Oatly has announced the closure of its facility in Senoko, Singapore, as part of an 'asset-light' supply chain strategy that aims to improve cost structure.

The decision to close the Singapore plant, in the company’s Europe and International segment, was made as part of an ongoing evaluation of Oatly’s Asian supply chain network. The $30 million facility was established in 2021 in partnership with local F&B producer Yeo Hiap Seng (Yeo's), supporting the production of Oatly's oat drinks in Singapore.

Following the closure of the manufacturing site, the Swedish oat milk giant said it expects growth in the Europe and International segment’s Asia-Pacific region to be supported by the segment’s existing facilities in Europe. These actions are expected to further increase capacity utilisation of the European factories.

The company’s CEO, Jean-Cristophe Flatin, expressed “deep gratitude” to members of staff at the Singapore plant. According to Channel News Asia, the companies have confirmed that 34 Oatly employees and 25 members of staff contracted by Yeo's will be affected, bringing the total number of impacted workers to 59.

Oatly CEO, Flatin, commented: “Over the past two years, our supply chain teams have done a good job at improving utilisation, efficiency and reliability while also finding solutions to enable us to gradually expand capacity when needed to support our growing business”.

“These actions have led to strong service rates and improved gross margins. Additionally, our prior decision to separate our Greater China business from the rest of the Asian business has enabled us to increase our local focus and competitiveness, which has led to significant improvements in the health of our Greater China segment.”

Flatin added that the closure of the Singapore facility is expected to capitalise on those improvements and further strengthen the company’s efficiency with 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 and ultimately deliver on our company’s mission.”

As part of the closure, Oatly expects to incur non-cash impairment charges of approximately $20-25 million in Q4 2024. Additionally, it estimates restructuring and other exit costs to result in $25-30 million of net cash outflows through 2027 after taking into consideration anticipated proceeds from selling certain equipment.

The company expects will provide additional details on its Q4 earnings call in early 2025.

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