volumes have remained at record-high level as consumers have continued to shift purchases from travel retail and on-trade to the monopolies. In the Finland & Exports segment, we saw a momentary recovery of travel retail and on-trade, while the monopoly channel continued to grow during the third quarter. In the Scandinavia segment, Norway continued its strong performance in both wines and spirits. In Sweden, spirits continued their strong growth and we gained market share in the strategically important gin, liquour and rum segments. In Altia Industrial, net sales growth was driven by the sale of cognac inventory and the growing but stabilising demand for ethanol during the quarter. Contract manufacturing and starch volumes continued to be negatively impacted by COVID-19. 

Despite the challenging market and operating environment, profitability improved in all three segments during the first nine months of the year. Comparable EBITDA improved by 33.1%, or EUR 8.3 million to EUR 33.4 million. The drivers for the solid profitability improvement were the Altia Industrial segment, strong sales and continued revenue management in the monopolies, as well as Group-wide cost savings measures.  

Altia’s financial position has strengthened further during the first nine months with a positive development of net cash flow from operations. The improvement of EBITDA and the positive development of net working capital contributed to the development, and net cash flow from operations totalled EUR 5.9 (-0.8) million at the end of the period. The liquidity position of the Group has also remained strong throughout the period. 

During this year, our innovations for our spirits brands have been very successful in international competitions. The most recent acknowledgement and a true testament for our innovation work is the award for the “Vodka Producer of the Year” by the International Spirits Challenge. This further strengthens our position as the Nordic innovation role model in the beverage industry. We are also continuously working on developing our digital platforms, viinimaa.fi and folkofolk.se. The user traffic on these platforms has been growing constantly, and the platforms are playing an increasingly important role in connecting consumers with our brands and products.  

Altia is a forerunner in sustainability in our industry. In our sustainability roadmap, packaging plays an important role and we aim for 100% recyclable packaging. PET bottles are a sustainable choice as their carbon footprint is 60% lower than that of a glass bottle. Within PET bottles, our aim is to increase the content of recycled plastic to 100% by 2030 compared to the EU requirement of 30% by 2030. During the quarter, we have launched our first products packed in rPET bottles which include recycled plastic.  

In September, we announced the merger of Altia and Arcus to form a leading Nordic wine and spirits brand house – ANORA GROUP. Altia’s Board of Directors has convened an Extraordinary General Meeting to make a decision on the merger on 12 November 2020. In addition, customary regulatory approvals are needed before the completion of the merger, which is expected to take place during the first half of 2021.  

Towards the rest of the year, the uncertainties related to COVID-19 have escalated and the negative impacts on Altia’s last and most important quarter are expected to be substantial. The restrictions on social gatherings will limit the festive season and hence impact negatively the Christmas sales. Especially in Scandinavia, the sales volumes of glögg and aquavit are expected to be lower than in the previous year. Further, the significant negative impact on sales in travel retail is expected to continue.  

In Altia Industrial, the escalated uncertainties relate to the decreased demand for starch, the tight situation on the ethanol market, the lower contract manufacturing volumes and the expected higher cost base due to increased barley cost. 

Despite the uncertainties in the fourth quarter, we are providing an updated guidance for 2020. Following the strong profitability development during the first nine months of the year, we expect comparable EBITDA for 2020 to be higher than in 2019.” 

Outlook for 2020 

Market outlook 

The development of the Group’s business operations and profitability are affected by the competitive environment, the overall economic outlook and changes in alcohol taxation and regulation. Uncertainty related to changes in consumer buying behaviour and consumer demand continues. In addition, overall fluctuations of direct product costs affect the Group’s profitability.  

COVID-19 update: Uncertainty in the economy and operating environment is high and the risk of an economic slowdown is high. The recovery of the market depends on the level and extent of government restrictions and recommendations on travel, movement and social distancing, and how these restrictions impact consumer behaviour. The pace of recovery is difficult to estimate and it is affected by changes in consumer behaviour and is expected to vary across sales channels.  

Seasonality 

There are substantial seasonal fluctuations in the consumption of alcoholic beverages impacting the net sales and cash flow of Altia. The company typically generates large amounts of its revenue and cash flow during the fourth quarter of the year, whereas the first quarter of the year is significantly lower. In addition, excise taxes related to the high season at the end of the year are paid in January, resulting in large cash outflows at the beginning of the year. 

Guidance  

Altia’s guidance for 2020 was suspended on 29 April 2020 due to the uncertainties related to the COVID-19 pandemic. Despite the uncertainties in the fourth quarter, Altia is providing an updated guidance for 2020. Following the strong profitability development during the first nine months of the year, Altia expects comparable EBITDA for 2020 to be higher than in 2019 (2019: EUR 44.8 million). 

Towards the rest of the year, the uncertainties related to COVID-19 have escalated and the negative impacts on Altia’s last and most important quarter are expected to be substantial. The restrictions on social gatherings will limit the festive season and hence impact negatively the Christmas sales. Especially in Scandinavia, the sales volumes of glögg and aquavit are expected to be lower than in the previous year. Further, the significant negative impact on sales in travel retail is expected to continue.  

In Altia Industrial, the escalated uncertainties relate to the decreased demand for starch, the tight situation on the ethanol market, the lower contract manufacturing volumes and the expected higher cost base due to increased barley cost.

Additional information:  

Pekka Tennilä, CEO

Juhana Jokinen, Interim CFO

Contacts:  

Analysts and investors: Tua Stenius-Örnhjelm, Investor Relations, tel. +358 40 748 8864  

Media: Petra Gräsbeck, Corporate Communications, tel. +358 40 767 0867  

Results presentation: 

CEO Pekka Tennilä and interim CFO Juhana Jokinen will present the report on the same day at 11:00 am EET. The presentation will be held as a Microsoft Teams Meeting. We recommend that participants join the event using the online meeting option.  

Option A: Online meeting 

Access meeting online here: Altia's Q3 results presentation  

Option B: Call-in 

Call into the meeting about 5 minutes earlier at the following numbers:  

FI: +358 9 2310 6678 

SE: +46 8 502 428 54 

UK: +44 20 3443 9579 

US: +1 917-781-4622 

Conference ID: 178 349 180# 

Remember to keep your microphone on mute during the presentation. 

Q&A 

We recommend that questions to the management are sent through the Teams chat. 

Presentation material and on-demand recording  

The presentation material will be shared in the online meeting and it can be downloaded on Altia’s website at: www.altiagroup.com/investors. A recording of the event will be available later at Altia’s website.

Distribution:  

Nasdaq Helsinki Ltd  

Principal media  

www.altiagroup.com  

Altia is a leading Nordic alcoholic beverage brand company operating in the wines and spirits markets in the Nordic and Baltic countries. Altia wants to support a development of a modern, responsible Nordic drinking culture. Altia’s flagship brands are Koskenkorva, O.P. Anderson and Larsen. Other iconic Nordic brands are Chill Out, Blossa, Xanté, Jaloviina, Leijona, Explorer and Grönstedts. Altia’s net sales in 2019 were EUR 359.6 million and the company employs about 650 professionals. Altia’s shares are listed on Nasdaq Helsinki.  www.altiagroup.com.