The Swedish oatmilk manufacturer continues to focus on streamlining global production and generating cost savings, with its Asia Pacific business now supported by existing facilities in Europe
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The closure is expected to incur asset losses of approximately $20m in the fourth quarter | Photo credit: Bob Oyoo
Oatly has closed its production facility in Singapore in a bid to accelerate its asset-light supply chain strategy and reduce operating costs in Asia.
In a press release, the Swedish oatmilk manufacturer said the decision forms part of an ongoing evaluation of its Asian supply chain network first announced in July 2023. The closure is expected to incur asset losses of approximately $20m in the fourth quarter, with restructuring and other exit costs forecast to reach $30m.
“We expect that the action we are announcing today will further strengthen our ability to ensure that we have the right amount of capacity, when we need it, while being efficient with our capital and costs. We also expect the continued simplification of our operations to enable us to sharpen our focus on execution as we drive toward consistent, structural profitable growth,” said Oatly CEO Jean-Christophe Flatin.
Oatly’s retail and foodservice contracts in Asia Pacific will now be supported by existing production hubs in Europe. Oatly consolidated its European and Asia Pacific businesses, as well as its operations in the Middle East and Latin America, under a single Europe & International reporting segment in the first quarter of 2024.
The move was part of plans to increase focus and derive greater sales from its China business, where Oatly operates a production site in the eastern city of Ma’anshan. The business said the decision has delivered ‘significant improvements’ and improved gross margins over the first nine months of 2024, with third quarter sales in China growing 14% year-on-year to $29m. Oatly’s Europe & International revenues grew 6% year-on-year to $110m during the quarter.
Oatly has been restructuring its supply chain network since the first quarter of 2023. In January 2023, the Swedish oatmilk manufacturer sold two of its North America production facilities as part of a hybrid manufacturing partnership with Ya YA Foods Corporation.
The following November, Oatly cancelled plans to open new production facilities in Europe and North America to offset falling sales and ongoing losses in Asia and the Americas. The decision incurred non-cash asset impairment charges of $172.6m, restructuring costs of $29m and strongly contributed to a $408m full-year loss.