CEO Jean-Christophe Flatin said the oatmilk manufacturer will gradually expand capacity at its existing facilities as it continues to enforce a simplified cost structure across its supply chain
Oatly is seeking to reduce capital expenditure requirements from its supply chain | Photo credit: Oatly
Oatly has ended plans to open new production facilities in Europe and North America amid falling sales and ongoing losses in Asia and the Americas.
CEO Jean-Christophe Flatin said the move formed part of efforts to ‘double down’ on its asset-light production strategy, which involves increasing operational focus while reducing ‘complexity’ and capital expenditure requirements from its supply chain.
The decision is expected to incur non-cash impairment charges – accounting expenses not involving a cash payment – of up to $150m in the fourth quarter, alongside restructuring costs of approximately $40m.
“We have found ways to service the growing demand by expanding capacity at our existing facilities in a more gradual manner. As such, we have decided to discontinue construction on the third production facility in each of the two segments. We believe that this change in our approach will increase our focus by reducing the complexity of the supply chain, which increases our confidence in our longer-term margin targets,” he said.
Although EBITDA from its operations in Asia improved in the third quarter, from a loss of $30.3m in the same period of 2022 to a loss of $21.6m this year, Oatly’s revenues in Asia fell 31% year-on-year to $27.3m.
The Swedish oatmilk manufacturer also posted a 4% fall in Americas revenue to $58.5m, with its operations in the region generating a $7.5m loss, albeit up from $17.9m in the prior year period.
Oatly’s total third quarter sales fell 2.5% year-on-year to $187.6m, largely offset by strong EMEA revenue.
Sales across the brand’s 26 EMEA markets grew 23% year-on-year to $101.8m, representing 54% of total revenue during the quarter. Nearly 84% of Oatly’s EMEA revenue currently comes from its retail channel.
EMEA EBITDA reached $11.8m for the third quarter compared to a loss of $11.7m in the same period last year. Oatly’s total adjusted EBITDA loss during the period was $36m, a year-on-year improvement of $47m.
“I am pleased with the progress that we made in the third quarter. Our profitability exceeded our internal expectations and improved sequentially in each segment. We are clearly starting to see the positive impacts of the bold actions that we have been taking over the past year, and we remain on track to achieve profitable growth in 2024,” said Jean-Christophe Flatin, CEO, Oatly.
In March 2023, then-CEO Toni Petersson said Oatly’s supply chain was ‘back on firmer footing’ which would enable the business to reach financial self-sufficiency and ‘play offense’ this year.
However, the group’s sales have fluctuated in the first nine months of 2023, particularly in Asia. Oatly posted 16.4% first quarter sales growth in the region to $33.4m, before reporting a 15% year-on-year decline in Asia market sales to $37m in the following quarter.