Bay of Plenty honey company Comvita is being eyed up by a third party interested in acquiring ‘all or substantially all’ of the company’s shares, the board announced today.
The news comes after the latest estimates on the value of its 2018 honey harvest resulted in Comvita downgrading its forecasted after tax operating earnings to $8m-$11m for the financial year ending June 30.
Comvita CEO Scott Coulter says in February, the company signalled the weather experienced during the second half of the 2018 honey season had not been conducive to good honey production, and they were now expecting honey crop volumes to be below that of an average year.
“We also signalled we would further update the market on the harvest once honey extraction from the hives and quality testing was completed in May.
“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.”
He says Comvita has now completed 80 per cent of the extraction for the season and tested 50 per cent of their honey, and the yields are ‘well below’ expectations – around half of what was originally budgeted.
“This poor harvest has a direct impact on our apiary business profitability for the current financial year ending June 30. The direct financial impact on our forecast position for the year is in the order of $8 million after tax.”
Comvita chairman Neil Craig says it is disappointing to experience such a poor end to the season.
“We indicated on February 23 that, subject to confirmation of apiary profitability and a solid recovery of the grey channel sales from New Zealand and Australia to China, the board remained confident in the full year outlook of an operating NPAT of greater than $17.1 million.
“Because of our latest estimate on the 2018 crop and some assumed risk to our sales targets to the end of this financial year, we now anticipate that our 2018 after tax operating earnings will be in the range of $8m-$11m.”
He says Comvita is currently party to a confidentiality agreement with a third party, ‘pursuant to which a due diligence process on Comvita is being conducted’.
“The purpose of the due diligence is to enable the third party to assess the potential acquisition of all or substantially all the shares in, or assets, of Comvita, whether by way of takeover, scheme of arrangement, amalgamation or other business combination.
He says while the board believes this due diligence process is moving towards a conclusion, the possible acquisition remains for now an incomplete transaction and there is no certainty that any offer will be forthcoming.
“The board cannot provide any further comment or guidance at this stage, other than the fact we should expect to be in a position to further update the market by mid-May.
He emphasises the third party approach remains an incomplete proposal.
“Ordinarily this would not require disclosure at this time. However, given the content of the 2018 financial forecast update, the board believes it is obliged to also foreshadow this possible future development, to ensure shareholders are fully appraised as to the current prospects of the company.”
Comvita opened on the NZX this morning at $7.10 – up 13 cents (1.87 per cent) from close of business yesterday.