Comvita shares jumped 10 per cent after the natural health products company beat full year guidance and said it expects to return to an operating profit in the current financial year.
The Te Puke-based company, which uses Manuka honey, reported a net profit of $9.8m in the year to June 30 versus $18.5m in the audited accounts for the 15 months to June 2016 and versus guidance of $9m. The after-tax operating loss was $5.5m versus a profit of $17.1m in the audited accounts for the 15 months, versus its forecast of an after-tax operating loss of $7m.
The better-than-forecast result was due to a stronger-than-expected second half as the so-called "grey channel" showed signs of recovery. The channel is made up of small-scale exporters who buy the product and post it to China. However, moves by the Chinese government to crack down on grey or "diagou" sales has crimped profits for companies like Comvita.
Those sales, however, showed signs of life in the second half of the year. Australasian grey channel sales reached $25m the second half, double what they were in the first half and that momentum has extended into the new year, it said. "We have a real rebound in our grey channel sales," said chief executive Scott Coulter, although he noted it is not a full recovery. "Its a partial recovery of the grey channel," he said. That, coupled with significant permanent cost savings and other initiatives "provides us with a good deal of confidence as we head into 2018," he said.
Comvita is forecasting after-tax operating earnings to be at least equal to the after-tax operating earning of $17.1m achieved in the 2016 financial year - over the comparable 12-month period, said Coulter. He underscored, however, the result is depending on the honey harvest improving.