China legal problems now over - Zespri

By David Porter

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Zespri's chief financial officer David Hazlehurst. Photo/file
Zespri's chief financial officer David Hazlehurst. Photo/file

Kiwifruit exporter Zespri says its legal problems in China relating to Shanghai Court action over its subsidiary ZMCC are now concluded.

As a result, it has removed a provision against potential financial penalties and lifted its profit range for the current financial year ending March 31.

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Zespri paid a $1.1 million fine last year relating to its invoicing issues in China. However, it had also set aside a $13.9 million provision in 2012/13 against possible penalties relating to illegal gains.

"We've been investigating this a lot and through that investigation we have come to the view that all of the things relating to the illegal gain have now been closed out with the Shanghai Court," Zespri chief financial officer Dave Hazlehurst told the Bay of Plenty Times.

"We believe all the legal issues are resolved, certainly to the extent that we can release the provision," he said.

Zespri continues to be subject to a Serious Fraud Office investigation in relation to the China invoicing issues.

Mr Hazlehurst said Zespri made the provision in 2012/13, adopting a conservative position pursuant to accounting standards.

"It is satisfying to get to this point today, which follows very extensive assessment, where we have sufficient clarity to be able to release the provision. Looking ahead, the China market is an exciting opportunity for the New Zealand kiwifruit industry."

During 2016/17 Zespri expects China to become its largest market by volume.

"Zespri is investing to support this positive outlook in such a dynamic market," he said.

"We are establishing new regional sales offices to support distribution partners and retail customers. We are reconfiguring our business model to be an importer of record in China, in line with more-established markets such as Europe and Japan. We are also continuing our strong focus on strengthening our compliance systems in China and across the company, as Zespri looks ahead to sustained growth in the next few years."

- Bay of Plenty Times

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