Shares of local fabric manufacturer Singtex Industrial Co (興采實業) declined 5.36 percent yesterday after it received notification of lawsuits against it by US-based yarn maker Cocona Inc for allegedly violating agreements and false advertising.
Singtex shares dropped to NT$61.79 yesterday from NT$65.29 on Friday last week.
According to Singtex, Cocona claims the company violated their supplier and non-disclosure agreements by using confidential information about Cocona’s products to study its production process and use it to develop Singtex’s S Cafe yarns during the time Cocona was the yarn supplier for Singtex.
Cocona has also accused Singtex of falsely asserting its S Cafe yarns have the same quality as its products, Singtex said.
Cocona will demand that Singtex pay compensation for its losses, the interest on the losses and legal fees, but it still has not proposed an exact figure, Singtex said.
However, Singtex assistant manager Alice Wang (王淑芬), said Cocona’s claims are one-sided and not well supported.
“We have appointed legal agencies in Taiwan and the US today for the upcoming lawsuits,” Wang told reporters yesterday. “We are considering filing lawsuits against Cocona for making false accusations and demanding compensation.”
Wang said the technology for making S Cafe yarns is different to that of Cocona’s, and Singtex has a patent in the US for S Cafe yarns.
Wang said that she hoped the company’s plan to shift its listing to the to the GRETAI Securities Market (GTSM, 櫃檯買賣中心) in the fourth quarter from the smaller Emerging Stock Market (興櫃市場) would not be delayed because of the lawsuits.
From 2005 to 2011, Singtex purchased coconut charcoal yarns from Cocona to make fabrics, and sales of the end products accounted for about 10 percent of Singtex’s annual revenue, Wang said.
Since 2011, the two companies have not had a business relationship because Singtex’s clients stopped ordering products made of coconut charcoal yarns, Wang said.
According to Singtex, Cocona is a company with a revenue of between US$700,000 and US$800,000 a year.
Currently, sales of S Cafe yarns and fabrics account for 20 percent of Singtex’s revenue, Wang said.
From January through last month, the company’s revenue declined 10.09 percent to NT$725.23 million (US$24.19 million) from the NT$806.67 million seen the previous year, according to a company filing to the Taiwan Stock Exchange.
Wang said the drop was due to the company adjusting its production lines as customers shifted preferences to new products, and Singtex’s revenue would see a year-on-year increase in the second half of the year.
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