Clover churns out higher earnings ahead of buyout

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Clover churns out higher earnings ahead of buyout

Published Date: 2019-05-13 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Clover churns out higher earnings ahead of buyout

The group, which is under a R4.8 billion takeover offer, will report a strong rise in profit after impairments affected its 2018 earnings.

Conditions have soured in the retail and fast-moving consumer goods sectors due to the volatile rand, rising oil prices and subdued economic conditions in the build-up to last week's elections. Despite this, Clover says it has continued to increase its market shares in various categories due to marketing investment and additional trade support. New spreads and margarines launched in March were well received. But given tough trading conditions it's delayed price increases to the trade from this month until August.

A fire at its Estcourt powder factory in March caused severe damage and had a big impact on the availability of cream as it couldn't produce skim milk powder. This in turn impacted production of some highly profitable products. However, it said it was insured for both the assets damaged by the fire and the loss of profits due to business interruption.

Volumes at Dairy Farmers of SA (DFSA) have also come under pressure, affecting fee income, while a distribution contract from the spreads business Remgro acquired from Unilever wasn't renewed after February. It's replaced this with a new contract with Willowton Group, which came into effect this month. It's also signed a five-year agreement with Danone to provide warehousing and distribution services from 1 July. It said the value of the contract, which is in excess of R400 million, could have a meaningful impact in the future.

In a trading statement, the dairy and drinks group said earnings per share (EPS) for the year to end-June were likely to come in at least 182.7c higher than the 23.1c loss it reported last year. Headline EPS are expected to be more than 180.5c up on the 23.1c loss previously reported. Last year's loss followed an impairment of a loan to DFSA. Its 2018 normalised HEPS came in at 206.9c.

The group remains under offer following a R4.8 billion bid from a consortium of investors, which it says represents an attractive opportunity for shareholders to realise value in cash and divest of their holdings at a big premium. It has been in talks with the potential buyers since last October and unveiled the R25 per share 'Milco' offer in February. However, Brimstone, a member of the consortium, withdrew due to opposition from organisations opposed to the inclusion of consortium leader, Israeli beverage firm Central Bottling Company.

It expects to report its full-year results on 10 September.

Its shares fell 0.9% to R22.65 on Friday.





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