Yeo Hiap Seng Receives $32 Million Compensation

SINGAPORE: Following the abrupt closure of Oatly's factory in Singapore, which has led to the layoffs of 59 employees, Yeo Hiap Seng is set to benefit from a substantial exit compensation of $32 million. This exit agreement marks the end of a collaboration that began in 2019 aimed at producing Oatly beverages for the Southeast Asian market.

Details of the Exit Agreement

The announcement came via Yeo Hiap Seng's official website, detailing the terms of the Exit Agreement that outlines the dissolution of their partnership. Although Yeo Hiap Seng will cease production of oat milk for Oatly, the firm will maintain its role as a distributor for Oatly products in both Singapore and Malaysia.

Compensation Structure

According to the agreement, the $32 million compensation will be disbursed in installments, fully paid out by January 2027. Yeo Hiap Seng reassured stakeholders that the closure of the Oatly facility is not expected to significantly impact its net tangible assets per share, indicating that the company's financial health remains robust.

Reasons Behind Oatly's Closure

Oatly, one of the leading manufacturers of oat-based drinks globally, announced the closure of the Singapore plant in a media release. The company cited a strategic need to enhance its cost structure and reduce future capital expenditures as the driving factors behind its decision to shut down operations, which had only commenced in October 2021 after a $30 million investment in the local facility.

Impact on Employees

Initially, the factory's closure was projected to affect 34 employees. However, the situation escalated as Yeo Hiap Seng's reassessment led to an additional 25 layoffs, bringing the total to 59. In light of these layoffs, the company confirmed that affected workers would receive severance packages calculated based on their salaries and duration of service.

Support for Displaced Workers

Furthermore, Yeo Hiap Seng proactively communicated with the Food and Beverage and Allied Industry Workers' Union to ensure compliance with Singapore’s tripartite guidelines regarding employment protection. To support the displaced workers, Yeo Hiap Seng is collaborating with the National Trades Union Congress' Employment and Employability Institute, providing assistance such as job matching services and career guidance as these individuals transition to new employment opportunities.

Market Implications

As the beverage industry continues to navigate shifting market demands and production costs, the closure of Oatly's Singapore facility serves as a critical reminder of the challenges facing global brands amid evolving economic landscapes. Will this exit reshape the oat milk market in Singapore? Stay tuned for more developments!