Comvita confident of earnings boost

Honey product manufacturer and exporter Comvita has been under pressure from short supplies but remains confident it can boost second-half earnings to better last year's $95.9 million revenue.

Yesterday, Comvita posted a first-half to September revenue rise, from $41.7 million a year ago to $45.4 million, but a 7.3% decline in after-tax profit, from $2.57 million to $2.38 million.

Comvita chairman Neil Craig said it was a "solid" result given the quieter first-half and said sales and profits are historically "significantly stronger" in second-half trading.

"We expect this to be the case again this financial year as Asian sales continue to grow strongly," Mr Craig said in a market statement yesterday.

Craigs Investment Partners broker, Peter McIntyre, highlighted an "outstanding" performance of the Asian division, with sales up more than 50% at $20.6 million and after-tax profit up 46%, at $3.3 million.

Comvita was the target for an aggressive, unwanted $71 million takeover from Singaporean food giant Cerebos a year ago, which lapsed in late-December amid an acrimonious 40% gulf in the respective valuations of the company.

Following the announcement yesterday, Comvita shares were up 2c at $3.72, having slipped from a year-high of $4.28 in late-September. The repeatedly rejected Cerebos offer was $2.50.

"The growth of our business year to date in our key Asian markets is especially pleasing and this will be fully reflected over the coming months as we enter the peak season in these northern hemisphere countries," Mr Craig said.

He was confident Comvita would deliver an increase in earnings for the full year, beating last year's sales of $95.9 million.

Mr McIntyre was confident the guidance, to beat last year's after-tax profit, was attainable, so long as Comvita maintained its cost controls and had the expected second-half supply boost of honey.

Mr Craig said the first-half revenue and profit were affected by slowing economies outside non-Asian markets, such as Australia and the UK, but the other factor was the short supply of key ingredient, manuka honey.

"The honey crop from last summer was well below average, due to generally inclement weather during the summer of 2011-12, resulting in a sharp increase in the purchase price for new season honey," he said.

Comvita, which bought in 100% of its stock four years ago, last month added a fourth Wanganui-based bee-keeping operation to its apiary business, which contributes about 33% of total manuka honey requirements.

"An increase in security of supply of this raw material is a key strategic initiative for Comvita,"he said.

There would be benefits from a targeted "priority allocation" of manuka honey sales with a "significant benefit" expected during the second half of year, going into the northern hemisphere winter, Christmas and the Chinese New Year festive seasons, he said.

• Unlike in the first half last year, Comvita will pay a dividend, of 4c per share this year.

 


Comvita

• Core product manuka honey.
• Used in healthcare, personal care, wound care and health foods.
• Sales into more than 18 countries through wholesale and third-party outlets, plus online.
• More than 470 branded retail outlets around Asia, including 400 stores in 40 Chinese cities.
• Offices New Zealand, Australia, Hong Kong, Japan, Taiwan, South Korea and the United Kingdom.


simon.hartley@odt.co.nz

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