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Oceania Natural on track to lift annual sales 58% as it tests new markets

Monday 31st October 2016

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Oceania Natural, the food supplements maker which listed on the NXT at the end of March, said it was on track to lift revenue by 58 percent this year as it tests new markets outside of China.

Its full-year revenue target is $5.4 million, up from $3.4 million last year. Sales were about $1 million in the second quarter, mainly from its key market of China, from $51,000 in the first quarter. Its gross margin narrowed to 43 percent from 56 percent and was on track to slip to 40 percent for the full year.

"The quarter was marked by laying further groundwork in China, which includes preparing for growth to accommodate larger sales volume through channels now controlled by the business," Oceania (ONL) said in its business update. "These channels to market are aligned with new Chinese regulations that favour businesses building physical establishments in China."

Explaining the smaller gross margin, ONL said its current pricing expectations "have been lowered given the current discounting of honey products in China by ONL’s competitors. This will adversely impact gross margins if retail pricing remains at current levels."

Part of ONL's strategy is to establish a presence in China, which it has done with ONL Wuxi, with the opening in Wuxi City of what is going to be the company's headquarters for Asia in September. It raised about $3.5 million in July from investors in a joint venture to establish a Hong Kong-based subsidiary.

In its update, Oceania said it is negotiating an agreement with Chinese insurer Property and Casualty Co which will control and produce the labelling on ONL products sold in China that will include a protected QR code that will make it harder for its manuka honey products to be faked.

The bulk of Oceania's revenue of food supplements derived from manuka honey and noni fruit juice come via its direct sales, amounting to $880,000 in the latest quarter, including $545,000 from ONL Wuxi. Sales through distributors were $127,000.

In the quarter, the company sent trial shipments to Taiwan and Japan and expects to make its first shipment to South Korea this month.

The shares last traded unchanged at $2.65 and have climbed 143 percent in the past 12 months.

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