Oatly Group AB (OTLY) Q2 2022 Earnings Call Transcript

Oatly Group AB (OTLY -6.46%)
Q2 2022 Earnings Call
Aug 02, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Oatly second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instruction] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Rachel Ulsh. Please go ahead.

Rachel Ulsh -- Investor Relations

Good morning, and thank you for joining us on Oatly second quarter 2022 earnings conference call and webcast. On today's call are Toni Petersson, chief executive officer; and Christian Hanke, chief financial officer. Peter Bergh, chief strategy officer, will also be available for questions. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws, including financial projections for future periods and fiscal year 2022.

These statements are based on management's current expectations and beliefs, and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the company's annual report on Form 20-F for the year ended December 31st, 2021, filed with the SEC on April 6, 2022, and other reports filed from time to time with the Securities and Exchange Commission for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note in today's call, management will refer to certain non-IFRS financial measures, including EBITADA, adjusted EBITDA, and constant currency revenue. While the company believes these non-IFRS financial measures will provide useful information for investors.

The presentation of this information is not intended to be considered in isolation, or as a substitute for the financial information presented in accordance with IFRS. Please refer to today's release for reconciliation, non-IFRS financial measures and the most comparable measures presented in accordance with IFRS. Please also note all retail standard data is based on Nielsen for the 12 weeks ended June 20, 22. In addition, Oatly has posted a supplemental presentation on its website for reference.

I'd now like to turn the call over to Toni Petersson.

Toni Petersson -- Chief Executive Officer

Thanks, Rachel. Good morning. We appreciate you joining us to discuss the second quarter results. Today, I will provide an update on our strong business performance, and I'm very pleased to share on these things.

production capacity plans. Christian will review our financial results and update its 2022 outlook. Then Peter, Christian, and I will be available for questions. In the second quarter, we deliver a strong revenue growth of 22% year-over-year to $178 million, with approximately 30% growth to $190 million in constant currency.

This strong performance reflects our belief that we have significant growth opportunity ahead of us, and we continue to believe Oatly's decision to become the number one [inaudible] company globally. Scanner data continues to show that the eight categories gaining share and becoming known their default of other alternatives across our key markets continue to grow the category. We believe that the combination of our Oatly brand of strategic feature with that multi-channel approach, and our proprietary oat-based production process differentiates us to consumers, and our mission of converting more than just the open consumer center around scaling and defining each of these two factors in each of our regions. Now, moving to our business performance.

The consistency globally is that we continue to see tremendous consumer demand and growth momentum, even though the massive dynamics that we face each region are very different. In EMEA, we're seeing highly uncertain rapidly changing environment. The current macro context economic conditions, which increase with the rhythm effects of the war in Ukraine, world inflation, energy prices, changing consumer behavior at retail, and the speed at which we can expand our challenges fusion. In spite of these challenges and the recent change in consumer spending, the plant-based dairy category has proven to be resilient and continues to grow, reflecting how consumers have adopted our products into their everyday life.

Oatly specifically continues to be the number one selling Oat milk brand in market-share, and the number one velocity brand in No-dairy in the UK, Germany, Sweden, Switzerland, Austria, and the Netherlands. Even more importantly, our velocity has remained stable so far, despite the massive dynamics. It continues to be at similar levels with prior quarters. Building on this performance and market leadership, we see significant growth opportunities across our channels, product innovation, and in the markets.

Within retail, which is the 82% of our business in EMEA, we expect to continue expanding and elevating our shelf space with existing partners, and also adapting to the current environment by entering new retail partnerships. For instance, we are seeing that consumers are responding to the new economic environment, changing where they choose to shop for the groceries, which now increasingly comes some discounters. To better position ourselves for this dynamic, we're growing our presence in soft discount for maintaining virtually the same price points as in our other retail channels. We recently launched with approximately 900 media sources in UK, and approximately 770 [inaudible] locations in Germany.

Our last year in March has been very successful to date and we have seeing strong velocity performance. [Inaudible] represents approximately 80% of our business in EMEA in Q2 and it's a core focus for expansion going forward to. Year-over-year of service business in EMEA increased 37%. So far this year, we have partnered with Deutsche Bank, Tchibo, Dunkin, and Aramark, and I'm excited to announce the partnership with Oral, the biggest German petrol station chain in October.

Oatly products will be found at the coffee station in 1250 stores, as well as on the convenience store retail shelf 950 locations. The main innovation, is similar one with further growth in product development, as most of our markets still only have limited experience due to historical production capacity constraints. We're starting to accelerate the expansion of potfolio, a recently introduced new format from a best selling perspective, with the launch of [inaudible] in over 3000 stores in the UK, Germany, and Netherland. As well as the [inaudible] across the same markets.

This information enabled us to reach new consumers and restrict usage occasions. Well, it is still early deletion of a lot of data and looks very promising, the other current geographic footprint in [inaudible], which is limited to four markets, we have a long runway to expand in neighboring markets that are ripe for disruption. We have proven model to launch the new markets, the growth category growth, and has led to leading market position. The most recent case studies of this success are increasing into the Netherlands, Switzerland, and Austria.

In Italy, releases [inaudible] in June. Overall, we are very excited about watching this opportunity is more commercially, globally. Turning to America's demand for Oatly products, [inaudible] remains very strong. We are the number Oatly brand -based on net sales, and according to the Nielsen data for the 12 weeks ended June 18, 2022, remain the number one fastest turning brand in total dairy, plant-based dairy in Oatlys  open market.

[Inaudible] nondairy default and have a market share of 22% as of June 2022, while on soy milks both declined year-over-year. Starting yesterday, August 1st, double-digit price increases went into effect across our channels, and we'll start to see a positive margin contribution impact in Q3, and expect to realize the full benefit in Q4. From a production standpoint, we achieved record label production volumes during the second quarter, the continued ramp up of all them and I'm hopefully some Oatlys' expansion is well underway on track to start initial production runs in the fall. If we increase the production capacity with significant distribution upside in the U.S.

where we only have 38% retail. However, the focus of the approach is to close the critical rate gaps before most. Finally in Asia, [inaudible]. Despite this versus and the impact it had on our foodservice channel, the team managed to achieve record revenue $44 million in the second quarter, over 70% year-over-year growth in constant currency, and a 52% increase compared to the first quarter.

Put in perspective, at the height of the lockdown, more than 7000 coffee shops, 10,000 milk tea shops, and [inaudible] are still closed. However, the team used the lockdown to shop in a multi-channel growth strategy to better position us both in the near term and longer term. In aggregate, e-commerce you see by himself is going to be 30% of total sales in Q2, up from 14% in Q1 [inaudible] What was successfully launched, the products of 250 million in the [inaudible] and products. [Inaudible] estimated to be at least twice the size of the specialty coffee channel with a huge opportunities to grow.

We continue to maintain a number one position on Tmall with 53% market share in the new plant-based category. [Inaudible] During 618 promotion, which is one of the largest shopping festivals in China, also ranked number one in the plant-based category, and second in beverage category on Tmall and Tmart. Then also the top seven in the beverage category on jv.com. The capacity for the new production line in Singapore, we have started expanding to new countries such as Malaysia, Indonesia, Vietnam, Cambodia, and Mongolia in the first half of the year and expects to launch in additional countries in the back half of the year.

While COVID-19 has not completely dissipated and the variants of the virus continue to break out in many cities, so navigating as best as we can. We tend to focus diversified and expand our channel and geographic reach through our route to market strategy, and believe we remain well positioned in Asia as COVID-19 headwinds subside. Turn in to production in the second quarter, [inaudible] increase to 34% on a total volume compared to the [inaudible] at 27% and having a 39%. Full production volume was 124 million liters, up 17% in the first quarter.

We're pleased with the recent performance of the Utah facility that successfully increase output in none of our expectations did not take a few steps to further improve output in the back half of this year. In Asia, Singapore is on track to be fully ramp during the second half of the year and market share will continue throughout the year. We expect to produce between 135 to 145 million liters of finished goods this quarter, driven primarily by improved production upgrading of them to Asia facilities. If you look toward the future capacity expansion, I'm happy to share we have adjusted our capacity [inaudible] to will reduce our 2022 guidance from the lower end of the $400 to $500 million range to $220 and $240 million without compromising of well.

We believe investing in our growth is critical to establish the infrastructure necessary for a high growth global company, and indeed drive the conversion of dairy futures if it translates to more consumers. In light of the unprecedented changing world around us, we are definitely like any fast growing company and should be taking into consideration, longer supply chain time, high cost of construction, and uncertainty to it. So, our focus is on investing in our growth would be in technical with our CapEx project management in order to balance speed to market with supply chain execution and cash flow management. We will continue to prioritize our investments in a region where we still have the highest and therefore where need for additional production volumes with the most pressing, Americas, and Asia.

We'll prioritizing [ianudible] the expansion and thus pulling up additional auto plants not targeted for 2020, speedy growth not planned to open in 2024 to line the timing of production when we need the volumes. The Melbourne Expansion Project also continues to be a near-term priority, and expects to produce initial rounds in the fall of this year. We continue to expect one way capacity of approximately 900 million users executed 2022, and now approximately 1.2 million users executed 2022, which would support our growth in 2024. So we're making it very clear that although the world is changing the fundamentals and a stable winning model, and therefore ambition and confidence have not.

Expect to have enough liquidity to support the global growth and expansion of our business for at least the next four months. We're updating our revenue guidance to $800 to $830 million for the year, or rather than $835 million to $855 million in constant currency. In line of the uncertain operating environment and macro factors, especially in EMEA and Asia, that we cannot ignore. Questions of review or any guidance in more detail momentarily, but we continue to expect accelerated revenue growth in the back half of this year.

In closing, I want to reiterate how strong the global demand opportunity is. We are in the early innings of a society should the majority of plant-based consumers join the category in the last few years. We believe that we are driving plant-based movement and the markets is the answer, is step change can benefit people and the planet and will continue to drive this global conversion compared to plant-based. That is not changed and is important today as it ever was.

What has changed is the global macro environment or just in our projections in 2020, but not deviating from our mission to make it easier for people to eat better and be healthier in life without recklessly takes the planet's resources. With that, I would like now to turn the call over to Christian.

Christian Hanke -- Chief Financial Officer

Thanks, Toni. And good morning, everyone. It's nice to speak with you today. Turning to the financials, revenue for the second quarter of 2022 with $178 million, an increase of $31.8 million or 21.8% compared to revenue of $146.2 million in the second quarter of 2021, excluding a significant foreign currency exchange headwind of $11.7 million.

Revenue for the second quarter would have been $189.6 million, or an increase of 29.7% in constant currency compared to the prior year period. In the second quarter of 2022, we experienced broad-based growth across retail and foodservice channels, as well as strong growth in e-commerce sales in China despite COVID-19 restrictions. The Foodservice Channel accounted for 35% of revenue for the second quarter of 2022, compared to 33.2% in the same period last year. As reported on a year-over-year basis, the Foodservice Channel was up 28.3% compared to Q2 of last year.

This reflects the significant focus that we are placing on expanding this channel. The retail channel accounted for 56.8% of the second quarter of 2022 revenue, compared to 61.5% in the prior year period, as reported on a year-over-year basis, the retail channel was up 12.5% compared to Q2 of last year. Consolidated net sales per liter was $1.47 in the second quarter of 2022, compared to $1.54 in the second quarter of 2021, mainly driven by a foreign exchange headwind in EMEA and customers found in Mexico. After reminder, our highest regional net leader is typically in Asia, followed by the Americas, and then EMEA.

Gross profit in the second quarter was $28.1 million or 15.8% gross profit margin compared to $38.6 million or 26.4% in the prior year period. Compared to the first quarter of 2022, gross profit margin of 9.5%, we had a 630 basis points sequential margin improvement that's shown on slide 21. This sequential improvement was primarily driven by improving our production model mix, as well as increased in-house and local production, reducing reliance on co-packers, the implementation of the EMEA price increase, and last thing the co-packer consolidation charge recorded in Q1 with no such charge in the second quarter. As we have indicated in the past, it usually takes at least 3 to 4 quarters and no longer due to COVID 19 impacts before a new facility reaches the state utilization of the production lines.

During the ramp up phase, we carry the full variable cost structure but have not yet reached a steady state levels of production output that fully utilizes the capacity of the facilities. We continue to expect that the localization and expansion of our production capacity within the region should improve our production economics over time. With increased production volume out of Singapore and [inaudible], we expect gross profit margins to continue to improve sequentially throughout the remainder of 2022. The positive impact of the higher share of sales manufacturing will unlock multiple margin accretive benefits at the same time.

Additionally, we have executed on broad-based price increases both in EMEA and the U.S. to offset the portion of the inflation we are experiencing from raw material, logistics, energy, and labor globally. In EMEA, the price increases were completed in May and in the year were double digit price increases one through effect yesterday, August 1st across our channels. Based on the impact of supply chain challenges, inflation, finding a new capacity to come in the line, mix of the production model, as well as mix by sales channel and region.

We continue to expect variability in our gross profit margin quarter to quarter. Additionally, we continue to monitor the geopolitical impacts of the war in Ukraine, as well as COVID 19 restrictions based on the impact these events have on commercial execution and consumer demand. Second quarter of 2022, EBITDA loss was $62.6 million, compared to EBITDA loss of $43.5 million in the second quarter of 2021. Adjusted EBITDA loss for the second quarter of 2022 was $53.4 million.

The adjusted EBITDA loss was primarily related to the low gross profit, higher branding, and customer distribution expenses of the company court and other operating expenses that came with normal operations to support growth across three continents, offset by positive impact from foreign exchange rate. As we stated on our last earnings call, we expected operating expenses as a share of net revenue to improve. In the second quarter, total operating expenses as a percent of revenue improved to 7.6%, compared to 65% in the first quarter of 2022. We expect this trend to continue in the second half of this year as we close and manage costs, given the more uncertain operating environment today and drive to see profitable growth.

Now focusing on our balance sheet and cash flow. As of June 30, 2022, we had cash and cash equivalents and short term investments of $275.1 million, and total outstanding debt to credit institution of $4.5 million. We also have a fully unutilized revolving credit facility of approximately $432 million, including an accordion. Net cash in operating activities was $127.3 million for the six months ended June 30, 2022, compared to $72.5 million in the prior year period.

Capital expenditures were $111.3 million for the six months ended June 30th, 2022, compared to $134.4 million in the prior year period. Capital spending was lower than expected in the first half of 2022 due to the phasing of our facility investment. Net cash used in financing activities was $6.9 million for the six months ended June 30, 2022, primarily reflecting the repayment of lease liabilities and repayment of liabilities to credit institution. Turning to guidance.

In the third quarter, we expect production volume in the range of 135 to 145 million liters, which is typically a leading indicator of our revenue expectation and reflects that our growth is production output. As I stated a few moments ago, compared to the second quarter of 2022, we expect gross margin improvement and operating expenses as a share of net revenue to improve sequentially in the second half of this year, we are highly focused on achieving profitability. As Toni mentioned, for fiscal year 2022, we are updating our outlook and now expect revenue of $835 to $865 million based on constant currency, an increase of 30% to 34% compared to fiscal year 2021 at the midpoint. Expect accelerated revenue growth in Q3 and Q4, primarily coming from the America and Asia.

That's the prevailing ethics rate that implies a revenue guidance range of $800 to $830 million, an increase of 24% to 29% compared to fiscal year 2021. As you know, currency exchange rates are volatile and difficult to predict. Our previous guidance was based on exchange rates for March 30, 2022. At the time, we originally provided guidance.

And our updated guidance is now based on fourth grade as of June 30th, 2022, accounting for approximately $35 million of the change versus the previous revenue guidance. The update to our guidance range is driven by our assessment of the overall macro environment. Although our second quarter performance was strong on a constant currency basis and in line with the full year guidance, we reiterated at our first quarter earnings outlook for the second half reflects a range of outcomes where there are several external factors that could impact our business performance. To provide more context.

Indonesia clearly continues to take market share within the plant-based category and establish itself as the non-dairy default. Household penetration in the category is also proving to remain resilient, which reinforces that consumers have adopted plant-based dairy into their day to day routine. Across our key markets, we remain a market leader with clear velocity of performance against our competitors. That being said, given the many uncertainties in the macro environment in EMEA, ranging from the war in Ukraine, to rising inflation, and interest rates, and changing retail dynamics, we are taking a more cautious approach in our outlook for the remainder of the year.

More specifically, it is impacting the speed at which we are able to expand our distribution footprint in 2022, particularly in foodservice and new markets, and also taking longer to recruit new consumers. However, we are still highly confident in our ability to accelerate growth in all these areas going forward. In Asia, COVID-19 related restrictions remain in place, and the new COVID top variant of the virus continues to break out. During our Q1 earnings call, we communicated that our guidance to lockdowns in China will be by the beginning of the third quarter.

However, the recovery in the foodservice channel so far has been slower than we expected because of lasting concerns over lockdowns. As a result, we feel prudent to reflect the former foodservice recovery into our expectations for the balance of 2022. During the campaign, as Toni stated, we are strategically managing spend in order to balance speed, execution, growth, and cash flow management in this uncertain environment, as well as focus on the geographic regions that need more supply sooner. Given the pacing of certain projects and prioritizing Americas and Asia, we now expect capital expenditures to be in the range of $220 to $240 million in fiscal 2022.

With the pacing of the capital project, we believe that our sources of liquidity and capital will be sufficient to meet our existing business needs for at least the next 12 months. We continue to expect run rate production capacity to be approximately 900 million liters of finished goods by the end of fiscal 2022. With that review, we are now ready to take your question. Operator.

Questions & Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator instruction] Our first question questions from Andrew Lazar of Barclays. Please go ahead.

Andrew Lazar -- Barclays -- Analyst

Great. Thanks very much. So first, I wanted to get a little bit of a better handle on the significant CapEx cut for the year. I guess in the release in your remarks, you talked about a reduction in CapEx due to the sort of the current operating environment.

And I guess there are some concerns that this move could be driven by sort of closer in liquidity issues. You also mentioned a more difficult time converting dairy to plant-based users. So I guess there's concern that some of this could be a demand driven decision as well. You know, in the past, always taken much more of a growth at sort of almost any cost mentality.

So I was hoping you could just sort of address this a little bit. Which one of those is it or is it simply, as you mentioned, just sort of a closer in level of conservatism given the macro environment That would be the first question.

Toni Petersson -- Chief Executive Officer

Hi, Andrew, this is Tony. Thank you so much for your question. I hope you hope you do well. So to your question, this is about discipline and adjusting to unprecedented changes in the world[inaudible] policy demand dynamic with a laser focused capacity expansion.

Execution. So the expansion execution, optimizing the timing or production capacity additions to when we need the bodies. So we're still investing in our projects, but we are facing them differently. And I think that's what you would expect from any business leader from the global high growth company.

We just have to be smarter and work harder to optimize our capital use without compromising growth. So this has absolutely nothing to do with the fund raising capital and the timing of that, which is often adapted to unprecedented changes that is happening in the world. I'm not sure.

Andrew Lazar -- Barclays -- Analyst

That was one quick follow up to that with I guess you're looking for something pretty similar in 23 in terms of the production volume 1.2 versus 1.3 previously. I guess I'm curious, would that still suggest it can go to one? I think originally you were looking for 1.8 million liters in 24. Maybe that's a little too far out now to give perspective on. But what I'm trying to get a sense of, does CapEx ramp up significantly more in 23 to get to a sort of similar place from a production standpoint in T4? Or is this just suggest maybe a a slower production ramp, even for the next couple of years? And in terms of how we should think about CapEx.

Christian Hanke -- Chief Financial Officer

 So it's we're still exiting this year, but 900 milliliters, as we've indicated. And like you said, we have close to 1.2 million as we exit 2023. So it's all about demand and managing the supply accordingly. So it's not more dramatic than that.

You know, from our perspective. And we're still investing for future growth.

Andrew Lazar -- Barclays -- Analyst

Got it. Last thing is just, um, we've not really seen how plant-based products like this would perform in a tougher consumer environment. You know, given somewhat the newness of the category, I guess. Are you it doesn't sound like you're suggesting the consumer is yet sort of fading away from plant based products of the environment weakens.

But I wanted to make sure I'm sort of hearing you right. Thank you.

Toni Petersson -- Chief Executive Officer

No, that's absolutely right, Andrew. Plant-based is very sticky. This is not about demand. This is about the pace of growth, and how the timing of how how fast you can recruit new consumers into the pace.

So pace, not demand.

Andrew Lazar -- Barclays -- Analyst

Thank you.

Operator

Next question is from Ken Goldman of J.P. Morgan. Please go ahead.

Ken Goldman -- J.P. Morgan -- Analyst

All right. Thank you. And just to clarify or build on that last point, Toni, you say it's not about demand, but I think there was some implication in your words today that it's a little more difficult to attract newer consumers to the product. You know, just given the challenging environment, maybe the implication is that in EMEA, for example, there'll be some consumers that are, obviously, just trying to pay the bills this this year.

But is there any implication or any read for we can have about the pricing or the price level of your product, whether that's a little bit more of a hindrance to some people coming in and what we thought. I'll just try to kind of square your comments about the ability to attract new consumers right now with your comment that it's not really about demand.

Toni Petersson -- Chief Executive Officer

Yeah, absolutely right. And that's a really good question. So we don't see the price elasticity due to price increases. So our velocity performance remained outstanding, and strong, and stable.

We are gaining market share across Europe. We are winning distribution. We receive launches. We see really good initial performance and foodservice is growing by 30%.

But you know, this is back here in Europe specifically, and we see tremendous challenges for retailers here to just navigate around this unprecedented change that is happening, and also the consumers who are really monitoring their household budgets. So and that goes for futures as well, you know. So there are basically three different things here that is related to timing. And it takes longer to expand into new markets, and it takes longer to expand its use in foodservice.

No, they're facing exactly the same challenges as retail, and then it's simply taking more time to recruit these new consumers into the category at the pace that we had planned for. And and this is given all of unprecedented set of factors that is impacting peril that people and business leaders are navigating through. So this is about pace fundamentally, as we can see, walking into a the retail client plant-based group is growing, that is an important point and in that entry is extremely strong in our position. So the timing thing is not about demand.

Ken Goldman -- J.P. Morgan -- Analyst

OK. Thank you for that. And then for my follow up. You mentioned that there was really not a liquidity issue for the next 12 months, I believe is how it was phrased.

It is sort of the messaging there that maybe you won't be doing a [inaudible] raise in the near term. I think a lot of observers may have expected that and some may have even hoped for it just to kind of get that overhang behind us. So can you talk a little bit about how that comment reflects sort of your desire or need to raise capital right now, and how you balance that with sort of what may be, you know, an overriding investor desire to kind of just focus on the fundamentals rather than maybe some shorter term balance sheet questions.

Christian Hanke -- Chief Financial Officer

Yeah. Hi, Ken. It's Christian here. I mean, as you said, with these adjustments, we have sufficient liquidity to fund the business now for the next 12 months.

But what we have done is to provide ourselves with more flexibility in terms of timing to fund our growth. And we're still confident that we have multiple options to access capital. So we're still looking to raise the capital to fund our growth. And the $400 million that we've put out there is a good estimate of how much capital is required to fund all of the CapEx project projects through 2024.

And that is also, you know, the number, sort of the reason why we said it at our previous year, we made some capacity pacing  we no longer need to raise the entire amount in a sIngle transaction. This year, and we have the flexibility to match the facing of the capital raise with the CapEx. And we're also approaching that with an objective of minimizing cost of capital as well.

Ken Goldman -- J.P. Morgan -- Analyst

Right. Thank you.

Operator

Our next question is from Kaumil Gajrawala of Credit Suisse. Just go ahead.

Kaumil Gajrawala -- Credit Suisse -- Analyst

Hi, thank you. When I think about some of your commentary on macro, you know your answer to this question on how conversions may be getting a little harder and stuff. Could you talk about what your expectations are for that going forward and that we might just be at the beginning of these macro issues, particularly as we get into the winter in Europe. So can you just talk about what you're expecting versus what you're observing in? Is this is the adjustment to top line just more about what you're observing so far? Or do you have expectations for the chance that things might get materially worse in the next six months or so?

Toni Petersson -- Chief Executive Officer

So yes, the revised guidance reflects what we see the back end of this year, especially in Europe and then Asia. That is not opening up the way we would hope. The runway is absolutely massive. So if anybody here in Europe understand that it is very cheap, you're right.

People are monitoring the household budget and the living costs is definitely increasing. But Oatlys' performance in that environment is stable and is proven to be resilient. Even if we do price increases, we also see that people are moving more often to, you know, soft discounts. So when we see we are launching [inaudible] the the velocity performance is absolutely massive.

It's the more sense that the consumers have. And I want to have the runway that we have been expanding. No, that hasn't changed. None of the fundamentals of the business have changed.

And this is enormous whitespace for us to take in expanding into new markets, more foodservice discount. What we are saying is that it just takes longer to close the deal and also people are distracted with everything else that is happening in the world. So this is about the remainder of 2022. And nothing nothing on that, according to us.

Kaumil Gajrawala -- Credit Suisse -- Analyst

OK. Got it. And then as it relates to the price increases. I'm sorry.

Go ahead.

Toni Petersson -- Chief Executive Officer

Can I just add that said, we are expecting accelerated growth for the company for the last half of the year.

Kaumil Gajrawala -- Credit Suisse -- Analyst

OK. Got it. And then on price increases, can you talk maybe a little bit more about your price increases versus the price increases of your competition, you know, maybe by region? And then also, just how are you thinking about your the price gaps? You're typically the premium offering in the space. If as we are going into maybe a bit of a different macro world, how are you thinking about price gaps between yourself and some of the other players in the space?

Toni Petersson -- Chief Executive Officer

Very good question. So first of all, no increased price elasticity due to the price increases that we made in Europe. And also the relative price gap between us, the competition is overall the same. So so nothing has really changed from that perspective.

Kaumil Gajrawala -- Credit Suisse -- Analyst

Great. Thank you.

Toni Petersson -- Chief Executive Officer

Thank you. And we are proving that the double digit price increase in any place in the US starting yesterday.

Kaumil Gajrawala -- Credit Suisse -- Analyst

Got it. Great.

Operator

Thank you. Next question is from. Next question is from Rupesh Parikh of Oppenheimer. Please go ahead.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Good morning. Thanks for taking my question. So on the cost side, I was hoping to get it update in terms of the cost pressures that you're facing. Just curious what level of cost inflation you're seeing right now versus I think, the 89% expectations you had last quarter?

Christian Hanke -- Chief Financial Officer

Hi, Rupesh. Christian here. Good question. I understand.

Of course, it's an interesting topic in today's world, but yet we didn't speak about inflation at all. But of course, now it's more more relevant.  We expect inflation to increase our total cost with another 5% to 6% in the coming quarters compared to where we are today in the second quarter. We have slightly increased inflation levels or expectations 2022 versus 2021 compared to where we were when we reported in our first earnings call. Now, I would expect on a consolidated level low double-digits globally.

And previously we were high single digits. And this is probably primarily the consequence of the coming out of the macroeconomic situation with the war in Ukraine. We have elevated energy costs here in Europe, but it's also impacting cost of materials

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Do your pricing actions can't wait so far incorporate these additional cost pressures or would you expect a bit more adjustments later in the year or next year?

Christian Hanke -- Chief Financial Officer

We are evaluating additional price increases in Europe.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

OK. Great. And then maybe one final question just on the gross margin front. So, obviously, we saw some sequential improvement from Q1, but last year, you did have gross margins in the 20% plus range, you for the full year.

I know you guys maybe aren't providing exact guidance, but any way to frame like, you know, how where we could shake out an exit rate for Q4 on the gross margin line.

Christian Hanke -- Chief Financial Officer

I think, compared to what we have communicated in the past, we sort of remain in that range of mid-20th exiting Q4.

Rupesh Parikh -- Oppenheimer and Company -- Analyst

OK. Great. Thank you.

Operator

Our next question comes from Michael Lavery of Piper Sandler. Please go ahead.

Michael Lavery -- Piper Sandler -- Analyst

Good morning. Thank you. I might as well come back to the revenue guidance and understand. So you're calling out a reduction on some of the macro environment and you've given that color, but you're also capacity constrained or have been, and you're holding your capacity expectations for the year.

So how do we reconcile those? Should we expect 100% customer service levels the rest of the year, and on just a weaker demand profile? How I tie that all together. 

Christian Hanke -- Chief Financial Officer

Hi, Mike. And then I think Toni will definitely jump in. I mean, it's not a demand issue. It's all about us increasing the output from a new facilities in the second half of the year and that would be converted into to revenue.

I think we have talked about it, the pace of growth in Europe driven by the macro environment is a bit different, but we still expect very solid and strong growth on a consolidated level, but more specifically in America themselves. And we're prioritizing euthanasia from a CapEx facing point of view, which we all just haven't spoken to during earnings call.

Toni Petersson -- Chief Executive Officer

Yeah, Michael, just just to clarify, we're at 96% in Europe. We still have and spread out throughout the whole product range. There is more to do in some specific products there. In the U.S., we increase that to fill rate gaps or close the gaps throughout the quarter from 60% up to 70%.

And that's going to continue to increase over time here. But again, it's you know, it's not a demand thing. It's going to be a catch up game for us. As we always mentioned, if demand continues to increase for product, it's going to be more difficult for us to close the gap.

But then production is definitely coming on board. So, yes, we hope there's going to be great promise here for next year. So that's where we are. It's.

Michael Lavery -- Piper Sandler -- Analyst

If you'll indulge me, maybe one more try. I don't mean to be tense, but if there's no supply issue in terms of change and if you're saying there's no demand issue, is it just a conservatism update, then to to lower the guidance?

Toni Petersson -- Chief Executive Officer

Well, they're different natures, right? I mean in U.S., we are completely light on getting the output from all this at full speed. And also we have Melville coming on board, not forget right at the end of this year. But continue to go down by our ability to supply their just.

Michael Lavery -- Piper Sandler -- Analyst

Yeah. OK. And then just if I could do one more with the color on EBITDA, you called out a positive currency contribution, but obviously it's a headwind on the translation on the top line. So presumably there's some transactional impact there.

Can you just explain how that works?

Christian Hanke -- Chief Financial Officer

Yeah. So I mean, if you think about OpEx, which we are calling out from a translation point of view, like you said, we have headwind on revenue, but we do have tailwind both record and OpEx, but pretty neutral on gross profit. But net net with OpEx, yeah, we saw a tailwind of the $7.8 million or something like that. Because we have data that we have is in European currencies which have depreciated.

Quite significantly versus U.S. dollar as compared to last year. And that is the impact that you see the translation.

Michael Lavery -- Piper Sandler -- Analyst

OK. So it's SG&A driven?

Christian Hanke -- Chief Financial Officer

Yeah.

Michael Lavery -- Piper Sandler -- Analyst

OK. Thanks so much.

Operator

The next question is from Jon Anderson of William Blair. Please go ahead.

Jon Anderson -- William Blair and Company -- Analyst

Yeah. Hi. Thanks for my first question. I wanted to focus on the Americas.

It looks like your shipment growth in the Americas in the quarter was quite a bit below the the retail takeaway. You know, in the era Nielsen data also, the Americas sales dollars that you've reported on an absolute basis been relatively flattish, around $50 million over the past four quarters or so. So just could you give us a bit of an update on what's happening from a capacity standpoint and when you expect, I guess, to more fully be able to meet, meet demand and again, ship to kind of consumption levels.

Christian Hanke -- Chief Financial Officer

So it's all related to our ability to scale our facility in order in putting more supply. And that will help both from a channel and customer mix allocation and that's sort of what you're seeing in terms of recent performance compared to your expectations. So strategic allocation that we're doing

Toni Petersson -- Chief Executive Officer

 And when it comes to production in U.S. We saw great progress in order to get to around 10 million liters per month by the end of the second quarter, in line with our expectation, a big uplift on quarter one. So and then, of course, it takes some some time to get that out to customers. And that's what we expect because we imported for.

The great improvement in production output both in America and Asia and also one out of the channel mix that we have to balance. And that is on [inaudible]

Jon Anderson -- William Blair and Company -- Analyst

So just just a quick follow up on that. So is there a time frame at this point where you would be comfortable or semi comfortable saying, you know, we expect to be able to to ship that 90%, 95% kind of fill rates across channels based on continued ramp it Ogden and the upgrade at Millville or is that just too uncertain at this point?

Toni Petersson -- Chief Executive Officer

Yeah, it is not certain, but we do expect definitely improvement in Q4. Demand continues to increase that. We see we're very strong. You know, we went from 34% to 38% this year, but still with very strong velocity numbers.

But we do hope and we really do expect that to improve in Q4.

Jon Anderson -- William Blair and Company -- Analyst

OK. Just one quick follow up. So you talked about it's a more challenging time to recruit new consumers into plant-based. And so I'm wondering if you might focus on leveraging existing plant-based consumers across a broader range of plant-based products, Oatly products.

So things outside of milk, you know, is that something that makes sense or you're focusing on or is the effort, again with milk in the near term and converting customers, even though it's a bit more challenging at the moment? Thanks.

Toni Petersson -- Chief Executive Officer

Well, that I think that's a relevant question. Our focus is definitely if you said previously milk and that that's going to be the biggest contributor to growth throughout the company. We're not we, absolutely see a big opportunity in the subcategories here and we just need to have the production team set up to produce those type of products for us.

Operator

Next question is from Bill Chappell of Truist. Please go ahead.

Bill Chappell -- Truist Securities -- Analyst

Thanks. Good morning or good afternoon to you. The couple can follow ups. Looking again to the U.S.

or to North America and kind of the acceleration in the back half. Is that the thought that it's going to be largely food service driven as as you meet capacity or meet fill rates. Or do you know I guess the question has been for the past year of as you. We're not shipping, you know, the full fill rates.

You lost a lot of shelf space at retail. Do you still think you can get some of that shelf space back at retail or is most of the growth going to come? Kind of, as I said, through foodservice?

Toni Petersson -- Chief Executive Officer

So first of all, we didn't lose any shelf space in the U.S. and then it's going to be a balanced growth between all these channels. So all the channels are going to grow.

Bill Chappell -- Truist Securities -- Analyst

OK. I get that in that lose. But it seems like a lot of competitors have filled tangential shelf space, so it doesn't sound like you will be adding shelf space from here. It's just there's more sell through at retail.

Toni Petersson -- Chief Executive Officer

It's first of all, it's too close to fill rate gaps that we had to do with existing customers. And we are still the number one and the sorry, the number two in measured channels in the U.S. and the number one overall U.S. in terms of net sales.

But certainly the output for all coming on board is going to help us greatly in expanding or really gaining market share in this channel, which is going to be visible to you again, hopefully by the end of this year.

Bill Chappell -- Truist Securities -- Analyst

OK. And then a follow up to Camille's, Question on pricing, not necessarily your direct competitors, but how will the pricing change the gaps between dairy, between [inaudible] , and between soy? Does it puts you at a more premium or less of a premium versus the others? As there's even within plant-based, there's there's more switching or trading up or trading around.

Toni Petersson -- Chief Executive Officer

No, I think our position has remained extremely strong, especially in Europe, through this turmoil. We don't see any any changes between crops and competition where we can see Sweden, which is extreme, dairy prices increased by 20%. So that's like what stands out in what we see on the markets. But other than that, the balance is intact.

Bill Chappell -- Truist Securities -- Analyst

OK. Great. Thank you.

Operator

Our next question is from John Baumgartner of Mizuho. Please go ahead.

John Baumgartner -- Mizuho Securities -- Analyst

Good morning. Thanks for the question. I want to focus on the middle of the [inaudible] on the SG&A line. It's still a pretty big number relative to the size of the business.

And I'm wondering how you think about discretionary costs and adjustments within that. I mean, as revenue growth is more moderate, obviously your leverage is more moderate as well. But how do we think about the ability and timing for outright cost reductions in that line, whether it's the external consultants or anything else? What do you think can really beat the C compression there in those costs?

Christian Hanke -- Chief Financial Officer

Hi, John, Christian, here. I mean, I think we are already today more disciplined in our spending related to our day to day activities and business operations. And I think we're being also a bit strategic as we're looking for the second half of this year how to best manage that [inaudible]. But we believe over time that this is an area that we are looking at to ensure that we are finding the right level in relation to how we growing as a company.

But then there's also have part of our SG&A that is growing as our revenue growth. So if you take them in distribution Expensive to keep that in mind our top line is growing in the second half of the year and SG&A able to grow as well. And that is sort of a direct link to revenue growth.

John Baumgartner -- Mizuho Securities -- Analyst

Thanks, Chris. And just to follow up, we think about sort of the macro pressures in delaying consumption increases. I'm curious, just given how long the company's been around, you look at per capita consumption in the North America, it's higher than a lot of places in Europe, lower than places like Spain. Have you ever seen over the years sort of a period where the rate of consumption sort of levels off, even independent of the macro environment? In some of your countries in Europe.

And what sort of prompted that sort of reinvigorated growth going forward? Does it feel that some of this may just be growing pains for the category where you get a moderation of of consumers coming in, maybe even independent of the macro backdrop? Just curious, your thoughts there. Thank you.

Toni Petersson -- Chief Executive Officer

No, we don't see any such thing. And we have been driving the category and we're still in the very early in. If you look at the house penetration from a volume perspective, it's very low still. And yet this data, once we try it, we can get once you get into the space, it is very sticky.

You don't go back. And that's what we see across all our markets now. It's about the pace, especially in Europe, in how fast you can drive new consumers into the space giving given everything else that is happening in the world, right? So so the fundamentals have to change. What we said all along, it's still very much true.

This is going to be opportunities. Absolutely massive is important. [inaudible]

John Baumgartner -- Mizuho Securities -- Analyst

OK. Thank you very much.

Toni Petersson -- Chief Executive Officer

I just want to thank everybody for joining us today. And we look forward to speaking to you on an earnings call in November. And we certainly hope everyone has a great rest of the time. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Rachel Ulsh -- Investor Relations

Toni Petersson -- Chief Executive Officer

Christian Hanke -- Chief Financial Officer

Andrew Lazar -- Barclays -- Analyst

Ken Goldman -- J.P. Morgan -- Analyst

Kaumil Gajrawala -- Credit Suisse -- Analyst

Rupesh Parikh -- Oppenheimer and Company -- Analyst

Michael Lavery -- Piper Sandler -- Analyst

Jon Anderson -- William Blair and Company -- Analyst

Bill Chappell -- Truist Securities -- Analyst

John Baumgartner -- Mizuho Securities -- Analyst

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