Oatly to Shut Singapore Plant After Three Years of Operation
Swedish drink manufacturer Oatly will be shutting its Singapore plant, jointly invested with local food and beverage company Yeo Hiap Seng for S$30 million, after just three years in operation.
Reason for Closure
The move is a result of Oatly’s ongoing evaluation of its supply chain network in Asia and is aligned with an asset-light supply chain strategy, the company said in a press statement released on Wednesday (Dec 18).
Expected Benefits
The closure is expected to improve the company’s future cost structure and reduce its capital expenditure needs going forward.
Impact on Yeo Hiap Seng
Yeo Hiap Seng said that it will issue a statement on Thursday, in response to queries from The Business Times. In its latest earnings update, the company reported that net profit for the half-year period ending in Jun 30 was down 3.8 per cent at S$3.2 million compared with the same period a year ago, as a result of lower sales of products not branded under Yeo Hiap Seng.
Future Growth Plans
After the plant’s closure, Oatly’s expected growth in the Asia-Pacific, excluding the Greater China region, will be supported by its existing facilities in Europe. These actions are expected to further increase capacity utilisation of the European factories, the company said.
Employee Impact
Oatly also said that 34 employees in Singapore will be affected by the closure, in response to queries from CNA. This will take place “through a phased approach over the coming months”, a spokesperson said.
Financial Implications
Oatly expects to incur non-cash impairment charges of between US$20 million and US$25 million in the fourth quarter of 2024, as a result of the closure. In addition, the company estimates restructuring and other exit costs to result in net cash outflows of between US$25 million and US$30 million through to 2027, after taking into consideration anticipated proceeds from selling certain equipment.
Conclusion
Oatly’s decision to shut its Singapore plant is a strategic move to improve its cost structure and reduce capital expenditure needs. While the closure will impact 34 employees, the company expects to support its growth in the Asia-Pacific region through its existing European facilities.
FAQs
A: The move is a result of Oatly’s ongoing evaluation of its supply chain network in Asia and is aligned with an asset-light supply chain strategy.
A: The closure is expected to improve Oatly’s future cost structure and reduce its capital expenditure needs going forward.
A: 34 employees in Singapore will be affected by the closure.
A: Oatly expects to incur non-cash impairment charges of between US$20 million and US$25 million in the fourth quarter of 2024, and estimates restructuring and other exit costs to result in net cash outflows of between US$25 million and US$30 million through to 2027.
