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Clover warns of sluggish trade in festive season
Clover warns of sluggish trade in festive season

Clover warns of sluggish trade in festive season

FMCG SUPPLIER NEWS - Jan 19th 2017, 09:17

Clover’s December 2016 trading volumes were markedly lower than for December 2015, the dairy company said. This pushed the share down 6.62% by the close on Wednesday. 

In late 2016, strong trading was critical during the festive season to match the performance in the same period in 2015, Clover said.

“Shareholders are hereby advised that December volumes tracked markedly lower than the comparative period,” the group, led by CEO Johann Vorster, said in a trading update on Wednesday.

Headline earnings per share for the six months ended December 2016 were expected to be between 15.7% and 25.7% lower than the 116.96c recorded in the period a year earlier.

Clover said in voluntary stock exchange announcements in October and December 2016 that trading conditions remained constrained, with sales volumes below expected levels.

Large one-off restructuring costs relating to the integration of Clover’s City Deep distribution facility into the Clayville plant in Gauteng were incurred during the period.

All categories of products except for ultrahigh-temperature processing and fermented goods reported lower volumes than in the comparative interim period, mainly because of negative consumer sentiment, Clover said. This was compounded by a wetter and cooler summer compared with the heat wave — and later drought — that prevailed in the six months to December 2015.

The company said it had to substantially increase its selling prices to recover not only inflationary cost increases but also a higher-than-expected raw-milk price due to the continued drought and a subsequent decline in sales volumes.

While the group expected a rise in revenue in the interim period to December 2016, it did not expect this to fully absorb all inflationary cost increases in the first half of the year.

“As a result, a fine balance was needed to balance price increases and protect our market share,” Clover said.

Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said on Wednesday that it appeared as though weaker trading had continued throughout December. Although Clover had warned the market, it had hoped December trade would be enough to offset some of this weakness.© BusinessLIVE MMXVII 

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