Oceania Natural lifts annual profit but misses guidance

Oceania Natural [NXT: ONL], the food supplements maker which listed on the NXT at the end of March, lifted annual profit as revenue more than doubled, although it missed its earnings guidance.

Net profit rose to $182,584 in the year ended March 31, from $1154 a year earlier, while revenue more than doubled to $3.4 million, the Auckland-based company said in a statement.

The company produces food supplements derived from manuka honey and noni fruit juice. The bulk of its revenue comes from China, where it generated $2.8 million of sales in the latest year, earning $704,006 after costs. In the New Zealand segment, revenue was $555,036 while, after costs, the segment delivered a loss of $450,298.

The majority of its sales were generated in the second half, the company said, a sales cycle it believes will continue as Christmas, Gregorian New Year, Chinese New Year and Valentine's Day are popular in China, its key market.

"Our marketing strategy for the next 12 months is focused upon the Chinese market where strong growth opportunities exist across a number of sales channels," chairman Walker Zhong said. "The second half of the financial year is traditionally the busiest sales period, and a good portion of the first six months of 2017 will be focused on putting the systems and people in place that will allow for us to meet our (2017) sales target of $5.4 million."

Oceania Natural's direct sales channels delivered 20% of its revenue, or $655,000, in 2016, and the company said it is looking to expand those channels, having set up shops on popular trading platforms WeChat, Taobao and Alibaba's TMall. When Oceania Natural listed, it predicted direct sales would increase to 26% of revenue by 2017. The majority of the company's revenue was generated through its three regional distributors in China.

The company missed its listing forecast for a normalised net profit of $700,000 to $900,000 because of "an unanticipated and incorrect forecast of costs adversely impacting upon our profit."

At the start of May, the company downgraded its forecast to a normalised net profit of $550,000 to $600,000. It put this down to Oceania Natural incurring "higher than expected compliance costs [in particular, consulting costs] for maintaining its listing on the NXT market" and the company not being able to exclude the costs entirely on a normalised basis, as it had previously thought, because it will incur "a larger than previously anticipated portion of these costs on an ongoing basis." It spent $443,278 on professional and consulting fees in 2016.

When downgrading its guidance, the company said the final result against its new forecast would be advised when it reported its annual results. Oceania Natural did not provide a normalised net profit figure in its annual results.

The shares last traded at $2.45 and have gained 125% this year.

(BusinessDesk)