Clover H1 diluted HEPS 57.7c vs 67.3c

Revenue was up 7.2% to R3.6 billion, while operating profit increased by 6.8% to R187.7 million. The company said improved product mix and higher volumes, rather than selling price increases, accounted for the revenue increase. An interim dividend of 15 cents per share was declared.

Clover said 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," it said in a statement.

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 as expressed in milk equivalent volume - came to 3.6%.

The non-bulk and branded product volumes grew by 7.6% as a result of 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%.

Looking ahead, Clover said the focus for the remainder of the year would be on continuous cost savings, the implementation of Project Cielo Blu and other margin-enhancing projects, 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.