Oatly Group AB (Nasdaq: OTLY), a global leader in oat-based drinks, confirmed the closure of its manufacturing facility in Singapore as part of an ongoing initiative to refine its supply chain. The decision aligns with the company’s asset-light strategy, which aims to optimize operational efficiency, reduce capital expenditure, and streamline production processes.
“The continued simplification of our operations will allow us to focus on executing our strategy for consistent, profitable growth”
The Singapore facility, which operated under Oatly’s Europe & International segment, will be shut down as part of a broader effort to consolidate the company’s supply chain network in Asia. Following the closure, Oatly will rely on its existing European facilities to support the growing demand within the Asia-Pacific market. The company anticipates that this move will enhance capacity utilization at its European production sites.
Oatly’s CEO, Jean-Christophe Flatin, highlighted the ongoing improvements in the company’s supply chain, noting that the closure of the Singapore facility would build on the efficiency gains achieved in recent years. “Our supply chain teams have made significant progress in improving utilization, efficiency, and reliability. This has helped us increase our service rates and improve gross margins,” Flatin stated.
He added that the decision to separate the Greater China business from the rest of the Asian operations had also boosted competitiveness and contributed to stronger performance in the region.
Shifting focus to European facilities
This announcement follows Oatly’s earlier decision to cancel plans for a large-scale factory in the UK, which had been intended to become one of the world’s largest vegan dairy production facilities. The move to focus on existing European assets has been part of a broader effort to enhance supply chain efficiency, contributing to a 9.6% revenue growth in the third quarter of 2024.
Flatin emphasized that the closure would further optimize Oatly’s operations, ensuring it has the appropriate production capacity in place while maintaining cost efficiency. “The continued simplification of our operations will allow us to focus on executing our strategy for consistent, profitable growth,” he remarked. Flatin also expressed gratitude to the Singapore plant team for their contributions over the years.
The facility’s closure is expected to result in non-cash impairment charges between $20 million and $25 million, which will be recorded in the fourth quarter of 2024. Additionally, restructuring and exit costs related to the closure are estimated at $25 million to $30 million, with expected cash outflows through 2027. These costs will be offset by proceeds from the sale of certain equipment.
Further details regarding the financial impact of the closure will be provided during Oatly’s fourth-quarter earnings call in early 2025.
