Sprue (AIM: SPRP), one of Europe’s leading home safety products suppliers, today issues an update on the supply terms with DTL, owned by Jarden Corporation (“Jarden”), the supplier of all of Sprue’s own branded smoke alarms and accessories, which also supplies the smoke and carbon monoxide alarms and accessories of BRK Brands Europe Limited (“BRK”), also owned by Jarden, and a substantial shareholder in the Company.
Retrospectively with effect from 1 January 2016, Sprue has agreed to amend supply terms with DTL, as a result of which the Board now expects that the Company’s operating profit for the year ending 31 December 2016 will be approximately £8.3 million, slightly below market expectations. The details of the amended supply terms are as follows:
- Working in partnership with, and at Sprue’s request, DTL has made significant investment in its new high technology manufacturing facility and is bearing increases in Chinese labour costs. Sprue has agreed to accept modest product price increases to reflect a share of the incremental costs incurred by DTL. The new CICAM manufacturing facility has significant capacity above current production levels which Sprue can utilise as product volumes increase over time.
- Sprue has agreed to share equally the impact of Sterling’s depreciation against the US Dollar from a previously fixed rate of GBP/US Dollar 1.62 exchange rate. Furthermore, the parties have agreed to an annual retrospective volume/12 month average foreign exchange rate rebate mechanism. At the expected current volumes and the current GBP/US Dollar exchange rate of around GBP/US Dollar 1.42, this results in significant product on cost on all DTL sourced product this year. However, should purchase volumes increase and/or the average GBP/US Dollar exchange rate improve from the current level, Sprue will see its share of the benefit.
- Sprue continues to purchase all Sprue and BRK products from DTL on 90 day landed credit terms
Sprue continues to purchase all Sprue and BRK products from DTL on 90 day landed credit terms