QIN (ASX) Ann: Trading Update

Where do we start with sandalwood grower Quintis? The latest update from the company didn't downgrade its sales and earnings forecasts so much as abandon them entirely.

But the good news is its brand ambassadors, Formula One star Daniel Ricciardo and former Test cricketer Adam Gilchrist, still have a job.

That's because the new boss, Julius Matthys, has bigger things to worry about – like reviving its sandalwood sales in China which accounted for the massive plunge in sales forecast for the current half year.

Just months ago the company was expecting sales in China of up to $20 million for the current half-year. It now says it might not make so much as $1 in sales to China.

This is on top of the fact that its cash earnings guidance for the current financial year – which ends in a few weeks – has been withdrawn entirely.

Its plantation sales program to MIS investors has been suspended.

And to top it all off, it has substantially reduced its new sandalwood tree planting this year.

With all of that to digest, investors might have warmed to the news that parties have approached the company about a potential transaction.

CBD understands the former boss, Frank Wilson, is involved with one of the parties which are looking at "potential debt and equity transactions".

We suspect that any approach from Wilson – who left abruptly in March to pursue a bid for the company – will not be met with open arms at Quintis.

The stock dropped more than 44 per cent in May after Quintis revealed that a Nestle subsidiary, Galderma, was no longer a customer. This had actually occurred six months earlier, but no one informed the board.

The latest announcement states that there would have been a $7.9 million write-off in the December 31 accounts if this had been "known to the current board of directors and current senior management".

It would have reduced first-half profits before tax by $7.9 million. So it is just as well the trading suspension will continue until June 21 when the company expects to update the markets on any potential transaction.

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