SOUTH AFRICA – Clover S.A. Ltd, consumer goods and products producer reported 7.7% revenue growth to US$352.50 million in the six months to December, attributed to a series of efficiency improvement initiatives.
The company’s operating profit shot up 14.8% to US$31.05 million, with headline earnings per share jumping 17.8%.
Establishment of Dairy Farmers SA (DFSA) made a significant contribution to high revenues due to high volumes of raw milk collected through the program.
This, together with initiatives to restructure the raw milk supply for the dairy segment allowed the company to put complete focus on the value-added sector of the business.
DFSA was created as a subsidiary of Clover S.A mandated to ensure the procurement and collection of milk, exports, finding new markets, supply of milk to other dairy processors and trade negotiations.
They are these efforts that drove the strive for developing higher-margin products, while limiting its price exposure to supply-and-demand cycles.
“By the end of this financial year [June 2018] we will have a full year to compare,” said Johann Vorster, CEO of the group.
Lower retail volumes as a result of poor weather were offset by growth in sales exceeding market expectations, as consumers took advantage of promotions.
Clover said that high revenue was also as a result of new product launches and product reformulations which led to lower ingredient and sugar costs.
Overall volume rose 8% while market share grew across a number of product categories after an initiative to plough savings back into the selling prices of selected products.
“Management needed to show it had addressed the issues that led to a very poor financial result last year and these results highlight to us that it is well on the road to meeting and even exceeding previous profitability levels,” said Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management.
He added that through DFSA, Clover is in a position to remove the low-margin, low-growth product from its results and they on the right track that will help meet and even exceed previous year’s profitability levels.