Bad weather fails to sour Comvita’s profit outlook
Comvita, the manuka honey company, swung to a first-half profit and reiterated its full-year earnings guidance, despite bad weather hitting the 2018 honey season.
The Te Puke-based company reported a net profit of $3.7 million, or 8.31c per share, in the six months to the end of December, compared with a loss of $7.1m, or 17.18cps, in the prior period.
Sales reached $83.6m versus $57.7m in the prior year. Earnings before interest, tax, depreciation and amortisation (ebitda) were $9.9m versus an ebitda loss of $2.8m in the same period a year earlier.
“Comvita’s total sales were up 44 per cent on the prior period, driven by sales to North America, which reached $19.6m for the half-year period compared to $1.6m on the prior period and meets our strategic objective of market diversification,” said chief executive Scott Coulter.
“Grey channel” sales into China were up 45 per cent compared to the first half of 2017, said Coulter. The grey channel is made up of smallscale exporters who buy the product and post it to China. Moves by the Chinese government to crack down on grey, or “daigou”, sales had crimped profits for companies such as Comvita.
The company said it would pay an interim dividend of 4c per share on March 23 for shares registered March 16.
Looking ahead, Comvita reiterated its confidence that full-year net profit would be greater than $17.1m, subject to confirmation of apiary profitability in May this year and continued recovery of the grey channel from New Zealand and Australia into China.
While the 2018 honey season started off well, leading it to be fairly upbeat in January, “since that announcement, the weather has not been supportive to honey production and we are now expecting honey crop volumes to be slightly below that of an average year,” said Coulter. However, quality is forecast to be above average and that should partly offset the volume deficit, Comvita said.
“It still too early to be definitive on both honey volumes and quality of the crop at this stage of the harvest as only 20 per cent of the 2017-18 crop has been harvested to date. We will update the market on the harvest once extraction of the honey from the hive and testing is completed in May,” he said.
Comvita said the Ministry for Primary Industries’ new legal definition for manuka honey is a “great leap forward for the industry”.
The manuka honey industry is worth around $180m to New Zealand every year, but there have been concerns about the authenticity of products sold as manuka honey. The honey will now be tested for four chemical markers and one DNA marker before overseas sale.
Comvita noted the regulations are causing “short-term uncertainty” but would be very positive for Comvita’s growth opportunities globally.