| Tue 13 Mar 2012, 7:15 | | CLR/CLRP - Clover Industries Limited - Unaudited interim condensed |
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CLR
CLR/CLRP - Clover Industries Limited - Unaudited interim condensed
consolidated results for the six months ended 31 December 2011 and cash
dividend declaration
Clover Industries Limited
(Incorporated in the Republic of South Africa)
Company registration number: 2003/030429/06
Ordinary share code: CLR ISIN: ZAE000152377
Preference share code: CLRP ISIN: ZAE000152385
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2011 AND CASH DIVIDEND DECLARATION
HIGHLIGHTS
- Revenue increased by 7,2% to R3,6 billion
- Operating profit increased by 6,8% to R187,7 million
- Headline earnings increased by 16,6% to R109,6 million
- Headline earnings per share decreased by 16,4% to 61,2 cents; as a result
of share issue
- Interim ordinary dividend per share of 15 cents declared
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Sales of products 3 028 556 2 818 938 5 510 436
Rendering of services 386 337 325 575 642 133
Sale of raw milk 173 025 203 544 386 070
Rental income 2 216 1 220 3 682
REVENUE 3 590 134 3 349 277 6 542 321
Cost of sales (2 600 198) (2 452 367) (4 801 323)
Gross profit 989 936 896 910 1 740 998
Other operating income 5 758 7 476 13 974
Selling and distribution costs (720 420) (632 431) (1 243 160)
Administrative expenses (80 383) (82 940) (173 287)
Restructuring expenses (2 481) (11 218) (16 907)
Other operating expenses (4 755) (1 808) (2 610)
Operating profit 187 655 175 989 319 008
Finance income 17 386 6 770 24 625
Finance cost (30 263) (32 775) (62 065)
Profit before tax from 174 778 149 984 281 568
continuing operations
Taxes (64 562) (52 078) (97 534)
PROFIT FOR THE PERIOD 110 216 97 906 184 034
Other comprehensive income
Exchange differences on 399 (810) (856)
translation of foreign
operations
Total comprehensive income for 110 615 97 096 183 178
the period, net of tax
Profit attributable to:
Equity holders of the parent 108 186 96 743 179 588
Non-controlling interests 2 030 1 163 4 446
110 216 97 906 184 034
Total comprehensive income
attributable to:
Equity holders of the parents 108 218 96 080 178 992
Non-controlling interests 2 397 1 016 4 186
110 615 97 096 183 178
Headline earnings calculation
Profit for the period 108 186 96 743 179 588
attributable to shareholders of
the parent company
Gross remeasurements excluded 2 017 (3 826) (4 173)
from headline earnings
Loss/(Profit) on sale and 2 017 (3 826) (7 277)
scrapping of property, plant
and equipment
Minority portion of profit on - - 1 324
sale and scrapping of property,
plant and equipment
Impairment of plant and - - 1 780
equipment
Taxation effects of (565) 1 071 (248)
remeasurements
Headline earnings attributable 109 638 93 988 175 167
to shareholders of the parent
company
Issued ordinary shares 179 111 867 171 969 010 179 111 867
Number of ordinary shares
usedin the calculation of:
Earnings per share - weighted 179 111 867 128 404 439 153 882 447
average
Diluted earnings per share - 190 069 110 139 703 240 164 890 519
weighted average
Earnings per share attributable
to ordinary equity holders of
the parent
Earnings per share (cents) 60,4 75,3 116,7
Diluted earnings per share 56,9 69,2 108,9
(cents)
Headline earnings per share 61,2 73,2 113,8
(cents)
Diluted headline earnings per 57,7 67,3 106,2
share (cents)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Balance at 1 July 1 751 795 1 076 467 1 076 467
Profit for the period 110 216 97 906 184 034
Other comprehensive income 399 (944) (856)
Total comprehensive income 110 615 96 962 183 178
Ordinary shares issued - 502 336 577 335
Share issue cost capitalised - (13 009) (14 807)
against share premium
Share-based payment reserve 6 120 4 395 11 192
accrued
Share appreciation rights (3 950) - -
exercised
Dividends of subsidiaries - non- - (1 806) (1 805)
controlling interest
Non-controlling interest 2 609 - (21 045)
acquired with the buy-out of
minorities
Dividends (27 216) (40 808) (58 720)
Dividends forfeited 1 557 - -
Balance at end of the period 1 841 530 1 624 537 1 751 795
Consists of:
Share capital and premium 684 068 610 867 684 068
Other capital reserves 255 141 245 786 252 784
Retained earnings 887 872 740 566 805 499
Shareholder equity 1 827 081 1 597 219 1 742 351
Non-controlling interest 14 449 27 318 9 444
Total equity 1 841 530 1 624 537 1 751 795
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 1 082 166 967 660 1 013 289
Investment properties 937 985 961
Intangible assets 354 660 294 744 347 102
Deferred tax assets 4 091 2 516 3 262
1 441 854 1 265 905 1 364 614
Current assets
Inventories 530 888 561 610 460 247
Trade and other receivables 1 116 832 1 032 568 866 475
Pre-payments 10 683 9 884 29 000
Income tax receivable 16 073 1 492 -
Cash and short-term deposits 801 698 792 411 824 212
2 476 174 2 397 965 2 179 934
Assets classified as held-for- - 937 940
sale
2 476 174 2 398 902 2 180 874
Total assets 3 918 028 3 664 807 3 545 488
EQUITY AND LIABILITIES
Equity
Issued capital 8 955 8 598 8 955
Share premium 675 113 602 269 675 113
Other reserves 255 141 245 786 252 784
Retained earnings 887 872 740 566 805 499
Equity attributable to equity 1 827 081 1 597 219 1 742 351
holders of the parent
Non-controlling interests 14 449 27 318 9 444
Total equity 1 841 530 1 624 537 1 751 795
Liabilities
Non-current liabilities
Interest-bearing loans and 428 857 594 790 432 833
borrowings
Provisions 62 277 53 210 62 526
Deferred tax liability 80 102 11 895 32 017
Trade and other payables 10 794 8 145 13 357
582 030 668 040 540 733
Current liabilities
Trade and other payables 1 467 904 1 320 130 1 068 836
Interest-bearing loans and 11 804 35 622 173 829
borrowings
Income tax payable 3 182 - 243
Provisions 11 578 16 478 10 052
1 494 468 1 372 230 1 252 960
Total liabilities 2 076 498 2 040 270 1 793 693
Total equity and liabilities 3 918 028 3 664 807 3 545 488
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Operating activities
Profit before tax 174 778 149 984 281 568
Adjustment for non-cash items 65 669 82 764 153 197
Working capital adjustments 91 703 (119 632) (122 585)
Income tax paid (28 914) (33 181) (55 264)
Net cash flow from operating 303 236 79 935 256 916
activities
Investing activities
Proceeds from sale of property, 3 196 5 887 10 675
plant and equipment
Interest received 17 386 6 770 24 625
Goodwill purchased through the - - (49 387)
buyout of Clover Beverages` non-
controlling interests
Acquisition of non-controlling - - (21 045)
interest in Clover Beverages
Capital expenditure: tangible (128 523) (112 651) (216 326)
and intangible assets
Net other investing activities 4 120 (1 556) (1 854)
Net cash flow used ininvesting (103 821) (101 550) (253 312)
activities
Financing activities
Interest paid (30 263) (32 775) (62 065)
Dividends paid (27 216) (40 808) (58 720)
Proceeds from issue ofordinary - 502 336 577 335
share capital
Transaction cost on issue of - (13 009) (14 807)
shares
Repayment of borrowings (166 001) (29 039) (52 790)
Net other financing activities 1 551 (1 953) 2 381
Net cash flows (used in)/from (221 929) 384 752 391 334
financing activities
Net (decrease)/increase in cash (22 514) 363 137 394 938
and cash equivalents
Cash and cash equivalents at 824 212 429 274 429 274
beginning of the period
Cash and cash equivalents at 801 698 792 411 824 212
end of the period
ACCOUNTING POLICIES AND NOTES
Corporate information and basis of preparation
Clover Industries Limited is a company incorporated and domiciled in South
Africa.
These unaudited interim condensed consolidated financial statements were
prepared in accordance with IAS 34: Interim Financial Reporting, the Listings
Requirements of the JSE Limited ("JSE") and the Companies Act, 2008 (Act 71
of 2008), as amended. The accounting policies adopted in the preparation of
these unaudited interim condensed consolidated financial statements are in
accordance with International Financial Reporting Standards (IFRS) and are
consistent with those followed in the preparation of the annual financial
statements for the year ended 30 June 2011.
Segment report
Segment information is presented in respect of the Group`s operating
segments. The operating segments are based on the Group`s management and
internal reporting structure.
The Group comprises the following operating segments:
- Dairy fluids segment is focused on providing the market with quality dairy
fluid products;
- The dairy concentrated products consist of cheese, butter, condensed milk
and retail milk powders;
- The ingredients products consist of bulk milk powders, bulk butter, bulk
condensed milk, bulk creamers, calf feed substitutes, whey powder and
buttermilk powder;
- The non-alcoholic beverages segment focuses on the development and
marketing of non-alcoholic, value-added branded beverages products; and
- Other consists of Clover`s holding company and Lactolab Proprietary Limited
that renders laboratory services.
As disclosed in the annual report the reportable segments were changed from
reporting operating entities to product groups. The comparative figures to
December 2010 were restated accordingly.
SEGMENTAL REPORT
For the period ended 31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
External revenue
Dairy fluids 1 587 323 1 467 971 2 959 585
Dairy concentrated products 499 380 505 610 922 306
Ingredients 188 873 182 468 332 258
Non-alcoholic beverages 748 074 658 297 1 287 553
Other 4 906 4 592 8 734
3 028 556 2 818 938 5 510 436
Margin on material
Dairy fluids 626 996 604 725 1 227 429
Dairy concentrated products 151 672 131 439 224 199
Ingredients 42 717 45 747 71 397
Non-alcoholic beverages 382 499 339 976 656 297
Other 3 641 3 115 6 160
1 207 525 1 125 002 2 185 482
The Group operates mainly in the geographical area of South Africa. The
revenue and assets of the operations outside South Africa are insignificant.
OVERVIEW
The first quarter of the financial year was characterised by increased input
costs and subdued consumer spending, in particular following the widespread
industrial actions of mid-2011 in South Africa. The second quarter yielded an
improved trading environment despite the continued rise in input costs.
Although Clover was unable to recover higher input costs due to the high milk
flow season, it managed to absorb a substantial part of these through higher
sales volumes, especially in branded and non-bulk products. Clover`s brands
performed well overall which again underlines the importance of brand
strength during testing times.
During mid-2011 certain supply contracts with milk producers expired and were
not renewed to support the growth aspirations of Clover`s Delivery Agreement
producers. Unfortunately during this time on-farm milk production input costs
had risen dramatically and consequently the additional "B" Delivery
Agreements issued to producers to compensate for the reduction in supply
contract milk could not be fully supplied as planned. Clover was unable to
increase farmgate milk prices at that time due to the approaching seasonal
peak production period but paid a full supply premium to producers during
August and September to help mitigate against the increased feed costs. As a
result, sales volumes and revenue were negatively affected as milk intake was
below market demand during the first quarter. From October to December 2011,
sufficient milk was collected to supply the market but the normal seasonal
stock build-up in anticipation of the 2012 autumn and winter was below
required levels.
The lower stockpile levels achieved will require Clover to import milk
powder, butter and UHT milk during the second half of the financial year to
enable full supply during the relocation process of production equipment from
Clayville to Port Elizabeth as part of Project Cielo Blu during winter 2012.
FINANCIAL PERFORMANCE
Headline earnings improved from R94,0 million to R109,6 million largely as a
result of the higher operating profit and lower net finance charges. The
dilution effect of shares issued at the time of the JSE listing resulted in
headline earnings per share reducing from 73,2 cents to 61,2 cents. The funds
raised by the listing are mainly earmarked for capital projects linked to
Project Cielo Blu and which will be completed during the 2013/2014 financial
year. In the interim, these funds are mainly invested in short -term money
market funds with significantly lower returns than the planned capital
projects.
Operating profit increased from R176,0 million to R187,7 million. Gross
margin improved from 26,8% to 27,6% mainly as a result of higher income from
services rendered to principals. Improved product mix and higher volumes,
rather than selling price increases, accounted for the revenue increase.
Increased factory throughput and additional UHT manufacturing capacity in
Port Elizabeth, resulting in lower raw milk transportation costs, largely
compensated for the significant increases in juice concentrates and other
ingredient costs. Administration costs declined by 3% mainly due to a
reduction in incentive bonuses linked to the achievement of financial
targets. Clover`s aggressive "Way Better" marketing and advertising campaign
contributed to the 13,9% increase in selling and distribution costs. Although
the cost of this campaign was incurred in the period under review, the
benefits thereof will only manifest over the medium term and are not fully
reflected in the reporting period. Strong cost inflation continued from the
closing months of the previous financial year into the current review period
and maintained pressure on the operating margin. During this period, selling
price increases were difficult to implement due to the normal seasonal over
supply of milk. Consequently the operating margin contracted slightly to 5,2%
from 5,3% in the corresponding previous period but increased from the 4,9%
achieved in the previous financial year.
The Project Cielo Blu capacity expansion at the Clayville distribution centre
was a significant contributor to the 18,7% growth in principal business
revenue (13,9% excluding the additional merchandising income from Danone
Southern Africa Proprietary Limited from May 2011).
Growth in overall sales volumes (locally produced concentrated and ingredient
products are expressed in milk equivalent volume) came to 3,6%. The non-bulk
and branded product volumes grew by 7,6% as a result of a very focused
commercial and marketing strategy. Bulk product volumes declined by 16,8% in
line with the overall Group strategy of decreasing exposure to these
products. Dairy fluid volumes increased by 6,7% and non-alcoholic beverage
volumes by 7,4% while concentrated volumes declined by 2,2% and ingredient
volumes by 12,4%. Pre-packed branded cheeses included under concentrated
products saw a 16,7% volume growth while the bulk cheese component reduced by
21,9%.
Net finance charges reduced by 50% or R13,1 million after the injection of
new share capital with the listing on the JSE in December 2010.
The tax expense is inflated by R3,1 million or 1,8% of pre-tax profits as a
result of the reversal of a deferred tax asset raised in the 2010/2011
financial year, following a Supreme Court of Appeal ruling during the period
under review. This ruling was not related to Clover.
FINANCIAL POSITION AND CASH FLOWS
The increase in property, plant and equipment post-June 2011 is mostly
related to the capital expenditure on Project Cielo Blu and other projects.
Inventory levels were higher than at June 2011 in line with the normal
seasonal trend but were lower than at December 2010 due to the lower than
normal milk intake as a result of on-farm cost pressures. Trade and other
receivables increased by 8,2%. This increase is slightly more than the
revenue increase of 7,2%. The period-end was over a long weekend which
delayed some debtor payments. For the same reason, trade and other payables
also increased by 11%. As a result, cash flow was healthy with working
capital releasing R91,7 million to cash. The seasonal nature of the business
typically causes working capital to absorb cash during the first six months
of Clover`s financial year.
During December 2011 a long-term loan of R155 million matured and was repaid.
Net cash flow from operating activities increased by R223,3 million to R303,2
million and was, except for the reduction in cash and cash equivalents of
R22,5 million, sufficient to fund the reduction in long-term debt of R166
million, capital expenditure of R128,5 million, taxes of R28,9 million, net
finance charges of R12,9 million and dividends of R27,2 million.
PROSPECTS
Farmgate milk prices were increased after the half-year-end in response to
high on-farm input costs. The milk price paid to producers went up by an
average 60 cents per litre or approximately 20% from January 2012 to March
2012. This is deemed sufficient to alleviate the immediate input cost
pressures on Clover`s producers and will be recovered in the market. This
cost recovery is likely to have a temporary impact on the healthy volume
growth Clover has experienced over the past number of years. However, Clover
believes that this should not impact its volume growth prospects over the
medium and long term.
Costs pressures are being strongly resisted and, where they cannot be
absorbed, these will be passed on to the market. Project Cielo Blu is
progressing well, although the positive impact of additional capacity for UHT
milk and distribution are not reflected fully in this review period. As
highlighted in the previous reporting period, the Queensburgh distribution
facility design was reconsidered and processes simplified to enhance long-
term benefits. The revised commissioning date is now expected to be in
September 2013. The balance of savings from Project Cielo Blu`s capacity and
efficiency improvements are on track and expected to come through as
originally anticipated.
To secure its milk source, in addition to the farmgate milk price increases,
Clover is in the process of supplementing its milk supply by entering into
supply contracts with certain new milk producers. It may, however, still
experience a milk shortage during the coming autumn and winter that will
necessitate the import of certain products.
Clover`s focus for the remainder of the year will be on continuous cost
savings, the implementation of Project Cielo Blu and other margin-enhancing
projects approved by the Board, the improvement of the product mix, and the
managing of selling prices in a highly competitive environment to further
enhance the quality and brand power of Clover`s products. Although the
economy remains sluggish, it is expected that the positive trend experienced
during the second quarter will continue and the Group is confident that it
will recover cost increases, including the increase in farmgate milk prices,
during the second half of the financial year. Considering the above, Clover
is well-positioned to deliver a solid performance during the second half of
the financial year.
EVENTS AFTER THE REPORTING PERIOD
No significant events occurred subsequent to the period-end, other than the
sharp increase in farmgate milk prices.
GOING CONCERN
The Directors are satisfied that the Group is a going concern and have
therefore continued to adopt the going concern basis in preparing the interim
condensed consolidated financial statements.
DIVIDENDS
The Board declared a 15 cents per share interim ordinary cash dividend for
the six months ended 31 December 2011, payable in South African currency on
10 April 2012.
The salient dates will be as follows:
Last day to trade "cum" the ordinary share Thursday, 29 March 2012
dividend
Shares commence trading "ex" the ordinary share Friday, 30 March 2012
dividend
Record date on Thursday, 5 April 2012
Payment date on Tuesday, 10 April 2012
Share certificates may not be dematerialised or rematerialised between
Friday, 30 March 2012 and Thursday, 5 April 2012, both days inclusive.
On behalf of the Board
JAH Bredin JH Vorster
Chairman Chief Executive
13 March 2012
PREPARATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS
The interim condensed financial statements set out above were prepared under
the supervision of Louis Jacques Botha, CA(SA), in his capacity as Chief
Financial Officer of the Group.
INDEPENDENT AUDIT BY AUDITORS
The interim condensed financial statements have not been audited or reviewed
by the Group`s independent auditors.
Registered office:
200 Constantia Drive, Constantia Kloof, 1709
Postal address:
PO Box 6161, Weltevredenpark, 1715
Telephone: (011) 471 1400
Transfer secretary:
Computershare Investment Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
Directors: Non-executive
JAH Bredin (Chairman)
WI Buchner (Vice-chairman)
TA Wixley* (Lead Independent)
SF Booysen (Dr)*
JNS du Plessis*
HPF du Preez
MG Elliott
JC Hendriks (Dr)
NP Mageza*
NA Smith
*Independent
Directors: Executive
JH Vorster (Chief Executive)
HB Roode (Deputy Chief Executive)
LJ Botha (Chief Financial Officer)
CP Lerm (Dr)
Company secretary:
HB Roode
Auditors:
Ernst & Young Inc., Johannesburg
Bankers:
The Absa Group, First National Bank, Investec Bank
Sponsor:
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
www.clover.co.za
Date: 13/03/2012 07:15:01 Produced by the JSE SENS Department.
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