Comvita CEO Scott Coulter to step down, review of business launched

Outgoing Comvita CEO Scott Couilter. Photo / NZ Herald.

Manuka honey maker Comvita said its chief executive Scott Coulter would step down and that the company would undertake a strategic review of its underperforming businesses and its balance sheet.

Comvita has said it expects to report a $6 million loss for the year to June 30.

The company's share price has struggled in recent times as it faced its third bad season in a row and poor production overall but rallied by 22c, or 7 per cent, on the back of today's announcement to $3.33.

In a statement, Comvita said it would form a sub-committee to examine the possibility of a more formal separation between the "brand" and "supply" components of the business.

External advisers will be retained as required to ensure minimal impact on the day-to-day operations of Comvita.

Comvita's shares have lost almost half their value over the past 12 months, raising questions about the company's capital structure.

The company said that throughout Coulter's 16-year tenure, including four years as CEO, he had played an integral role in transitioning the company from a small exporter with sales of $20 million to a company with annual global sales of over $200m.

Coulter had been instrumental in the establishment of its business in China and he will remain involved beyond his September 30 departure date in a governance capacity.

The board hopes to appoint a new CEO before the year's end.

Chairman Neil Craig said Coulter's commitment to Comvita since joining the company in 2003 had been "outstanding".

Craig said Coulter had chosen to step down following the successful completion of the acquisition of 100 per cent of the Comvita business in China.

Coulter said while 2019 as a whole has been a very tough year for shareholders and staff at Comvita, "we have moved the company forward strategically and are finishing the year positively this quarter".

The board has established a special purpose sub-committee to be led by Brett Hewlett, a director and former chief executive acting in a temporary capacity as executive director.

The sub-committee is charged with undertaking a review of the underperforming assets of the business, as well as structural, balance sheet, leadership and organisation considerations.

External advisers will be retained as required to ensure minimal impact on the day-to-day operations of Comvita.

Comvita said it was targeting the annual meeting on October 17, 2019, as the date to announce details of the business strategic review, and if required, to seek any necessary approvals from shareholders to proceed with any recommended structural changes.

In the interim, it was "business as usual".

Comvita's share price slumped when it reported a first-half loss of $2.7m in March.

The stock rode the crest of a wave in 2014 and 2015, buoyed up by enthusiasm for manuka honey and strong demand for it in China, through the unofficial grey market, or "daigou" trade.

It peaked at more than $12 in 2016, valuing the stock at more than $580 million, but quickly fell when it hit regulatory problems in the daigou markets the following year.

At the time, the market was less than impressed with the company's move to cancel its interim dividend.

Revelations about the company's levels of honey inventory, relative to its debt, were also badly received.

Craig told the Herald last month that Comvita could navigate through a third consecutive poor honey season without raising capital.

"Raising capital is an option for us, but it's not necessary," Craig told the Herald when asked about the pressure building on Comvita's balance sheet amid high debt and falling earnings.

"We have significant bank headroom ... we said that at the half-year announcement because we know it's a perceived issue. But it's not an issue for the board and it's not an issue for the company and it's certainly not an issue for the bank," he said then.