South African food group Clover Industries said that its strategy to balance its portfolio by expanding in value-added dairy continued to “gain traction” this year.
The company benefited from an increased contribution from higher margin products in the full-year to 30 June, chief executive Johann Vorster revealed. “Our strategy to balance traditional dairy products with higher margin value-added products continued to gain traction. Although our roots will always remain firmly in dairy; non-dairy and value-added products now contribute 40% to margin on material. Our short-term aim is to increase this to an even split,” he explained.
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Improved product mix alongside greater efficiency and higher volumes enabled Clover to absorb higher input costs – which increased 8.4% in the period – without passing along pricing, Vorster said. The company reported a 10.9% increase in operating profit, which rose to ZAR564.5m (US$39.6m) in the period.
“The rate at which we were able to improve efficiencies and reduce costs this year is commendable. Senior management has further committed to a voluntary salary freeze with no increases for the current financial year in order to contain costs further,” commented Vorster.
Revenue in the year rose 6% to ZAR9.8bn, Clover reported, with sales volumes up 9.7%.
Looking to the future, Vorster said that opportunities for synergistic consolidation in the African market remained “on our radar”.
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By GlobalDataHe added that Clover is mulling the possibility of centralising its production base. “Longer term, we look to centralise certain of our major production facilities into a strategically located and purpose built industrial park to reach optimal efficiencies. This facility would also produce longer life powders and could begin exporting local dairy products. This initiative will however require substantial investment and management is therefore considering the business case for the park in conjunction with various stakeholders and government.”
