Clover formed a special purpose vehicle to source raw milk directly from its milk suppliers.     Simphiwe Mbokazi/African News Agency (ANA)
Clover formed a special purpose vehicle to source raw milk directly from its milk suppliers. Simphiwe Mbokazi/African News Agency (ANA)
Clover formed a special purpose vehicle to source raw milk directly from its milk suppliers.     Simphiwe Mbokazi/African News Agency (ANA)
Clover formed a special purpose vehicle to source raw milk directly from its milk suppliers. Simphiwe Mbokazi/African News Agency (ANA)
JOHANNESBURG – Branded consumer goods company Clover has bounced back from the crippling drought of 2016, reporting a bumper R611 million operating profit for the year ended June 2018 - the highest since its listing eight years ago.

The group said the hike was 94 percent better than the 2017 reporting period, as it had to withstand a hammering drought mainly in KwaZulu-Natal.

Chief executive Johann Vorster said the group had returned to profitability, despite the threat of the VAT increase, high fuel prices, rising unemployment and rand volatility placing disposable incomes of consumers under strain.

“Returning the business to historical profitability levels was no easy feat, and required a collaborative effort... We re-focused on the basics and took a consumer-centric approach to improve efficiencies and reduce costs,” Vorster said.

Clover said normalised headline earnings rose 223 percent to 206c during the period, paving a way for a dividend of 75.25c to shareholders.

The group, however, posted a R439m impairment on its 20-year revolving credit facility it had extended to the Dairy Farmers SA (DFSA), despite the robust financial performance.

The impairment saw the share price sliding by 4percent to trade at R14.29 a share.

Clover also announced that DFSA chief executive Louis Botha quit amid mounting pressure, following an enormous conflict between losing milk producers or losing market share. DFSA chairperson Dirk Reyneke also quit to give the opportunity to the producer shareholders to appoint their own management.

The company said it was now in search of a new management team.

DFSA incurred a loss of R128.8m for the financial year as a result of national milk surpluses stimulated by higher milk prices paid to milk producers from July 2017 to December 2017, as well as better weather patterns in many parts of the country in summer.

Clover formed DFSA as a special purpose vehicle to source raw milk directly from its existing milk suppliers as part of the restructuring of the company last year.

Clover owns 26 percent of DFSA and 74 percent of the entity was made available to its producers.

Ron Klipin, an investment analyst at Cratos Wealth, said the improved Clover results signalled that management was moving in the right direction.

“Management has delivered despite consumers being in a tough space,” he said.

“Management has also moved away from the cyclical business and more to value-added products."

Clover yesterday closed 0.74percent lower on the JSE at R14.78.

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– BUSINESS REPORT