Comvita - CVT

[SilverBack]

Downward spiral continues .......
Funniest thing about this article supermarket operator says prices dropped 10 % , producer says 25-50 % .....

https://www.stuff.co.nz/business/far...nds-beekeepers

What is so amusing about being ripped off by your favourite friendly supermarket?

[SilverBack]

Hang on hang on... two poor performing seasons but now an oversupply of Manuka.

I call BS on the management here (if I hadn't done already)

Watch the export margin slide on their products.

You are stretching things here. Manuka has a narrow flowering season but the bees keep making honey all year from any flower that they can find with nectar. A bonus in honey supply need not mean a surfeit of manuka honey. It all depends on the conditions at the time of the manuka flowering and the extent of the manuka response to conditions over the months preceding the flowering.
Nevertheless, CVT will be selling non-manuka honey from the hives that they own and so the better question is "what proportion of revenues comes from non-manuka honey"? Please excuse me for not researching that question but I have lots of other shares to worry about and am short of time just now.
Of course, this news just amplifies the fact that CVT is a horticultural company that has to deal with the vagaries of seasonal fluctuations like any other horticulturalist and so needs to be valued accordingly. They can minimise this by spreading hives thoughout the country, whether by contract or by ownership but they cannot escape the seasonal impacts.
If we have a bumper manuka harvest then this is definitely a positive because of the export orientation. Who cares if there is too much manuka for the NZ demand if China, US etc want more? One other factor - honey and related bee products can be stored, especially the products processed from it and so a bumper harvest one year can be released out over the forthcoming months for maximum advantage. We are not talking about the sale of fresh milk here.

[Beagle]

Yes its just an agricultural company that deserves an agricultural PE of about 8.5 - 9.5 but who knows what normal earnings are and there's certainly no point asking management. I valued it a while back on this basis and arrived at ~ $1.50. All I need to know is that the current price is still wildly optimistic based on unproven results and continued disappointments from management who are so wildly inaccurate with their forecasting they'd be far better to simply keep their mouths firmly shut as its quite obvious they have no forward visibility whatsoever. Quite frankly in my opinion throwing darts at a dartboard would have given more accurate forecasting over the years.

[kiwidollabill]

Ok, please tell me why inventory is ~0.65x total sales after 2 years of terrible honey harvests? That is an aboslute rubbish inventory turn over rate for an FMCG company. My belief is that they are sitting on a whole lot of product which they have been unable to sell.... both because of over supply and because the Australians are taking the demand.... margin has contracted from ~50% in 2015 to ~41% now, inventory was 0.3x revenue then also

For the last 2.5years they've had a significant operating negative cashflow and the market place is getting worse.

They're either going to have to loan more on their bank lines or divest more assets before the end of the year (or stop buying so much honey, but they are probably contracturally locked in). DYOR but I think this has got alot more to slide.

[Ogg]

http://nzx-prod-s7fsd7f98s.s3-websit...180/298232.pdf

China is moving more into a direct trade and a formalised cross border e-commerce model

Postcompletion of this transaction, Li Wang will hold 18.41% of Comvita’s total shares on issue

[Yoda]

https://www.mpi.govt.nz/growing-and-...y-loss-survey/

The overall loss rate, i.e. total winter losses reported by survey respondents divided by the total number of colonies that were alive on 1 June 2018, was estimated to be 10.21%, with a 95% confidence interval of [9.85%, 10.58%]. Although these estimates of overall loss rates are statistically indistinguishable from those in 2017, they are significantly higher than for winter 2015 and winter 2016, providing evidence that loss rates have increased at a national level. Moreover, evidence from trend analysis indicates a positive time trend in overall loss rates between 2015 and 2018, suggesting that future overall loss rates are likely to be higher still.

oops.... we need the bees for more than just honey...
less bees, less honey, less profit.
no doubt that is too simplistic

[SilverBack]

https://www.mpi.govt.nz/growing-and-...y-loss-survey/

The overall loss rate, i.e. total winter losses reported by survey respondents divided by the total number of colonies that were alive on 1 June 2018, was estimated to be 10.21%, with a 95% confidence interval of [9.85%, 10.58%]. Although these estimates of overall loss rates are statistically indistinguishable from those in 2017, they are significantly higher than for winter 2015 and winter 2016, providing evidence that loss rates have increased at a national level. Moreover, evidence from trend analysis indicates a positive time trend in overall loss rates between 2015 and 2018, suggesting that future overall loss rates are likely to be higher still.

oops.... we need the bees for more than just honey...
less bees, less honey, less profit.
no doubt that is too simplistic

The trend is small and it could be influenced by increasing willingness of apiarists to respond to MPI requests for info as well as increased awareness of the issue.
Your final comment is correct in terms of fundamentals but honey producers have been dealing with hive threats for centuries. It is actually pretty easy to keep hives alive and protected from food loss and pests during winter. Just isolate them and feed a sugar solution. No varroa, no other pests and no need for flowers. Problem is you will probably go broke in the process, and of course you will not get any manuka factor but that is true throughout winter anyway. Nevertheless, I know that apiarists sometimes build up their hives by feeding sugar.
If MPI establish that bee loss is increasing then they can help the industry to deal with this in practical ways. The most basic way to counteract hive loss is to increase hive reproduction and all apiarists will work at this. Hence, what is of concern here, is the cost of building up hives rather than whether hives are lost (which they always will be). MPI can certainly help the industry with this.

[Apathy]

Ok, please tell me why inventory is ~0.65x total sales after 2 years of terrible honey harvests? That is an aboslute rubbish inventory turn over rate for an FMCG company. My belief is that they are sitting on a whole lot of product which they have been unable to sell.... both because of over supply and because the Australians are taking the demand.... margin has contracted from ~50% in 2015 to ~41% now, inventory was 0.3x revenue then also

For the last 2.5years they've had a significant operating negative cashflow and the market place is getting worse.

They're either going to have to loan more on their bank lines or divest more assets before the end of the year (or stop buying so much honey, but they are probably contracturally locked in). DYOR but I think this has got alot more to slide.

Spot on - its hysterical ......... they put honey in bottles........ ........ and they now have a 'minor shareholder at 18%' who will have blocking rights on any takeover - i.e. they need to take him out before doing any hail mary.............

[Balance]

Spot on - its hysterical ......... they put honey in bottles........ Chair was one hit wonder on the basis of being right place right time........ and they now have a 'minor shareholder at 18%' who will have blocking rights on any takeover - i.e. they need to take him out before doing any hail mary.............

Minor shareholder could very well facilitate a takeover - actually.

CVT directors should have taken the $5.50 offer which was on the table last year - that offer is only going to look better and better as CVT's sp goes lower and lower.

Meanwhile, Kiwidollabill is exactly right about CVT's spin losing momentum and is now down the drain - poor harvests & build up in inventories = BS.

[winner69]

Comvita guy on radio this morning saying now they taken control of Chinese distribution things are looking very bright for the future ...but I dozed off without hearing the end of the interview