Oceania Natural slashes 2017 forecast as cheap rival honey weighs on Chinese sales

NXT-listed Oceania Natural has slashed its 2017 revenue forecast as deep discounts on rival honey products undermine sales into China.

The Auckland-based company lowered its revenue target to $2.2 million for the year ending March 31 from $5.4 million. Sales into China via distributors are expected to be $605,000, down from a previous forecast of $4 million, while Oceania's direct sales are projected to be $1.6 million, up from $1.4 million. The forecasts make up Oceania's key operating milestones (KOM) used on the NXT market instead of continuous disclosure requirements.

"ONL has not been able to meet distributor price expectations for product in the fouth quarter and has accordingly removed forecast sales to distributors from the restated KOM targets," it said in a statement. "ONL is reluctant to supply product to distributors at the heavily discounted levels requested and this has significantly impacted upon its distributor sales targets."

Oceania's warning comes a day after manuka honey health products maker Comvita slashed earnings guidance after New Zealand's unseasonably wet and windy summer weighed on honey production, reducing inventory, and compounding with a Chinese crackdown on grey market traders, weighing on a variety of exporters relying on those distribution channels, such as infant formula makers.

The NXT-listed company, which sells products derived from manuka honey and noni juice, said direct sales into China began in September last year and will be Oceania's dominant sales channel for 2017.

While sales will be lower than expected, Oceania retained its projection for gross margin to be 40%.

"As ONL does not have material inventories of manuka honey retail product, the gross profit of the forecast product sales mix has not seen any restatement of this key operating milestone," it said.

The NXT-listed shares last traded at $2.16, up from 64 cents when it went through a compliance listing in March last year.

(BusinessDesk)