Paengaroa based honey products company Comvita has made more sales but announced a reduced profit in the annual result for the end of the financial year.

While sales increased by eight per cent to break the $100million milestone for the first time, net profit after tax for the year is $7.4 million, compared with the $8.2million for the 2012 year.

Comvita has cracked the $100million milestone in sales.

The $7.4m net profit was achieved despite a constrained Manuka honey supply and wholesale honey costs that rose sharply in the second half of the year. The 10 per cent fall in net profit is at the upper end of the revised earnings guidance Comvita informed the market of in February 2013.

Strong demand in Asia combined with product and market diversity insulated Comvita earnings from the worst impact of Manuka honey shortages and honey cost increases, say directors.

Sales increased by eight per cent for the year breaking through $100m, to reach $103.5million from $96million as sales continue to grow in the high-value North Asian markets – notably China, Hong Kong and Korea.

Challenging trading conditions in the United Kingdom, Europe and Australia, the strong New Zealand dollar and a squeeze on Manuka honey supply, combined to see earnings before interest, tax, depreciation and amortisation fall five per cent to $14.7million.

A final dividend of 9 cents per share has been declared by the Board, bringing total dividends for the year to a fully imputed 13 cents per share. Last year's dividend was 14 cents per share.

An above average 2012-2013 summer flowering season and additional volumes through the acquisition of an additional high-quality Manuka apiary business has the Manuka honey supply returning to normal.

Manuka honey prices increased up to 50 per cent during the year due to rising demand for this unique New Zealand product, combined with a lower honey harvest following cold weather during the 2011/2012 Manuka flowering season. This followed an equally poor 2012/2011 harvest, which together had the impact of depleting Comvita's inventory of its key raw material.

'Given the constraint on the supply of Manuka honey, one of our most important ingredients, we are satisfied with our financial results,” says Comvita Chairman Neil Craig.

'Our significant investment in sales and marketing infrastructure in key export markets over the last few years has allowed us to pass on raw material price increases without dampening demand, albeit with some lag in financial impact on our profits.

'We have taken steps to shore up our Manuka honey supply with long term supply contracts, the acquisition in October 2012 of another large Manuka honey apiary business and the expansion of hive numbers.”

The October 2012 acquisition of the Kiwi Honey apiary business in the Whanganui area provides Comvita with an additional 3000 hives. This followed on the acquisition of a Waikato apiary in the 2012 financial year and Kiwibee Medical in 2008.

With 16,000 hives, Comvita is now one of the largest beekeepers in the country. It is expecting the honey supply to return to normal this year, which Neil says vindicates the decision at the start of the year not to cut under-utilised sales and marketing capability and infrastructure in markets where they see long-term growth potential.

Comvita can now supply 30 per cent of its total honey requirement from Comvita owned and operated apiaries.

Comvita is also engaged in a Primary Growth Partnership with the Ministry of Primary industries researching high performance Manuka plantations on marginal land.

There is a series of major climate trails at Massey where a lot of the money is spent actively deciding what the causes of Manuka's medical aspects are - whether it's a genetic factor or related to climate, soils, temperatures.

The PGP is also looking at developing Manuka as a planation crop at locations scattered about the back blocks of Taranaki.

Comvita derives more than 80 per cent of revenue from international markets, with Asian markets now accounting for 44 per cent of Comvita group sales.

Comvita's strategy of reducing reliance on Manuka honey by diversifying into other ingredient platforms such as Propolis and Fresh Olive Leaf Extract is showing promise. During the year the highly-respected Liggins Institute at The University of Auckland released the results of a clinical trial clearly demonstrating the beneficial effects of Comvita fresh Olive Leaf Extract in supporting normal blood sugar levels in at-risk adults.

The results indicate Olive Leaf Extract may have a place as an adjunct therapy for the delay or prevention of Type II diabetes in the growing at-risk population.

New Comvita products have been released on the strength of the evidence, including ‘Olive Leaf Extract Blood Sugar Support' listing on the Australian Therapeutic Goods Administration database. In a partnership with Massey University (New Zealand) and Reading University (England) a new clinical trial is underway on the cardiovascular benefits of Olive Leaf Extract.

At the end of last year Comvita acquired new land in Queensland, Australia and stepped up olive tree plantings and the production of Fresh Olive Leaf Extract in anticipation of increased demand in the current financial year and beyond.