Comvita annual profit rises 3.3% as honey price squeezes margin, sees more growth in 2015

Comvita [NZX: CVT], which produces health products from manuka honey and olive leaves, lifted annual profit 3.3 percent as the rising cost of honey squeezed margins, and said revenue and earnings would grow in 2015.

Net profit rose to $7.6 million, or 24.37 cents per share, in the 12 months ended March 31 from $7.4 million, or 24.52 cents a year earlier, the Te Puke-based company said in a statement. That's slightly ahead of the $7.5 million profit Comvita signalled earlier this month. Earnings before interest, tax, depreciation and amortisation rose 11 percent to $16.4 million and revenue gained by the same amount to $115.3 million.

"Margins were impacted by the very strong New Zealand dollar and from further sharp rises in the cost of Manuka honey," the company said. "Because of contractual commitments on pricing in the fast growing China market these costs couldn't be recovered within the annual time frame."

Yesterday Comvita announced a $12.3 million acquisition of NZ Honey in cash and scrip to help the manufacturer secure its honey supply. The company acquired two other apiary businesses during the year, and the NZ Honey purchase would meet its target of controlling at least half its supply.

"We are now where we want to be strategically and can place more focus on extending our existing product range and increasing the emphasis on marketing and contribution margins, thereby making full use of our comprehensive infrastructure," Comvita said. "Our outlook for the next fiscal year remains optimistic. We anticipate continued growth in revenue and net earnings."

Comvita's cash and equivalents fell to $2.9 million as at March 31 from $6 million a year earlier, with debt repayments and the purchase of property, plant and equipment accounting for the bulk of the decline. The firm's operational cash inflow rose to $8.5 million from $3 million. Bank debt declined to $28.8 million at the end of the period from $29.4 million a year earlier.

The company is still looking at acquisitions, which "fit our high end Comvita natural product brand" and is looking to spread earnings more evenly through the year. The company typically derives the majority of revenue in the second half of the year.

The board declared a final dividend of 8 cents a share, payable on June 27, taking the total return o 12 cents. Comvita paid 13 cents in 2013.

The shares were unchanged at $3.50 today and have shed 3.6 percent this year. The stock is rated a 'hold' with a target price of $3.64 by one analyst recommendation compiled by Reuters.

(BusinessDesk)