Welcome to our Q2 and half-year report. Before we get going, the usual disclaimer. We will be referring to future events, and as such, there is always some uncertainty with those statements. By now you are familiar with Tiina-Liisa, our Chief Financial Officer and Chief Information Officer, and myself, Patrik, who has the pleasure to be the Chief Executive Officer of Olvi Group.
We want to start by looking at the numbers and then reflect on our performance in further detail. Net sales profit grew and accelerated during the second quarter. We are pleased with that. The volumes also grew during the whole first half-year period and were boosted by the three acquisitions that are included in H1 numbers. What I want to emphasize when it comes to our performance on both volume, net sales, and EBIT or profit growth, is that there is an organic element that is important to call out.
We grew organically across all our markets except for Denmark. In Denmark, the challenges continue, as do our focus on improving our operations. We put in a lot of effort in making sure that we run the facility efficiently. We made some changes to our management, and we are currently actively seeking more volume to use that excess capacity we have and to make sure that we can cover our overheads.
Going back to the broader picture and the overall performance, we are very pleased with the fact that our mix is improving. Our novelties have been really well-received by consumers across our markets, and there is a clear preference for our brands, which means that our shares are staying strong and our performance is solid. I mentioned already on the previous slide that the volume was boosted by acquisitions, and by now all four acquisitions have closed.
Also, the most recent one, Värska, which is included from July numbers onwards. For the first half, it is three of the acquisitions, and now for the balance of the year, we will see all four companies included in the numbers.
We can expect some support there on net sales and volumes from the acquisitions, whereas the profit improvement will be more visible then in 2027 after the synergies start to materialize. This year, the first year, is all about integration and bringing the teams on board. Also want to call out the fact that with these acquisitions, we have entered four new markets. We are now active in Sweden, in Norway, in Bosnia and Herzegovina, and in Serbia. We have our own businesses in these four countries now. As such, we are able to service 25 million new local consumers.
It is quite a significant improvement of our reach, extension of our reach, if you like. Another aspect I also want to call out is the balance of our portfolio. We are now, with these four acquisitions, in a position where half of our portfolio is non-alcoholic and the other half is alcoholic. That gives us a great place from which to build future sustainable growth across our territories and beyond. With those entry words, I will hand over to Tiina-Liisa to take us through the numbers. Thank you.
Thank you, Patrik. Let's start going through the final sale performance, and we will start with the quarter two, so the latest three months. Volumes were 300 million liters in quarter two. Weather was quite normal and supporting that way the season start. Volumes grew 4.2%. If we exclude Denmark from these numbers, the volume grew by 8.4%, so double what we can see in the report.
In Denmark, we have to remember that the previous year's figures included a significant share of the private label production in Denmark, and that is causing the decline of the volumes. Channel-wise, the HoReCa channel and export grew the most. In categories, mild alcoholic beverages grew the most, with the emphasis on beer and mixed drinks. There we have cocktails, ready-to-drinks, and also hard seltzer, for example.
New businesses also contributed and affected the sales volume by 4.7%. When we now refer to the new businesses, we are talking about this Latvia Valmiermuižas alus, then the new markets in Sweden, Norway, Bosnia and Herzegovina, and Serbia. As it was mentioned, Värska Originaal AS operating numbers are not included in June numbers, but from quarter three onwards.
Only balance sheet part is combined to quarter two numbers. Overall, the market shares have remained at a good level in this tight price competition. Net sales grew 15%, and that's because the average sales price per liter increased through the optimization of our product portfolios, prices, and range also. EBIT grew 21%. In gross margin level, profitability improved both in euros and in relative to net sales. Our gross margin percentage is now 42% compared to the 41% last year.
With that, we are covering growing fixed expenses and therefore able to improve the operating result. Successful launches of new products, price and this product portfolio optimization and improved profitability, especially in the Baltic countries and Belarus, supported the profitability development.
When we go to the segment level in quarter two. In Finland, we can see that our volume grew 5.8% and net sales 5.6%. Growth focused on the retail trade, while in the HoReCa segment, the consumer's modest purchasing behavior continued still in Finland. Olvi's market shares remained strong and also volume growth was achieved both in non-alco and in alco categories. We can mention, for example, this hard seltzers where the growth is continuing very strongly, and we are a market leader there. This OLVI Juju new soft drink brand started very well.
Our own brand soft drink sales has grown from last year. EBIT wise in Finland, the growth was 1%. The strength in product portfolio has supported the net sale growth, but increased price competition, higher retail sales weight, the impact of the cost inflation also accelerated by Iran war, particularly in freight and packaging materials.
Limited opportunities for price increases and investments in the marketing of own brands have made profit improvement not possible in quarter two. Rest of the Europe, volumes grew 2.7%. The organic sales volume decreased by 10% or 10.6%. If we exclude Denmark, the organic sales volume remained at the previous year level. New businesses increased the segment sales volume by almost 12%. In the net sales, the growth was 18%.
Here the organic net sales declined by 2.8%, while excluding Denmark, organic net sales increased by 2.5%. Other companies than Denmark has been able to increase the average sales price. New businesses increased the segment's net sales by 19.2%. The average price was increased by product portfolio optimization measures in several markets and the higher price point of the brands represented in Sweden and Norway.
EBIT in rest of the Europe segment grew almost 11%. Baltic countries has improved significantly, and the impact of the new businesses was already clearly positive in the second quarter. We have to remember that the synergies will begin to materialize mainly in 2027. Yes, Denmark is burdening the segment's profitability heavily by making losses. Belarus volume grew 5.6% and its growth driver is mainly non-alco, waters, and soft drinks.
Net sales grew 24%, and that is supported by price and product portfolio optimization measures, mainly in beer and soft drinks. Successful launches of new products and improved delivery accuracy. EBIT 48%, and the improvement in profitability was supported by the increased gross profit due to the improvement in the average price and net sales, as I explained.
When we check the first half of the year in total, we can see that the volume grew totally 3.8% and was more than 500 million liters. The sales volume improved in the second quarter as we saw. The sales volume increased by 4.4% inorganically. Again, excluding Denmark, the sales volume grew by 8.1%. Launches of the new products, strong local brands supported the growth in sales and keeping the market shares at a good level.
Net sales grew by 13.5% following the new acquisition, improved portfolio mix, and better average sales price. EBIT +9.6%, and the profitability improved in Baltics and in Belarus is the main cause of that one, and thanks to the more optimum product portfolio in general.
Shortly the first half of the year segment-wise in Finland, we can see that the sales volume and net sales growth has been pretty similar, so more than 4% both. EBIT-wise, the EBIT has been in the same level, and that is because of the reasons that was explained when we discussed about the quarter two. The rest of the Europe volumes +1% and the net sales 16.4%. The average sales price has grown in many markets, and the new businesses are contributing in the net sales more than to the volumes.
EBIT decline was mainly due to Denmark, as mentioned before, where the operating result is at a loss due to the low sales volumes. The low capacity utilization rate and the cost associated with the ongoing development program increased the operating loss. There are actions going on. On the other hand, profitability has been significantly improved in the Baltic countries through measures such as price and product portfolio optimization.
The integration of the new subsidiaries has gone according to the plan, but takeover and the business development costs, among other things, are burdening profitability in 2026. We are heading to the 2027 with all the developments. In Denmark, to improve profitability, efforts are focused on securing additional production volume and adapting operations to the changed volume level. Belarus sales volume 6.7%+, net sales 22%+, and EBIT 31%+.
What has caused this good development in Belarus? The stable exchange rate, growing consumer purchasing power, and the market growth, especially in non-alcoholic product categories, have supported the overall market development. Local company has been able to strengthen also the branded sales and improve profitability in gross margin level.
The final KPI summary. We can see that the equity ratio is a little bit lower than last year, but we remember that we have been financing now the Iisalmi new brewery with the green loan, and also we have used short and long-term loans to finance our growth and the new acquisitions. Earnings per share a little bit higher than last year. Operating cash flow clearly better than last year, and that is because of the better net working capital situation. Investments are in a high level of EUR 24 million. The main investments are still going in Iisalmi.
We are finalizing our warehouse and inner logistic investment. We have started also in Lithuania a new warehouse investment. So we are also investing in growth. Personnel has increased mainly because of the new businesses. In sustainability, we are participating in United Nations Global Compact Beyond Basics program, which then deepens expertise in managing the human rights impacts of procurement. But I think those were the-
Great.
-highlights of the finances.
Very good summary. Thank you. With that, now that the half year is behind us, we are able to update our guidance and narrow the range. The range that we are communicating and aiming for this year will be between EUR 84 million and EUR 90 million in terms of EBIT operating results. For the balance of year, of course, the year is not over. We are in the middle of August, so we consider it still summer.
So summer is still here. We are going to keep pushing the business forward along with our chosen priorities. So this year has been about growth. It has been about development and efficiency. We will keep growing in our new markets and domestically, organically, especially also driven by non-alcoholic categories. These new markets and new consumers and new need states that we will be approaching, more on that later this year, will also support our growth.
We will, of course, focus on our own business, making our operations as efficient as possible, making sure we leave no stone unturned. With that, we close and open for questions. Thank you. Maybe we start here in the room, and then we go online if there are further. Please.
Yes. Thank you. Maria Wikström from SEB. I first wanted to touch upon the new guidance. Of course, it is just a small downgrade on the high end of the range. Given that you are already ahead of last year after the first half of the year, why wouldn't you see this trend to continue so that you could keep the range? As you write here that the estimate operating result has been updated based on the actual results of the first half of the year. What did disappoint during the first half of the year?
Thank you. Good question. I am sure Tiina-Liisa wants to elaborate, but maybe two things come to mind, and one is, of course, the impact of the situation there in the Strait of Hormuz, its impact on logistics costs and then packaging materials. So that was a change, a negative surprise, the continuation of that conflict. Secondarily, I would probably call out the Värska deal.
It closed later than we had expected. It is now closed, so it is good news, and we will carry on. But in our previous guidance, we expected it to close already in April, May time. I would call those two out. Is there something additional?
Maybe to add that this Iran war thing is affecting, and it is causing uncertainty. We have been able to offset the price increases mainly, but there is some uncertainties in some markets that can be fully the whole year to offset these price increases. Also, I think that as we have mentioned Denmark, to acknowledge that unfortunately we have not been able to turn around the operations as we were hoping. So there is also a slight deviation. As you said, it is a minor change or specification in the guidance, but we wanted to make it now so that we are also open, but we think that these kind of things will affect on that.
You mentioned the Danish turnaround. Did the operating loss expand in the second quarter compared to the first quarter? I am also interested in the measures to turn around the operations, given that it has been going on for a few years now, that one starts to wonder if it is actually possible to turn around the Danish operations.
Thank you for your question. I understand your concerns. Indeed, what we have done is focused on our operations, making sure that we streamline it in line with the volumes as much as we can. The primary priority really is to find more volume. We are running the factory at very low capacity currently, meaning we were looking for volume not only in the Danish market, but also in other markets and across our business. That has always been part of the play there with Denmark being geographically well-placed to produce for other markets, be it for export purposes or for our own domestic markets now with having presence in Norway and Sweden.
So those I would call out. I would also emphasize that we have made changes to management, where we have confidence in our ability to present more compelling cases both to local sales and addressing those opportunities beyond. That is a few things that we have done. We cannot shy away from the fact that the volume we were looking for is not there at the moment, so we need to continue pursuing that.
I think you asked that if the situation changed from quarter one to quarter two. I think it is a pretty similar situation that we are doing these changes right now. Yes, as we said, the situation with the profitability has not improved compared to the last year.
Yes. My final question is, I am interested in what I would define organic volume growth. Your volumes were up 4% in the quarter, and if you would exclude the Danish portfolio changes, it was up 8%. How much would have the volumes been up organically, so without these acquisitions and without the negative impact from the Danish portfolio changes?
Thank you for the question. I do not know if we can give an exact percentage, but in full transparency, we intend to clarify this point. We had some questions on that, so I do not have a percentage to give. We can confirm there is local domestic organic growth bar Denmark. That we can confirm, but I cannot give you a percentage because I simply do not have it top of mind.
As you saw that in Finland, in Belarus, there was organic growth coming true. Also in Baltics, there is some organic growth also happening. You remember that last year, the first half of the year was not easy, that the weather was not that supporting. That is also helping there.
I wanted to ask your views that now positively we have seen some signs of Finnish consumer confidence to pick up during the summer months. How do you expect this to impact your business during the second half of the year if the trends were continuing and the Finnish consumer would be more spirited than it has been over the last two and a half years?
Well, I guess that's what we've been waiting for and hoping for. Whilst indeed we read positive headlines, we see some positive underlying numbers. Some of the retailers report positive figures. I think what still holds true is the price pressures. So consumers are still conscious as to what they spend. We don't see the premiumization kick in yet. We don't see that spilling over into the HoReCa channels yet. But there are signals that that should come.
When we get there, we will be, of course, stronger than we've been before. We're sitting today here in Finland, and from that perspective, it's also interesting to point out an agreement with Pernod Ricard to represent their portfolio in Finland, making us stronger in the HoReCa trade. When the market recovers, we're well-placed to take our share of that. But yes, the signs are there, and we're hopeful, but we won't build our business on hope. We'll keep performing regardless of the market situation.
Maybe one more.
I think-
I just came from Anora Group's Q2 call, and there the Chief Executive Officer said that it seems that the weather is favorable for extending enjoyful moments for their drinks. If we now look over to the some months of Q3, how does the weather look for you guys?
I am glad that Anora Group seems to be referencing our moments of enjoyment, and indeed, we intend to deliver those. Again, we are not building the business on hope. I am not able to predict the weather, but we will be here. We are ready to serve if there is a spike in demand for sure. Thank you for all your questions. Shall we see if there is something online?
Yes. There are a few questions in the chat. First question: Is the seasonality in the new markets as heavily weighted towards Q2 to Q3 as it is in Finland?
Well, if you look at Sweden and Norway, the answer would be yes. Then in the Balkans, there is also seasonality.
Yes.
Perhaps not as dramatic as in the north.
Thank you. Next question: Why do not you report EBIT contribution anymore? It will be important to understand the underlying development, especially when Värska Originaal AS is included.
Thank you. Good question. As already referenced here today, we intend to provide further clarity on that. It is an area of opportunity. Thank you.
Next question: As an early take, which one of your acquisitions has been the most positive surprise?
Well, I am glad to say we haven't had many surprises. They have delivered against expectations. But in any integration, in any acquisition, there are always important learnings. I think we are very pleased that we can confirm that all four deals have now completed.
That was important. I think one of the key aspects was to expand our reach into new markets, to service new consumers, and look for growth there, both for the acquired business and then complementing that with group products. That's all working well. Then indeed to upweight the non-alcoholic part of our portfolio, achieving what we now have, which is a 50/50 split between non-alcoholic and alcoholic. These have all materialized.
Of course, there are small examples. In Sweden, we have been able to start Sandels beer sales, and it has started quite well, above the expectations.
I think that has been a positive surprise in a way, and also that we have found a way to also widen the portfolio with our products in Norway and Sweden and other markets, also in Bosnia and Herzegovina and in Serbia, quite quickly. Anyway, we have started the integration and preparing the synergies for 2027. At least those has been positive-
Yep.
-kind of surprises that our people are working very heavily towards the targets.
Thank you. Was it a mistake to cut private label volumes in Denmark as you now lack scale?
Well, there is a two-pronged answer to that. There was part of the volume we wanted to get rid of. There was another part we wanted to have, and we lost.
We are trying to recover some of that volume that has an economic justification. Thank you.
Thank you. What have you assumed for Värska in 2026, and is the EBIT contribution still less than 5% from M&A in 2026?
I believe it is too early to comment, and we have not so far, so we will not elaborate on the 5% that we mentioned previously. But thank you for your question.
Thank you. Last question: Did you lose market share in Finland in Q2?
We did not. Not on the major categories.
Thank you
We have performed better than market.
That was all the questions.
Thank you. Then with that, as we have answered all the questions, we thank you for your attention and wish you a nice weekend. It's Friday. So keep enjoying life. Thank you.
Bye-bye.
See you next time.