Comvita advises of possible takeover; poor honey harvest to hit earnings
By Tina Morrison
April 16 (BusinessDesk) - Comvita, the NZX-listed manuka honey company, foreshadowed that it may be the subject of a takeover, with an unidentified third party currently undertaking due diligence to assess the business.
The Paengaroa-based company emphasised that the possible acquisition remains for now "an incomplete transaction" and there is no certainty that any offer will be forthcoming. Comvita's board disclosed the potential takeover along with a downgrade to its earnings forecast for this year, saying it felt obliged to disclose that a third party had been conducting due diligence on the company for several months "to assess the potential acquisition of all or substantially all the shares in Comvita, whether by way of takeover scheme of arrangement, amalgamation or other business combination".
The due diligence is "moving towards a conclusion" and Comvita expects to provide a further update by mid-May, the company said in a statement. Comvita shares seesawed in early trading on the NZX following the announcement and were recently up 0.4 percent to $7.
Comvita's flagship manuka honey business can be volatile as weather conditions impact honey production. The company warned today that its after-tax operating earnings for the year ending June 30 are expected to be between $8 million to $11 million, down from an earlier forecast for earnings of more than $17.1 million as adverse weather in the second half of the 2018 honey season hurt its honey harvest.
"We have now completed 80 percent of the extraction for the season and tested 50 percent of our honey and the yields are well below expectations; around half of what we originally budgeted," said chief executive Scott Coulter. "This poor harvest has a direct impact on our apiary business profitability for the current financial year."
Comvita had earlier said that the 2018 honey season started off well, and even though adverse weather had started to affect the honey crop volumes in the second half of the season, the quality was expected to partly offset the reduced volume. Today it said the weather for the rest of February and early March continued to not be conducive to honey production and the anticipated late harvest did not eventuate.