Clover also expected its earnings a share to show an improvement as compared with 2017 results. Photo: Simphiwe Mbokazi/African News Agency (ANA)

DURBAN - Food and beverages group Clover gained more than 2 percent after it released a second trading update in which the company expects its headline earnings a share to increase by between 207.13 percent and 227.13 percent for the year to June.

In the first trading update released at the end of June, the group expected its headline earnings a share to increase by slightly more than 20 percent. 

However, in the latest update Clover said headline earnings a share were expected to between 196.26 cents and 209.04c a share, improving on last year’s earnings of 63.90c.

“During the current period, a mix of interventions by the management team and the normalisation of external factors enabled the company’s results to recover to expected profit levels compared with the disappointing results achieved in the comparative period,” the group said.

The share price jumped by 2.14 percent on Tuesday afternoon to R18.16 a share, from Monday’s closing price of R17.78.

The interventions and factors that helped the expected earnings include the normalised weather conditions following the drought-related difficulties that  significantly impacted the company’s performance compared with last year, lower input costs, aggressive fixed cost control, realisation of planned supply chain efficiencies and resultant lower costs as well as the successful exit and transfer of the cyclical low margin drinking milk business from Clover to Dairy Farmers of South Africa (DFSA), to name few of the favourable conditions for the company during the year.

Clover also expected its earnings a share to show an improvement as compared with 2017 results.

“Earnings a share for the current period are expected to be between 135 percent and 155 percent higher than earnings a share of 83.1c reported for the comparative period, resulting in expected earnings a share of between 195.40c and 212.03c,” the group said.

The group stated that the macro environment during the second half of the financial year was in some instances tougher than the first half and characterised by a rise in unemployment, a contraction in gross domestic product (GDP), rand volatility and ongoing price inflation, specifically higher fuel and electricity prices. 

“In addition, the introduction of sugar taxes and the VAT increase put a significant strain on consumer spending,” the group said. 

During the period the company said it decided to increase selling prices only moderately and to implement them late in the financial year in order to gain back lost market shares from the previous year. 

“Selling prices were therefore increased in April 2018 to cover inflationary cost pressures, however, cost management and driving efficiencies remained a clear focus to align with the consumers’ continued price sensitivity,” Clover said.

- BUSINESS REPORT ONLINE