23 Aug 2019

Comvita reports profits hit from Chinese market restrictions, poor honey harvests

12:25 pm on 23 August 2019

Honey producer Comvita has confirmed a full year net loss of $27.7m with China market access restrictions and tougher regulations locally affecting the company's sales.

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Photo: 123rf

It followed the company's $8.2m net profit the previous year, although the bottom line result included $20.1m worth of asset writedowns.

Comvita's operating loss was $7.6m compared to a $9.3 million dollar profit in 2018.

Chairman Neil Craig said it was an extremely disappointing end to the year, with events outside the company's control having a negative effect.

"Sales volume and margin have been directly impacted by the changes to market access rules imposed by the Chinese government on daigou (behalf of) resellers, at the same time as New Zealand's Ministry for Primary Industries imposed tighter specifications on the export of branded Mānuka honey."

The company had earlier indicated it would be heading for a loss and noted that its apiary business, Kiwi Bee, had another poor season which would have a $6m impact on the company's profit.

Revenue dipped slightly from $178m in 2018 to $171m this past year.

In June, Comvita set up a review of underperforming parts of the business, led by executive director Brett Hewlett.

"Changes have already started at the company. Early in the process we looked to draw out any skeletons from the balance sheet cupboard and deal quickly to impediments to improving performance in FY20," Mr Hewlett said.

He said because of the recent poor honey harvests, changes to the regulatory environment, and the shadow of a languishing share price that undervalues some of the company's assets the board had made the decision the time was right to clean the balance sheet and impair the value of some of those assets.

"This will also ensure that we are not unnecessarily hindered as we strive to returning to net positive earnings growth."

The company said it would restore sales momentum and earnings this financial year by pooling its global resources, while continuing to carry out its strategic review.

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