AN IMPROVED product mix and higher selling prices combined with good volume growth helped Clover increase earnings in the year ended June, the dairy products company said on Tuesday.
Headline earnings grew 18.6% to R207m from R175.2m in the previous year. A 16.4% increase in operating profit and a 36.3% reduction in net financing costs contributed to the rise in headline earnings, the company said.
Clover said revenue rose 10,4% from R6,5bn to R7,2bn due to services to its principals and good volume growth, while its operating margin for the year under review improved from 4.9% to 5.1%.
Although it is a relatively small part of its business, Clover is one of the country’s largest providers of chilled and ambient distribution services. During the period it increased revenue from rendering services to principals by 18.9% as a result of additional distribution capacity, volume growth and new business won during the year.
"We are pleased with this solid performance, despite inflationary pressures, high input costs and a lacklustre economy. We are confident that the continued implementation of Cielo Blu, ongoing cost savings and other margin-enhancing projects will ensure that Clover retains a healthy market share and strong balance sheet." said CEO Johann Vorster.
The Cielo Blu project aims to redress historical inefficiencies in Clover’s distribution network and is due for completion towards the end of next year.
Mr Vorster said consumers were still under pressure and had been downtrading in the period.
"It is important to note, however, that there is strong middle-class growth. Consumers are becoming more sophisticated," he said.
"Over the next 18 months, efficiency-enhancing projects such as Project Cielo Blu will provide a base from which to further grow market share while enhancing the quality and brand power of Clover’s products," Mr Vorster added.
He said a milk price increase could be on the cards in the year ahead as a result of input cost pressures at farm level, which could put more pressure on selling prices.
"The global economy is set to remain uncertain in the year ahead and Clover is bracing itself for another difficult year economically in South Africa," the company said.
Clover declared a dividend of 13.4c per share.
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