Dairy products group Clover Industries on Tuesday pointed to prolonged drought conditions, a wetter and cooler summer, and rand volatility as headline earnings decreased by 65.9 percent or R235 million to R121.6 million for the year ended 30 June 2017.
Clover said the drought also had a major impact on the availability and increased cost of raw milk and fruit pulp.
The group said the decrease in headline earnings was primarily because of headline operating profit, which decreased by 52.4 percent, or R298 million, and net finance costs, which increased by 18 percent or R20.3 million.
This was an exceptionally challenging year for Clover as South African food producers and retailers had to contend with several complex and ongoing issues in the economy.
Consumer spending and investor confidence in South Africa remains dampened despite the economy emerging from recession in June, helped by a recovery in agriculture after a drought last year.
The resultant above-inflation input costs, subdued volume growth and continued low consumer spending amidst aggressive competitor pricing forced Clover to take some very tough decisions during the year, to position and sustain the business optimally against a constrained “new reality” it said.
Clover decided to invest its future funds in more profitable businesses that will suit its business model better, whilst remaining a substantial service provider to the dairy industry after realising new trends in the milk business model where owner-producers supply the trade directly, as opposed to traditional intermediary companies.
Clover’s revenue improved by 2.4 percent or R239.9 million to just above R10 billion. Approximately R46.8 million was spent on retrenchment costs, which are classified as restructuring expenses.
Clover said though consumer confidence remained lacklustre, with discretionary spend under pressure, the improved outlook for inflation and the recent reduction in interest rates should provide some relief although the prospect of future interest rate cuts was uncertain.
“We, therefore, remain optimistic and excited about Clover’s future as we have considered and employed measurable strategies that will return the company’s profitability to historic levels over the medium and longer term,” the company said.
The board resolved not to declare a final dividend due to the current weak economic circumstance and the group’s growth funding requirements.
– African News Agency (ANA)
