Comvita warns annual earnings to slump on weak honey harvest, slow China sales
By Paul McBeth
Jan. 23 (BusinessDesk) - Comvita shares sank 14 percent after the manuka honey products maker warned annual earnings
will tumble by about two-thirds as the nation's unseasonably wet and windy weather saps the honey harvest and slow sales
via China's informal trading channels.
Te Puke-based Comvita expects after-tax operating earnings of between $5 million and $7 million in the year ending June
30, having previously predicted it would be in line with 2016's earnings of $17.1 million. However, 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 $20 million and $22 million.
The shares dropped $1.06 to $6.77, the lowest they've been since November 2015.
"Unfortunately these wet, cold, and particularly windy conditions have significantly impacted the production of this
season's honey, which in turn has impacted our ability to deliver on our 2017 financial forecast," chairman Neil Craig
said in a statement. "We also indicated for the first four months of the year, we had experienced 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."
In October Comvita warned it was likely to report a first-half loss due to the crackdown by Chinese authorities on grey
market traders, which has also hit other industries that use those distribution channels such infant formula makers.
Comvita chief executive Scott Coulter said outside the grey market into China, the company's sales were strong across
all other markets. He said the honey products maker was keeping a lid on costs, "which enables us to maintain confidence
to deliver on our longer term objectives", and has previously said it laid off 23 staff from head office.
The company expects a honey crop of 380 tonnes in the 2017 year, compared to an average harvest of 974 tonnes.
Coulter said Comvita had been preparing for this type of scenario, buying Manuka honey inventory from third party
suppliers over the past 18 months, which gives it enough supply to meet demand for the next year.
"The very poor honey production this season reinforces the importance of being successful in our diversification and
value add strategies," he said. "This is an active ongoing process about which we expect to release more details over
the next few months."