NUTRYFARM International’s indirectly wholly-owned subsidiary, Global Agricapital (Thailand) Co (GAT), which supplies durians, faces the prospect of having to compensate 2 of its customers a total of 33.4 million yuan (S$6.8 million) due to a shortfall in delivery.

Disclosing this in a filing on Friday (May 27), the company said the finance manager of GAT had on May 23 sent in 2 settlement agreements that were entered into with Moonda (Beijing) Agricultural Science and Technology Co and China Railway Production Control (Chengdu) Industrial Co in January.

The one with Moonda relates to a purchase agreement to buy 200 containers of fresh durians between July and December in 2021. 

GAT only managed to deliver 44 containers, as it could not ensure the quality of the durians during shipment because of shipping delays and restrictions imposed by the Chinese customs to control Covid-19, NutryFarm said.

As a result, GAT has to pay Moonda 15.6 million yuan for the economic losses incurred. Among others, the customer faced a loss of market share and incurred costs from having to restore consumer confidence, NutryFarm pointed out.

The compensation amount is to be paid on or before Jul 31, or a penalty of 0.05 per cent of the outstanding amount would be levied per day on the first 15 days after the due date. The penalty increases to 10 per cent per day thereafter.

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However, should GAT make up for the delivery shortfall of the 156 containers by Jul 30, Moonda may waive the compensation amount and penalties at its discretion, it noted.

The situation with China Railway is similar – GAT delivered only 222 containers worth of fresh durians when it was supposed to deliver 400 for the whole of 2021.

Therefore, GAT is to compensate China Railway 17.8 million yuan for the economic losses.

This compensation amount is to be settled by offsetting a trade amount of 87.1 million Thai baht (17.4 million yuan) due from China Railway, with the balance to be paid by GAT on or before Aug 30. 

If GAT fails to pay up, it’ll face a 0.05 per cent penalty per day after the due date in this case.

If GAT makes up for the delivery shortfall by Aug 30, however, China Railway may waive the compensation amount and penalties at its discretion.

Shares of NutryFarm closed unchanged at S$0.085 on Friday, before the announcement.