CVT
24/09/2014 09:43
FORECAST
REL: 0943 HRS Comvita Limited
FORECAST: CVT: Strategic Update and Earnings Outlook
Comvita's strategic initiative to increase security of Manuka honey supply is
resulting in a significantly improved annual sales and earnings outlook for
the business. Ownership of what is now a very large beekeeping operation is
delivering value. However, it has resulted in significant structural changes
for the business, and the associated financial reporting, further
exacerbating the year-of-two-halves. Comvita will report a lower first half
and a higher second half year net earnings result.
- Sales for the six months ending September 2014 are estimated to be $56
million, up from $43 million in the prior year. Sales for the full year
through to the end of March 2015 are forecast to be in the range of $140 -
$145 million, up from $115 million in the prior year.
- Net profit after tax (NPAT) for the period ending September 2014 is
estimated to be a loss of approximately $4.0 million, compared to a loss of
$0.8 million in the prior year. For the full year ending March 2015, the
company forecasts NPAT of $9 - $10 million, up from $7.6 million in the prior
year.
Strategic initiatives realised
Comvita has recently completed a three year strategic initiative to increase
direct ownership of Manuka honey supply to around 50% of the company's total
needs for this coming season. Additionally in May this year the company
concluded the acquisition of South Island based New Zealand Honey Ltd. That
acquisition incorporated a long term honey supply agreement with NZ Honey
Producers Co-operative. Armed with this additional security of supply,
Comvita has been able to forge ahead with growth plans both in the key Asian
markets and also closer to home in Australia and NZ.
Year-of-two halves further exacerbated
At the annual shareholders meeting in July, the company gave guidance that
the operating profit for the half year is likely to be lower than the prior
year, and that the full year will be higher. This is partly due to our
year-of-two-halves given the imbalance of sales between the northern
hemisphere and southern hemisphere seasons. However, another key contributing
factor is that ownership of a very large beekeeping operation has resulted in
structural changes to the business. The accounting treatment for beekeeping
operations, means that the profit benefit for the wider business, generated
from the cost advantages of ownership, can only be recognised after the honey
harvest is collected in the period January-March 2015. This therefore has a
negative effect on the NPAT result for the first half of the year.
Comvita CEO, Brett Hewlett said, "We thought it was important to communicate
how the changes to the business impact the half year and full year reporting.
The performance of the business is trending in line with internal forecasts
and we expect to be able to report an increase in net earnings of greater
than 20% for the full year. We will keep the market informed if there is any
material change to this outlook."
Profit guidance
NPAT for the period ending September 2014 is estimated to be a reported loss
of approximately $4.0million, compared to a loss of $0.8 million for the same
period in the prior year. This difference has resulted from the accounting
treatment of our beekeeping operations, a negative impact of the non-cash
revaluation of warrants held in Derma Sciences (NASDAQ:DSCI), and the one-off
acquisition costs associated with New Zealand Honey Ltd. These differences
account for $3.4 million of the estimated loss of $4.0 million.
For the full year ending March 2015 the company forecasts NPAT of $9 - $10
million, up from $7.6 million in the prior year. The full year earnings
forecast is sensitive to the outcome of the New Zealand summer honey harvest,
the actual market sales and any further revaluations up or down, of Derma
Sciences warrants held by Comvita.
Comvita's result for the first half of 2015 will be reported on 27th November
2014.
# Ends #
For further information:
Brett Hewlett, Comvita CEO, 021 740 160
Neil Craig, Comvita Chairman, 021 731 509
Julie Chadwick, Comvita Communications Manager, 021 510 693
Background information
About Comvita (www.comvita.com)
Comvita (NZX:CVT) is a global natural health company committed to the
development of innovative products, backed by ongoing investment in
scientific research. We are the world leaders in Manuka (leptospermum) honey
and fresh-picked Olive Leaf Extract, which are at the core of the Comvita
product range.
We have approximately 50% of honey supply under direct ownership or control,
with the balance of supply from long term contractual and partnership
arrangements. Comvita pioneered the development and use of medical grade
Manuka honey and was the first to receive FDA approval (2007). We partner
with US wound care company Derma Sciences, Inc. (NASDAQ:DSCI), the global
licensee for Medihoney specialist wound care products, which are used in
hospitals and medical centres around the world. Comvita's Olive Leaf Extract
is grown, harvested, extracted and bottled at the world's largest specialised
olive leaf grove, with over one million olive trees.
Comvita sells into more than 18 countries through a network of our own
branded retail locations, online (nine country specific e-commerce websites)
and third-party outlets. We have over 450 staff located in New Zealand,
Australia, Hong Kong, Japan, Taiwan, South Korea, United Kingdom and USA.
End CA:00255634 For:CVT Type:FORECAST Time:2014-09-24 09:43:55
