Bay of Plenty honey producer Comvita reports loss

Neil Craig, founder of Craigs Investment Partners. Photo/file

Comvita has announced a net loss after tax of $7.1 million.

For the six months ending December 31, 2016 sales were $57.7m.

The result is down on the reported net profit after tax of $3m on sales of $91.1m for the six month period to 30 September 2015.

At an operating level, adjusting for changes in fair value of derivatives, the net loss after tax was $4.4m, the company reported to the NZX today. The difference between the reported net profit and the operating net profit was attributed to the downwards revaluation of Comvita's options in SeaDragon by $2.8m.

Comvita chairman Neil Craig said that, as signalled last month, informal channel sales to China through Asian resellers in Australia and New Zealand were down on expectations.

Channel sales are when a product is sold through a distributor rather than direct from the company.

"The poor interim result is almost entirely a result of the drop in sales in these two markets," he said.

"While this result is very disappointing, we are very pleased with the mitigating actions taken by the management team, including cost reduction initiatives, with a focus on productivity and ongoing innovation and product development. The board believes the company is still well-placed to meet its long-term strategic objectives."

Chief executive Scott Coulter said the business operating conditions in Comvita's two biggest markets, Australia and New Zealand, had been extremely tough over the first six months and accounted for most of the shortfall in revenue for the period.

"We are working through a painful period of channel rebalancing from informal to more formal paths to China. This adjustment period may continue for a few more months and the informal channel business in Australasia remains the largest risk to our short term projections."

Mr Coulter said the company's China Joint Venture was on track and expected to start from 1 July 2017.

"This will improve both our profitability from China-based sales and our visibility into this market. Our strategic partnership with China Resources is progressing well and we believe this relationship will enable our brand to expand more broadly into Chinese based distribution of high quality, premium, healthy food products outside our traditional bee-products base."

The honey season was likely to be significantly impacted by prolonged and unfavourable weather conditions, he said, noting the exceptionally poor honey harvest across the country.

"We will not have full visibility on our 2017 honey harvest until April/May 2017."

Comvita Financial results - six months to 31 December 2016

* Sales: 2016 $57.7 million (2015 $91.1 million)

* Net profit after tax: 2016 (-$7.1 million) ( 2015 $3.0 million)

* Interim dividend: two cents per share, payable on 21 March 2017