Comvita - CVT

[william67]

Comvita's brand power is weak in North America. Powerful brand like Coca-Cola is not going to lose one big customer.
Comvita is one powerful brand in China, but the purchasing power of the middle class in china is reduced sharply by property value declined and China stock market reached dangerous low.
Another serious impact to retail comes from internet celebrities livestreaming.
CVT share price manifests it is difficut time. The mangement should change mindset, increase competitiveness, spend carefully.

[winner69]

Comvita's brand power is weak in North America. Powerful brand like Coca-Cola is not going to lose one big customer.
Comvita is one powerful brand in China, but the buy power of the middle class in china is reduced sharply by property value declined and China stock market reached dangerous low.
Another serious impact to retail comes from internet celebrities livestreaming.
CVT share price manifests it is difficut time. The mangement should change mindset, increase competitiveness, spend carefully.

Those super duper flagship show rooms they built should be helping sales …….won a design award they did

[william67]

Three years passed, they should objectively evaluate the Comvita Wellness Lab. Is it a good idea or just a bleeding cash Lab?

[nztx]

Support at around $1.80.



only just -- close 1.81 today

[winner69]

Half year loss $3.2m

But no worries …good headline

Challenging interim result, margins and market share robust

[Sideshow Bob]

https://www.nzx.com/announcements/426525

Comvita Limited (NZX:CVT) today announced its interim results for the half year ending 31st December 2023 (H1 FY24), consistent with the recent update given to the market on 1st February 2024. Comvita also gives more detail on its FY24 forecast and reaffirms its outlook to FY25.

H1 FY24 results were impacted by weaker consumer sentiment in mainland China and, to a lesser degree, in North America, where the results were also affected by the loss of some distribution with one customer. However, Comvita’s market positioning and margins remain strong, as the market leader in five out of six of its key markets, and gross margin at 60%, remains in line with Comvita’s FY25 strategic plan.

While China sales are still below the prior year (as reflected in our recently updated FY24 guidance), there are some signs of near-term improvement, with a solid uplift in Q2 vs Q1 and, pleasingly, this has continued into January. Meanwhile, newly signed distribution agreements in North America in the second half will partially offset the loss of distribution noted above.

Looking forward, management remains focused on delivering the FY25 strategic plan first shared in 2020 once trading begins to normalise. This plan has delivered three and a half years of consistent top and bottom-line growth up until FY23, in line with market guidance. At this point, Comvita expects to see momentum return and when combined with strong market share, positions the company well for growth.


Summary

- H1 FY24 revenue $103M, down 7.8% vs prior corresponding period (PCP)
- H1 FY24 EBITDA (excluding ERP costs) $9.5M, down 32% vs PCP driven by weakness in China and North America, and negative (predominantly non-cash) FX adjustments in December 2023
- Net debt finished at $86M in line with its updated guidance, +$22M vs PCP due to investment in HoneyWorld™, Apiter and elevated inventory levels
- FY24 revenue is forecasted to be $225M to $235M
- FY24 EBITDA (excluding ERP costs) is forecasted to be $30M to $35M
- Outlook driven by reduced consumer demand, most notably in Comvita’s largest market, China, and a moderation in North American demand coupled with a distribution change
- Gross margin remained at 60%. Market share is stable or growing in key markets
- Impact on FY25 strategic plan: Comvita is focussed on returning to consistent growth once trading conditions normalise. Management remains committed to its FY25 strategic plan to deliver EBITDA of c$50M, subject to the timing of a more stable trading environment
- Dividend: Directors declared a fully imputed interim dividend of 1 cps

H1 FY24 results

Comvita’s revenue was $103M, a reduction of $8.8M vs PCP, with recent acquisition HoneyWorld™ contributing $6.8M in revenue. Thus, on a like for like basis, revenue excluding HoneyWorld™ fell by $14M (-12%) vs PCP, after adjusting for Comvita sales to HoneyWorld™ in PCP of $1.4M.

Gross margin was strong at 60.2 %, in-line with the FY25 strategic plan, though reduced by 160 bps vs PCP due to formulation benefits and one-off provision release in the PCP. Direct margin increased +140 bps vs PCP.

Unaudited EBITDA for the period (excluding ERP costs) was $9.5M, 32% down vs PCP due to the decreased revenue. There were $1.2M of predominantly non-cash FX adjustments in December relating to the strengthening of the NZD in the month. Excluding the FX impact above, EBITDA (excluding ERP costs) would have been materially within guidance of 20% down. Note that the non-cash FX impact substantially reversed in January.

NPAT (Net Profit after Tax) for the period was a loss of $3.2M ($0.8M NPAT excluding ERP costs) compared to a profit of $4.2M in the prior period. Net debt at the half year was $85.8M and inventory $143M.

China and North America

Trading was challenging in Comvita’s two focus markets of China and North America. Greater China revenue was $45M, down by $6.9M or 13%, and North America revenue was $13M, down by $7.7M vs PCP or 37%. Mainland China revenue for the half year was $33M, down 19% on PCP. Mainland China revenue slowdown was caused by macro-economic weakness, impacting the premium consumer category across multiple sectors. Mainland China market Q1 FY24 revenue was down 26% vs PCP and Q2 revenue was down 15% vs PCP. However, Q2 FY24 revenue lifted by 76% vs Q1 FY24, an improvement beyond usual seasonality of c50-60% quarter on quarter (QoQ). Mainland China’s improving performance continued in January. Hong Kong SAR showed single-digit growth in the half.

North America revenue for the half year was $13M, down 37% on PCP. North America sales were impacted by the loss of some distribution with one customer, inflationary pressure on discretionary spend and a disproportionately strong first half in the PCP. Comvita is seeing an improvement in sales in the Natural and Grocery channel and has recently signed agreements in this market with approximately 700 new stores. E-commerce sales improved by 8% in North America with Amazon revenue improved by 162%.

Rest Of Asia – HoneyWorld™ integration on plan

The Rest of Asia segment showed good performance with revenue improving by 49% or $6.3M to $19.2M and is expected to overtake the ANZ segment at the revenue level. The strategic acquisition of HoneyWorld™ in July 2023 has been seamlessly integrated into the region. Revenue is in line with the plan with agreed new distribution representing strong growth opportunities in H2. Korea delivered 13% topline growth. Segment net contribution was down $700K vs PCP due to integration costs of c$200K and continued planned investment for long-term growth and premiumisation.

Australia and New Zealand (ANZ)

ANZ revenue improved by $1.2M or 7% to $19.3M in the period with strong performance in the Australia domestic market and recovery in the Asian Health segment, in line with recovering demand seen in Mainland China. Comvita remains the market leader in this segment and has recently launched its flagship store at Auckland Airport applying learnings from its destination store in the city, results are looking positive at this early stage and are supported by increased tourism numbers.
Net debt, inventory, and operating cashflow

Net debt finished the half at $85.8M an increase of $22M vs the PCP. The increase is primarily due to strategic investments in HoneyWorld™ and Apiter (together $9.8M) and investment in inventory.

Inventory finished the year at $143M showing a slight improvement to PCP. Comvita is forecasting a reduction in both inventory and net debt by the end of the financial year in line with last year’s performance.

Full year guidance

As announced on 1st February, Comvita expects FY24 reported EBITDA (excluding ERP costs) of $30M to $35M and revenue of $225M to $235M.
Comvita has reviewed independent market data showing forecast consumer spending strengthening in 2024. Comvita expects a steady improvement in consumption through the second half. More detail on Comvita’s FY24 guidance can be found in the investor presentation, also released today, including both a revenue and EBITDA bridge from H1 to H2. In particular, Comvita has identified $8M of specific cost savings to be made in H2 FY24.

Management is actively managing costs, launching new products, and opening new markets and channels to ensure that they can adjust and respond to market opportunities. These include regional NPD in China and new distribution in the Middle East and the UK.

Honey harvest

Whilst too early to confirm the results of this year’s honey harvest, Comvita has experienced strong performance to date, with early indications of significantly enhanced quality of yield delivered in its forests. Due to a change in accounting treatment, Comvita is not forecasting any contribution to group profits from its Apiary division during FY24, but this will benefit FY25 and FY26 due to lower average cost of sales as a result of this change.
Market share remains strong

While consumer sentiment weakened, Comvita’s market positioning and margins have remained strong. Market share grew in key markets during the period, pricing remained consistent and the gross margins that are integral to the delivery of its 2025 strategic plan remained around 60%. This gives the board and management confidence that the current performance is revenue-related, short term in nature and will return to trend once consumer sentiment, particularly in China, starts to normalise. Comvita has reviewed its FY25 strategic plan in detail and reiterates its c$50M EBITDA target. This is dependent on a return to normal trading conditions in both China and North America, the timing of which is uncertain.

Commenting on the results Chair Brett Hewlett said, “Comvita has shown agility and resolve in making appropriate adjustments in the current challenging market conditions in China. We have thoroughly reviewed our costs and planned investments and have reduced these appropriately. In addition, the investment we have already made for the long-term in securing a scalable supply of high-quality raw materials as well as world class manufacturing, distribution and now operating systems to match, have created a strong platform for future growth. Alongside the substantial investments in the Comvita brand we believe that we are well placed.”

On a more personal note, as a long-standing shareholder of more than 18 years, I can empathise with the feelings of surprise and frustration in the current share price shared with me by many of our fellow shareholders. I do want to reiterate that our market share and underlying performance remains positive, our prices and margin are stable and I believe that we are still on track to deliver our FY25 strategic plan once consumer confidence in China returns.”

“Directors have declared a fully imputed interim dividend of 1 cps to reflect the softer first half trading. Comvita remains committed to balancing shareholder distributions with prudent capital management. The board will review our full year dividend in August as normal in line with our actual performance and FY25 outlook.”  
Platform for growth supports exciting future

The Comvita FY25 strategic plan was designed to deliver record revenue and profit in FY25 but, as importantly, to systematically build a platform across its whole value chain that is integrated, efficient and scalable. By the end of FY24 this investment phase will have been fully implemented. Comvita has established a platform that is able to deliver Comvita’s FY30 ambition, without further material additional capital investment.

Long-term investment in brand building and premiumisation continues

The Comvita business model is designed for high margin and high re-investment in its brand. During H1 FY24 Comvita invested $14M or 13.5% of sales into brand building activity. Central to this investment is further premiumisation of the Comvita brand both online and in physical stores. Comvita was particularly pleased to launch its new experiential shop-in-shop at Auckland Airport along with its new retail execution in Takashimaya, Singapore, and its pop-up store in Roppongi, Japan.
Comvita Lepteridine™ clinical trial results

Comvita invests more in scientific understanding of Mānuka than the rest of the industry combined and as part of this work discovered the unique molecule Lepteridine™. Comvita commenced a clinical trial on the impact of Lepteridine™ on gut health in July 2023. These results are in final stages of preparation and will be shared at the Foodomics conference on 19 - 21 March in Wellington. Comvita has strong patents for Lepteridine™ in place to enable long-term competitive advantage.

New Apiculture Industry strategy

Comvita is pleased to actively support the new Apiculture Industry strategy launched by the Government on the 20th February 2024 aiming to double Mānuka exports by 2030 focusing on enhanced quality, sustainability, bee welfare and recognition of Mānuka as a taonga species from Aotearoa, New Zealand.

Commenting, David Banfield (Group CEO) said “We remain confident that our business model, premiumisation of the Mānuka honey category and long-term investment in our brand, puts us in a strong position once macro-economic conditions stabilise. We continue to maintain or grow share in our core markets, and we see premium retailers in the US and Middle East turning to Comvita to help them build the Mānuka honey category with three new high-quality partnerships confirmed for H2. We remain committed to delivering cost reductions in H2 to protect our earnings and are forecasting a further reduction of debt and inventory in H2 supported by positive operating cash flow. While our debt and inventory levels are higher at present, we reiterate our commitment to deliver our target leverage ratio (1-1.5 x earnings), in line with our FY25 strategic plan.”

“After three and a half years of consistent performance growing both top and bottom-line in line with our market guidance and strategic plan, we are disappointed in this result, which reflects current trading conditions. The team and I are absolutely focused on doing everything possible to ensure a return to our track record of delivering consistent top and bottom-line growth. We are in year four of our five-year plan and have invested significantly over the last three years in our infrastructure and team capability to build a better more scalable business at Comvita that is able to deliver on our 2030 ambition.”

Brett Hewlett
Chair

[winner69]

Going to be huge 2nd half of financial year

[kiwikeith]

"Investment in inventory". What a wonderful expression!

[Sideshow Bob]

"Investment in inventory". What a wonderful expression!

Because that always works well!! :sleep:

[winner69]

"Investment in inventory". What a wonderful expression!

Suppose the planned reduction in inventory becomes a ‘divestment of inventory’

[bull....]

I like the first page of the presentation .... POISED FOR TAKEOFF ..... lol in what year are we talking about cause the result was terrible and there going back to those bad days off to much debt and inventory again :scared:

[Sideshow Bob]

I like the first page of the presentation .... POISED FOR TAKEOFF ..... lol in what year are we talking about cause the result was terrible and there going back to those bad days off to much debt and inventory again :scared:

Do they just recycle these announcements, inserting the current year and figures??

Seems like it......!!

[Recaster]

Bad result. Suspicious of any company that makes EBITDA the P&L focus in its announcements.

[winner69]

Bad result. Suspicious of any company that makes EBITDA the P&L focus in its announcements.

..even more so when Comvita use a few different versions of EBITDA

[winner69]

It'll be OK says David so no worries about the cash flow trend

I take back my words of a couple of years ago when I said that David has at least told them '.... that cash generation is important'

Never mind as David still hoping that they'll be taken over and we'll never know if inventory reduced to $85m and they collected all those unpaid bills

That post a year ago

Nothing changed over last year ….burning cash but still paying dividends …and hoping

Updated chart below

[kiora]

"Investment in inventory". What a wonderful expression!

Great honey season this year
Typically 1/5 years???

[Valuegrowth]

Volume is low. Despite poor earnings stock prices are up? May be punters are reacting to
the future. Is the future bright?

[nztx]

Despite poor earnings stock prices are up? May be punters are reacting to
the future. Is the future bright?


Another 1c dividend 6 months or so further down the track ? ;)

Money in da bank might yield better .. and that's after the Taxmans slice gets peeled off first

[william67]

There is nothing wrong with this "Investment in inventory"
Turn "raw materials " to "finished goods" need capital input
The "raw materials " inventory reduced $20.1m. "finished goods" increased $17.2m, they are ready to sell.

[william67]

"Honey harvest
Whilst too early to confirm the results of this year’s honey harvest, Comvita has experienced strong performance to date, with early indications of significantly enhanced quality of yield delivered in its forests. Due to a change in accounting treatment, Comvita is not forecasting any contribution to group profits from its Apiary division during FY24, but this will benefit FY25 and FY26 due to lower average cost of sales as a result of this change."
https://www.nzx.com/announcements/426525

[nztx]

"Honey harvest
Whilst too early to confirm the results of this year’s honey harvest, Comvita has experienced strong performance to date, with early indications of significantly enhanced quality of yield delivered in its forests. Due to a change in accounting treatment, Comvita is not forecasting any contribution to group profits from its Apiary division during FY24, but this will benefit FY25 and FY26 due to lower average cost of sales as a result of this change."
https://www.nzx.com/announcements/426525


It would be surprising if any sort of current yield did not surpass the year before of wetness, cyclones etc ;)

it was a bit of a wash out the previous period

[william67]

Have some faith. They could get very well information from their 7.5k hectares manuka trees.

[nztx]

Have some faith. They could get very well information from their 7.5k hectares manuka trees.


Not many Bees around here .. CVT must be attracting them all onto their acreage on healthy OT rates with performance sweeteners ;)

[Sideshow Bob]

Is this a play out of the Rakon book to get the SP up??

https://www.nzx.com/announcements/426680

Comvita Limited NZX:CVT today advises that a credible offshore party has approached Comvita with a highly conditional unsolicited, indicative, non-binding proposal to acquire all of its shares (“NBIO”). The indicated offer price represents a significant premium to the current share price. The party indicated it would prefer to implement any acquisition by a negotiated scheme of arrangement.

The Board of Comvita has retained Goldman Sachs New Zealand Limited as financial adviser and Simpson Grierson and Chapman Tripp as external legal counsel, to assist with Comvita’s consideration of the proposal.

Comvita has concluded an initial exchange of information with the party, following which the party confirmed its interest in undertaking further confirmatory due diligence.

The Board has decided to provide further access to confirmatory due diligence information with a view to determining whether the NBIO may evolve into a formal proposal that might be in the best interests of all shareholders.

There is no certainty that the NBIO will result in any negotiated transaction for shareholders to then vote on. Comvita shareholders do not need to take any action at this time in relation to the NBIO. The Comvita Board will continue to keep shareholders and the market informed of any material developments in accordance with its continuous disclosure obligations.

Bridget Coates
Chair of the Comvita Board sub-committee responding to the NBIO

[winner69]

Dave with a big smile telling himself ‘ it’s taken a while but I’ve finally found a buyer’

I get feeling Comvita Board is quite keen to sell so might not do the Rakon, Arvida trick

Action coming up I reckon

No mention of price

[JSwan]

Any guesses on price?

[winner69]

Any guesses on price?

Might get away with $2.50 / $3.00 but $4 sounds good

Chinese interests might have a say

Interesting

[kiwikeith]

Just learnt the hard way not to leave an order open. I tried to sell some shares for $1.95 a few weeks ago and left it there as the shares went down to the 1.80s. This possible bid news came out and I was bought out at $2.01. I have some other cvt shares with sharesies which I will leave to see how this possible bid develops.

[percy]

W69.
Perhaps "our David" should become FBU's next CEO.?

[winner69]

W69.
Perhaps "our David" should become FBU's next CEO.?

If this goes through it’ll be 2 in a row eh …Methven and possibly Comvita

Seems good at making companies attractive for sale

[william67]

Beekeepers' forum
https://nzbees.net/threads/honey-crop-so-far.1103/
DNA shows NZ manuka unique
https://waateanews.com/2024/01/30/dna-shows-nz-manuka-unique/

[Valuegrowth]

Beekeepers' forum
https://nzbees.net/threads/honey-crop-so-far.1103/
DNA shows NZ manuka unique
https://waateanews.com/2024/01/30/dna-shows-nz-manuka-unique/

Dear W67

Thank you for the above links.

[ralph]

Any guesses on price?
I would say 3.50-4$ .
We shall see ,The chinese will have a say & probably are the offshore bidders

[nztx]

W69.
Perhaps "our David" should become FBU's next CEO.?


MPG for further practice with some interested parties outside the door might be another :)

[nztx]

I would say 3.50-4$ .
We shall see ,The chinese will have a say & probably are the offshore bidders


they be buyers or sellers ? :)_

[Toddy]

I would say 3.50-4$ .
We shall see ,The chinese will have a say & probably are the offshore bidders


Sounds like a Jarden valuation that one. Track record of scaring any bidders away with extreme valuations.

[nztx]

Sounds like a Jarden valuation that one. Track record of scaring any bidders away with extreme valuations.


Hey come on now .. have others already been in the pots and barrels already & discovered most of the mislabeled ones are instead full of the really good stuff ? ;)

[Filthy]

https://www.nbr.co.nz/investment/comvita-receives-takeover-bid/

edit - missed it yesterday

[william67]

Indicative price?
$50m Cpital/equity raised at $2.5 in june 2020. milford asset management cost
$3.25 is the leadership holding cost and the net asset per share.
at $4.3 , $300m is equal the total consideration received by the sale of Manuka Health business. also is Li SUN and Li WANG's cost to get a piece of CVT ownership. (Li WANG 's average cost much higher $6.5+)
c$50m EBITDA FY2025 and beyond- FY2030. net profit $20m+ The valuation from $400m, Sp at $6+
The serious indicative price must be $4.5+, otherwise don't make sense.

[Habits]

If they can't buy comvita there is always MFB

[ralph]

Indicative price?
$50m Cpital/equity raised at $2.5 in june 2020. milford asset management cost
$3.25 is the leadership holding cost and the net asset per share.
at $4.3 , $300m is equal the total consideration received by the sale of Manuka Health business. also is Li SUN and Li WANG's cost to get a piece of CVT ownership. (Li WANG 's average cost much higher $6.5+)
c$50m EBITDA FY2025 and beyond- FY2030. net profit $20m+ The valuation from $400m, Sp at $6+
The serious indicative price must be $4.5+, otherwise don't make sense.





Good assessment William ,it will certainly be getting up there

[Valuegrowth]

Today the top gainer. Over last 2 days have beaten nvidia. Kind of an acquisition play.

[nztx]

Indicative price?
$50m Cpital/equity raised at $2.5 in june 2020. milford asset management cost
$3.25 is the leadership holding cost and the net asset per share.
at $4.3 , $300m is equal the total consideration received by the sale of Manuka Health business. also is Li SUN and Li WANG's cost to get a piece of CVT ownership. (Li WANG 's average cost much higher $6.5+)
c$50m EBITDA FY2025 and beyond- FY2030. net profit $20m+ The valuation from $400m, Sp at $6+
The serious indicative price must be $4.5+, otherwise don't make sense.







Come on now - serious indicative price must mean taking out the rest at as close to $2.50 as possible :)

[Valuegrowth]

If they offer above price better sell Nivida and park money in CVT.

[nztx]

If they offer above price better sell Nivida and park money in CVT.



So this one could just be the Bee's Knees after all ?:)

[Getty]

Foreign control of our pollination could be beestly

[Valuegrowth]

I agree. There was a good company waste management. I had a interest on it. Sadly, it got delisted. Boring is beautiful.

[Sideshow Bob]

No further updates....?? Share price easing back slightly.

[Goob]

Ha: "Comvita wins best growth strategy award"

https://www.nzherald.co.nz/business/deloitte-top-200-comvita-wins-best-growth-strategy-award/HDOQ7PK3LBGBFHZ2VBLSJJQRU4/

[Toddy]

Never knew that they were New Zealands second biggest employer in China.

Makes Zespri look efficient if they have less staff in China than Comvita

[Valuegrowth]

If I'm right New Zealand is the 2nd largest honey exporter in the world after China.

[Jenny Ruth]

Hi all. My latest column published on my Substack, Just the Business, takes a look at what's been happening at honey company Comvita. The headline is: Trying to explain away Comvita's bad news
And you can find it here:
https://substack.com/@justthebusinessjennyruth

[winner69]

Hi all. My latest column published on my Substack, Just the Business, takes a look at what's been happening at honey company Comvita. The headline is: Trying to explain away Comvita's bad news
And you can find it here:
https://substack.com/@justthebusinessjennyruth

You mention ‘explain away’ ….. good term

This bit if sage advice applies to Comvita I reckon -

“in the absence of a track record of accomplishment, you should take a CEO’s plans as hopeful intent. That doesn’t mean they are lying, just that we really don’t necessarily know what they can or cannot do. There is a particular danger if they use language that resonates with you. More than once in my investment career did I fall for someone who said all the right things, except that they hadn’t done them — in the past, or as it turned out, in the future.”

[Balance]

You mention ‘explain away’ ….. good term

This bit if sage advice applies to Comvita I reckon -

“in the absence of a track record of accomplishment, you should take a CEO’s plans as hopeful intent. That doesn’t mean they are lying, just that we really don’t necessarily know what they can or cannot do. There is a particular danger if they use language that resonates with you. More than once in my investment career did I fall for someone who said all the right things, except that they hadn’t done them — in the past, or as it turned out, in the future.”

Sounds like the Labour government of Ardern, Hipkins and the Maori Cabal with the woke leftists tuning in on every utterances from the one source of truth?

Comvita of course actually has an excellent brand (best in the manuka honey industry) and is still a profitable outfit. If it gets taken over, there goes another great NZ brand and I am pretty sure the offshore buyer will know how to make the best of the brand.

In any case, David Banfield's implicit strategy of courting a takeover is now in progress?

[winner69]

Sounds like the Labour government of Ardern, Hipkins and the Maori Cabal with the woke leftists tuning in on every utterances from the one source of truth?

Comvita of course actually has an excellent brand (best in the manuka honey industry) and is still a profitable outfit. If it gets taken over, there goes another great NZ brand and I am pretty sure the offshore buyer will know how to make the best of the brand.

In any case, David Banfield's implicit strategy of courting a takeover is now in progress?

Dave has worked hard to find a buyer …..hope it works out for him.

[Sideshow Bob]

The supplementation of mānuka honey has been shown to reduce symptoms of functional dyspepsia, New Zealand-based mānuka honey maker Comvita announced....

https://www.nutraingredients-asia.com/Article/2024/04/22/manuka-honey-helps-reduce-functional-dyspepsia-symptoms