Poor harvest affects Comvita result
A SECOND poor annual harvest for manuka honey grower and exporter Comvita resulted in a 16% decline in aftertax profit to $8.2 million.
While a third poor harvest is not being ruled out, Comvita has increased its raw material honey purchasing and maintains a ‘‘positive outlook’’ for full year 2019.
Gross sales for its year to June were up 19% to $176.7 million, earnings before interest, tax, depreciation and amortisation rose rose from $19.8 million to $20.5 million and aftertax profit declined from $9.8 million a year ago to $8.2 million.
Comvita shares are down more than 30% since starting the year above $8.30, and traded down slightly yesterday at $5.67, following the announcement.
Comvita chief executive Scott Coulter said the poor harvest had a negative $6.2 million impact on aftertax profit.
‘‘Unfortunately the weather did not play its part and for the second season in a row the honey harvest was poor.’’
He said historically a third consecutive poor honey season in New Zealand was ‘‘unlikely’’.
Comvita had made changes to its apiary model, increased its marketing spend against lowering its overhead costs and renewed its focus on opportunities in its China and US markets. Because of the second poor honey season, Comvita had been aggressively buying more honey, with $89 million of raw stock, to ensure its has enough honey for full year 2019.
Comvita said it was in a strong inventory position, up from $88 million a year ago to $116 million. Total sales were $186 million, before a $9.3 mil lion deduction from its China joint venture, including $46 million sales through the joint venture Comvita Food (China) Ltd, $8.7 million UK sales, and $26.8 million in sales in North America; the latter described as a ‘‘breakthrough’’.
Total revenue came from 71% of sales in functional foods, up from $90 million last year to $132 million and 23% was from healthcare products, down from $43 million last year to $42 million.
Medical was 4% of sales, declining from $11 million to $7 million and 2% was personal care products, up from $4 million to $5 million.
Net debt stood at $92 million, with a further $25 million available
Comvita had started a $12 million upgrade of its warehousing capacity at Paengaroa, southeast of Tauranga, due for completion next February, including a photovoltaic solar system and rainwater storage.
‘‘This will provide us the ability to store virtually all of our raw materials at Paengaroa in a purposebuilt, state of the art, climatecontrolled warehouse,’’ Mr Coulter said.
In early July, Comvita completed its 20% investment in Uruguayan propolis supplier Apiter, whose propolis is similar to New Zealand’s, for $US5.65 million cash and $US600,000 in shares. Propolis is an antimicrobial product made by bees, used in lozenges, toothpaste and other products.
Comvita declared a final 2c dividend, taking the full year to 6c, having changed its policy of providing 40%45% of after tax profits for dividends to a range of 25%30%; given the company’s need for cash to fund growth.