Clover to fill capacity created by its expansion programme
CLOVER would in the next four years work on filling the capacity that it had created through expansion programmes it had been involved with in over the past few years, the group’s chief executive Johann Vorster said yesterday.
“Now that the Cielo Blue project is complete, the first priority now for us is to fill the capacity that we have created through acquisition or launching of new products,” he said.
The owner of Tropika, Aquartz Mineral Water and Quali Juice invested about R171 million as part of its Cielo Blue project in the expansion of its Queensburgh production and distribution facility in Durban.
It also acquired the yoghurt and long-life milk business of fellow dairy company DairyBelle for R200m in May.
Vorster said Clover thought that buying the DairyBelle yoghurt business would give the group capacity for two years. However, it was sold out within a month and half.
Clover had since ordered another machine, which was part of the capital expenditure project, at R65m.
The new machine will include packaging and processing lines and will be available between September and October.
Vorster was concerned that Clover was under-supplying the market, but hoped that would change in the future.
He commended the supply chain, saying that both Clover and DairyBelle yoghurt volumes had increased at the same rate.
Vorster said Clover was, however, hesitant of getting other principals only to leave them when the new production line came in at the end of year.
The group was able to increase its revenue by 7.9 percent to R4.7m mainly as a result of selling price increases implemented in June. Gross margins were up by 31 percent with operating margin increasing to 6.9 percent from 5.4 percent in the previous period.
The dairy industry had experienced difficulties in increasing prices in the comparable six months last year, which had led to lower results.
“The increased selling prices and profitability did, however, impact on volumes as expected, resulting in market share contraction across most categories,” Vorster said.
But Clover said it had managed to get the price increases through in the past six months, leading to the group being able to restore its margins, but losing a bit of market share in a process.
Overall sales volumes declined by 3.2 percent.
“For us it has been a very good result, especially since we had a couple of launches in the new products and a lot of… longerterm investments.
“We had spent R47m more compared with the previous period in research and development as well as marketing,” Vorster said.
Clover shares on the JSE fell 2.31 percent to R19.05.