Shares in Comvita took a caning on the NZX after the manuka honey maker reported a loss for the first half, continuing on with what has been a string of earnings disappointments.
The company's stock closed $1.03, or 20 per cent, lower at $4.14 after Te Puke based Comvita announced a $2.7 million loss for the first half to December 31 compared with a profit of $3.7m in the corresponding period a year earlier, and signalled that its full-year profit would fall short of the previous year's.
Comvita also said it would not pay an interim dividend, compared with a 4c payout last year.
Oyvinn Rimer, senior research analyst at Harbour Asset Management, said a string of disappointing results had deflated investor sentiment in the stock.
The company said changes to the way it does business with China, a lack of orders from a major existing US customer, and another poor pre-Christmas honey harvest, drove the company into the red over the first half.
Chairman Neil Craig said these issues would impact on the full-year result to June 30 to the extent that it would not exceed the previous year's profit of $8.2m.
Last August, Comvita, said it had turned itself around after suffering two unusually poor harvests in a row.
The company then reported a net profit after tax for the June year $8.2m - towards the bottom end of its own $8-$10m guidance - compared with net profit of $9.8m in 2017.
Shares in the former high flier dropped out of the key NZX50 index last December, which put the shares under downward pressure.
At last year's annual meeting, Comvita said redefining the strategic direction has been a strong focus of the board and management, and that it was confident of both sales and profit growth for the full year.
Rimer said it appeared Comvita were "working hard to put the pieces together but it would seem that consumer demand was not was not what one would have hoped".
Rimer said Comvita's $104 million in net debt as of December 31 was "Ritzy", relative to its EBITDA for the half year of just $1.6m.
Comvita has also built up a large inventory worth $120 million.
"This provides us with secure honey supply of the highest quality which will grow in value while in storage," Comvita said.
As we produce more honey from our own apiaries and generate profit, we expect this net debt to decline.
Comvita said its debt was $95m "with significant bank headroom available".
Rimer said the company's fortunes were likely to improve in the second half.
"It is a good business, so the second half will be have better cashflows because it collects honey in the first half and sells in the second," he said.
Craig said the business had been set up from a revenue and margin point of view to deliver strongly in the balance of the 2019 calendar year and beyond.
"We believe our efforts with respect to price harmonisation between markets and channels and our brand building work in China over the last 12 months will reward us for years to come," he said in a statement to the NZX.
In today's statement, Craig said there had been reduced dependence on the unofficial "daigou" trade channel of Australia and New Zealand into China.
As the manuka honey season draws to a close, Comvita said January to mid-February had shown strong yields from the central and western part of the North Island, which would help counter the poor pre-Christmas crop from Northland and the northern and eastern parts of the North Island.
"We are optimistic that, while the crop is lower than our budget, it is significantly better in terms of quantity and quality than the last two years," the company said.