Clover profits on the decline

March 1  2017 – CLOVER Industries pointed to depressed economic growth in South Africa’s retail sector as operating profit declined by 5.2 percent to R322 million for the six months ended 31 December 2016.

Though the dairy products group grew its revenue by 2.1 percent to R5.1 billion, it saw headline earnings per share (HEPS) declining by 14.7 percent to 99.8 cents compared to HEPS of 116.96 cents reported for the comparative period.

Clover said the country’s retail sector had been characterised by rising input costs, weaker consumer spending and general food price inflation, adding that consumers were likely to remain under pressure.

The severe impact of the drought on maize and other crops, as well as substantial increases in input costs as a result of inflationary pressure and the rand volatility, also impacted negatively on Clover’s performance.

Clover said this situation necessitated further increases in raw milk prices. And although sales prices returned to more realistic levels, sales volumes came under pressure, resulting in a muted performance for the first six months ended 31 December 2016.

This comes as Clover is in the process of restructuring its current operations.

The restructure will effectively result in the group rearranging its business in a way that will see Clover continue its strategy of focusing on branded products whilst simultaneously supporting the ambitions of its milk producers to pursue a volume growth strategy through a newly formed special purpose vehicle, Dairy Farmers of South Africa (DFSA) that will acquire the dairy fluid business.

Though the process of formalising the restructuring by drafting the relevant agreements planned is still underway, the implementation date for the restructure is scheduled to be 1 July 2017.

Clover declared an interim dividend for the six months ended 31 December 2016 from retained earnings of 24,21 cents per share.– ANA