Drought skimmed 1.4% off SA milk production
THE SOUTH African milk industry produced less milk last year than it did in 2015, because of the drought.
Clover Industries said total milk production was 1.4 percent lower in 2016 compared with 2015.
However, Clover chief executive Johann Vorster said he was optimistic that the year ahead will be better, because the drought showed signs of abating in late 2016.
The summer rains in most parts of the country resulted in the company seeing better milk production in December last year than in December 2015. Production in December 2016 was estimated to have been 0.9 percent higher than in December 2015.
Revenue The group’s revenue increased by only 2 percent to R5.1 billion for the six months to the end of December, because of higher product selling prices.
Vorster said that, in addition to the higher cost of raw milk, packaging costs increased on the back of the weaker rand at the beginning of the reporting period, while a sharp increase in the cost of ingredients, driven by the cost of sugar and a shortage of fruit pulp concentrates, placed further pressure on the group.
“To recover these high inflationary input costs, Clover increased its selling prices in most categories.
“The combined effect of higher selling prices, subdued consumer sentiment and a comparatively wetter and cooler summer impacted overall sales volumes and market shares in certain categories.
“However, Clover did increase sales of new products, and stringent supply chain cost savings largely mitigated an overall decline in principal income,” Vorster said.
The group said selling and distribution costs increased 7.1 percent to R69.8 million, because of costs linked to additions on its distribution platform and marketing costs linked to the launch of new products.
The group had incurred costs of R23.6m to integrate the City Deep distribution facility into the Clayville distribution facility.
“The board remains confident that the long-term benefits of the City Deep integration and new launches will accrue in the second half of the financial year and beyond.
“Clover has invested significantly behind its focus on new brands and new market development, with research and development receiving a 20 percent increase to R29.2m,” Vorster said.