Clover gives ‘staggering’ update on half-year results

Zeenat Moorad

CLOVER‚ South Africa’s biggest dairy distributor‚ on Friday said it expected headline earnings per share for the half-year ended December to be between 82% and 92% higher than the 40.7c reported in the corresponding period of the previous year.

The sizeable rise is due to once-off elements such as cost-saving initiatives and exchange-rate profits made by certain African subsidiaries due to the weakening of the rand.

“The increases are attributable to the non-recurring marketing investments in new product launches made during the first half of last year‚ the implementation of selling-price increases to the market in January last year and again early in the current reporting period‚ reduced promotional activities following the selling-price increases and the positive contribution of project Cielo Blu‚” Clover said.

Cielo Blu was started when the company listed in 2010 and had the cash to tackle logistical and distribution inefficiencies in its business by investing in the expansion and relocation of its infrastructure. The primary capital project included the relocation of the company’s long-life milk processing plant‚ from Midrand‚ Gauteng‚ to Perseverance‚ Port Elizabeth.

Vunani Securities analyst Anthony Clark said the update was “remarkable”.

“It’s a very good result‚ it’s staggering‚ but unrepeatable because there are a number of once-off factors in this results which pushed the trading statement to these sort of levels.

“Cielo Blu is coming to an end and the benefits have accrued to the business and there will be more going forward. In this trading update they are coming off a low base too because this time last year they had issues with new packaging and pricing and new products in the market which had increased marketing and promotional spend‚” he said.

Clover noted that earnings per share for the period under review were expected to be 80%-90% higher than the corresponding reporting period’s 46.4c.

“Clover does not expect this level of earnings improvement to continue into the second half of the 2013-14 financial year due to strong overall inflationary cost pressure specifically relating to raw milk‚ packaging and fuel costs and the negative impact of the high inflationary environment on consumers‚” the dairy player said.

Clover will release its results on or about March 17. “I remain very positive on the company purely because its expansion into new dairy categories and the breakage of the Danone agreements means it has significantly new growth areas.

“The next big expansion at Clover will be when it starts moving into new product areas of custard‚ yoghurt and processed sliced cheese. So there is further growth to come in the company‚” Mr Clark added.

In September Clover said it would end its supply and service agreement with Danone‚ allowing it to make high-margin products such as yoghurt.