Comvita lifts full year profit 28% to record as Asian tourists help drive sales growth

Comvita [NZX: CVT], the Te Puke-based maker of health products based on manuka honey, beat its guidance with a 28% gain in annual profit and said purchases by Asian tourists to New Zealand helped drive sales.

Profit rose to a record $10.2 million in the year ended March 31, up from $8 million a year earlier, and exceeding the $9.5 million it flagged in April. Sales rose 32% to $152.7 million, the company said in a statement. The board declared a dividend of 9 cents a share, taking total payments for the year to 13c, up from 12c a year earlier. 

Almost a third of Comvita sales come from Asian market, including 400 stores in the company's core market of China. In the year to April, Chinese tourism to New Zealand rose to a record, driving sales of Comvita honey-based products, which are sold in tourist shops and are popular gifts. 

"That helps us a lot because we have such a loyal consumer base in mainland China and Hong Kong and where Chinese nationals tend to live," chief executive Brett Hewlett told BusinessDesk. "When they do come here, they've already got this strong association with the Comvita brand, which they see as a luxury, premium product. It's the sort of thing they must buy when they're here and take back as a gift. That certainly has a big impact."

Sales in New Zealand jumped 92% to $46.5 million, driven by tourism demand, Mr Hewlett said. Australian sales increased 39% to $40.1 million. Sales in Asia slipped 0.4% to $46.9 million, while its European sales rose 40% to $9.5 million. 

"Our focus is on that greater China market, so mainland China, Hong Kong, Taiwan and Macau, and then Chinese nationals – the diaspora of course is global, so you've got a network then, which spreads into a lot of other markets," Hewlett said.

Comvita said internet sales rose 55% in the year. The company has seven country specific e-commerce stores. 

"You can't take on the world – it just becomes too big and too expensive and a lot of the companies that make that mistake become too thinly spread," Mr Hewlett said. "We were probably guilty of that in the past, of going into a lot of different markets and our focus has been to consolidate and aggregate and make sure we can actually take the current markets we are in and just make them perform much, much better for us."

Comvita raised some $24 million last year in a rights issue to repay debt, fund its honey inventory and make further acquisitions after a three-year effort to increase direct ownership of manuka honey supply, including the purchase of Timaru-based NZ Honey Producers Cooperative for $12.3 million last July. It also has a joint venture, Kaimanawa Honey, with East Taupo Lands Trust to harvest manuka honey from 3000 hives on Ngati Tūwharetoa trust land holdings. The company now has about 50% of its honey supply under direct control, with the balance of supply from long-term contractual and partnership arrangements.

At balance date the company had $200 million in assets, up from $149 million a year earlier, and had nearly double its raw material inventory to $28 million, from $15 million a year earlier. 

The company's strong balance sheet meant it was in a position to consider further acquisitions, said chairman Neil Craig. "Any acquisitions will need to fit within both our existing investment criteria and product platforms and be earnings accretive in the short term.” 

Comvita also used $1.7 million of the capital raised to lift its shareholding in Nasdaq-listed Derma Sciences to 4%, saying it helped secure access to the "global medical honey wound-care market.”

Comvita shares last traded at $4.15 and have gained 12% since the start of the year. 

(BusinessDesk)