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Oatly shares fall 20% following quality issues and supply chain delays

Oatly shares fall 20% following quality issues and supply chain delays
Oatly shares fall 20% following quality issues and supply chain delays

Swedish oat milk producer, Oatly, has reported a loss of $7 million in sales owing to production and distribution problems over the summer. The brand’s negative performance comes despite it seeing a surge in demand for its products.

According to reports, Oatly shares plunged by nearly 20% at the start of the week after it warned about further loss in sales across Europe citing its ongoing investigation regarding a quality issue, which may force it to discontinue certain products.

The alternative milk maker reported that sales in the UK were $1 million lower than it had expected for the third quarter ending September owing to the shortage of drivers in the country, which resulted in delayed deliveries. In the US, it reported a $3 million sales hit due to technical and mechanical issues at its production plant in Utah.

Meanwhile, the firm also suffered a loss of $3 million in Asia attributing to the region’s sweeping hospitality sector closures due to the pandemic-related lockdowns.

The company further added that because of the pandemic, the pace of sales growth from retailers in Europe and the Middle East was also far slower than anticipated.

Oatly CEO, Toni Petersson, stated that the firm’s positive growth momentum has been partially offset by temporary headwinds as it scales its global production capacity, especially in Utah, and Asia as it weathers the coronavirus Delta variant-related restrictions and temporary closures in the foodservice sector.

Petersson also added that the company is confident in its ability to cater to the growing global demand for its products.

Oatly’s profit margins, which had attracted investment from Blackstone, Jay-Z, and Oprah Winfrey, have also been affected due to higher transportation costs and expenditure towards the expansion of its manufacturing sites in the US.

Since its US stock market debut in May, Oatly’s share price has dipped almost 60% amid concerns regarding its growth potential given the heavy competition from big-name brands like Danone and Alpro.

While Oatly had reported a 50% rise in sales in the latest quarter, to $171 million, it also suffered an escalation in pretax losses to $41 million in the same period, from last year's $9.8 million.

Source credit: https://www.theguardian.com/business/2021/nov/15/oatly-shares-fall-20-after-quality-issue-warning-and-delivery-delays

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for newsorigins.com, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.