Welcome to our Q1 interim report. Another year has started and the Q1 is behind us. Before we get going, the usual disclaimer. We will be referring to future expectations, and as we read in the papers on a daily basis, that comes with certain uncertainties. So just a reminder of that. Many of you are already familiar with us. I'm here with Tiina-Liisa Liukkonen, our CFO, and myself, Patrik Lundell, the CEO of the Olvi Group. We've started the year in a strong way. We're preparing for the season. We're stocking up to be able to service the demand that's ever-increasing with weather improving. We are working solidly on the integration of three of our acquisitions. We announced four acquisitions at the end of last year. Three of them have closed and the integration is moving ahead swiftly. also a brewhouse.
Our new brewhouse investment in Iisalmi has been completed on schedule and is already up and running operational. That's a few key items worth mentioning. I'll cover a few of the highlights from Q1, and then I'll hand over to Tiina-Liisa, who will take us through the numbers and go into the segments where there's, of course, a reporting change as well. As I already mentioned, the year has started well. Our volume is growing, our net sales is growing, and importantly, our gross profit has improved with 15%. You will, of course, also see that the results are slightly behind those of last year when we look at EBIT. The reason is very clear. There's two aspects that deliver this change or this negative delta, if you like. It's on one hand, Denmark. Denmark, in the market, we're still short of achieving the ambitions we have.
We've walked away from some unhealthy business. We've also lost some business. Currently, we're building the volume that we need to run the businesses effectively, and we're driving our two leading brands, Willemoes and Olvi, in the market. At the moment, the size of our volume is not sufficient to cover all our costs, and hence this negative evolution. The delta or the comparison, the comps, if you like, will improve as we move further down the year as those private label volumes that we had in the Q1 of 2025 will disappear from the competitive numbers. On the other hand, as I mentioned, we're working on these integrations. Three acquisitions have closed. There's certain one-off costs associated with bringing new businesses on board. We have the amortizations and the cost allocations burdening a rather small quarter.
Let's remember, Q1 is only 50% of the year. Again, we're in a strong position. We go into the season with confidence. We have strong market shares. We've been able to improve them in many categories. We brought 228 new products to market for summer, meaning we're there to excite our consumers and our customers, driving profitable growth across categories. In Finland, like you can see here on the table and on the screen, we've launched an entirely new soft drinks brand entering both the cola segment and the flavor segments with a strong proposition that's scoring well in blind tasting, and we're investing a lot behind the brand to get it into the public domain in terms of awareness and trial.
The integrations are working, moving ahead according to plan, and we expect the synergies and the upside growth to start materializing towards the end of this year and into 2027. The brewhouse in Iisalmi, I mentioned. Let me just pause on the daily news as it were. The situation in Iran is having a wide impact on our industry and all other industries. We are however very happy and proud of the system we have in place for protecting ourselves and guarding ourselves for these types of inflationary pressures. I'm referring to our hedging policy. It has worked well for us in the short term, but of course, we expect the impact of this to be broader. There will be a tail that probably brings us all the way into 2027.
Some impact for sure, but for the moment, we're in a steady pace and thereby we're very confident in our ability to deliver another strong year in 2026. Perhaps with those opening words, Tiina-Liisa, I'll hand over to you to look at the numbers in further detail. Thank you.
Thank you, Patrik. Let's move forward and have a look at this whole quarter one performance first. Sales volume increased by 3.1%, and that was supported by acquisitions, novelties, and strong March sales, which included the part of the Easter sales this year. Last year, that was in April. New businesses grew the total volume by 4.1%. When we are referring to these new businesses, we are referring to Sweden, Norway, Bosnia-Herzegovina, Serbia and Latvia, where this Valmiermuižas alus business is a new one. That is the new businesses referred. In Denmark, as said already, volumes declined significantly, but excluding Denmark, group total sales volumes grew by 7.7%.
Again, thanks to our strong local brands and new launches, market shares in the main product categories have remained at the previous year level, which is the good level. Net sales growth exceeded the volume growth significantly as the average sales price grew in many markets and is higher in new markets than the old markets. EBIT declined by this 14.5%, which represents only EUR 1.8 million. Gross profit improved by 15.2% and was 42.3%, so that improvement is very good. The EBIT decrease was caused by bigger losses in Denmark due to the volumes, and then this purchase price allocation related depreciations linked to the new businesses. That was EUR 700,000. But that is a little bit higher in quarter one, so the full year, this PPA-related depreciations will be EUR 1.7 million for this acquisition confirmed. Also, new businesses takeovers and integration incurred one-off expenses.
As said already, EBIT is traditionally lower in the volume-wise quiet Q1 and than full year. Historically, January, March accounts for around 15% of the year result. The segments. There is now a segment change. We have added these new businesses to the former Baltics region. We see that with this change, the Finland and Belarus are clearly separated as own market areas. Also these segments are representing by their nature and size evenly our business. In Finland, we had good volumes and net sales development. We can see that the volumes grew 2.6% and then the net sales 3.4%. EBIT is at last year level, and that is due to the higher marketing cost related to the brand launches like Juju. We are preparing for the season with these launches.
Just one note also what has happened in the quarter one, so we have launched Sandels in the Systembolaget. That is also representing our new capabilities with our new brewhouse. Now we have a capacity to export our products too. This new Rest of Europe segment. There, the volume declined 1.3%. New businesses increased the volume almost 11%, and Denmark decreased due to this discontinued production of the private label products. Organic growth was -15.5%, and without Denmark, only 1.1%. Net sales grew clearly ahead of volumes thanks to the higher average sales price, as was earlier mentioned. EBIT percentage change seems dramatic, but we have to remember that this is only EUR 1.6 million, and that is mainly because of Denmark. Other organic business in Baltic improved their profitability.
New subsidiaries and businesses as a whole remained negative due to the takeover and integration cost and also high cost level compared to the low quarter one sales figures. As a kind of result of this takeover integrations, for example, in Latvia, we have been able to already implement our ERP system, changed our kind of logistics, integrated already that one. A lot has happened also in the integrations. In Belarus, volume increased 8.5%. That is mainly coming from the non-Alko that is growing in a total market. Net sales is growing with help of the higher average sales price. There is a little bit help from the stronger currency also. The year-over-year this quarter one result improved 6% in total. Some financial KPIs or highlights from the quarter one.
Our equity ratio is strong despite the increased debt level. We have taken a new debt, about EUR 30 million to finance our brewhouse and then the acquisitions in this small quarter one to support the cash flow. In investments, we already have mentioned many times this Iisalmi brewhouse that is up and running already in March, so we are ready for the season. We are building more warehouse capacities in Estonia and Lithuania. Earnings per share, that is due to the softer quarter one result, but there are also higher financial expenses and taxes than last year. This personnel increase is coming from the new companies mainly. That is the explanation for that one. The operating cash flow, that is better and that is driven by the net working capital improvement by inventory change.
Inventories are at the last year level, but the change is smaller. In sustainability. All these climate targets have been approved under the Science Based Targets initiative. The approval confirms that our emission reduction targets are aligned with the target of the Paris Agreement. That was the first time we got this one. In second time, we got this Gold EcoVadis recognition. The evaluation measures company's environmental, social, and ethical operating practices, as well as the sustainability of the supply chain. We are very proud to have that in a second time in a row. I think that was the financial part.
Yeah. Let's look at the near-term outlook, and it remains unchanged. We're still aiming to deliver between EUR 84 million and EUR 92 million in terms of profit this year. I mentioned Iran, and that's included in our forward-looking forecast. Again, we've been able, in our hedging policy, to secure our near-term outlook. There will be some impacts already this year. Again, some impacts on to next year, but those are considered in this estimate. Indeed, if you, again, look back at the performance of Q1, the track record is strong. Volume is seeing growth. Net sales is improving. The gross profit percentage is improving. We're on the right path. The Q1, burdened by these few items that Tiina-Liisa called out, Denmark integrations are very clearly explaining that performance. Otherwise, the business is moving very solidly in the right direction.
Then in terms of focus for 2026, some of you are getting familiar with our strategy one-pager. I won't dwell on that to a greater extent today. I want to underline that we continue to deliver growth, and we want to do it in a sustainable way, not only from an environmental perspective, but also considering our people, our products, and indeed our profits. There are some items in the operating environment that are impacting us. We've touched on the geopolitical situation, its impacts on raw materials. Households and consumers remain under financial pressure, or then they act cautiously. The good thing is that the way in which you can perform in this type of market environment is by having a broad portfolio. That's one of our strengths.
We have a portfolio that talks to all need states, all occasions throughout your day, and even touching several price points. That's evident in the increasing volumes and the strong market shares. Again, our offering is both relevant and attractive and on a growth path. What will be key this year, critical, is to indeed unlock that growth through non-alcoholic, through this expanded reach to new consumers. Let's remember that we closed 2025 with operations in six countries. Now, if we include our sales team in Serbia, we're active in 10 countries today. We're able to address a local consumer base, which is twice the size of the one we had at the end of 2025. There truly is a tremendous growth opportunity in our expanding footprint. We have to succeed by building strong, enduring brands. That's one part.
Let's invest in brands that can perform for the long term. On the development side, we continue the data journey. We continue to learn, evolve, and use our data more efficiently. We want to complete the integrations on time to make sure we can start unlocking those synergies and growth opportunities. As a team, we're very much a growth mindset kind of organization where we continue to learn and develop. Finally, I'll close on the efficiency. We have to be efficient cross-functionally. We have to collaborate more, we have to tease out savings where we can, and we have to be very diligent on our spend. Cost discipline is one of the themes that we follow throughout the year. For the long term, our ambitions, our targets remain the same. We want to be carbon neutral in our own brewhouses by 2030.
We want to make sure that we keep strengthening our competitiveness, that we look after our people, that they are safe and healthy. We keep investing in our development and importantly, we reach more and more consumption occasions each day. We're already at 7 million moments of enjoyment every day, so just a matter of time when we get to 10 million. With those thoughts, I think we covered most of our, pretty much what all that we wanted to say, and now we're very keen to take any of your questions. We close here.
Thank you. Please.
Thank you. It's Caj Toppari from Nordea. Maybe as the first question, you mentioned that the gross profit increased quite significantly year-on-year. What drove the expansion of the gross margin? Was it mainly related to the average selling price increase?
I'd point to the, Tiina-Liisa mentioned the average sales price, but how does that construct itself? It's through the portfolio play. Again, I mentioned that we're touching several price points in many occasions. The key here is to make sure that we sell continuously a healthier composition of products. I would speak also to the portfolio structure.
As this average sales price, definitely the portfolio mix is the key. As you have seen that in Denmark, for example, we have cleaned the portfolio, and it's also that we have to kind of have a healthy portfolio in every country. That's the portfolio and also kind of the keeping that average sales price going forward. Also, I think we have to mention that in COGS, we have been more efficient. If we compare to last year, so that is something, the work that we are doing internally, the efficiency in the production, that is the key focus area to kind of remain in a competitive side. Also kind of all these actions like hedging and these kind of things.
Thank you. Since you mentioned last year you had a quite promotional intensive focus in the Baltics here within the product mix, and now it seems you're reaping the fruits of these measures, at least partly.
How do you view going forward for 2026? Is there more to gain here within the product mix optimization or should this be seen as a new baseline for you?
I think for sure. We believe we're on a journey, and the work continues, as Tiina-Liisa pointed to, and what I referenced there in terms of efficiency, looking at cross-functional efficiency as a driver in our own operations. You've got the pricing element, then you've got the promotional spend, how much of your volume do you sell on deal.
... the overall portfolio mix. There are several levers that we're working with and continue to work with. You brought up the Baltics specifically. Last year, we were quite ambitious in our planning and activations in the Q2 , particularly. We succeeded in taking share, but the market itself was really low. We haven't planned any weather impact into this year, so we're expecting kind of a comparable year. There may be an upside, but we're quite confident there shouldn't be a major downside in terms of overall demand. The consumer remains to be under pressure.
We don't see a huge improvement in overall demand as a trend per se, but we remain cautiously optimistic that this year will be at least as good as last year.
Yeah, I think we have a good position. Even though last year, as those all actions mentioned, we were able to remain a good market shares or even grow those ones. I think we are in a good position now also including the portfolio mix kind of efforts and everything. Yes, we believe that we are in a good position to heading to the season.
The numbers demonstrate it. Again, if you look at the underlying numbers for Q1, they prove that we're on the right path.
All right. Thank you. You mentioned that you already started integrating some of these companies through ERPs and logistics, but what are the next steps during this year for the integration?
Yeah, of course, in quarter one, with these three acquisitions, we have concentrated very kind of basic things now so that we are getting the operations, this takeover done, and we are getting the data flowing and all these basic things. Now I think onwards we are focusing much more in the business. As I said, we have already a great kind of result. In Sweden, for example, we have this Sandels and Systembolaget. We are putting all our beer in June there, and there will come a new product. Yes, these business integrations are going forward, but we expect that the kind of the real result end of the year or next year. Now we are focusing on this portfolio mixes and this multi-local strategy and all this, the core thing that we are doing in the business in general.
Yeah, great. I just want to underline the fact that we've had early successes, as you mentioned.
Yeah
Systembolaget launch. Then when you think about next steps and you think, for instance, about the Balkan area, currently we're only selling a very tight range of beers.
How can we quickly expand that offering into other categories? The work continues.
Yeah. As we said that in the quarter one there were this one, of course, related to this one, so as we said that this kind of change in the logistics or implement the ERP, so that is the kind of what we need to do. Of course, that will be the kind of the first part of the year and this year in the focus.
Thank you. Last question. What are your plans to recover Denmark's volumes as well as the profitability, partly as a reason through that?
Yeah, great question. I think we need to be open. We haven't managed yet to achieve our ambitions in the market. We've been saying constantly as well that our operations in Denmark are geographically well-placed, so for sure, we want to be relevant in the market, and we are already. We have Jolly as a relevant local soft drink offering that took 3%, not 3%, but three times larger share in the category last year. We're very committed to build that. Willemoes as a strong beer proposition keeps growing. We're expanding the distribution of it. Beyond the borders of Denmark, what can we produce at the site, in a sense, to support our new business in Norway and Sweden? How can we go further into Europe considering border trade?
What additional products from the group might we choose to produce in Denmark for the benefit of the other market? Not only are we considering it a Danish operation, but really a catalyst for growth beyond the borders.
All right. Thank you. That's all from my part.
Thank you. I believe we have some questions online as well.
Yes, we have a few questions on the chat. First question: How do you think the shift in cola bottlers will affect you? What opportunities do you think it will bring?
Thank you. That's a big question. I think the big news of this week, and I've had the pleasure myself to be in food and beverage for the last 25 years, and it's ever exciting. There's always something going on. On the other hand, we as Olvi, we've been in business soon for 150 years, so we've also seen changes in the market. There's acquisitions, there's divestitures, and things always happening. For us, of course, the primary thing is to keep focusing on building our own business, building it profitably into the future. When it comes to partnerships, that's also something we've called out in our strategy. We're open to partner with other companies. When it comes to this cola situation specifically, of course, there will be intensified competition now in the cola category.
We expect both operators to do their most during the next two years until they then take on board new brands or launch new brands. Whatever they intend to do, you'll have to talk to them. We'll keep performing. We'll remain open for opportunities. We see this as an interesting and significant change, but not something that changes our business model.
Thank you. Next question. Press release regarding the Värska acquisition was quite obscure and indicated some type of court issue. Could you please clarify the real issue and expected timeline of the acquisitions?
Thank you for the question. Quite important, so we're sorry if it was ambiguous. We thought it was very clear. The competition authorities have approved the deal, so there's no question marks as to whether this should happen or not in the eyes of the competition board. There's a local operator who has challenged the decision, also something we expected. This is something we're dealing with now in the court proceedings, and we expect to have clarity by summer, and we expect, of course, the competition board's decision to stand. I hope that clarified the status there.
Thank you. That was all the online questions.
Okay.
Thanks.
Well, with that, we thank you, and we look forward to seeing you after Q2, and we'll keep building the business in the meantime.
Yes.
We wish you a great spring and a long, warm summer, and please enjoy our beverages regardless of what market you find yourselves in. Thank you.
Thank you.