Fertilizer Contract (8589P)

TIDMACHL

RNS Number : 8589P

Asian Citrus Holdings Ltd

10 October 2011

 
 For immediate release   10 October 2011

Asian Citrus Holdings Limited

("Asian Citrus" or "the Group")

Update on Fertilizer Contract with Fujian Chaoda Group

The Board of Asian Citrus Holdings, the largest orange plantation owner and operator in China, announces that it held a meeting on 10 October 2011 to consider the Fertilizer Supply Agreement with Fujian Chaoda Group which is going to expire on 30 June 2012.

Following the meeting the Board wishes to announce that the Company decided not to renew the Fertilizer Supply Agreement with Fujian Chaoda Group when it expires on 30 June 2012.

Background

As disclosed in the Company's Listing Document dated 23 November 2009, Asian Citrus Holdings Limited (the "Company" together with its subsidiaries, the "Group") and Fujian Chaoda Group entered into an organic fertilizers supply agreement ("Fertilizers Supply Agreement") on 17 November 2009, pursuant to which Fujian Chaoda Group agreed to supply (or procure its wholly-owned subsidiaries to supply) and the Company agreed to purchase (or procure its wholly-owned subsidiaries to purchase) biological organic fertilizers and high efficiency organic fertilizers (or such other types of organic fertilizers as may be agreed between the parties in writing from time to time). The Fertilizers Supply Agreement provides that the prices to be paid would be agreed between the parties at the time when a purchase order is placed by any member of the Group with Fujian Chaoda Group, provided that it shall not exceed the ex-factory price (net of delivery costs) at which the same type of organic fertilizers is supplied by Fujian Chaoda Group to independent third parties at the time when the purchase order is placed. The Fertilizers Supply Agreement is due to expire on 30 June 2012. At the time of entering the Fertilizers Supply Agreement, the Board considered that the Group required a stable and reliable supply of organic fertilizers which it could achieve through the Fertilizers Supply Agreement.

To the best of the Board's knowledge, Fujian Chaoda Group is 95% owned by Mr. Kwok Ho who is the Chairman, Executive Director and substantial shareholder of Chaoda Modern Agriculture (Holdings) Limited ("Chaoda Modern"). As as the date of this announcement, Chaoda Modern holds approximately 13.4% in the total issued share capital of the Company.

Current development

In recent years, other organic fertilizer suppliers in China have become more competitive and the Group has adopted a policy of diversifying its sources of fertilizers, in order to spread risk. As a result, the purchase of fertilizers from Fujian Chaoda Group decreased from approximately RMB47,430,000 for the year ended 30 June 2010 (approximately 28% of the total fertilizer usage) to approximately RMB34,185,000 for the year ended 30 June 2011 (approximately 17% of the total fertilizer usage).

Expected decrease in the purchase amount for 2012

As the Company continues its policy of diversifying its sources of fertilizers from other independent suppliers, the amount of fertilizers to be purchased from Fujian Chaoda Group for the year ending 30 June 2012 is expected to decrease further and would not exceed RMB10,000,000.

Conclusion

In view of the current market conditions of organic fertilizers supply, the Company considers that sufficient organic fertilizers can readily be sourced from other independent suppliers at competitive prices without any material impact on the Group's cost of production. In order to enhance the Group's corporate governance and minimize any dispensable connected transactions, the Company decided not to renew the Fertilizer Supply Agreement with Fujian Chaoda Group when it expires on 30 June 2012.

 
 Asian Citrus 
 Eric Sung, Finance Director                  +852 2559 0323 
 
 Seymour Pierce Limited 
 Nandita Sahgal, Jonathan Wright (NOMAD)      020 7101 8000 
 Leti McManus, Richard Redmayne, (Broking) 
 Weber Shandwick Financial                    020 7067 0700 
 Nick Oborne, Stephanie Badjonat, 
  John Moriarty

This information is provided by RNS

The company news service from the London Stock Exchange

END

MSCFMMMGNGFGMZG

Asian Citrus (LSE:ACHL)
Historical Stock Chart
From Jun 2024 to Jul 2024