Comvita widens 1H loss; announces plans to raise $24.4M   12 Nov 2014

Comvita widens 1H loss; announces plans to raise $24.4M in rights offer

By Suze Metherell

Nov. 12 (BusinessDesk) - Comvita, which makes health products derived from manuka honey, widened its first-half loss and detailed plans to raise $24.4 million from shareholders.

Its net loss after tax widened to $3.3 million in the six months ended Sept. 30, from a loss of $800,000 a year earlier, the Te Puke-based company said in a statement. The result is better than the $4 million loss the company forecast in September. Sales rose 38 percent to $59.7 million, beating its September guidance of $56 million.

The loss stems from the accounting treatment of the beekeeping operations, a revaluation of its warrants in Nasdaq-listed Derma Sciences, and acquisition costs from New Zealand Honey. In July, Comvita acquired Timaru-based New Zealand Honey Producers Cooperative for $12.3 million, as part of its strategy of apiary acquisitions to shore up its own supply of raw honey. Earlier this week it announced a joint venture, Kaimanawa Honey, with East Taupo Lands Trust to harvest manuka honey from 3,000 hives on Ngati Tuwharetoa trust's land holdings.

"Comvita has completed a three-year strategic initiative to increase direct ownership of manuka honey supply, including the acquisition of New Zealand Honey," said chief executive Brett Hewlett. "The additional security of supply has enabled Comvita to continue with growth plans in their key Asian markets and in Australia and New Zealand."

The listed-honey business announced a 1 for 5 renounceable rights issue at $3.55 apiece to raise up to $24.4 million to reduce bank debt, provide working capital for honey inventory and to fund further acquisitions. Earlier acquisitions had largely been funded from operating cash flows, long and short-term borrowings and its strategic investment made by Derma Sciences of $8.9 million in September last year, the company said.

Shares of Comvita fell 5.3 percent to a three-week low of $3.94, making them the worst performer on the NZX All Index today. The stock has gained 15 percent since the start of the year.

Comvita gave firmer annual guidance which was in the middle of its September guidance, expecting profit to rise 25 percent to $9.5 million on a 24 percent increase in sales to $142.5 million.The honey maker's profit largely comes through in the second half of the year, due to uneven sales between the northern and southern hemispheres, and after the honey harvest is collected between January and May next year, which will generate revenue from the beekeeping operations.

"The business is a 40 percent revenue first-half, 60 percent second-half split," chairman Neil Craig told a teleconference. "It's a quirk of this business we can't eliminate, but we'd like to mitigate it."

That would include changing the product mix to products which sell all year round, and building its olive leaf products offerings, Craig said.

(BusinessDesk)

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