Clover looks back at a hard year
FOOD and beverages group Clover Industries share price shed 6.37 percent after it released its results, which showed a decline in profits.
The price dropped to its lowest level of R13.18 a share in five years, declining from Monday’s closing price of R14.02. However, it recovered in the afternoon before closing at R13.50 by the end of the day.
Chief executive Johann Vorster said Clover faced an exceptionally challenging year.
“The most significant impacts on the performance such as the prolonged drought, a wetter and cooler summer and rand volatility were unfortunately beyond our control. These were all onceoff impacts that affected our results,” Vorster said.
These once-off costs amounted to about R196.8 million during the year, he said.
“We spent R46.8m on restructuring, R90m on drought and R60m was spent on project launches. We do not think that in the near future our results will be negatively impacted by these events, because we believe they were once-off,” Vorster added.
For the year to end June, Clover reported headline earnings decreased 65.9 percent to R121.6m, while headline earnings per share slid by 66.2 percent to 63.9 cents a share.
Operating profit decreased 44.3 percent to R314.5m, while the operating margin decreased to 3.1 percent from 5.7 percent as compared to the past year.
Clover reported a 2.4 percent increase in revenue to R10 billion.
The group said its total dividend was 24.21c a share, 62.8 percent lower than the previous year.
The period also saw the group experiencing substantial increases in input costs, with raw material costs showing an increase of 6 percent to R218m.
On the back of the drought, raw milk prices increased by an average of 13 percent as dairy producers required protection to stimulate milk flow, while sugar and fruit pulp also increased by 13 percent.
Packaging costs rose 4.9 percent, driven by weakening exchange rates.
Milk collection costs decreased 3 percent, given the general volume decrease and manufacturing costs rose by 3.7 percent, primarily due to higher wages, increased outsourced production and energy cost increases, while primary distribution costs decreased by 2 percent, mainly owing to lower volumes.
The group said with tough market conditions, it focused on cost saving initiatives during the review period.
“The management team drove efficiencies and cost savings, especially on variable costs exceptionally hard. Executive management volunteered for a salary freeze and head office managed to avoid inflationary increases to overheads, while reducing its overall spend by 9.6 percent or R25m.
The operational restructure involved the creation of a newly formed entity, Dairy Farmers of South Africa Proprietary Limited (DFSA). This operational restructuring was finalised in July when Clover issued the B-shares to producers which constitute 74 percent of the voting rights in DFSA. Clover now holds the A-shares which constitute 26 percent of the voting rights in DFSA.