By Paul McBeth
Feb. 19 (BusinessDesk) - ASX-listed HRL Holdings says the new regulatory regime defining mānuka honey has stoked short-term demand for its recently acquired Analytica Laboratories division.
Queensland-based HRL recorded underlying earnings of A$205,000 on revenue of A$846,000 in just one shortened month of owning the New Zealand food testing unit, and said activity at Analytica was "highly encouraging". The Australian firm paid $13.3 million in cash and $5.7 million in scrip for Analytica, with earnouts of up to $11 million if certain targets are met.
The acquisition was underpinned by the lab testing firm's position in the domestic dairy market, where it has a strategic alliance with Milk Test NZ for another five years and a 26 percent stake in an accredited joint venture supported by the Chinese Academy of Inspection and Quarantine servicing the dairy export market with a focus on infant formula.
However, with the honey season about to begin, HRL noted early indications from apiaries are for a strong season in 2018, and that the Ministry for Primary Industries released their revised guidelines for the definition of mānuka honey.
"This has created short-term demand to test mānuka honey samples under the new guidelines," HRL said in its first-half accounts. "Analytica is the market leader of honey testing in New Zealand and is well-placed to benefit from this regulation change."
MPI's new labelling standards over what constitutes mānuka were effective from Feb. 5, requiring tests for four chemical markers and one DNA marker before a product can be sold overseas as mānuka.
HRL's Analytica acquisition expanded a Kiwi footprint that already encompassed hazardous material testing lab Precise Consulting. That forms part of HRL's hazmat (hazardous materials) division and the New Zealand business was the primary contributor of the 42 percent gain in operating earnings to A$1.23 million in the six months ended Dec. 31.
"Precise Consulting continues its strong performance providing a range of services with government agencies councils, corporate and commercial clients," HRL said. "Precise continued to improve its market share of property contamination testing and is widely recognised as the preferred operator for government agencies and insurance clients."
The group reported a net loss of A$166,000 in the six months ended Dec. 31, due to acquisition costs and earn-outs. Revenue doubled to $11 million.
The ASX-listed shares were unchanged at 15.5 Australian cents, and have gained 29 percent so far this year.