Comvita Limited Analysis

Overview

Comvita's origins go back to the 1960s, when research was carried out on a honey and bee products-based therapeutic product range was developed. Exports to England and California commenced in 1989. In 1990 the company was restructured and began focusing on exports to Asia. Comvita shares began quotation on the Unlisted Security Market in September 2002 and the company moved to the NZSX market in 2006.

Performance

The following information was extracted from Comvita Limited's amended full year report, released on 26 September 2024:

Comvita Limited (NZX:CVT) is reporting FY24 results, which were impacted by challenging market conditions, as well as a substantial non-cash impairment and one off non-recurring costs.

FY24 Results snapshot

• Revenue of $204.3M -12.7% vs PCP (FY23: $234M)
• Gross profit of 55% -300bps vs PCP (FY23: 58%)
• EBITDA*
• Reported pre-impairment $4.5M (FY23: $30.6M)
• Underlying** $10.3M (FY23: $33.5M)
• NPAT
• Reported -$77.4M (FY23: $11.1M)
• Underlying** -$9.3M(FY23: $13.1M)
• Non-recurring one off costs of $7.6M
• Non-cash impairment of $64.2M before tax (FY23: $0)
• Net debt $79.7M (FY23: $53.4M)
• Inventory $134.4M (FY23: $136M) targeting material inventory reduction in FY25
• No dividend declared

Key points

• Demand: Abrupt change in consumer demand following macro-economic challenges in China and loss of a major customer in the North America market
• Cancellation of major shopping events (12:12 and 6:18 shopping festival) and weak 11:11 festival in China severely impacted demand
• Pricing: Significant unsustainable aggressive short-term price driven promotions from competition and beekeepers exiting the category
• Supply: Over production from FY17 – FY22 has created a glut of honey being cleared in markets around the world. Between 2020 and 2023 there has been a 56% reduction in supply, in addition, hive numbers are forecast to drop by 50% to c500K by 2025
• Business model designed for anticipated growth with a significant fixed cost element
• Long term cost-out programme initiated and on track, targeting $10M-$15M annualised savings to enable Comvita to be agile through different economic cycles

CEO David Banfield said “I’m extremely disappointed with the results that we report today, particularly after three consecutive years of record performance. Throughout FY24 we faced difficult trading conditions in our key markets along with aggressive price activity from competitors caused by industry overstocks. Our revenue and gross profit decline along with significant non-recurring costs and a non-cash impairment has resulted in a net loss of -$77.4M with an underlying net loss after tax of -$9.3M. We already have action underway to target value consumers whilst continuing our brand premiumisation in key Asian markets. Our $10-15M cost out programme is on target and is designed to streamline and simplify the business and ensure agility through different economic cycles. In addition, we have a clear focus on inventory reduction enabling us to reduce net debt to targeted levels.

I’d like to thank and recognise the hard work and resilience of the team in New Zealand and markets around the world as we navigate these tough trading conditions.” Concluded Banfield.