CLOVER INDUSTRIES LIMITED - Trading update and trading statement

Trading update and trading statement

Clover Industries Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/030429/06)
Share code: CLR ISIN No: ZAE000152377
NSX Ordinary Share code: CLN
(“Clover” or “the Group” or “the Company”)

TRADING UPDATE AND TRADING STATEMENT

Trading update
Shareholders of the Company are referred to the voluntary Stock
Exchange News Service (SENS) announcements of 27 October 2016 and
5 December 2016 advising that trading conditions remained
constrained with sales volumes tracking below anticipated levels.

The Company further advised that strong trade during the festive
season was critical to match the financial performance achieved
for the six months ended 31 December 2015 (“comparative period”).

Shareholders are hereby advised that December volumes tracked
markedly lower than the comparative period. All categories with
the exception of UHT and fermented products reported lower volumes
than in the comparative six-month period, mainly as a result of
negative consumer sentiment that was further compounded with the
wet and cooler summer compared to the heatwave that prevailed in
the comparative period.

The Company had to increase its selling prices in the market
substantially to recover not only inflationary cost increases, but
also a higher than anticipated raw milk price due to the continued
drought, and sales volumes as a result came under further
pressure.

While the Group anticipates an increase in overall revenue, it
does not expect the increase in revenue to fully absorb all
inflationary cost increases in the first half of the year, and as
a result, a fine balance was needed to balance price increases and
protect our market shares.

Importantly, significant once-off restructuring costs related to
the integration of the Company’s City Deep distribution facility
into the Clayville distribution facility were incurred during the
period. In addition, Clover continued to expand its value-added
product range with new listings which generally attract higher
initial costs to establish the product in the trade.     The Board
remains confident that the long-term benefits of the City Deep
integration and new launches will accrue in the second half of the
financial year and beyond.

Trading statement
Shareholders are hereby advised that due to the reasons explained
above, Clover expects headline earnings for the six months ended
31 December 2016 (“the period”) to be between 14.6% and 24.6%
lower and earnings to be between 12.1% and 22.1% lower than the
comparative period.

Headline earnings per share (“HEPS”) for the period is expected to
be between 15.7% (18.33 cents) and 25.7% (30.02 cents) lower than
HEPS of 116.96 cents reported for the comparative period. Further,
earnings per share (“EPS”) for the period is expected to be
between 13.2% (15.36 cents) and 23.2% (26.96 cents) lower than EPS
of 116.07 cents reported for the comparative period.

Despite the lackluster operating environment, Clover remains
committed to its medium to long term goals of investing in and
growing its value added product portfolio and to balance cost
recoveries from consumers with market position.

Shareholders are referred to the SENS announcement of 5 December
2016 regarding the Group’s proposed restructure to give effect to
its stated objective of developing higher margin, value added
products in dairy and other related food categories and to
eliminate its exposure to the cyclicality of its low margin
business in future. The planned restructuring aims to accelerate
this migration process away from low margin products. Further
details of this proposed restructure will be communicated in due
course.

The forecasted financial information on which this trading
statement is based has not been reviewed and reported on by the
Company’s external auditors.

The Company expects to release its annual financial results for
the year ended 30 December 2016 on SENS on or about 01 March 2017.

Johannesburg
18 January 2017

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

NSX Sponsor
IJG SECURITIES

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