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Oatly Group AB Shifts Strategy with Closure of Singapore Facility
Oatly Group AB will close its Singapore facility to enhance cost efficiency and streamline operations in Asia-Pacific.
Key Details of the Closure
Oatly Group AB, recognized as the leading oat drink company globally, has announced the shutdown of its Singapore manufacturing facility. This move is part of the company’s asset-light supply chain strategy, intended to refine its cost structure and minimize future capital expenditures. CEO Jean-Christophe Flatin indicated that this decision follows enhancements in supply chain efficiency and a targeted focus on the burgeoning Greater China market. The closure is projected to incur non-cash impairment charges between $20 to $25 million in Q4 2024, along with anticipated restructuring costs ranging from $25 to $30 million through 2027. In response, Oatly aims to increase production capacity at its existing European facilities to foster growth in the Asia-Pacific region. More insights will be shared in the upcoming Q4 earnings call set for early 2025.
Advantages of the Closure
- This closure aligns with Oatly’s asset-light supply chain approach, expected to enhance the company’s cost effectiveness and lower future capital needs.
- Utilization rates in the current European factories are likely to improve due to the closure of the Singapore facility.
- According to CEO Jean-Christophe Flatin, significant improvements in the Greater China segment are indicative of increased local competitiveness and continued growth potential.
- The company’s focus on achieving consistent, profitable growth showcases its commitment to operational simplification and execution.
Challenges Ahead
- The Singapore facility’s closure may signal a reduction in Oatly’s operational reach and market presence in the Asian region.
- Oatly estimates non-cash impairment charges of $20 to $25 million, which could adversely affect its financial results.
- Restructuring costs are projected to lead to net cash outflows of $25 to $30 million through 2027, imposing a significant financial impact during this period.
Questions and Answers
What is the reason for Oatly’s decision to close its Singapore facility?
The closure of the Singapore facility is part of Oatly’s asset-light supply chain strategy, aiming to enhance financial efficiency and reduce capital needs.
What financial impacts will arise from closing the Singapore plant?
Oatly anticipates non-cash impairment charges of $20 to $25 million and additional restructuring costs of $25 to $30 million through 2027.
How will this decision impact Oatly’s operations in Asia?
After shutting down the Singapore plant, Oatly plans to drive growth in the Asia-Pacific region through its existing European facilities.
What are Oatly’s plans for the future after the closure?
Following the plant closure, Oatly intends to boost capacity utilization in Europe while pursuing profitable and efficient growth.
When will Oatly provide updates regarding this transition?
Oatly plans to disclose further details about the closure and its ramifications during its fourth-quarter earnings call in early 2025.
Disclaimer: This is an AI-generated summary of a press release distributed by GlobeNewswire. The model used to summarize this release may make mistakes. See the full release here.
Hedge Fund Activity Regarding $OTLY
In recent activity, 50 institutional investors have decided to increase their holdings of $OTLY stock, while 67 have reduced their positions this past quarter.
Here are some of the notable recent moves:
- WOODLINE PARTNERS LP added 1,402,499 shares (+54.2%) to their portfolio in Q3 2024.
- BNP PARIBAS ASSET MANAGEMENT HOLDING S.A. increased holdings by 1,292,592 shares (+19.6%) in Q3 2024.
- SHIKIAR ASSET MANAGEMENT INC added 1,169,104 shares (+inf%) in Q3 2024.
- BALYASNY ASSET MANAGEMENT L.P. cleared 988,496 shares (-100.0%) from their portfolio in Q3 2024.
- LUXOR CAPITAL GROUP, LP removed 644,118 shares (-100.0%) from their portfolio in Q2 2024.
- IPG INVESTMENT ADVISORS LLC divested 400,000 shares (-100.0%) in Q3 2024.
- IQ EQ FUND MANAGEMENT (IRELAND) LTD reduced its holdings by 387,589 shares (-44.4%) in Q3 2024.
To monitor hedge funds’ stock portfolios, explore Quiver Quantitative’s institutional holdings dashboard.
Full Release
MALMÖ, Sweden, Dec. 18, 2024 (GLOBE NEWSWIRE) — Oatly Group AB (Nasdaq: OTLY) (“Oatly” or the “Company”), the world’s original and largest oat drink company, today announced the closure of its Singapore facility in the Europe & International segment. This action aligns with the Company’s asset-light supply chain strategy and is expected to improve the Company’s future cost structure and reduce future capital expenditure needs.
CEO Jean-Christophe Flatin remarked: “Over the past two years, our supply chain teams have done a commendable job at enhancing utilization, efficiency, and reliability while also finding solutions to expand capacity as needed to support our growing business. These efforts have resulted in strong service rates and improved gross margins. Additionally, separating our Greater China business from the broader Asian operations has allowed us to heighten our local focus and competitiveness, leading to notable improvements in the health of our Greater China segment.”
He added, “We anticipate that this decision will capitalize on those improvements and further enhance our capacity to efficiently manage capital and costs. The continued simplification of our operations will enable us to more sharply focus on execution, pushing us towards consistently achieving structural profitable growth and fulfilling our Company’s mission. I want to express my sincere gratitude to the team at the Singapore plant for their dedicated work over the years.”
Closure of Singapore Facility
As part of Oatly’s ongoing assessment of its Asian supply chain, the company has decided to close its Singapore manufacturing facility, pending any necessary lender approvals. This facility is part of the Europe & International segment. After the closure, growth in the Asia-Pacific region will be supported by the existing European facilities. These steps are expected to further enhance capacity utilization in the European factories of the Europe & International segment.
The closure will result in non-cash impairment charges of approximately $20 to $25 million in Q4 2024. Furthermore, Oatly anticipates restructuring and exit costs that will lead to net cash outflows of $25 to $30 million through 2027, factoring in expected equipment sales. The company expects to account for these costs in the fourth quarter of 2024.
This closure is intended to enhance the Company’s future cost structure and reduce capital expenditure needs. Oatly will provide further information on its fourth-quarter earnings call in early 2025.
About Oatly
We are the world’s original and largest oat drink company.
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Oatly: Charting a Future in Sustainable Oat-Based Products
About Oatly’s Commitment to Oats and Sustainability
For over 25 years, Oatly Group AB has concentrated on mastering the potential of oats. This globally significant crop offers unique benefits for sustainability and human health. The company’s dedication to oats has fostered key technical advancements, enabling Oatly to expand its dairy alternatives portfolio. These products include various types of milks, ice cream, yogurt, cooking creams, and spreads. Oatly, headquartered in Malmö, Sweden, operates in over 20 countries worldwide.
For additional details, please visit:
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Contact Information
Oatly Group AB
+46 418 47 55 00
Understanding Forward-Looking Statements
This press release includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Any declarations that are not historical facts may be considered forward-looking, such as projections regarding our financial outlook for 2024, anticipated profitability improvements, or growth strategies. These statements often feature words like “expect,” “intend,” “plan,” and “project.” It’s important to note that these statements are subject to various risks and uncertainties which could cause actual outcomes to differ significantly from expectations.
Some of these risks include the closure of certain production facilities, inflationary pressures affecting costs, and changes in raw material availability. Additionally, Oatly faces challenges related to its competitive market, potential brand damage from food safety incidents, and the complexities of international trade, especially amid ongoing geopolitical tensions like those in Ukraine and Israel. Many variables could impact our ability to maintain profitability, execute our strategies, and adapt to market changes.
For a comprehensive understanding of the various risks involved, you can refer to the “Risk Factors” section in our annual report filed with the U.S. Securities and Exchange Commission (“SEC”). Any forward-looking statements made here only reflect our stance as of today and should not be overly relied upon. Oatly does not undertake any obligation to update these statements, except as required by law.
This article was originally published on Quiver News. Read the full story.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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