Making sure the story behind the numbers is clear... as honey

Questions and concerns were raised at last year’s AGM about how the honey revenue for the year had been reported, and so the information has been clarified.

“Both the Board and the management team looked at the financial statement disclosures and the way we had explained how we account for the honey revenue and decided that how the information was presented needed to be improved,” says Andrew Beijeman, CEO. “We know it is important that our shareholders understand the numbers, but also that they have knowledge of the contributing factors behind the results they are presented with.”

“These factors are something we as a management team are familiar with and work on regularly. We want readers to fully understand the story we are telling them.”

Therefore, an additional note (6b) has been added to this year’s financial statements to explain in more detail where the honey revenue is coming from.

At the end of each year, the Incorporation values its honey using the latest market information. This is sourced from price lists provided by large honey buyers, recent honey sales, and involves understanding what is happening with supply and demand in the market. These factors are then assessed to determine Atihau-Whanganui Inc’s valuation (price per kg) which is applied to the confirmed stock levels.

Reflected in note 6b is that:

• A total of 90,155 kgs of honey was harvested in the 2020/2021 season valued at $70.23 per kg, totalling $6.3M.

• During the year, 42,278 kgs of honey valued at $87.10 per kg was sold realising a total of $3.7M.

• The value of the 41,921 kgs of honey remaining in storage from the previous year decreased by $1.7M, or $41.84 per kg.

This decrease is due to an exceptionally good season 18 months ago across New Zealand that meant more honey in the market. Greater supply and minimal change to demand levels has made it harder to sell mānuka honey (and the global COVID-19 pandemic also contributed to the situation) which is why so much honey remains in the incorporation’s storage shed.

“Some beekeepers produced twice as much as they normally would in the summer of 2020,” explained Andrew.

Buyers have also changed how they purchase their honey. “In the past they would take honey straight from the hive. Now they want it after it has matured in the drum and is ready to pack. This has meant that our inventory level at year end has increased.”

Finding new market channels for AWHI honey has been a priority for the team over the past 12 months.

“We have worked really hard, found a new buyer, and are building a strong relationship with them,” says Andrew.

“This means we already have a contract in place for the 2020/2021 season and have almost achieved our budgeted sales for the year ahead. We are in a much better position than this time last year and are looking for other ways to de-risk the apiary business.”

“Large valuation changes each year is something we want to avoid. But over the years that we have been a producer in the honey market we have experienced how dynamic it is. Factors like Covid and changes to purchaser and consumer demands and market expectations occurred, to name a few. Honey is unique when compared to other markets, which makes valuing our product difficult.

“This year we’ve been more conservative in our pricing and have been able to base it on a growing base of actual sales data, which should reduce the degree of variation in our future revaluations.”

The complexity of the honey market and the volatility in pricing for valuing honey stocks, means that the Incorporation’s auditors also focus their review closely on this area of the business. This means any errors would be picked up immediately, a reassuring measure for both management, the board and shareholders.

“Despite the challenges, our apiary business remains a solid investment, consistently delivering around twenty percent of annual income,” says Andrew.

“Some of the difficulties we face are because it’s a young industry that is still maturing. But honey doesn’t go off, and one challenging season with low industry-wide production is all it will take for the market (and prices) to significantly change. Finding better paths to market will also help us to ride the peaks and troughs in a more sustainable way, now we are confident we can sell the honey that we produce. We have made a lot of progress in this space over the last year.”

“Our honey business delivers more than just financial gain to the organisation. We have been growing the team too – providing jobs and training for our uri in line with our kaupapa. Honey is a crucial aspect of our current and long-term strategy – to diversify to reduce risk, to broaden our asset base and to ensure appropriate land use. Honey is an integral part of what we do today, tomorrow and into the future.”

Ensuring shareholder understanding of how the business is performing is vital, and by including the additional information in the Financial Statements, Andrew and his team seek to give confidence and assurance.