Comvita's annual sales rose by 11.4 per cent during its last financial year, totalling $115.1 million, contributing to a slight 3.3 per cent increase in profit to $7.6m.

The Paengaroa-based global natural health products company is calling it ‘a year of two halves' for its sales, of which about 80 per cent are to export markets.

Comvita is a natural health products company operating from Paengaroa.

'Sales in the first half year were negatively impacted by honey supply shortages. Full-year earnings were suppressed by a sharp increase in the cost of honey, as supply was restored during the second half year.”

Sales growth in the second half was also up 24 per cent on the same six-month period in the previous year.

Comvita says sales in key markets of Asia and New Zealand, which comprise 62 per cent of sales, were strong.

'However, margins were impacted by the very strong NZ dollar and from further sharp rises in the cost of Manuka honey.

'Because of contractual commitments on pricing in the fast growing China market these costs couldn't be recovered within the annual time frame. Price rises are now in effect for the coming year.”

A final dividend of eight cents per share has been declared by Comvita's board, bringing total dividends for the year to a fully imputed 12 cents per share. This is ex-dividend on June 20, 2014, and payable on June 27, 2014.

Sales in Australia were strong, up 17 per cent on the prior year. But a weakening of the

Australian dollar relative to the NZ dollar contributed to suppressed margins.

Sales and profit contribution from Comvita's fresh Olive Leaf Extract range were also impacted in Australia, where price competition intensified.

'We expect the mounting clinical evidence supporting the efficacy of our fresh Olive Leaf Extract products will assist us to lead a recovery of lost market share in the coming year.”

But Comvita continues to see strong growth of circa 35 per cent in its Medihoney woundcare business.

'During the year it did not translate into growth of profits for our medical business unit because the sharp rise in the cost of medical grade manuka honey could not be passed on at such short notice due to commitments of phased pricing adjustments with our US partners.”

However, Comvita says security of future honey supply is assured.

'In September 2013, we issued 2.3 million ordinary shares to Derma Sciences Inc, our Medihoney woundcare partner, at $3.90 per share, primarily for use in expansion of our ownership of Manuka honey supply.

'During the year we acquired two further apiary businesses [in Gisborne and Hawke's Bay], giving us six apiary hubs spread throughout the North Island, with a collective capacity of 30,000 hives for the coming 2014/2015 season, targeting manuka honey.

'Apiary profits are now contributing to overall profitability of Comvita, thereby helping mitigate the current high cost of contract honey supply.”

This week's announcement of the acquisition of South Island-based New Zealand Honey Limited, in addition to Comvita's North Island operations, means it's surpassed its strategic objective of having at least 50 per cent of honey supply under direct ownership or control.

'This position helps alleviate the pressure we have experienced in the past few years caused by honey supply shortages.”

Comvita invested about $15m in a number of capital projects, from a Point-of-Sale till system for retail outlets to a Demand Planner system for production planning, logistics and inventory management, and a proprietary Apiary Management Systems allowing full digital traceability of honey back to individual hives.

To ensure full control over quality and safety of products, Comvita established a new, world-class analytical laboratory in Paengaroa.

It also opened two concept retail stores – in Auckland and Paengaroa – and a new kiosk at Auckland International Airport to better profile the Comvita brand in the domestic market and target a growing Asian consumer base.

Last November, the company launched the Comvita Tourism Experience, at its Paengaroa base and expanded the honey production facility, creating a 50 per cent increase in overall honey through-put capacity.

It also increased its apiary business by adding 7000 hives to make 30,000-hive capacity for 2014-2015.

Comvita says its balance sheet remains in good shape.

'Our capital spend in 2013-2014 has been paid for out of earnings from operations, and funds from the share placement to Derma Sciences.

'At year end, our net debt position of $26.5m was similar to last year ($25.3m), leaving our Balance Sheet in a relatively strong position.

'Post balance date we spent $12.3m on acquiring New Zealand Honey Limited, mostly funded by bank borrowings.

'Our dividend policy of paying 50 per cent of after tax profit is maintained, which we believe is the right balance between rewarding shareholders with income and retaining funds for growth.”

While the focus in recent times has been on security of supply of high quality raw material and control of supply chain right, Comvita's is happy with its strategical placing.

'[We now have] more focus on extending our existing product range and increasing the emphasis on marketing and contribution margins, thereby making full use of our comprehensive infrastructure.

'We are also working to address the challenges of managing a year of two profit halves.”

Comvita's outlook for the next fiscal year remains optimistic.

'We anticipate continued growth in revenue and net earnings.”