Yeo Hiap Seng lays off 25 employees as Oatly shuts its Singapore plant
The affected workers will receive severance packages based on their salary and years of service
YEO Hiap Seng will be laying off 25 employees as a result of Oatly’s decision to cease its manufacturing operations in Singapore.
This is in addition to the 34 Oatly workers affected by the closure, bringing the total to 59.
On Thursday (Dec 19), Yeo Hiap Seng said that a total of 41 employees were directly involved in Oatly’s manufacturing operations.
It noted that it has placed 16 employees in other roles within the company.
However, the remaining 25 employees will be retrenched and will receive severance packages based on their salary and years of service.
“The affected employees were specifically hired to support Oatly’s production at Yeo’s Senoko plant, and the layoff is a direct result of Oatly’s evaluation of its supply network,” it said.
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Yeo Hiap Seng said that it has informed the Food, Drinks and Allied Workers Union (FDAWU) and is working with them to assist the affected workers.
In a statement on Thursday, FDAWU’s president Julie Cheong said that the union is engaging in negotiations with Yeo Hiap Seng to secure fair compensation packages for the affected workers, in line with unionised norms.
She added that FDAWU will render support to the affected union members and workers in Yeo Hiap Seng.
This includes providing job-matching support and career advisory services through the National Trades Union Congress’ (NTUC) Employment and Employability Institute.
Cheong also said: “NTUC and FDAWU also appeal to companies that while retrenchments may be inevitable, it should only be used as a last resort.”
Companies must exhaust all other options before deciding to retrench workers and they should be “considerate about the timing of such exercises”, as well as avoid doing so “during festive periods, as far as possible”, she advised.
Yeo Hiap Seng’s chief executive Ong Yuh Hwang said: “We deeply regret having to make this decision. Our priority is to support our colleagues and to reduce stress and anxiety for them during this period.
“To this end, we will work closely with the union to ensure affected employees receive all the necessary resources during this challenging time.”
Ceasing production
On Wednesday night, Swedish drink manufacturer Oatly announced that it will be shutting its Singapore plant – jointly invested with Yeo Hiap Seng for S$30 million – after just three years in operation.
The Singapore facility, which operates under a co-packing agreement, will cease producing Oatly drink products by the end of this year.
While manufacturing operations will end, Yeo Hiap Seng said that it will continue to support Oatly’s distribution operations in Singapore and Malaysia.
The machinery related to the Oatly co-packing agreement will be transferred to Oatly, a spokesperson from Yeo Hiap Seng told The Business Times.
“Yeo’s will focus on producing Asian drinks and (the Senoko plant) continues to serve as a distribution centre for Singapore and exports,” added the spokesperson.
The company also said that the closure is not expected to have a material impact on its net tangible assets (NTA) per share.
Based on the exit agreement signed by both parties, Yeo Hiap Seng will receive an exit compensation of S$32 million, which will be paid in full by January 2027. This includes assets buy-out, compensation for order obligations, loans repayment and future lease payables.
The company also expects to book net other income of about S$10 million in the financial year ending Dec 31, and S$600,000 in FY2025.
Yeo Hiap Seng’s spokesperson said that it expects to “more than recover against our initial investment”.
“There is no direct asset impairment in relation to Yeo Hiap Seng’s assets acquired for the co-packing agreement,” said the company.
But it noted that since the co-packing agreement “helps to absorb some operating expenses”, the company will review any need for asset impairment for its Singapore assets at its FY2024 year-end audit.
Likewise, the amount is not expected to have any significant impact on the group’s NTA for FY2024, added Yeo Hiap Seng.
Going forward
As for Oatly, the facility’s closure is expected to improve its future cost structure and reduce its capital expenditure needs.
After the closure, Oatly’s expected growth in the Asia-Pacific region, excluding Greater China, will be supported by its existing facilities in Europe. These actions are expected to further increase capacity utilisation of the European factories, noted Oatly.
Oatly expects to incur non-cash impairment charges of between US$20 million and US$25 million in the fourth quarter of 2024, as a result of the closure.
It also projects restructuring and other exit costs to result in net cash outflows of between US$25 million and US$30 million through to 2027, after taking into account expected proceeds from selling certain equipment. The company expects to accrue for these costs in Q4 2024.
Shares of Yeo Hiap Seng were trading down 0.9 per cent or S$0.005 at S$0.575 as at 2.57 pm on Thursday, after the news.
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