Poorer sales hit Comvita's earnings

Comvita's sales in Hong Kong have been impacted by recent food security issues.

Comvita, which produces health products from manuka honey, said it posted a first-half loss on increased price competition in Australia and the UK and concern over New Zealand food safety in Hong Kong, however it expects to make up the difference in the second half to post a higher annual profit.

The company reported a loss of about $1 million in the six months ended September 30, from a profit of $2.4 million in the year-earlier period, Te Puke-based Comvita said in a statement. Sales slipped to $43.3 million from $45.4 million during the same period, it said. The interim figures will be confirmed November 28.

Comvita said it expects to garner more than 60 per cent of total sales in the second half of the financial year, up from 56 per cent last year, and marketing costs will also be lower in the second half, helping boost full-year profit above last year's $7.4 million. Comvita shares rose 1.3 per cent to $4.

"Trading conditions in most markets have been challenging throughout the six month period, particularly in wholesale markets such as Australia and the UK where we have limited sales direct to the consumer, where price competition remains strong," chief executive Brett Hewlett said. "Sales in Hong Kong, our second-largest market by sales value, have been impacted over August and September as the recent food security issues have heightened consumers' scrutiny of all imported food products from New Zealand."

Hewlett said the company remains confident sales in its key Asian market of Hong Kong will meet its budget in the second half as it embarks on an information marketing campaign aimed at reassuring customers of its quality and integrity ahead of the Asian high season.

Sales have been stimulated in the UK in recent weeks, with new listings in Tesco's Costco and Boots, as customers turn to Comvita after publicity about misleading labelling by rivals, Hewlett said.

Meanwhile, high honey costs, driven by a weather-related supply shortage, are expected to ease throughout the year as supply and demand are better matched, he said.

Comvita said it has acquired an additional Manuka honey apiary business in Poverty Bay, meaning about a third of the company's honey is now coming from its own apiaries, enabling it to better manage costs.