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Clover rises above tough trading environment

10th May 2019

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed Clover continues to increase its markets share in various categories on the back of marketing investments and additional trade support, boding well for its future performance, despite weaker trading conditions than in the previous year.

In a statement on Friday, the company indicated that, for the 12 months ending June 30, it expects its headline earnings a share to be more than 180.5c higher than the 23.1c headline loss a share reported for the prior financial year.

Further, earnings a share for the current period are expected to be more than 182.7c higher than 19.9c loss a share reported for the prior financial year.

The company, which expects to publish its full-year results on or about September 10, however, cautioned that it continues to operate in a very uncertain environment, having experienced several short-term setbacks and challenges.

Nevertheless, it did record some positive advances that would be realised in the next financial year and beyond.

Clover highlighted that its spreads and margarines that were launched in March were well received by the trade. Owing to the tough trading conditions, there has been a delay in price increases to the trade, which the company now expects to go through between May and August.

A fire at Clover’s Estcourt powder factory, in March, caused severe damage to the facility and considerably impacted on the availability of cream as the company could not produce skim milk powder. This, in turn, impacted on production of certain highly profitable products.

Clover indicated that it was comprehensively insured for the assets affected by the fire and the resultant loss of profits. It is still in discussions with its insurers to quantify its claim.

Services-rendered income has come under pressure as volumes in dairy farmers of South Africa Proprietary – one of its principals – have declined considerably, negatively impacting on fee income.

Moreover, Clover only received service fee income from the Remgro (previously Unilever) spread business until February, as the distribution contract was not renewed.

A new principal, being the Willowton Group, has however been signed up with effect from May 1.

Efficiencies and the full financial impact of the contract will only be realised in the next financial year.

A new five-year agreement has also been signed with Danone Southern Africa to provide certain warehousing and distribution services with effect from July 1.

The company indicated that the value of the contract, which is in excess of R400-million, could have a meaningful impact on Clover going forward.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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