Comvita profit plummets in turbulent year

Comvita New Zealand's net profit has plunged more than $4.5million as a result of unplanned events in a turbulent financial year.
The after-tax profit for the year ending March 2011 was $503,000 on sales of $82million - down from $5million on sales of $84.9million the previous year.
The global natural health products company, based in Paengaroa, was affected by a complex court case in Britain, the strong NZ dollar, an underperforming distributor in Australia, a surprise regulatory change in China and a mild winter season, as well as a downturn in consumer spending in New Zealand and Australia because of natural disasters (earthquakes and Queensland flooding) and an overhang of the global financial recession.
"These all played a role in making 2010/11 one of the most challenging years that Comvita has confronted for quite some time," said its chairman, Neil Craig.
"Underlying all of this turmoil is a healthy core business in which sales actually grew ... in local currency terms by 8 per cent," he said.
Mr Craig said the improvement was less than budgeted for and not enough to make up for the weakness in the British pound and US dollar - 46 per cent of the total company sales are struck in those currencies.
He said in Britain, Comvita was defending one of its medical woundcare patents and it cost the company time and more money than anticipated.
"We had an adverse ruling by the Patent Court, leave has been granted by the court to appeal the judgment and the hearing will take place later this year," Mr Craig said.
He said the company had significant intellectual property (IP) and patents in the medical honey "space" and needed to protect and preserve its leadership position, particularly because of its investment and commercial relationship with US-based manufacturer, Derma Sciences.
Mr Craig reported that Comvita's investment in Derma was now valued at $13.2million as the American company's share price had increased. Sales of Medihoney products by Derma had nearly doubled in the past 12 months, resulting in revenue for Comvita of $2.3million, and the growth in Medihoney sales was expected to trigger a further payment of US$1million from Derma in the near future.
The Comvita directors declared a fully imputed dividend of 3 cents a share, payable on June 24 for shareholders registered on June 17.
Comvita's operating surplus before tax was $2.48million compared with $7.23million the previous year, and its net borrowings rose from $11.5million to $18.9million as the company built its stock of raw material and finished goods to meet forecast sales.
Mr Craig said that at the gross profit level, margins increased to 56 per cent from 51 per cent in the previous year. "This improvement has been achieved through a combination of cost reductions and gains in operating efficiencies, and a higher proportion of sales of premium-priced products such as manuka honey, fresh olive-leaf extracts and propolis."
During the past financial year, Comvita launched its Omega-3 fish oil range, expanded skincare products, developed a new global website, and established its own office and improved its presence in the key market of Korea.