Oatly announced it will lay off staff and transition the business to an “asset-light” hybrid production model after reporting a net loss of $107.9 million, with revenue growth falling short of analysts’ expectations, in its Q3 earnings report today.
Hit hard by a three-week outage at its Ogden, Utah production plant this summer resulting from a failure in its fire suppression system, Oatly CEO Toni Petersson said the company underperformed sales projections during the third quarter as it worked to fill the supply gap. The Swedish oat-based alt-dairy maker, which has routinely struggled with supply and demand issues in the years since its U.S. launch, is now moving away from its fully integrated production model to embrace a hybrid approach and is seeking manufacturing partners for its under construction Fort Worth, Texas and Peterborough, U.K. facilities.
“This move towards a more hybrid network is expected to significantly reduce our future capital expenditures and have a positive effect on our cash flow outlook,” Petersson said during an earnings call. “It will also enable us to support growth and provide us with more flexibility to expand capacity faster in the future.”
Revenue grew 7% year-over-year to $183 million in Q3. Broken down by region, revenue for Europe, Middle East and Africa (EMEA) fell 5.5% to $82.6 million, while the Americas grew 22.7% to $60.7 million and Asia was up 16.3% to $39.8 million. Gross profit was $5 million, a 2.7% margin, compared to gross profit of $44.9 million with a 26.2% margin in 2021. Capital expenditures in the quarter were $59.2 million, up from $52.3 million the year before.
Due to the quarter’s lower earnings, the company updated its 2022 revenue projection to between $700 million to$720 million (up around 9%-12%), down from the $800 million to$830 million expected earlier this year.
The full year capital expenditure projection of $220 million to $240 million remains unchanged and run-rate production capacity is expected to be around 900 million liters.
In addition to restructuring its production model, Oatly will also slash its workforce in order to save up to 25% of expenses related to “group corporate functions and regional EMEA layers,” Petersson said. Although he did not specify how many employees are likely to be affected by the cuts, the company expects to save up to $25 million annually beginning in Q1 2023. Oatly expects to save an additional $25 million from “incremental opportunities in the rest of the organization,” he added.
The company employed around 1,280 people globally as of 2021.
In the U.S., Oatly has achieved 36% retail ACV for its oat milk line, with fill rates of 79% – up from 67% in Q1. Additionally, the company’s Millville, New Jersey facility expanded its production line capacity and began commercial production this month.
Meanwhile, Oatly still faced pandemic-related challenges in the Asian market, where COVID-19 restrictions impacted sales.
“We believe these challenges are transitory and we are encouraged by our current volume growth, underlying consumer demand and future growth opportunities,” Petersson said, during the call. “In the third quarter, we saw year-over-year sales volume growth of 16% across all regions and continue to see strong category leading velocities, the global demand remains resilient.”