Daniel Chan of Sunrising, Enza’s former Hong Kong-based trading partner, has refuted comments made by the CEO of Enza’s parent company Turners & Growers (T&G) regarding debts owing to Enza from Sunrising, saying that his account of the situation is “a misrepresentation”.
Asreportedby Asiafruit on Fruitnet.com on 13 June, T&G CEO Geoff Hipkins estimated that Daniel Chan and father YC Chan of Sunrising had run up around US$2m of debt, with the majority of that amount accruing between January 2011 and March 2012 on the trading of South African citrus and grapes into Hong Kong and China.
Hipkins said T&G/Enza was withholding payment to some of its South African creditors - largely grape suppliers - until it had resolved the debt situation involving Sunrising, which was further complicated by “a whole raft of claims” that the Chans had made on fruit quality.
But Chan has denied that Sunrising owes T&G/Enza monies for the trading of South African citrus and grapes for the January 2011 to March 2012 period. “With the previous management of T&G, we discussed a budget and we had this approved before every season started. Outstanding issues had to be cleared before the new season started,” Chan told Asiafruit. “It was clear to me that all outstanding amounts to growers during the period Hipkins mentions were settled.”
Sunrising and Enza had a “business arrangement” that was negotiated with T&G’s previous management, according to Chan. “The business arrangement was that Enza would finance Sunrising on trade, with short-term funds provided by Enza, and Sunrising would support Enza for developing red kiwifruit and the Enza brand in China as a long-term project, with long-term funds from Sunrising,” he said.
Hipkins took over as CEO of T&G towards the end of March and since then he has moved to sever Enza’s “arrangement” with Sunrising, according to Chan.
Citrus commission
Under the trading agreement between the two companies, Chan said Enza charged Sunrising a commission on the FOB value of each container of South African citrus it imported during the 2011 season. While noting that Sunrising had accumulated a commission payment owed to Enza for the 2011 citrus season, Chan said this amount had to be offset against the accumulated expenses it had paid on Enza’s behalf. He declined to disclose the amounts of the commission owed or the expenses incurred.
“It might be the case that the previous management hadn't mentioned such expenses to Hipkins or that he simply wanted to ignore this,” he said. “In any case this was an internal matter between us, and not related to South African growers at all. Until the end of May `this year`, we have a clean on-time payment record with Enza under payment terms agreed between Enza and Sunrising for the South African grapes shipped during 2012.'
Chan also denied that Sunrising had made “a whole raft of claims” on South African imports. “We worked with Enza for hundreds of containers, but the number of claims Sunrising had on these represented a very small percentage and such claims were legitimate,” he argued.
T&G’s decision to suspend Enza’s payments to some South African grape growers for the 2012 season relates to separate issues, Chan claimed.
The group’s UK-based subsidiary World Wide Fruit (WWF) paid Sunrising US$0.65m for the exclusive distribution rights to a red kiwifruit variety around five years ago, an amount it has since requested that Sunrising refund. “We have a dispute on this, but it cannot be considered a debt,” said Chan.
“All in all, I believe Hipkins is trying to push Sunrising to pay back the US$0.65m for the exclusive UK kiwifruit license plus the 2011 citrus commission by stopping payments to South African grape suppliers for their 2012 grape supply,” he continued. “From my point of view, this doesn’t seem correct as it’s not fair to the growers. Firstly, the Enza-Sunrising internal matters don’t relate to South African grape suppliers. Secondly, Enza has terms of trade with suppliers so on-time payment to grower-suppliers is Enza’s responsibility.”
Commenting on the situation on Thursday (28 June), Hipkins maintained that Sunrising owed a sizeable debt to Enza/T&G on the trading of South African fruit.
T&G’s Murray Sollit, who recently returned from Hong Kong where he helped to assess the merits of the quality claims and clarify the debt situation, said that Sunrising owes Enza around US$1.5m for fruit purchased from South Africa, which relates to around 60 unpaid containers. “There are five claims still outstanding but it won’t change the position much,” said Sollit.
According to Sollit’s figures, Sunrising owes T&G around US$411,000 on the 2011 South African citrus trading programme and more than US$1m on the 2012 grape programme.
“All the containers on which payment is outstanding to Enza would have been sold and liquidated by now, so Sunrising is sitting on the money that could be paid to Enza,” said Hipkins.
Separately, Hipkins said Sunrising still has a debt of US$0.65m to WWF, of which US$325,000 is owing to T&G as a 50 per cent shareholder in WWF.
Future of red kiwifruit
While adding that T&G/Enza's relationship with the Chans was terminated in mid-May, Hipkins said this would not impact on Enza’s production or marketing of EnzaRed kiwifruit in the future. “The red kiwifruit variety is wholly sublicensed to Enza,” he pointed out. “T&G has the worldwide rights to it, and our production is focused outside of China, so the breakdown of this relationship won’t affect that.”
EnzaRed kiwifruit is currently planted in New Zealand and Chile, with new plantings soon to be made in Europe, according to Hipkins.
While noting that the worldwide rights to the red kiwifruit include China, Hipkins said that Sunrising has the distribution rights for plant material of the variety within China under a license arrangement. He added that T&G would be reviewing its strategy on marketing of the Enza brand in China.
Meanwhile, Chan said the breakdown of the relationship with Enza/T&G would seriously impact on Sunrising’s operations. “We’re now seeking legal advice because we don’t know how much we’ll suffer due to the sudden ending of this partnership for trade and for the red kiwifruit project, especially on the China side where we have made significant investments,” he said. “The cost and energy we put into red kiwifruit for the past few years was very significant and the production units we invested in or organised were all supposed to be to build the Enza brand on the understanding this was a long-term project.”
