Wellington Drive strikes supply deal with Ziehl

Wellington Drive Technologies, the unprofitable maker of energy-efficient refrigeration motors, has granted a manufacturing and distribution licence to German customer Ziehl-Abegg as part of a deal to change the terms of their supply agreement.

The Auckland-based company said it would face a cost of US$745,000 ($953,000), as expected, to supply Ziehl with motors and components to settle orders worth US$6.3 million.

That will mop up most of the company's existing inventory, and manufacturing of the final orders will be completed at Wellington Drive's Singapore facility by the end of March next year, with both parties bearing the cost equally.

The new terms of the agreement grant Ziehl an exclusive licence to manufacture and distribute motors, which will not lead to any new royalty payments to Wellington Drive.

In lieu of all warranty and support obligations, Wellington Drive will supply extra motors on top of those agreed upon in the deal.

The agreement is part of Wellington Drive's restructuring bid to reduce costs and working capital, and focus on its refrigeration business. The company said the manufacturing of ventilation motors was being transferred to contract partners to help cut costs.

Because the size of the deal represents more than half of its average market capitalisation, Wellington Drive needed a waiver from NZX listing rules, which was granted, to go ahead with the transaction.

Wellington Drive has not turned a profit since it began in 1986.