Comvita - CVT

[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.co...epsia-symptoms

[Valuegrowth]

CVT traded around $3.40 back then somewhere in August 2023. Today It has dropped to $1.71. What a drop? Any major reason?

[Sideshow Bob]

https://www.nzx.com/announcements/431303

Comvita Limited (NZX:CVT) is today updating its FY24 guidance, reflecting weaker conditions in Q4 FY24, despite improved performance during Q3.

The company now expects lower revenue and adjusted EBITDA* for FY24. The key driver for this change to guidance is the prolonged weakness of consumer demand in the China market, exacerbated by the partial cancellation of the 6:18 Festival, China’s second-largest retail festival.

Given the prolonged weakness, the company has also reviewed its FY25 plan.

Summary:
• Quarterly sequential improvements for the first three quarters. Q3 revenue was flat vs PCP
• Q4 is now forecast to be impacted by the continuation of weaker consumer demand and underperformance of the 6:18 festival in China, which has affected many premium categories
• FY24 revenue and adjusted EBITDA* is now expected to be lower (see table below)
• $50M EBITDA* target within the FY25 strategic plan, is now considered to be unachievable in FY25
• Gross margin remains strong. FY24 gross margin is expected to be c60%
• Net debt and inventory as at 30 June 2024 are still expected to be below December 2023 levels, as indicated in February 2024

Updated FY24 guidance

Expected FY24 Revenue: $211M - $218M (previously $225M - $235M in February 2024)Expected FY24 adjusted EBITDA*: $23M - $28M (previously $30M - $35M in February 2024)

Group revenue through the first three quarters of the year had seen improvement, as shown in the table below.

Guidance in February was based on the partial recovery of Chinese consumer demand in Q3, but this has not continued into Q4.Group revenue progression(vs prior corresponding period):Q1 (Jul-Sep 23): -8.8% vs PCPQ2 (Oct-Dec 23): -6.9% vs PCPQ3 (Jan-Mar 24): +1.5% vs PCPSeasonally, Q4 (Apr-Jun) is typically the highest or second highest quarter for revenue and profit contribution with heightened demand normally generated by the 6:18 Festival, a major annual trading opportunity for the company. But this year Comvita now anticipates performance to be considerably below what the February guidance contemplated. H2 FY24 revenue is now expected to be $110M (mid-point of above range), down 9.7% vs H2 FY23.

The weakness shown in April’s result is primarily due to the cancelation of pre-sales for the 6:18 event in China and this has now been forecast to continue for the quarter.

Market demand in Mainland China is responsible for c60% of the change to guidance, while the flow on impact of the decline in China into Australia and New Zealand, Rest of Asia and EMEA accounts for the additional c40%. Meanwhile, North America continues to trade in line with February guidance.While consumer sentiment remains weakened, Comvita’s market positioning has remained strong and Comvita continues its premium product strategy, maintaining margins at c60%. The company remains on track with its FY24 cost out programme of around $8M.

Update on other markets
• America – Continues to broadly trade in line with February guidance
• ANZ – Impacted by Daigou cross border sales into the China market• Middle East – Shipments for new listings delayed into FY25
• Rest of Asia – Impacted by stalled growth in Korean marketFY25 strategic planIn 2020 Comvita launched its FY25 strategic plan.

Over the first three years, Comvita was successfully tracking to its FY25 strategic plan, including its EBITDA* target of $50M for FY25. However, FY24 has seen a significant change in economic conditions and consumer sentiment globally.Based on latest assessments in its key markets, in particular the market in China, the underlying economic assumptions for the FY25 plan now appear very unlikely to be realised.

Accordingly, Comvita now consider the EBITDA* target unlikely to be achieved in FY25.In response to the significant change in consumer sentiment globally, a cost-out programme for FY25 has been initiated, over-and-above the FY24 programme, and is targeted to deliver incremental savings of $10M (COGS and Opex).Comvita will provide the market with an update on its outlook for FY25 when the company reports its FY24 results in August.In terms of the strategic plan, the company remains committed to meeting its targets with respect to pricing and gross margins, indicating strong potential once market conditions normalise, although timing of this normalisation is not yet clear.

Management commentary

CEO David Banfield said that although the company was maintaining its margins and market share, it is taking further action in response to weaker market conditions to remain agile in the face of challenging operating realities.“It’s really disappointing to provide a further update to guidance, given the progress we have made on our strategic plan to grow value and lift performance since 2020. We have created a platform for growth over the last four years that will enable us to thrive once conditions improve.” He said, “The realities of what now is a more sustained slowdown in our key markets, including a significant drop off in China in Q4, make it necessary to further reduce costs to reflect these tougher conditions.

”Chairman Brett Hewlett said: “The underlying value of Comvita's assets, its high quality products and services, its scaled sustainable supply capability, premium brand positioning, international business operations and networks offer significant growth opportunities over the medium to long term. However, notwithstanding the team's hard work to grow margin and market share, the decline in broader market demand is something we must adjust for in the short-term, whilst ensuring we remain well-positioned and apply flexibility in our responses to market conditions as they evolve."

[Sideshow Bob]

https://www.nzx.com/announcements/431304

On 22 February 2024, Comvita Limited (NZX:CVT) advised it had received a highly-conditional unsolicited non-binding indicative offer (NBIO) from a credible offshore party to acquire all of its shares. The indicative offer price represented a significant premium to the prevailing share price.Comvita has provided the interested party with confidential access to the company and its information in order to undertake due diligence. A sub-committee of the Board was established to oversee this process, with advice from financial advisors Goldman Sachs, as well as legal advisors Chapman Tripp and Simpson Grierson.Throughout this process, the Comvita Board of Directors have maintained a tight focus on maximising value for shareholders, to enable the potential acquirer to appraise both the near term and longer term outlook for the company in its global markets.Comvita remains subject to confidentiality restrictions in respect of the NBIO and its engagement with the offshore party but will inform shareholders of material developments and any other matters, in accordance with its continuous disclosure obligations.The Board advises shareholders that there is no certainty that any transaction will eventuate from the NBIO process. As such, no action is required from shareholders at this time.

[winner69]

Dave’s Raves getting depressing …even Dave can’t paint a bright future

Dave hoping like hell that the takeover succeeds so he can get out of there…..quickly

Not much NPAT this year for Comvita ….remember 1st half was a loss