Oatly, headquartered in Sweden, plans to close its Singapore manufacturing facility. This decision is part of a broader strategy aimed at reducing costs and steering its oat-drinks business toward profitability.
Oatly anticipates incurring an impairment charge due to this closure, estimating a non-cash component of about $20-25 million in the final quarter of its current fiscal year ending in 2024.
Additionally, the associated restructuring and “other exit costs” will incur further net cash outflows of approximately $25-30 million through 2027, according to a statement released by the dairy-alternatives company on December 18.
Notably, the Singapore site is part of Oatly’s newly restructured Europe and International division. This regional change follows the spinning off of China from the Asia business region into a standalone unit, which occurred in January.
With this transition, Oatly will operate five manufacturing plants: two in the United States, alongside one each in Sweden, the Netherlands, and China. This shift reflects a refined operational strategy.
Plans for new production facilities in the UK, US, and China were shelved in November last year, further emphasizing Oatly’s commitment to its “asset-light strategy.” You can find more about this in their latest updates.
Nasdaq-listed Oatly also recognized impairments related to the decision to abandon new factories in its 2023 financial year. This included a non-cash portion of nearly $173 million and additional restructuring costs amounting to $29 million.
Oatly’s CEO, Jean-Christophe Flatin, affirmed: “Over the past two years, our supply chain teams have significantly improved utilization, efficiency, and reliability. Moreover, they found effective solutions to enable us to expand capacity gradually, thus supporting our growing business.
“These actions have contributed to strong service rates and enhanced gross margins.” Flatin, who succeeded Toni Peterson in June last year, noted that separating China from Asia has resulted in improved competitiveness and delivered significant enhancements to the health of the China business
He added, “We expect that the actions we are announcing today will capitalize on those collective improvements and further strengthen our ability to maintain the right capacity at the right time while being efficient with capital and costs.
“We also anticipate that continued simplification of our operations will sharpen our focus on execution, driving consistent, structural profitable growth and ultimately fulfilling our company’s mission.”
Oatly remains in its fourth quarter but reported a narrowing of losses during the nine-month period. Adjusted EBITDA losses declined from $138.3 million to $29.3 million, while net losses decreased from $118.3 million to $110.9 million during the same timeframe.
Revenue for the nine months surged by 5.2%, reaching $609.3 million, supported by an 8.4% increase in volume. However, the price/mix component experienced a 3.5% decrease in constant-currency terms.
During the results announcement in November, Oatly indicated it expected an adjusted EBITDA loss of $35-50 million for the full year, with constant-currency revenue growth anticipated at 6-10%. The company also reduced its capital expenditure forecasts to below $55 million, down from previously estimated levels.
Oatly to Shut Down Singapore Facility Amid Ongoing Cost-Cutting Measures
