Comvita upgrades annual profit guidance; shares jump to a record

See also: Comvita’s grip on supply chain key to Asian success

UPDATED: Comvita [NZX: CVT], the manuka honey products maker, raised its annual profit guidance after first-half revenue jumped 52 percent, driven by sales in New Zealand, Asia and Australia. Its shares soared to a record high.

The Te Puke-based company turned to a profit of $3.04 million in the six months ended Sept. 30, from a loss of $3.3 million a year earlier, it said in a statement. Sales gained to $91.1 million from $59.7 million.

"At our annual meeting on 23 July 2015, we advised the market that our earnings would be at least 35 percent in excess of the full year ended 31 March 2015," said chairman Neil Craig. "With the strong result for the first six months we now expect our operating profit after tax to be in the range of $15-17 million, up 46 percent to 65 percent for the 12 months to 31 March 2016, compared to the prior year."

On an investor conference call today, Comvita said it was focused on value-added products with greater margins such as omega-3 fish oils, olive leaf and propolis.

Chief executive Scott Coulter, who took over the role in October, having been chief operating officer, said the company was targeting the "top 7 percent of the market" to reach its five-year target for annual sales of $400 million.

"We are targeting the premium end of the market," he said. "The top 7 percent of the market is around 20 million people - we cover about one-and-a-half-to-two million people now. Over the next five years, we will target that 7 percent."

Comvita has calculated that target market by looking at total users of vitamin and mineral supplements, and segmenting those users into groups depending on frequency of purchase, brand loyalty, importance given to scientific backing and likelihood of recommending to a friend.

Coulter said New Zealand, China and Australia were the company's "cash cows", and it is looking for growth in the US and Japan.

The shares jumped 7.2 percent to a record $7.45. Before today, the stock had gained 88 percent so far this year.

Comvita has benefited from a surge in demand for manuka honey products, especially in Asia, where they are sought for their purported health benefits. First-half sales in Asia grew 53 percent to $30.3 million from the year earlier period. Australian sales increased 72 percent to $28.7 million.

The company is also expanding its range of profits, having launched olive leaf based preparations and in September buying a 19.9 percent stake in SeaDragon, which gave the health products maker a secure supply of fish oil to expand its health supplement range. In May 2014, Comvita bought the Timaru-based honey producer New Zealand Honey for $12.3 million, as part of a strategy to secure supplies of the raw material.

Comvita will pay a 6 cents a share dividend on Nov. 27, up from a 4 cent dividend in the year earlier period.

(BusinessDesk)