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Why Oatly Stock Was Sinking This Week
For alt-milk products specialist Oatly Group (NASDAQ: OTLY), the weekend likely can't come fast enough. The company's stock was having a rough time on the market; according to data compiled by S&P Global Market Intelligence, it had fallen 13% in price week to date as of early Friday morning. It seems investors are concerned about the strategic direction the company is taking.
Goodbye Singapore
On Wednesday, Oatly announced the closure of a company-owned production facility in Singapore. This is the latest implementation of the oat milk specialist's stated goal to become an asset-light manufacturer (i.e., outsource production to third parties).
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Oatly said the shuttering of the factory will improve its cost structure while reducing necessary capital expenditures. It added that it expects to book noncash impairment charges related to the closure of roughly $20 million to $25 million in its current (fourth) quarter. Additionally, restructuring and related exit costs should generate $25 million to $30 million in net cash outflows through 2027.
CEO Jean-Christophe Flatin said in a press release, "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."
Change can be hard
Any time a company changes its business strategy, it raises many questions, not least of which is whether the new direction is a potentially beneficial one. To be charitable to Oatly, it's still managing to grow its revenue -- it was up 11% year over year in the third quarter, to $208 million -- although bottom-line profitability continues to be largely elusive.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
