Petra warns of loss in Q3 after settling legal spat with Barry Callebaut

It will book a one-time charge of US$19.4m.

Petra Foods has finally reached an amicable settlement with multinational cocoa producer Barry Callebaut. However, the final deal isn't as sweet as Petra might have hoped, as a one-time settlement charge will drag the company into the red in Q3.

The dispute is rooted in the sale of Petra's Cocoa Ingredients business to Barry Callebaut. Although the deal was completed on June 2013, Barry Callebaut has sought a of US$103 million.

Under the settlement, Petra and Barry Callebaut have agreed, among other things, to fully and finally settle the dispute and discontinue the arbitration, without any admission of liability by either party.

As part of the settlement, the two companies have mutually agreed that Petra Foods will pay a sum of US$38 million plus interest of US$0.8 million as an adjustment to the closing price and in consideration of full and final settlement of all claims.

As a result of the settlement, Petra will recognise a one-time exceptional charge of US$19.4 million.  Although this is a non-operational item, Petra said that the charge is likely to result in a net loss for 3Q15 and a drag on the full year 2015 performance.

After taking the settlement into account, Petra's overall pre-tax gain on the sale of the Cocoa Ingredients business amounts to US$46.1 million.

Petra Foods will have cash in excess of US$100 million, the majority of which comprises the proceeds from the sale of the Cocoa Ingredients business.

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Penilaianmu: MagBe