An Asset hidden in Plain Sight

Key metrics

• P/E is around 11.4, historically above 17.

• EV/EBIT is 7.8, Historically around 14.

• Growing retained earnings

The Business

Olvi Oyj (OMXHEX:OLVAS) is a brewery and beverage manufacturer in Finland. It is the third largest brewery in the country and is the market leader with over 50% market share.

Olvi also owns breweries and beverage manufacturers in Denmark, Estonia, Latvia, Lithuania and Belarus. The products sold in these countries besides beer are soft drinks, water, long drinks, energy/sports/wellness drinks juice, ciders and kvass. Kvass is a fermented drink with a lower alcohol content.

Olvi and its subsidiaries distribute the beverages to retailers and the hotel and restaurant channels.

The beverage industry, like the rest of the food and drink related industries, is a recession proof. The downside is limited growth for the industry. Olvi already has the largest market share in Finland and the finish population doesn’t grow fast.

To keep continuous growth for Olvi, they make strategic acquisitions from time to time. The last one was in 2021. They purchased a brewery in Denmark, named Vestfyn.

Other acquisitions in the past are A. Le Coq (Estonia), Cesu Alus (Latvia) and Volfas Engleman (Lithuania) completing the Baltic region. Olvi owns also Lidskoe Pivo in Belarus.

In Q3 of 2025, they announced three more acquisitions. A mineral bottler and a premium craft brewery in the Baltic region. The other is a brewery in Bosnia and Herzegovina expanding to Southern Europe.

Olvi owns at least 96% of every subsidiary. The Belarusian unit is the only one that operates standalone. That means that Olvi isn’t making any investments in the subsidiary. They support themselves with internal free cashflows. The unusual structure has to do with the Ukrainian war and will be discussed later.

Valuation

Competitors

I like to look at retained earnings for a long-term investment. Olvi’s retained earnings grew 6.2% annually over the last 10 years. Heineken, the International brewery, did marginally better with 6.4%.

Revenue, on the other hand, for Olvi grew 7.8% annually and Heineken only 3.8%.

Earnings per share CAGR is 9.3% over the 10 year period for Olvi. Heineken’s earnings are very inconsistent. It has negative growth over the same period.

Yet, Olvi’s P/E ratio is now hovering around 11. Heineken’s P/E is double that of Olvi.

It is a similar story with EV/EBIT of 7.8 and 14.6.

Comparing with other competitors like Anheuser-Busch InBev it is similar to Heineken. Olvi looks on paper undervalued compared to its peers.

Olvi’s price to earnings ratio used to be hovering around 20 before the Ukrainian war happened. The EV/EBIT was around 14-15. Now it is seriously lower.

And to consider that the market is projected to grow with around 6 to 7% per year till 20230 in northern Europe, according to statista.com.

Margins

In the last 10 years, Olvi managed an average gross margin of around 50. When Covid hit, it reduced to the low 40s. The cause was a price increase in packaging materials and raw materials like sugar.

The Ukrainian war continues to affect raw material pricing. But the gross margins made their move back up towards the 50s in the last two years.

The operating margins used to lie around 12.5%, but were lower the last 5 years. Management optimizes processes to reduce costs and get the margins back to 12.5%.

They are doing a good job, but they’re not back to the levels as before Covid so this is a great opportunity. The macro environment causes temporary headwinds for the company.

Moat

Olvi offers 421 drinks over various product categories. Management produces new drinks, according to the trends and listen to what the customers are looking for. The offerings reduced from +500 over the last five years to smoothen operations.

The beer brands they own have a significant market share in every country they operate in and make up most of their sales. It is hard for other companies to capture a large market share.

Every country has their own taste according to their taste buds. This makes it hard for beers brands to gain the largest market share in another country. Heineken, for example, is popular in the Netherlands and Guinness in Ireland.

The easiest way to for a foreign company to is to buy a local brewery in the targeted country. It is much harder to create a strong brand where competition exist for over 100 years.

So, I think it is save to say that Olvi has a moat for their beer brand.

Risks

We mentioned earlier, the Belarusian subsidiary. Since the war in Ukraine broke out, Olvi decided to impair the Belarusian unit at the end of 2022. The government of the country did not approve at all of this impairment and a fine for Olvi followed in 2023.

This impairment and fine, made a dent in the earnings, and thus was also reflective in their retained earnings for those years.

The Belarusian subsidiary is self sustaining. The parent company only direct operations.

The major risk for Olvi is to loose the subsidiary to the Belarusian government.

You see, historically in Eastern Europe when democracies transformed to communism, many assets got confiscated by the government. Think about companies, land, houses. Everyone who was well off lost it all overnight.

The market prices the parent company with this fear in mind.

At first, it wasn’t sure if Belarus would do such a thing and nationalize Olvi’s subsidiary. Currently no such action has been taken. However they have put some other levels in place that obstruct all from completely benefiting as a parent company.

For 2024 and 2025 subsidiaries in Belarus, owned by western parent companies, aren’t allowed to pay full dividends. Olvi reports that dividends are capped for them at €3 million. The rest of the profits appear on the consolidated balance sheet but isn’t accessible by Olvi.

In the course of 2025, the Belarusian government extended the dividend limit to include 2026.

Unfortunately, this isn’t all. The government also introduced a law that prohibits Olvi from selling the subsidiary. So the company is currently caught in having the subsidiary fully consolidated on the balance sheet. There isn’t much they can do for now they only can carry on with operating the business as is.

Since the market prices Olvi so low, because of the fear of losing the subsidiary. It is like a hidden asset in plain sight. Everyone knows it is there, but doesn’t acknowledge the value.

Luckily, there is light at the end of the tunnel. Since 2025, there are numerous attempts to end the war or at least create a status quo peace agreement. When an agreement like that is in effect, investors may judge the risky subsidiary differently.

Obviously, when the market feels that the risk is falling away the price is likely to go up towards a P/E of 14.

Even when Belarus nationalizes the subsidiary, there is the expected market growth and acquisitions. In the past, Olvi has proven to grow smaller breweries faster than the beverage market grows. For example, in 2010 the beer Cesu Alus had a market share of 2-3%. Under Olvi’s wings, the brand gained a market share of 30% 12 years later.

The new acquired breweries are awaiting the same fate. With or without Belarus.

Conclusion

The prospects for the company are looking good in terms of growth through market growth and acquisitions. As discussed, the major risk is the nationalization of the Belarusian subsidiary. Which is also the hidden asset in plain sight. The market priced for the risk accordingly. But the new peace talks reduces the risk to nationalize. It means escalation.

It also looks like that the risk of nationalization of the subsidiary is being reduced. Obviously, this is more like a feeling than a fact.

When the new acquisitions are approved and they limited dividend law is taken away. These are major boost for valuation of Olvi.

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I hope you liked the write up.

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