Considering the milk surplus experienced during the six months ended December 31, 2015, as well as the loss of a major principal’s income, JSE-listed Clover is pleased with its results for the period, reporting increased revenue of between 5.8% and 10.8%.
South Africa’s milk supply remained much higher month-on-month in 2015, compared with prior year periods, except in December 2015. “This national oversupply of raw milk inevitably impacted negatively on local market prices, which were further affected by very low international dairy commodity prices during the calendar year,” the dairy products producer said on Monday.
Clover explained that its unique milk procurement system successfully maintained a balance between its milk intake and market demand (sales), although downward pressure on overall market prices impacted on the secondary industry as a whole.
To a large extent, Clover’s selling price decreases in the market were absorbed by extensive cost-cutting initiatives and increased efficiencies group-wide.
However, the mounting ramifications of a protracted drought across some areas of the country had resulted in a shortage of feed and an increase in on-farm costs. This, Clover calculated, “may necessitate further increases in selling prices”.
Meanwhile, the loss of principal income was largely mitigated by increased sales of existing and new products, as well as income from a new principal contract.
Overall, Clover’s brands traded in line with expectations, buoyed by solid demand during the festive season and effective cost management. “Where necessary, Clover adjusted its price premium to successfully defend its market share in some categories,” the company highlighted, adding that the severe heat wave and drought conditions resulted in the exceptional performance of its beverage portfolio.
“The majority of newly launched products also traded above expectations, with value-added products not exposed to dairy price fluctuations performing especially well,” stated Clover, which in October reported that it bought a 51% stake in Frankies Olde Soft Drinks.
Clover attributed its redesigned strategy since listing and its management’s ability to rapidly adapt to market changes, enabling the company to employ numerous levers, to its ability to mitigate the cyclicality of the business.
For the period under review, Clover expected headline earnings to be between 7.9% and 12.9% higher than that achieved for the previous comparative period, and earnings to be between 1% below and 4% higher.
Headline earnings per share (HEPS) for the period under review are expected to be between 4.7%, or 5.14c, and 9.7%, or 10.60c, higher than HEPS of 109.22c reported for the comparative period. Further, earnings per share (EPS) for the period are expected to be between 3.9%, or 4.57c, below and 1.1%, or 1.32c, higher than EPS of 117.76c for the comparative period.
“HEPS and EPS is less than headline earnings and earnings, as the weighted number of shares increased as a result of equity settled share appreciation rights that were exercised by management during the previous financial year,” Clover noted.
The company expected its interim financial results for the six months ended December 31, 2015, to be released on or about March 2.
This financial information had yet to be reviewed and reported on by Clover’s external auditors.