The company has been informed that certain of its Chinese customers, accounting for around 15% of Xaar's total revenue, are being investigated by the Chinese customs authorities over alleged non-payment of import duty.
Xaar trading update
Xaar itself is not a party to the investigation but is co-operating with customs officials.
Xaar was notified by the authorities of the impending investigation on 19th July, but at that time did not consider it would have a material effect on sales. Digital printing is a high profile growth industry in China which has attracted similar investigations before, with little or no impact on the company.
It has now become apparent, however, that the current investigation is being coordinated by central customs authorities, rather than by local officials as has previously been the case. This is likely to increase the period of the investigation and its impact on current trading which remains below expectations.
It is the company's aim that results for the full year should be similar to those reported for 2005 but, until the current investigation has run its course, it is not possible to quantify accurately the impact it will have on the timing of sales over the remainder of the year.
A further update will be issued with the interim results which are scheduled for release on 13th September.
Xaar is a world leader in the development of digital inkjet technology