Results in: Is the Capilano Honey Ltd share price in the buy zone?

The Capilano Honey Ltd (ASX: CZZ) share price has edged lower this morning following the release of its full-year results.

At the time of writing its shares are down 1% to $16.35. Here are the key highlights from the honey producer’s results:

  • Revenue from ordinary activities down 0.4% to $133.1 million.
  • Earnings before interest and tax up slightly to $14.1 million.
  • Profit from ordinary activities after tax up 9% to $10.3 million.
  • Honey export sales down 18.8% to $22.5 million.
  • Final fully franked dividend of 40 cents per share.
  • Full-year earnings per share of $1.09.
  • Honey stocks up 20% to 5,953 tonnes.

Overall I felt this was a reasonably mixed result from Capilano Honey and I can’t say I’m overly surprised to see its share price edge lower.

The slight drop in its top line was due to the unfavourable impact of changes to net pricing with a key customer. This reduced revenue by approximately $3.4 million.

Elsewhere, a disappointing drop in international export sales weighed heavily on its results. Although honey prices have stabilised following last year’s softening, unsustainable prices and insufficient margins in the bulk honey market meant the company was forced to cease its supply to some international industrial segments.

Should you buy the dip?

Based on today’s result Capilano Honey’s shares are changing hands at approximately 15x full-year earnings and provide a fully franked 2.5% dividend.

Whilst I think this makes them about fair value given its result today, I’m not in a huge rush to invest.

Overall I’m quite disappointed with its export sales in FY 2017, especially as I felt they would be the key driver of growth moving forward.

But to see such a sharp drop in its exports and its Beeotic range appearing to not really add much to its top line result, I feel a touch underwhelmed.

As a result, I plan to hold out to get in at a lower price and focus on other consumer staples company’s such as Costa Group Holdings Ltd (ASX: CGC) and a2 Milk Company Ltd (Australia) (ASX: A2M) in the meantime instead.

As well as Capilano Honey, I'm avoiding these three toxic shares for the time being.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Capilano Honey Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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