Clover dragged down by drought, weak rand

JSE-listed South African dairy and foods group Clover has announced a poor set of results brought on by a severe drought and a volatile local currency. Annual earnings fell 66% and diluted headline earnings per share fell to 63.2 cents per share for the year ended 30 June 2017, compared with 184.7 cents per share for the same period last year. In addition, Clover said it would not declare a final dividend due to the weak economic conditions and funding requirements.

"Some impacts, such as the prolonged drought, a wetter and cooler summer, and rand volatility, were beyond our control," Clover said in a statement on Tuesday.

"The resultant above-inflation input costs, subdued volume growth and continued low consumer spending amidst aggressive competitor pricing meant that we had to take some very tough decisions during the year, to position and sustain the business optimally against a constrained 'new reality'."

However, the company expects to recover next year, as the effects of the drought lessen and lower inflation aids cash-strapped consumers.

"While the after-effects of the prolonged drought will be felt for some time, a gradual recovery in milk and fruit production volumes together with the strengthening of the rand to the dollar should result in a reduction in input cost inflation," Clover said.

In addition, Clover's recently completed corporate restructuring will take effect in the year to end-June 2018. Dairy Farmers of SA was set up as a special purpose vehicle in which the dairy producers that supply Clover own 74% of voting rights via B shares to enable the company to focus on value-added products.

Clover, Africa's largest dairy company, was founded as Natal Creamery in 1899. It was later converted into a co-operative and a supplier of raw milk and related products, but now draws 45% of its revenue from non-dairy products. In 2015, the JSE-listed company was ranked the third-best company in SA for which to work, according to Deloitte.

A chartered accountant and Bcom graduate of the University of the North West, Financial Director Elton Bosch (pictured) joined the executive committee of Clover South Africa in June 2012 to further business development, Africa and risk management. He is a former nominee of the CFO Awards 2017.