Paengaroa honey and olive products developer Comvita Ltd says it has finished the year in a stronger position to deal the company issue of a year of two halves.

'Sales in the first half year were negatively impacted by honey supply shortages,” says chairman Neil Graig in the annual report.

'Full year earnings were suppressed by a sharp increase in the cost of honey as supply was restored during the second half of the year.”

Sales in key Asia and New Zealand markets which deliver 62 per cent of revenue were strong, but margins were impacted by a very strong New Zealand dollar and 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,” says Neil.

Sales in Australia increased 16 per cent on the previous trading year. But a weakening of the Australian dollar against the NZ dollar contributed to reduced profits.

Sales and profits 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,” says Neil.

After tax profit for the year is $7,616,000. It's up about $245,000 on last year's profit of $7,371,000 but still down on the 2012 profit of $8,224,000.

The company's key focus over the last year was to shape up the honey supply chain through Comvita ownership and contractual relationships.

Comvita acquired New Zealand Honey Limited (post balance date) and entered a long term partnership with the New Zealand Honey Co-operative based in Timaru. Two apiary acquisitions and significant organic growth of Comvita's own hive numbers has secured the company's honey supply. Comvita has reached a strategic objective of having at least 50 per cent of the supply either 100 per cent owned or under Comvita control.

'Managing a year of two profit halves has challenges we are working to address,” says CEO Brett Hewlett.

Last year 62 per cent of the full year's sales occurred in the second half of the year. Becasue of the nature of the apiary business Comvita has the situation of operational costs loaded mostly to the front half of the year, and the profit from the harvest all coming in the second half of the year.

'We are evolving our product and channel portfolio so that we can have a more even spread throughout the year. We will seek to do this via organic growth but also remain on the lookout for suitable acquisitions,” says Brett.

'During the second half of the year, when we were unconstrained by shortages of raw honey, we were really able to demonstrate the strength of that demand. Sales in the second half year grew by 24 per cent compared to the same second six months in the prior year.”

The USA and South Korea showed the strongest growth trend. Closer to home, both Australia and New Zealand had solid years with 16 per cent and 18 per cent growth respectively.

US based medical devices partner, Derma Sciences had yet another very strong year, growing Medihoney® sales more than 35 per cent.

At year end, Comvita's net debt position of $26.5m was similar to last year $25.3m.

Post balance date, Comvita spent $12.3m on New Zealand Honey Limited, mostly funded by bank borrowings. A significant part of this acquisition was honey inventory

Comvita's dividend policy of paying 50 per cent of after tax profit is maintained.