Italy-based distributor Esprinet has been handed a lawsuit from one of its suppliers demanding €55m in damages due to alleged "undue conduct".
The unnamed supplier in question, which manufactures devices for Esprinet's "Sports Technology" product line, recently went into liquidation putting a €17m hole in the distributor's profits for full-year 2018.
The supplier filed a civil action lawsuit against Esprinet on 6 February asking for €55m in damages for "alleged undue conduct". On 13 February, Esprinet's board of directors agreed to resist the supplier's claims, describing them as "groundless" and "pretentious".
"[Esprinet] - following the opinion expressed by its consultants - reiterates full compliance of its work according to law and statute and trusts that the judicial authority can confirm this as soon as possible, ascertaining the groundlessness and pretentiousness of the judicial initiative taken against Esprinet," the distributor stated, translated from the original Italian.
The supplier started voluntary liquidation proceedings on 18 December 2018, but Esprinet claims it was only notified at the beginning of January this year.
Esprinet posted preliminary financial results in January which warned that earnings before taxes would come in 33 per cent lower than the previous year, largely due to the supplier entering liquidation.
Recently published financial accounts from Esprinet reveal the full financial extent of the supplier's collapse on its bottom line.
Earnings before taxes for its domestic Italian business fell by 79 per cent year on year in 2018 to just €3.9m. Revenues meanwhile grew by 13 per cent to €2.29bn.
The distributor claims it gave the supplier an advance and credit notes totalling €12.5m on expected goods from factories located mainly in China. The firm predicts that the total financial impact connected with the supplier's liquidation totals €17.3m.
The distributor also cited a "rapid drop" in prices for its Sports Technology brand in Q4 last year, which also put pressure on the product line's profits.
Meanwhile, Esprinet's business in Spain and Portugal remained buoyant and helped alleviate spiralling profits from its Italian business.
Iberian revenues grew by nine per cent to €1.33bn, while profits surged by 25 per cent to €19.5m.
Some say performance, others say money but it may be systems and processes that carry the day
Azure Arc and Synapse are 'game changers', according to New Signature boss
Acquisitive UK distributor welcomes two more firms to the fold, on the same day its H1 sees a 43 per cent jump in operating profit
The investment marks an expansion in the region, a month after the vendor's EMEA boss said it was capitalising on rival NetApp's withdrawal of support