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Clover earnings diminished by discontinuation of Danone services

16 Sep 2014

Branded foods and beverages group Clover Industries (CLR) said it expected some "financial implications" from the discontinuation of the Danone services and that there would be a "delay" in replacing the lost income in the short term.

Clover earnings diminished by discontinuation of Danone services

In 2013‚ Danone and Clover reached an agreement for the company to sell its 45% shareholding to Danone for R1.085bn.

The company‚ which released its full-year results on Tuesday‚ said one of its key initiatives following the conclusion of Danone's services at the end of 2014‚ included re-entry into the yoghurt and custard market by the first quarter of 2015.

The group approved a R150m investment in a yoghurt production facility to take advantage of the new market opportunity and planned to secure about 20% of the market over the next five years.

Clover said "strong overall inflationary cost pressures‚ especially on packaging and ingredient costs" affected headline earnings‚ which decreased 12.8% to R187.5m.

"In addition‚ we increased the price we pay for raw milk to ensure on-farm sustainability‚" it said.

Operating profit dipped to R282.3m from R371.6m in the year-earlier period and a final dividend of 16c per share was declared.

Clover said it would continue to deliver on its targets‚ including volume and market share growth‚ the reduction of overall costs‚ especially in the supply chain‚ despite some of the most challenging trading conditions in its recent history.

"We expect the current subdued operating environment to continue for the foreseeable future‚ given the current cycle of interest rate increases‚ a low growth economy‚ rising unemployment and the aftermath of the protracted labour actions that have to work their way through the economy.

"As demonstrated by the success of our new platforms in difficult economic conditions‚ the successful execution of our expansion plans for new value-added products and platforms is imperative. This will allow us to leverage our iconic brand and production capacity as well as expanding our business further into sub-Saharan Africa‚" it said.

Source: Business Day

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