Bad weather stings Comvita
Honey maker expects 60% shortfall as cold stops bees from producing
Ashock earnings downgrade from New Zealand’s biggest manuka honey maker, Comvita, has highlighted the damaging impact the unsettled weather is having on the sector.
Comvita said a poor season would bring a 60 per cent shortfall in its manuka honey harvest which, together with slower sales through China’s informal trading channels, would drag its June year operating earnings down to about $5 million to $7m from a previous forecast of $17.1m.
The company expects a honey crop of 380 tonnes in the 2017 year, compared to an average harvest of 974 tonnes.
Although Comvita’s operating earnings will take a hit, the company’s sale of its Medihoney brand and shareholding in Derma Sciences will bolster the bottom line, with net profit expected to be between $20m and $22m.
The company’s share price closed down 17 per cent at $6.50 on the news, wiping $56.5m off its market capitalisation.
The company’s share price has nearly halved since hitting a record high of $12.87 mid-way through 2016. Comvita is by far the biggest player in the manuka honey sector, but the smaller operators across the country were also suffering because of the bad weather, UMF Honey Association’s John Rawcliffe said.
“Indications are that it is a very poor year, which means the industry needs to get together to support each other and look at ways to get through it,” Rawcliffe told the Herald.
“The season did not start well. There have been storms and bees do not like the rain or the wind and we just have not had the temperature,” he said.
Bees tend to stay inside their hives during bad weather and manuka trees do not produce as much nectar when the cold sets in.
“It’s part of the seasonal nature of the business ,” Rawcliffe said. “We have not had the greatest of summers.” Comvita chief executive Scott Coulter said most of the country has seen cold, wet and windy conditions during the optimal nectar flow period.
“Although we do not have full visibility on our 2017 honey crop until April/May, the honey season has progressed to a point where we have enough evidence to suggest we are likely to see a 60 per cent shortfall in harvest expectations this season from our own apiary operations,” he said in a statement to the NZX.
Coulter said there was still some time in certain areas of the country, subject to a sustained period of fine weather, to see some form of recovery.
“However, it appears the whole industry is experiencing one of the most difficult honey production seasons for many years,” he said.
Comvita had been preparing for this type of scenario, buying manuka honey inventory from third party suppliers during the past 18 months, which gives it enough supply to meet demand for the next year, he said.
Mark Lister, head of private wealth research at Craigs Investment Partners, said it was a reminder that Comvita could be affected by the weather, just like any other agricultural company.
“It’s disappointing but I guess it’s a reminder that it is a company with agricultural exposure in many ways and that it is at the mercy of the weather and other things that can influence how much supply they have got,” Lister said.
Comvita warned last year that the June quarter had seen tough trading conditions, with sales significantly lower than the prior year resulting from a slowdown in the New Zealand and Australian informal
trade channels into China.