- New Zealand Coastal Seafoods (NZS) has revealed a complication in its ongoing purchase agreement with SuperMilkBaba (SMB)
- SMB has advised that it is unlikely to meet the year one minimums set by the contract in March of this year
- Under the purchase agreement, SMB would order at least 100 tonnes of frozen ling maw over the initial 12 months
- However, SMB said it’ll likely fall short of its obligations due to COVID-19 impacts, customer demand in China, and general global trading conditions
- Shares in New Zealand Coastal Seafoods have sunk 9.09 per cent into the red, worth four cents per share
New Zealand Coastal Seafoods (NZS) has revealed a complication in its ongoing purchase agreement with SuperMilkBaba (SMB).
SMB and NZCS originally signed a purchase agreement together in March of 2020.
Under the agreement, SMB would order at least 100 tonnes of frozen ling maw from NZCS during the first 12 months of the contract. Ling maw is the dried bladder of ling, a white-fleshed fish which is found in deep waters around New Zealand. NZCS is currently SMB’s only supplier of ling maw in New Zealand.
This order amount was forecast based on anticipated demand at the time and was set as the contract’s year one minimums.
However, SMB has advised NZCS that it is unlikely to meet the year one minimums set by the companies’ purchase agreement.
The company does not believe it can meet its obligations because of a number of time-based factors, including the unexpected trading conditions caused by the COVID-19 pandemic.
SMB entered the purchase agreement with NZCS before the pandemic’s full impact on businesses became clear. The company also attributed its inability to meet the minimums to changes in customer demand in China, and global trade in general.
This development is likely to result in a significant decrease in orders which NZCS will receive from SMB. As such, NZCS has formed the view that this purchase agreement is no longer a material contract for the company.
However, the two companies are still in discussions regarding the purchase agreement, and attempting to work constructively with each other.
New Zealand Coastal Seafoods’ CEO, Andrew Peti, commented on the complication posed by SMB’s contract update.
“Although it is disappointing that SMB will not meet the contract Year 1 Minimums for Ling Maw, NZCS is committed to working with SMB through this implementation period, with the aim of ultimately extending the SMB Purchase Agreement,” he said.
Shares in New Zealand Coastal Seafoods have sunk 9.09 per cent into the red, worth four cents per share at 10:51 am AEDT.