Comvita & the Leap of Faith

By Bruce Roscoe

Comvita raised NZD40.5m through the sale of 59.3m new shares in a rights issue and placement that concluded 7 May. The share sale, which increased shares in issue 84.0% to 129.8m, was Comvita’s largest ever. Banks will be paid all sale proceeds as a condition for agreeing new loans.

The capital raise represents the fourth major share sale undertaken by the company since 2015 – three were made in rights issues, the other a private placement to China Resources of Hong Kong. These sales supplied an approximate total NZD136.2m, or NZD11.3m per year, to Comvita, whose future continues to be leased from banks but on more stringent and watchful terms than applied to earlier lending.

The new funds cleared Comvita’s slate of the aftermath of a string of cul-de-sac investments — from California stardust to Uruguayan propolis — financed by bank loans and equity, or a combination of both.

Equity (an ownership stake represented in this case by shares) is viewed as the most expensive of all financing types, because of the risk that shareholders, who become part owners of the business, must take. Yet in Comvita’s case, share sales may represent an inexpensive financing method. When no after-tax profits are made, none need be shared, and no monthly repayments are needed.

Conversely, the debilitating costs are bank interest charges and fees linked mainly to Comvita’s position as a publicly quoted company. In its latest financial year (ended June 2025), Comvita paid a monthly average NZD665,250 in interest and other financing expenses, NZD93,833 in legal and other professional fees, and NZD93,417 in accounting and auditing fees.

Comvita must repay loans to two commercial banks and pay fees to two investment banks and two (at least) law firms. Banks will receive the NZD40.5m less the fee owed investment banks, which will amount to an estimated 3.5-4% of the amount raised.

Banks have limited Comvita’s new borrowings to NZD44m, compared with about NZD80m following the May-June 2020 capital raise. (Also in the 2020 example, which at NZD50m represented Comvita’s largest ever share sale by value, the entire amount, less NZD1.8m in fees, was used to repay banks.)

Reservoir of Goodwill

The final result of the share sale, announced 12 May, showed the top three shareholders as F&N Ventures, a wholly owned subsidiary of food, beverage, and printing enterprise Fraser and Neave (F&N) of Singapore, with 19.99%; PHC Investments, wholly owned by Private Health Care (NZ), 11.73%; and Kauri NZ Investments, 10.14%.   

Comvita has raised NZD40.5m through the sale of 59.3m new shares, resulting in Singaporean food, beverage and printing giant F&N Ventures taking a 19.99% ownership stake of the Paengaroa-based company.

Shareholders who did not participate were diluted 45.7%. By the same token, the currency value of Comvita shares is much reduced. To illustrate by simplified example – this time Comvita raised NZD10 by selling 15 shares, whereas in the 2020 raise it could pocket the same amount by selling 4 shares.

Still, the fact that Comvita could raise such a large amount of funds following successive earnings disappointments and management upheaval, all amid geopolitical instability, evidences how deep is the reservoir of goodwill toward the company among some shareholders. 

The Milky Way

Milk may have brought everyone together. Comvita chief executive Karl Gradon, during an about 14-year tenure with Fonterra, held posts in Singapore (2012-2014). In the three years before signing with Comvita in 2025, he led milk processor and exporter Miraka, whose markets include Singapore. Andrea Wilkins, who records a 2011-2015 tenure with Fonterra followed by 10 years with Spring Sheep Milk Co., joined Comvita as chief marketing officer in March. (Source: LinkedIn profiles.)

Kauri NZ Investments wholly owns Oravida, whose China website gives top billing to mineral water followed by organic milk, ice cream, and mānuka honey.

F&N’s dairy farm operations and dairy product division recorded sales of SD1,276m to account for 55.0% of total sales in the year to September 2025.

Can Southeast Asia become a latter-day land of milk and honey? Comvita believes that the region, with a population of some 686 million, offers “considerable opportunity”. The tropical climate would suit the milk more than the mānuka honey, which fares best in northern climes where winters are long and cold.

The placement to F&N may open a door to prosperity. F&N said in a 15 April announcement that it saw the “partnership” with Comvita as one “with long-term merit, one that can strengthen the quality of F&N’s portfolio while creating value for both companies over time”. F&N, which traces its history to 1883, can take a longer-term view than banks may allow Comvita.  

F&N is announced as a “cornerstone” shareholder, but such cornerstones are uncemented. Equity capital that has participated in the mānuka honey industry has shown itself to be transitory. Among other examples, Comvita recorded Capilano Honey (Australia) as a major shareholder on only two dates (25 May 2008 and 22 May 2009).

Soft-nosed Bullet

The industry has dodged a soft-nosed bullet, which cause wounds more wide than deep. A Comvita collapse would have triggered a falling domino effect as payments to suppliers and employees (NZD160m in the June 2025 year) evaporated.

Such a collapse may also have shuttered the UMF Honey Association (UMFHA), which in turn would disable the Manuka Charitable Trust (MCT). Comvita supplies the queen bee’s share of licence revenues (for both mānuka honey and products that contain mānuka honey) to UMFHA, which co-funds MCT.

Comvita shareholders have taken a leap of faith. They are owed a debt that may be larger than any that Comvita can repay. Hopes of dividend income may be wistful. To compete with a Kiwibank six-month term deposit of NZD1,000, for example, a Comvita dividend must yield 3.5%, which would require a payout of NZD2.95m (NZD0.65 share cost x 0.035 x 129.8m shares). Comvita has paid a higher dividend in only six of the 23 years to June 2025.

Shareholders can only hope that, even as a speculative asset play, their investment in Comvita will not end in the throwing of good money after bad.

Note: This report updates dilution and other data which appeared in our May 3 report Comvita Wins Reprieve from New Shareholders and which were current at the time of publication.

Bruce Roscoe is a Japan-resident researcher and former foreign correspondent and securities analyst.