Clover is a well-recognised consumer goods and products group with operations in South Africa, West Africa, Namibia, Botswana and Swaziland. Most well known for its dairy products, Clover also produces popular beverages such as Tropika, Aquartz Mineral Water, Milo, Danao and Manhattan Ice Tea. The group’s quality value-added dairy and non-dairy products are delivered through one of the biggest ambient and chilled distribution networks in southern Africa.
Clover’s history began in 1898 when a group of farmers met in the Natal Midlands to discuss the establishment of a butter factory, which was started the following year.
The company was changed from a co-operative to a public company in 2003. As part of its growth path, Clover implemented a capital restructuring in 2010, and Clover shares were listed on the Johannesburg Stock Exchange (JSE). The group also listed on the Namibian Stock Exchange in 2015.
The group is the largest milk producer in South Africa, procuring approximately 600 million litres of milk every year from 173 producers, and delivers its product portfolio to approximately 15 000 outlets across South Africa, for sale to an extensive cross section of customers. Clover currently employs more than 7 100 people.
Clover Shares Growth Driver
Clover’s 2015 annual report highlighted some remarkable data, most notably an 80% increase in operating profits for the financial year, at R509.1 million. Shareholders enjoyed a 75% increase in dividends and a 69% increase in headline earnings per share.
Clover has had to increase its selling prices recently to recover significant escalation in raw milk and other costs. The increase in prices led to increased profitability, but resulted in volume and market share losses in some product categories. This has been offset by strong performance from Clover’s yoghurts and custard, and the group has decided to buy into its yoghurt production capacity to meet better-than-expected market demand.
Despite volatility in the economy and the dairy products market, South African milk production has reflected upward growth, and 2015 proved to be a year of record production, with more than 3 million tonnes of milk being produced. This oversupply of raw milk negatively impacts local market prices, which are further exacerbated by current very low international dairy commodity prices. The forecast is that the group will be exposed to downward pressure on market prices.
The group is currently seeking to widen its revenue streams by investigating various opportunities in Mozambique, Zimbabwe, Zambia, Kenya, Tanzania, Angola and Nigeria.
Clover Group Investor Tip
Clover share price dipped significantly at the beginning of 2016, but the live online stocks chart shows a strong recovery since a investors look to buy the shares. Despite the oversupply of raw milk in its primary South African market, Clover has a good strategy of diversification and effective cost control measures in place. The new products they have been producing have performed above expectation and will be more significantly exploited in the future. This should offset deterioration in other key markets somewhat and maintain the strength of Clover share price.
Investment analysts have voiced confidence in the company, suggesting that investors should buy equity in anticipation of more growth.
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