Clover’s operating profit grows by 10.9%
R564.45m in the year to end June
FOODS and beverages group Clover yesterday reported a 10.9 percent increase in operating profit to R564.45 million for the year to end June, up from R509.07m reported last year.
The company said its headline earnings a share increased by 8.9 percent to 188.9 cents while earnings a share came down 2.4 percent to 185.9c, down from 190.4c a share reported for last year.
The company said revenue improved 6 percent to R9.82 billion for the year.
Chief executive Johann Vorster said the results reflected the difficult market conditions under which the company was operating.
“Dairy is very devastating place to be in at the moment,” Vorster said. “We have embarked on a radical cost efficiency drive to mitigate the impact of higher-than-expected inflationary cost increases across Clover’s value chain.”
The company said the weakening of the rand against major currencies during the period saw it incurring higher-than-expected cost inflation.
Working capital
Cash generated from operations, before working capital changes, totalled R709.7m compared with R566.7m reported in the prior year. The group reported that working capital absorbed R36.2m of cash compared with R406.5m last year.
Vorster said farm gate milk prices fell in August last year as the national milk intake was still 7.2 percent higher than the previous year, which yielded unprecedented growth.
“Due to lower farm gate milk prices and higher feed costs, milk production slowed from the exceptionally high levels of the preceding 18 months, which considerably eased the need for investment in inventory,” he said. The company had invested heavily in acquisitions since listing in 2010. He said Clover would continue to invest in facilities and in its factories.
“We have made some acquisitions that will be very important for the business in the future,” he said. “This level
Closing price of Clover shares on the JSE yesterday
of investment was needed to maintain Clover’s outstanding reputation for quality products. Our brand reputation is underpinned by Clover’s chilled distribution network, which is universally regarded as South Africa’s finest. This invaluable asset also required a significant investment to maintain its hard earned reputation,” Vorster added.
Clover reported that its investment activities consumed R332.6m in cash compared with R556.8m in the previous year, following the acquisitions of the Dairybelle yoghurt and UHT businesses and the Nkunzi MilkyWay business. Clover also spent R101.4m less capital on tangible assets.
Cost cutting
The board declared a total dividend per ordinary share for the year of 65.15c per share, up from a dividend of 56c per share declared last year.
Lee Kern, an assistant portfolio manager at Cratos Wealth, said cost-cutting measures implemented by the company contributed to the positive performance. Kern said inflationary costs absorbed through these measures saw sales volumes rising.
“The joint venture with Good Hope International Beverages to create Clover Good Hope providing Clover with a platform into soy-based products and long life fruit juices is good for the company,” Kern said. “This will allow the company to have export opportunities to more than 40 countries around the globe, including the EU, Japan, New Zealand, Australia, Canada, and the US, among others.”
Clover shares rose 0.21 percent to close at R19.10 on the JSE yesterday.