Zespri has upgraded full-year profit guidance after deciding it doesn't need to retain an accounting provision related to a Chinese subsidiary that was found guilty of smuggling in 2013.
The Tauranga-based kiwifruit marketer said profit for the year to March 31 was expected to be in the range of $32 million to $35 million, up from a previous forecast of between $19 million and $22 million.
Explaining the upgrade, the company said a $13.9 million provision entered in 2012/2013 relating to its Chinese subsidiary, ZMCC, had been released.
ZMCC was convicted of smuggling general cargo and fined around $1 million in 2013. Its China manager, Joseph Yu, was sentenced to five years in jail for being an accessory.
The fraud centred around the issuing of pro-forma invoices by Zespri for tax and customs purposes, significantly understating the value of shipments into China.
The company later invoiced the importer for the final sales value and was paid in full.
"Our assessment is that all issues relating to Zespri's subsidiary in China, ZMCC, have now been resolved with the Shanghai Court, therefore there is no justification for Zespri to hold the accounting provision," Zespri said today.
A Chinese court also requested that Zespri repay $10 million in "illegal gains" from the customs fraud.
Zespri chief financial officer Dave Hazlehurst said the $10 million had been fully repaid by the company's former importer Shanghai Neuhof, which was also found guilty on smuggling charges.
Zespri had strengthened its compliance systems in China, he added.
"We've invested in people and support structures and there's a very clear message going to all our employees what the compliance system is and how we work within it."
Hazlehurst said China remained a major opportunity for the New Zealand kiwifruit industry.
"Zespri sales in China increased by 50 per cent in 2015/16 to reach record levels of around 18 million trays," he said. "During 2016/17 we expect it to become our largest market by volume."