Sharechat Logo

Comvita shares tumble as it says honey production season was poor overall

Monday 6th May 2019

Text too small?

Comvita shares fell 9.3 percent after it said honey production had been "poor overall" for the third season in a row and it now expects a net loss of around $6 million for the year. 

The shares recently traded at $3.80 and are down 14 percent so far this year. In late May 2016, the stock was trading at $13.

"Even though production per hive for Comvita was higher than the previous year, it was a poor production season overall. This has been put down to poor weather patterns but we also believe that there is an impact in most regions, but notably Northland and East Coast, of over-crowding of Manuka sites with hives by competing beekeepers," it said. 

While honey production post-Christmas met the budgeted expectations on a per hive basis, honey grades were lower than expected and the MPI Manuka honey definition changes led to a large drop in value of multi-flora Manuka "by-catch".

Manuka honey has a significant premium over other honey and in December 2017, the Ministry for Primary Industries finalised a scientific definition that can be used to authenticate whether or not a particular honey is New Zealand manuka honey.

All honey labelled as manuka for export must be tested by an MPI-recognised laboratory to make sure it meets the new manuka honey definition. Among other things, it identifies it as either monofloral or multifloral. 

Comvita said the poor honey production season was  "extremely disappointing" in light of the fact the company has been moving its apiary business to a more variable cost model. "Obviously we have much work to do," it said.

It will look to change the direction of the business unit before the next season.

"This will involve a review of our apiary business operations and under-performing assets, withdrawing from sites that have become non-viable due to overcrowding, and moving these hives to where there are large tracts of Manuka, including our own plantations, which will produce material quantities of honey over the next two to three years," it said. 

Comvita noted it now has greater control over sales channels and in-market pricing. With the acquisition of 100 percent of the China joint venture and by securing a direct trading relationship with the last of the major cross border e-commerce platforms into China, "we are now achieving consistent and growing monthly revenue at improved margins," it said.

These relationships reduce its dependence on the so-called Daigou channels, essentially an army of informal travelling shopping agents who buy products in Australasia for sale in China.

However, Comvita said benefits won't be obvious until the 2019-2020 year, reiterating that it underestimated how difficult in time and resource commitment it would be to get pricing right and build direct contractual relationships with all the major e-commerce channels into China.

In February it reported a first half net loss of $2.7 million as the planned shift to more formal sales channels was taking longer than expected. 


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar bounces off four-year low; seen weaker
Vector urges regulatory change in low-interest-rate environment
Vector urges regulatory change in low-interest-rate environment
Govt moves against surprise Supreme Court 'black hole' tax ruling
Qantas CFO Race Strauss to join A2 Milk as CFO
Climate Committee seeks data, evidence for future carbon budgets
Spark's wobbly world cup start raises stakes for live-streaming - analysts
An algorithm dunnit: anatomy of Spark's mid-match surrender
Stanley-Tallwood liquidator cuts deal over KiwiBuild development
Stanley-Tallwood liquidator cuts deal over KiwiBuild development

IRG See IRG research reports