(Yicai Global) June 11 -- Kingfa Science and Technology’s nearly USD1 billion face mask order from a US client is hanging in the balance as the modified plastics manufacturer-turned-mask maker awaits a 40 percent down payment before starting production.
The Guangzhou-based company received a USD975 million order for KN95 face masks from a US buyer on May 17. From that single contract Kingfa would earn more than half of what it did in the whole of last year, which was a net profit of CNY1.2 billion (USD170 million). News of the contract sent its share price soaring by the exchange-imposed limit of 10 percent.
The unnamed US buyer has failed to make the down payment and has already postponed that once, Kingfa said yesterday. Under the deal, the purchaser should have paid the deposit within three days of signing the agreement. But after a 20-day extension, there is still no sign of the money, Kingfa said.
Kingfa does not know if the contract can be honored because of significant uncertainties, it said. Kingfa is unable to make an accurate assessment of the buyer’s ability to honor the contract because it is unable to send employees to the US due to travel restrictions in place because of the coronavirus pandemic.
The buyer planned to pay from a trust fund, but such large payments require authorization and a legal compliance review that affects the payment schedule, the client told Kingfa.
Kingfa was supposed to complete the order within three months by making weekly deliveries of batches. But no masks have been shipped yet.
The firm’s stock price [SHA:600143] closed down 1.8 percent today at CNY12.84 (USD1.82), while the benchmark Shanghai Composite Index fell almost 0.8 percent.
Editor: Kim Taylor