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Comvita first-half earnings fall 7.4% after manuka honey shortage

Comvita, which sells products based on the health and medical benefits of honey, posted a 7.4% drop in first-half profit, saying a shortage of Manuka honey after an inclement 2012 summer constrained sales growth and margins.

Profit fell to $2.39 million, or 7.95 cents a share, in the six months ended September 30, from $2.58 million, or 8.92 cents a year earlier, the Te Puke-based company says in a statement. Sales climbed to $45.4 million from $41.8 million.

The year-on-year result would have been a gain in profit but the year-earlier numbers were restated for what Comvita says were errors in the accounting treatment of operational costs in its apiary business. The amendments do not change the full-year result of $8.2 million, a figure the company expects to better in the current year.

"Comvita historically has a year of two halves, with the second-half year sales and profits significantly stronger than the first half," chairman Neil Craig says. "We expect this to be the case again this financial year as Asian sales continue to grow strongly."

Trading activity in China, South Korea and Hong Kong, where Comvita mainly operates a direct-to-consumer retail business, "has been especially strong", the company says. "Still, in non-Asian markets such as Australia and the UK the trading environment has been relatively tough.

"The other factor that has been a constraint on sales growth and margins during this first half year is the short supply of our key ingredient, manuka honey," it says.

"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."

To limit the impact of price fluctuations, the company is seeking direct ownership of more of its honey supplies. It now has four apiaries in the North Island, which supply about a third of its honey requirements.

The company will pay a first-half dividend of 4 cents a share. It did not pay a dividend in the first half of last year. Its shares last traded at $3.70 and have gained 50% this year.

This time last year it rejected a $2.50 a share takeover offer from Cerebos New Zealand, a unit of Singapore-listed Cerebos Pacific.

"We remain confident that both top line and bottom line growth can be achieved for this fiscal year and beyond," chief executive Brett Hewlett says.

(BusinessDesk)

Comments and questions
2

Failed to deliver again. Comvita has been a serial financial underperformer, although they always find new excuses for underperforming.

Time for changes of the board and others.

The company has substantially grown sales, earnings and dividends over the past few years, to say nothing of the increase in share price, which is now 50% higher than the $2.50 offered by Cerebos.

An unusual definition of "serial financial underperformer."