Uni-President Enterprises Corp (統一企業), Taiwan’s largest food company, said a Chinese supplier had failed to deliver contracted sugar, which could hurt profit at its unit.
Uni-President China Holdings Ltd (統一企業中國控股公司) paid Guangdong Zhong Gu Tang Ye Group Co (廣東中谷糖業公司) 100 million yuan (US$15 million) after signing two contracts, the unit said in a filing to the Hong Kong Stock Exchange on Tuesday night.
The statement did not say if the contracted sugar was valued at 100 million yuan or if the amount paid was a deposit.
Declining sugar prices have hurt farmers who grow the crop, the China Daily said yesterday, citing a party chief from Guangxi Province.
Sugar futures have plunged 16 percent in the second half of the year in London trading on concern the slowing global economy will erode demand.
“Uni-President’s business model has a big problem,” Sophie Fan (範碩芬), consumer analyst at CSC Securities HK Ltd (群益證券), said by telephone from Hong Kong.
“It uses a lot of suppliers but doesn’t have a solid relationship with them so this lowers the bargaining power on raw materials, such as sugar, and the power to control product quality,” she said.
Negotiations to settle the deal have been complicated by the death of the supplier’s chairman, Uni-President China said in a statement. It was unclear whether the supplier would be able to fulfill the contract, the parent said yesterday in a separate statement to the Taiwan exchange.