Business case
Our client, a manufacturer of aluminium products, had a long-term agreement to supply lithographic coils for a global producer of imaging products, one of its major customers. As a result of changes to its supply chain, the customer ceased purchases from our client, in breach of the contract.
A key area of dispute between the parties related to the appropriate profitability metric to assess damages (i.e. net profit or contribution). As is typical in heavy industries, our client incurred a high level of fixed costs and needed to achieve a critical level of sales volumes to maintain profitability. Because the client had differing profitability across its multiple product lines and customers, it was necessary to calculate a specific contribution per tonne to assess the damages. We also investigated the client’s classification of fixed and variable costs to support the computations.
We performed an initial assessment of the damage for settlement negotiations and, subsequently, prepared a full expert report for litigation. Our assessment covered a historical claim of missed minimum offtake and a claim for lost future sales and other costs.