Sandalwood producer Quintis tears up China contract seven months later

Troubled sandalwood producer Quintis has terminated a long-term sales deal with a Chinese buyer that was embroiled in an investigation by Chinese authorities into custom duty avoidance.

In March, Quintis told investors that if it became “aware the customer has been charged or has been engaging in customs evasion, it will immediately terminate the contract and begin supplying these other customers who are seeking our wood products”.

Yesterday Quintis announced it had terminated the contract with China-based buyer Shanghai Richer Link.

At the time Quintis said the contract would not impact its guidance of $45 million to $55 million in sales for the year.

“Quintis believes that its ability to achieve this guidance is not dependent on further sales to Shanghai Richer Link as any wood not sold to Shanghai Richer Link will be sold to alternative customers.”

Since then, Quintis (ASX:QIN) has faced a number of challenges, including the resignation of founder and managing director Frank Wilson and a shareholder class action alleging lack of disclosure about another failed contract earlier this year.

Investors after compensation

Lawyers Bannister Law say Quintis lost a contract supplying dermatology company Galderma in December — but failed to disclose the news to market for four months.

Quintis’s shares fell 44 per cent and investors are after compensation.

Touted as the world’s largest owner and manager of commercial Indian sandalwood plantations, Quintis has been in a trading halt since May when shares traded at 29.5c.

The company was the subject of a scathing research report from a US short-seller Glaucus in March which compared it to a Ponzi scheme with “dubious promises of future profits”.

“In our opinion TFS’s (Quintis’s previous trading name) model resembles such collapsed agricultural managed investment scheme companies and their Ponzi-like structure,” they wrote.

In a request for extension of their voluntary suspension, the company was optimistic of a recapitalisation proposal as soon as the end of the month citing “exceptional” circumstances.

“The board remains concerned that the reinstatement of trading in the company’s securities before the completion of these transactions could potentially mean that the market would not be trading on an informed basis.

“A failure to negotiate and complete the transactions, given the company’s current liquidity issues, is critical to the company’s continued solvency.”

Quintis has 14,000ha of Indian sandalwood plantations and five million trees spread across three states, with about a third owned outright by the listed entity.