Sugar tax takes toll on South Africa’s Clover Industries Limited performance

SOUTH AFRICA – Clover Industries Limited, a South African branded consumer goods and beverages group, has revealed that sugar tax has continued to implicate on its performance shaving off US$2.98 million during its recent half year period.

The Johannesburg Stock Exchange (JSE) listed group posted 4.1% growth to US$309.66 million during the six months 31st December 2018 period.

However, clover said that costs of distribution increased during the period which in addition to the sugar tax introduced in April 2018 contributed to a decline in its net profit by 0.3% to US$16.36 million.

“In addition, the sharp increase in fuel prices during the latter part of the 2018 calendar year made it difficult to contain distribution costs, which could not be passed on to the consumer,” the company said.

The group has also faulted declining consumer spending and challenging operating business as other contributors to the performance.

“The ongoing deterioration in disposable household income has had an adverse effect on consumer goods companies, and consensus amongst analysts is that tough times lie ahead for SA’s food producers.

Clover’s early implementation of its strategic focus contributed to a stable performance, despite pressure on consumer spending,” Clover said in its results.

Despite a decline in operating margins from 8.8% the previous year before to 7.8%, because of the sugar tax, the company recorded a moderate growth in sales volumes and prices of certain products.

“During the period under review which was characterised by low growth and constrained consumer spend, we took a consumer-centric approach by ploughing savings back into selected selling prices.

This together with our investment in marketing and sales campaigns as well as expansion of our sales team, supported volume growth and market share increases across most product categories,” the company added.

However, the company raised its interim dividend per share by 5% to 27.89c and reached a market capitalisation of US$309.66 million.

In February, Clover received a US$359.88 million takeover offer from a consortium led by Israel-based Central Bottling Company, a deal that has however spiked resistance from several groups in the country, reports Business Report.

If the deal is approved Clover could be delisted from the bourse in May this year.

Among others, the Boycott Divestment Sanctions (BDS) has pushed for the consortium’s local partner Brimstone to review its participation in the transaction, which will culminate in Clover’s delisting from the JSE.

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