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Yowie Group (ASX: YOW) has been hit with a sharp rise in US tariffs with the rate on Chinese imports soaring to 145 per cent overnight, threatening a US$3.6 million (AUD$5.8 million) hole in its cost base while it also navigates ongoing disputes over a loan to its majority owner, Keybridge Capital (ASX: KBC).
The news comes only four days after the company announced a major customer would be recalibrating store layouts to give Yowie products "materially fewer store facings effective immediately".
Despite manufacturing its US-distributed products in-market, Yowie also sources inputs from around the world, with US$2.5 million allocated for Chinese-made toys.
The latest tariff increase has caused this budget to balloon to US$6.1 million, reflecting an additional US$3.6 million in costs.
The confectionary group currently has US$850,000 in Chinese-made toy inventory en route to the USA, resulting in an unbudgeted incremental import cost of US$1.2 million ($2 million) based on the increased tariff announced by US President Donald Trump.
“As previously advised, Yowie manufactures its US-distributed product in the US, however, it sources inputs for that product from around the world,” the company said in an ASX statement today.
“The two material inputs are chocolate and toys. The latter Yowie sources from China, at a budgeted cost of US$2.5 million a year.
“The revised tariff rate has a likely incremental impact on Yowie’s cost base of US$3.6 million p.a. ($5.8 million p.a.), bringing the total cost of toys to US$6.1 million p.a.”
The announcement comes as uncertainty still hangs over Yowie regarding a $4.6 million loan to its majority shareholder Keybridge, which entered administration in February after Yowie’s board demanded urgent repayment.
At the time, Keybridge and Yowie shared a CEO, Nicholas Bolton, who has since been ousted from the Keybridge board by Geoff Wilson's WAM Active (ASX: WAA) following a NSW Supreme Court ruling.
Yowie had previously flagged a potential funding lifeline for Keybridge via a related-party loan from WAM, which would have enabled creditor repayments.
However, that proposal has now been rejected by WAM’s board, leaving the timing and prospects of any debt recovery uncertain.
Yowie is now claiming it is owed $6.7 million by Keybridge.
“Yowie now understands that the purported funding proposal has not been approved by WAM board and, accordingly, is not available to Keybridge (or, as a result, Yowie) to rely upon,” the company said.
“Yowie will continue to monitor the situation and will update shareholders as further information becomes available.”
The removal of Bolton did not involve management changes at Yowie. However, its North America country manager Leo Valle recently announced he will be retiring on 30 April.
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