Honey shortage hits Comvita bottom line
Natural health and beauty products company Comvita has cut its full-year earnings guidance after a shortage of manuka honey pushed up prices for the key ingredient.
Comvita has also hit difficult trading conditions in Britain and Australia. It now forecasts net profit for the year ending March 31 to be about $7 million - down from $8.2m last financial year.
Chairman Neil Craig said at its half-year result in November that Comvita remained confident of delivering an increase in earnings for the full year.
The company said today sales were expected to increase 4 per cent to about $100m. Its shares slipped 4.6 per cent this morning on the news, to $3.72.
Comvita said two successive years of poor honey harvest due to bad weather had resulted in sharp wholesale price increases of up to 50 per cent.
"The full extent of the increase in purchase price only became apparent during the latter part of the year," it said.
But relief was in sight, with the honey harvest from this season shaping up to be above average.
"At the same time, we have increased the capacity of our recently purchased beekeeping operations throughout the North Island to now produce approximately one-third of our own honey needs, enabling us to better manage costs of this key ingredient," the company said.
Trading in Britain and across the Tasman had been difficult, with the downturn in consumer confidence and the economies of those markets making retail there increasingly competitive.
"While we have been successful in pushing through price rises that better-reflect the raw material cost increases, this has resulted in a loss of sales with the more price-sensitive trade customers," it said.
In contrast, sales in its key Asian markets and in New Zealand had been strong, with price rises more readily accepted and good growth in its non-honey product range.
Comvita said it regretted the profit downgrade but remained confident its causes were isolated, and mitigation measures were in place.
"Most importantly, the current strategy still holds with the business on a path of strong earnings growth beyond this financial year," it said.
Comvita will release its full-year result in late May.