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.
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, it said in a press statement released on Wednesday (Dec 18).
The closure is expected to improve the company’s future cost structure and reduce its capital expenditure needs going forward.
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 released in August this year, Yeo Hiap Seng had 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.
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, read its press statement.
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The company had previously separated its Greater China business from the rest of its Asian business, a move which Oatly said had enabled it to increase its local focus and competitiveness, and led to significant improvements in the health of its Greater China segment.
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.
The company expects to accrue for these costs in Q4 2024.
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.
Shares of Yeo Hiap Seng closed flat at S$0.58 on Wednesday.
