KEY POINTS:
Comvita describes its big net loss as a "blip" in an otherwise growing trend.
Yesterday the Manuka honey manufacturing and marketing company reported a net loss for the 15-month period ended March 31, which was almost three times greater than projected.
The loss of $3.37 million includes $1.36 million from operations and $2 million for a non-cash payment relating to a legal dispute between Comvita and WaikatoLink involving the Fair Trading Act last month. Prior to the dispute, operating losses were expected to be between $1.2 and $1.8 million for the same period.
Comvita chief executive Brett Hewlett said the disagreement could not be resolved in mediation last month so will have to go through the courts. But it would not affect Comvita's future results, he said.
Comvita's total revenue for the 15-month period was $65.2 million and for the year ended March 31 group sales, at $56.5 million, were up 41 per cent on the previous year.
The company's margins have been restricted by New Zealand's volatile currency and the rising cost of raw material this year, Hewlett said.
"There has been upward pressure on raw material prices for Manuka honey driven by overseas demand for the product. To some extent we are the victims of our own success: the promotion and branding that we have put around Manuka is now coming back to bite us."
But three recent acquisitions and the purchase of medical honey supplier KiwiBee will help Comvita work towards revenue forecasts of $65 to $70 million for the next year and net profit after tax of $2 to $2.5 million.
Hewlett said the tight supply of Manuka honey means the company is just keeping up with its current growth - around 25 per cent.
"To maintain that growth is about as far as we can go."
The acquisition of Olive Products Australia will reduce Comvita's dependence on a single source of raw supply and is a scalable business, Hewlett said: "We can't see big opportunities and big markets [in Manuka honey], whereas in olive we can."
He said Comvita was also working to reduce inventory, improve its use of capital and tighten cost.
In September Comvita's Cambridge operation will close while the Paengaroa manufacturing plant expands.
Hewlett says while it is disappointing to announce a loss, the company's longer term growth plans are "very much on track. This is very much a blip, rather than a trend," he said.
Comvita shares were unchanged yesterday at $2.00.
