Johannesburg - Dairy products company Clover would soon make an announcement regarding three strategic acquisitions in Angola, Nigeria and east Africa for a total cost of R470 million, the company said yesterday.
Clover’s plans to seek new markets in the rest of Africa and follow rival producers, such as Pioneer Foods and Tiger Brands, which have expanded to countries such as Nigeria and Kenya as opportunities for growth in their home market remains muted.
Clover is also considering building South Africa’s first dairy mega-factory to boost exports to the rest of the continent from a country that consumes about 98 percent of the milk it produces, potentially countering the need for future volume and price cuts.
The proposed plant would be built near Estcourt in eastern KwaZulu-Natal for R890m and would produce dairy products including milk powders and baby foods, Clover chief executive Johann Vorster said.
The facility will be the first of its kind on the continent, employing technology that will ensure an efficient process, resulting in less wastage of by-products, and will make dry milk-based lines that can last for as many as two years.
Fonterra Cooperative Group, the biggest dairy exporter, was advising Clover on the plant, Vorster said.
“The sad thing about South Africa is that we have to cut milk prices every three, four years to keep volumes in check,” Vorster said. “The infrastructure is just not there to export,” he added, referring to plants that were able to manufacture for sales in other markets.
Turning to its latest annual results, the maker of Tropika, Aquartz Mineral Water and Quali Juice conceded that tough conditions in the previous year would have had a bigger impact on results save for price increases reported in the 12 months to June.
At the same time, the group said it had received a boost from the market liking its new product range of yoghurts and custard that it had introduced in January. This followed the expiry of the restraint of trade with Danone and the acquisition of the Dairybelle yoghurt and ultra-heat treatment (UHT) businesses.
In the year to June, Clover reported an 82.9 percent rise in profit for the year to R345.7 million up from R189m.
Lucky
The group’s operating profit rose by 80.3 percent to R509.1m, while headline earnings per share increased by 69 percent to 173.6c compared with the year-earlier period.
Revenue gained 8.6 percent to R9.3bn. A final dividend of 33.4c per share was declared for a total dividend of 56c, up by 75 percent from the prior year.
Vorster said the low inventory levels at the start of the year, following the raw milk shortage experienced during the winter of 2014, contributed to volume and market share losses in cheese and hindered the strong volume growth achieved in UHT sales.
Vorster said the company had also been lucky in not being adversely affected by prevailing macroeconomic conditions of lower than average growth, declines in commodity prices, a rapidly weakening currency and the possibility of interest rate hikes later this year.
“The pressure has been on juices and other categories of discretionary spend. Overall we have been lucky, particularly with the drop in oil prices, which helped us in acquiring some inputs cheaper while the weakening of the rand helped in keeping more imports out of the market,” he said.
With effect from June 1, Clover has been providing sales, distribution, merchandising and credit control services to Dairybelle, which will further lessen the impact of the loss of revenue from Danone.
* Additional reporting by Bloomberg
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