Oat beverage manufacturer Oatly Group AB has announced the closure of its Singapore facility, which the company says aligns with its asset-light supply chain strategy.

Following the closure of the facility, expected growth in the Asia-Pacific region will be supported by existing facilities in Europe. These actions are expected to further increase capacity utilization of Oatly’s European factories.

“Over the past two years, our supply chain teams have done a good job at improving utilization, efficiency and reliability while also finding solutions to enable us to gradually expand capacity when needed to support our growing business,” says Oatly CEO Jean-Christophe Flatin. “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. We expect that the action we are announcing today will capitalize on those collective improvements and 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 and ultimately deliver on our company’s mission. On behalf of the entire Oatly team, I want to express my deep gratitude to the team at the Singapore plant for the work they have done over the years.”

As part of the Singapore facility closure, the company expects to incur non-cash impairment charges of approximately $20 to $25 million in the fourth quarter 2024. In addition, the company estimates restructuring and other exit costs will result in $25 to $30 million of net cash outflows through 2027, after taking into consideration anticipated proceeds from selling certain equipment. Oatly expects to accrue for these costs in the fourth quarter 2024.

The closure of the facility is expected to improve the company’s future cost structure and reduce future capital expenditure needs.