Quintis smashed by contract loss

Shares in sandalwood supplier Quintis were down 44 per cent today after the company admitted it had lost a contract supplying Nestle five months ago, the second issue relating to a contract this year.

The admission follows an article in The Australian Financial Review this morning revealing the contract had been discontinued, with Quintis today saying it had only become aware of the contract loss yesterday.

In March, the company said Chinese timber buyer Shanghai Richer Link, with which Quintis had a sales contract, had not ordered any timber in 2017.

Santalis Pharmaceuticals, which became a wholly owned subsidiary of Quintis in August 2015, had signed contracts with Nestle branch Galderma in early 2014 covering licensing of acne medication and setting a price to supply sandalwood oil for use in the products.

But Quintis today revealed Santalis had not sold any sandalwood to Galderma this financial year, nor factored sales into its financial projections.

In today’s announcement, the board of Quintis said it had been advised only yesterday afternoon that the agreement had been terminated in December.

“Under the termination agreement, Galderma retained an option to reinstate the licence and supply arrangements on or prior to July 1 2017,” Quintis said in the announcement today.

“Prior to yesterday’s advice, the fact and details of the contract termination had not been provided to current members of both the board of Quintis and its senior management (outside of Santalis).

Quintis chairman Dalton Gooding said it was unacceptable the board was not made aware of the contract termination when it took place.

“We are taking immediate and appropriate measures to ensure that this type of communication breakdown is not repeated,” he said.

About 1,200 kilograms of East Indian Sandalwood oil was supplied in 2014 and 2015, Quintis said, with Nestle securing a majority stake of acne brand Proactiv in March 2016.

Quintis shareholders punished the company, with the share price down 43.9 per cent to 60 cents each at the time of writing.

That’s less than half the price of Quintis shares just two months ago.

The company recently came under significant pressure from US-based short seller Glaucus Research Group, which issued a report highly critical of Quintis.

Glaucus said Quintis operated in a ponzi structure and was bound to fail, and that it was reliant on raising capital because it didn’t generate much revenue from sales.

Quintis said the report was full of substantial and egregious inaccuracies.

At the end of March, managing director Frank Wilson resigned from the company to work with an unnamed international bidder in an attempt to take over the board.

He was replaced by deputy chairman and former BHP Billiton executive Julius Matthys, who stepped up as interim chief executive officer a few days later.