This week, Oatly's stock experienced a downturn.
For the plant-based milk heavyweight Oatly Group (OTLY with a 4.53% increase), the upcoming weekend probably feels like it's taking forever to arrive.As per data provided by S&P Global Market Intelligence, the company's stock had seen a significant drop of 13% in value by early Friday morning, signaling that investors are scrutinizing the company's strategic decisions.
Farewell to Singapore
In a move in line with its aim to become a lean manufacturer (outsourcing production to external parties), on Wednesday, Oatly announced the closure of its very own production facility in Singapore.
Oatly shared that this action will positively impact its cost structure and decrease the demand for significant capital expenditures.They further mentioned that they are anticipating non-cash impairment charges related to the factory closure, estimated to be around $20 million to $25 million, in their current (fourth) quarter. Moreover, the restructuring process and associated exit expenses are projected to result in a net cash outflow of $25 million to $30 million over the course of 2027.
In a press statement, CEO Jean-Christophe Flatin stated, "Over the past two years, our supply chain teams have been successful in enhancing utilization, efficiency, and dependability while simultaneously finding methods to expand our capacity incrementally to support our expanding enterprise."
Adaptation can be challenging
Anytime a company alters its business strategy, it raises concerns, such as whether the new plan is a productive move. In Oatly's defense, it is still capable of expanding its revenue – it reported a 11% rise in revenue in the third quarter to $208 million – although profitability still remains largely out of reach.
The decision to close the production facility in Singapore is expected to reduce Oatly's demand for capital expenditures, demonstrating their focus on financial efficiency in their manufacturing process. Investors closely monitor such strategic decisions, and the closure led to a 13% drop in Oatly Group's stock value by early Friday morning.
