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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 Company”)
TRADING STATEMENT
In terms of the Listings Requirements of the JSE Limited, a listed
company is required to publish a trading statement as soon as it
becomes aware that the financial results for the financial period
to be reported on next will vary by 20% or more from those of the
previous comparable period.
Shareholders are referred to the announcement of the financial
results for the six months ended 31 December 2016, issued on 1 March
2017, whereby shareholders were advised that Clover had to contend
with many complex challenges during the period. The prolonged drought
and rand volatility resulted in above inflation input costs which
could not be recovered through revenue increases as consumer
sentiment was subdued and competitive pricing aggressive. Clover’s
price increases and a comparatively wetter and cooler summer also
negatively impacted sales volumes.
As expected, several of these challenges continued to impact the
business during the second half of the financial year. While many
factors were beyond the Company’s control, certain tough strategic
decisions needed to be made at the expense of this year's results,
but in aid of longer term sustainability.
The drought resulted in high farm gate milk prices to ensure
sustainability of supply, and fruit pulp prices also remained
inflated as a result thereof. These two unavoidable factors have
been the largest disrupters of this year's results.
Clover increased selling prices to recover these higher input costs,
however pressure on volumes and market shares was experienced as
consumer sentiment remained subdued. Although these unfortunate
events weighed in heavily on the results, strategically it was the
correct action to take, as the Clover brand is heavily reliant on
the continued supply of quality milk and fruit pulp. In order to
protect its market shares, Clover began dealing in promotions during
March 2017 and April 2017, and the regaining of market shares and
increased volumes are already evident.
Clover deliberately maintained its rejuvenated high volume
infrastructure as it was unclear if volumes would return, however
after a thorough strategic review of the business environment, and
its internal capacities, it was concluded that the muted
environment will be extended for some time and structural changes
in Clover's infrastructure have therefore been introduced to balance
its supply and demand expectations in future, which will lead to
significant cost savings on its current cost base.
Following Easter, which is traditionally a high trading period,
Clover is now able to provide more informed guidance on its financial
results for the year ending 30 June 2017.
Accordingly, shareholders are advised that, for the twelve months
ending 30 June 2017:
- Headline earnings per share (“HEPS”) is expected to be between
50.0% and 65.0% lower than that reported for the year ended 30
June 2016 (“the previous corresponding period”). Accordingly,
HEPS is expected to be between 66.12 and 94.42 cents compared
to 188.9 cents reported for the previous corresponding period;
and
- Earnings per share (“ËPS”) is expected to be between 40.0% and
55.0% lower than that reported in the previous corresponding
period. Accordingly, EPS is expected to be between 83.58 and
111.56 cents compared to 185.9 cents reported for the previous
corresponding period.
The establishment of Dairy Farmers of South Africa Proprietary
Limited (“DFSA”), will significantly reduce Clover’s high exposure
to milk as an input source, once the operational restructuring is
fully implemented on 1 July 2017.
While the expected results are not desirable, management remains
optimistic about the Company’s future owing to:
- The end of the drought in certain parts of the country.
- Anticipated recovery of milk production volumes and normalised
fruit production volumes.
- The stabilisation of the rand has, hopefully curbed rising input
cost inflation.
- Improved cost efficiencies and increased sales supported by
investments made into production facilities, distribution
platforms, research and development as well as marketing.
- Benefits accruing from the City Deep integration and new product
launches.
- The impending operational restructuring of Clover’s current
operations, giving effect to its stated objective of developing
higher margin, value added products in dairy and other related
food categories and eliminating its exposure to the cyclicality
of its low margin business in future through the establishment
of a separate entity - DFSA.
Clover remains committed to its medium to long term goals of
investing in and growing its value-added product portfolio and
infrastructure. It will also continue to explore synergistic
opportunities to leverage its infrastructure and it is envisaged
that significant cost savings may materialise which can be passed
onto consumers.
The forecast 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 June 2017 on SENS on or about 12 September 2017.
Johannesburg
29 May 2017
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
NSX Sponsor
IJG SECURITIES
Date: 29/05/2017 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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