China drives Comvita's positive growth

Bay of Plenty honey and health products company Comvita's results came in right on guidance this week with a net profit after tax of $18.5 million on sales of $231m. Chinese consumers played a major role in the company's earnings.

The result compares to the unaudited result of a NPAT (net profit after tax) of $17.2m on sales of $202m reported to the market in the 12 months to March. The company this year shifted to a June year balance date in response to the seasonal challenges presented by the honey business. Most of the harvest is carried out from March to May, making it difficult to estimate volumes.

"It made a lot of sense for the business we are in to shift our financial year-end date," said chief executive Scott Coulter.

During the past 15 months, Comvita reported sales of $130m in Australia and New Zealand, driven by re-exports to China, said Mr Coulter. "Australia is now our largest market with sales of $74 million over the last 15 months and has contributed significantly to our result."

China sales grew strongly and in particular sales through the various e-commerce platforms and the 400 branded retail outlets operated by Comvita's dedicated Chinese distribution partner. Comvita supplies all of the major e-commerce platforms in China and is now the number one honey brand on Chinese consumer-to-consumer site Ta Bao, based on data which includes local brands. Comvita is the number two brand on T-Mall, the leading business-to-consumer site.

"China is the largest honey producer in the world, so this is a very positive position for our brand," said Mr Coulter. "We estimate more than 60 per cent of our total sales globally to end up in the hands of a Chinese consumer."

Chairman Neil Craig said Comvita continued to be focused on growing earnings per share from the solid business base that had been established during the past 10 years.

EBITDA (earnings before interest, taxes, depreciation and Amortisation) margin for the 15-month period was 17.1 per cent and return on capital employed was 14.3 per cent, which represented good performance growth compared to the prior year's figures of 15 per cent and 12 per cent respectively, he said.

Mr Coulter the two key building blocks of Comvita's strategy were security of supply and new product innovation.

"Over the past two years, we have used our balance sheet strength to invest aggressively in manuka UMF honey supply, and our raw honey inventory is the strongest it has been at this time of year," said Mr Coulter. "For the first time in several years, we can now look to open new markets for high-value manuka honey."