for the six months ended 31 December 2015 - · PDF file• Industry remains subject to...
Transcript of for the six months ended 31 December 2015 - · PDF file• Industry remains subject to...
CLOVER INDUSTRIES LIMITED:
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS
for the six months ended 31 December
2015 Speakers:
Johann Vorster (CE) & Elton Bosch (CFO)
Date: 02nd and 03rd March 2016
2 for the six months ended 31 December 2015
AGENDA
• Highlights
• Operating environment
• Segmental and product performance
• Group financial results
• Capital projects
• Prospects
• Questions and answers
HIGHLIGHTS
7,9% REVENUE
R5,0 BILLION
7,1% HEPS
117,0 CENTS
10,2% HEADLINE EARNINGS
R219,7 MILLION
5,8% OPERATING
PROFIT
R340,3 MILLION
7,1% TOTAL INTERIM
DIVIDEND PER SHARE
24,2c
4 for the six months ended 31 December 2015
MAJOR FACTORS THAT INFLUENCED RESULTS
ECONOMIC CHALLENGES AND HEADWINDS
• Pedestrian growth of economy - SA’s economy only grew 1,3% in 2015
• More incidents of social and political unrest
• Infrastructure constraints – interrupted electricity supply – water quality and availability
• High unemployment and rising interest rates
• Labour costs increasing at a rate higher than inflation
• Macro-economic outlook for sub-Saharan Africa is muted – currency weakness and foreign exchange
liquidity are additional risks
• Growth has slowed in emerging economies – consumer spending not affected to same extent as in SA
• Perceived difficulties in China have increased risk aversion and impacted emerging market currencies,
particularly those in commodity based economies
• Industry remains subject to evolving and increasing regulation
• Further health regulations related to sugar and salt levels are expected in the medium term
• Food safety remains a concern
5 for the six months ended 31 December 2015
EXIT OF PRINCIPAL
• The termination of income from a principal of R104 million in the previous
corresponding six month period, led to lower services rendered income for the
reporting period
CYCLICAL SURPLUS OF RAW MILK
• Milk production for 2014/15 was 7,3% higher than the previous year, resulting in
an oversupply of raw milk in the country, and consequently lower selling prices
MAJOR FACTORS THAT INFLUENCED THE COMPANY
EXIT OF PRINCIPAL AND CYCLICAL SURPLUS OF RAW MILK
6 for the six months ended 31 December 2015
6.5 6.4 5.8 5.0 4.7
4.3 4.4 4.3 4.4 4.8 4.8 5.9
17.4
15.0 14.3
12.1
9.9 7.9
3.3 4.3
(0.7)
(3.7)
(5.7)
(8.6) (10)
(5)
0
5
10
15
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Total food inflation Milk inflation
MAJOR FACTORS THAT INFLUENCED THE INDUSTRY
CYCLICAL NATIONAL SURPLUS AND SELLING PRICES
2015 MILK INFLATION VS. TOTAL FOOD INFLATION – MONTH VS. SAME PERIOD 2014
Source: Total food inflation – www.tradingeconomics.com/Stats SA Source: Milk inflation – Nielsen RMS December 2015
Perc
enta
ge
Management fixed cost levers
7 for the six months ended 31 December 2015
MAJOR MANAGEMENT ACTIONS TO MITIGATE CHALLENGES
IN THE ENVIRONMENT, INDUSTRY AND COMPANY
EXIT OF PRINCIPAL
• Clover managed to sign up new principals
• Invested in new product categories such as yoghurt, custard and maas
CYCLICAL NATIONAL SURPLUS
• Enhanced the beverage portfolio
• Developed export market initiative (Mozambique)
• Enhanced distribution reach for the bottom of the pyramid
• Increased efficiencies and cost cutting initiatives
9 for the six months ended 31 December 2015
2.4%
2.0%
2.3%
3.2%
2.5%
3.4%
3.3%
4.0%
3.0%
3.4% 3.8%
4.1%
Jul Aug Sep Oct Nov Dec
Dec-14 Dec-15
OPERATING ENVIRONMENT
TOTAL RETAIL SALES DATA FOR SOUTH AFRICA
Source: Statistics SA (Statistical Release of Retail Sales Data for December 2014 and 2015)
Year-on-year retail sales volumes for
the six months increased by 3,3%
YEAR-ON-YEAR VOLUME MOVEMENT (%)
10 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
TOTAL RETAIL SALES DATA FOR SOUTH AFRICA
Source: Statistics SA (Statistical Release of Retail Sales Data for December 2014 and 2015)
Year-on-year retail sales for the six
months increased by 7,5%
8.5% 8.2% 8.0%
8.6% 8.1%
9.0%
7.2%
7.9%
6.9% 7.4%
7.7% 8.2%
Jul Aug Sep Oct Nov Dec
Dec 14 Dec 15
YEAR-ON-YEAR TOTAL SALES MOVEMENT (%)
11 for the six months ended 31 December 2015
Six
months
ended
31 Dec
2014
Six
months
ended
31 Dec
2015
OPERATING ENVIRONMENT
INTERNATIONAL DAIRY COMMODITY PRICES
1. Prices recovered marginally after
another NZ drought and expected
lower supply
2. This was however followed by a
steep decline in world commodity
prices due to the Russian ban on
EU manufactured products and the
softening of the Chinese economy
and market
0
1 000
2 000
3 000
4 000
5 000
6 000
Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15
US$
pe
r to
n
Skimmed milk powder Whole milk powder
Source: Calculated by Clover using various international sources
12 for the six months ended 31 December 2015
Six
months
ended
31 Dec
2014
Six
months
ended
31 Dec
2015
OPERATING ENVIRONMENT
INTERNATIONAL SMP PRICES IN US$ AND ZAR
1. US$ prices weakened due to the
Russian ban and softening of the
Chinese market
2. The South African Rand weakened
against foreign currencies since
January 2015
3. Although the US$ prices are low,
imports are not that attractive,
due to the weakening Rand
0
10 000
20 000
30 000
40 000
50 000
60 000
0
1 000
2 000
3 000
4 000
5 000
6 000
Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15
Ran
d p
er
ton
US$
pe
r to
n
US$/ton ZAR/ton
Source: Calculated by Clover using various international sources
13 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
INTERNATIONAL FARM GATE MILK PRICE TRENDS
1. Strong decline in international
prices due to collapse in dairy
commodity prices
2. RSA prices stable throughout
period
3. International prices started to firm
4. Clover’s milk price was decreased
by 60 c/litre on 1 August 2015,
due to a strong oversupply in the
country and resulting lower
market prices
5. The impact of the severe and
prolonged drought in the country
will force producer prices up in
South Africa
Sep
12
Dec
12
Mar
13
Jun
13
Sep
13
Dec
13
Mar
14
Jun
14
Sep
14
Dec
14
Mar
15
Jun
15
Sep
15
Dec
15
EU NZ USA SOUTH AMERICA CLOVER
14 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
RSA NATIONAL FARM GATE MILK PRICE TO FEED COST RATIO
Source: Milk Producers Organisation
1. Ratio improved drastically from
early 2014 due to favorable feed
costs and milk price increases
2. Ratio deteriorated dramatically
due to increased feed costs and
lower milk prices during the latter
part of 2015
3. The severe and prolonged drought
in South Africa has resulted in a
continuous increase in feed prices,
due to maize shortages and very
low availability of good quality
roughage
4. The ratio is currently at a level
where the production of raw milk
is de-stimulated and the only short
term solution to protect the raw
milk source is to increase the farm
gate milk prices
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
Jul 0
7
Jan
08
Jul 0
8
Jan
09
Jul 0
9
Jan
10
Jul 1
0
Jan
11
Jul 1
1
Jan
12
Jul 1
2
Jan
13
Jul 1
3
Jan
14
Jul 1
4
Jan
15
Jul 1
5
Rat
io
Actual ratio Break even ratio Linear (Actual ratio)
15 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
RSA NATIONAL MILK PRODUCTION
Source: Milk Producers Organisation
1. The national raw milk production was very strong since the latter part of 2014, resulting from a favorable milk price to feed cost ratio which followed through into 2015
2. Milk production for 2014/15 was 7,3% higher than the previous year, resulting in an oversupply of raw milk in the country
3. Although Clover’s unique milk procurement system (CUMPS) protected it from an oversupply of raw milk from its own producers, the group was still exposed to lower prices in the market for dairy products
4. The raw milk in the country started to show a decline from November 2015 and December’s intake was 3,5% below the previous year
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
2012/13 2013/14 2014/15 2015/16
16 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
CLOVER’S FARM GATE MILK PRICE VS. CPI
1. Clover’s milk prices remained high
during the 2014/15 year:
• Competition after shortage of
raw milk during the last quarter
of the previous financial year
• Volatility in the raw milk market
due to Clover’s cessation of its
milk supply to Danone on
31 December 2014, as well as
fierce competition for raw milk
for cheese production
2. The Farm gate price paid to
producers was lowered by ±60 c on
1 August 2015 due to market forces
and to prevent further exceptional
milk production growth during the
spring and summer of 2015
80
100
120
140
160
180
200
Jul 0
7
Jan
08
Jul 0
8
Jan
09
Jul 0
9
Jan
10
Jul 1
0
Jan
11
Jul 1
1
Jan
12
Jul 1
2
Jan
13
Jul 1
3
Jan
14
Jul 1
4
Jan
15
Jul 1
5
Ind
ex
Farm gate milk price CPI inflated milk price
95% upper control limit 95% lower control limit
Source: Calculated by Clover
17 for the six months ended 31 December 2015
OPERATING ENVIRONMENT
TOTAL MARKET VOLUME GROWTH
FOR THE SIX MONTHS TO DECEMBER 2015
Source: Nielsen RMS (total SA incl. all store types)
(2.39)
19.86
(7.13)
13.41
4.97
6.40
(3.19)
7.11
2.82
5.65
(2.57)
3.46
5.77
30.93
(0.88)
5.10
7.87
FRESH MILK (INCL UP MILK)
UHT MILK
RTD FLAVOURED MILK
FRESH CREAM
MAAS
NATURAL PREPACKED CHEESE
PROCESSED CHEESE SLICES
FETA
TOTAL SLFJ
100% SLFJ
NECTAR SLFJ
DFM SLFJ
BUTTER
LIQUID CUSTARD
RTD ICE TEA
YOGHURT
BOTTLED WATER
RTD = Ready to Drink DFM = Dairy Fruit Mix SLPJ = Short Life Pure Juice UP = Ultra Pasteurised
19 for the six months ended 31 December 2015
47,6% 25,9%
15,5% 8,1% 2,7%
46,9% 35,6%
10,7% 5,8% 0,9%
SEGMENTAL PERFORMANCE
CONTRIBUTION TO CLOVER’S OVERALL REVENUE
AND MARGIN ON MATERIAL (MOM)
Dairy fluids Non-alcoholic
beverages
Dairy concentrated
products
Fermented products
and desserts
Ingredients
Dairy fluids Non-alcoholic
beverages
Dairy concentrated
products
Fermented products
and desserts Ingredients
CONTRIBUTION TO REVENUE
CONTRIBUTION TO MOM
R 2,21bn R 1,20bn R 720m R375m R 125m
20 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
REVENUE
100.0%
(14.1%)
13.9%
15.2%
(0.7%)
100.0%
(24.7%)
1.3%
0.7%
(6.7%)
391.3%
10.6%
12.6%
14.5%
6.0%
Fermented Products & Desserts*
Ingredients
Dairy concentrated products
Non-alcoholic beverages
Dairy fluids
Volume growth Price inflation and mix changes Revenue growth
* The Fermented Products and Desserts category does not have comparative figures and thus shows a growth of 100%
21 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
MARGIN ON MATERIALS (MOM) %
28.8%
13.4%
27.9%
55.5%
39.9%
0.0%
31.2%
32.6%
52.8%
40.3%
Fermented Products and Desserts
Ingredients
Dairy concentrated products
Non-alcoholic beverages
Dairy fluids
Dec 14 Dec 15
22 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
PRODUCT VOLUME GROWTH VS MARKET GROWTH
Total market growth source: Nielsen RMS (total SA incl. all store types)
(2.4
)
19
.9
(7.1
)
13
.4
5.0
6.4
(3.2
)
7.1
2.8
5.6
(2.6
)
3.5
5.8
30
.9
(0.9
)
5.1
7.9
(2.0
)
3.7
(10
.1)
4.2
19
.6 3
7.8
30
.0
14
.5
2.2
(0.5
)
(5.7
)
5.1
(18
.2)
91
.7
(0.6
)
7.9
(1.6
)
FRES
H M
ILK
(IN
CL
UP
MIL
K)
UH
T M
ILK
RTD
FLA
VO
UR
ED M
ILK
FRES
H C
REA
M
MA
AS
NA
TUR
AL
PR
EPA
CK
ED C
HEE
SE
PR
OC
ESSE
D C
HEE
SE S
LIC
ES
FETA
TOTA
L SL
FJ
100%
SLF
J
NEC
TAR
SLF
J
DFM
SLF
J
BU
TTER
LIQ
UID
CU
STA
RD
RTD
ICE
TEA
YOG
HU
RT
BO
TTLE
D W
ATE
R
6-MONTH VOLUME GROWTH 6-MONTH VOLUME GROWTH
23 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
DAIRY FLUIDS
Dairy fluid volumes up 6% and MOM % was down by 0,4% to 39,9% due to:
• The volume growth was driven by higher national milk flow of 7,3% in South Africa in the 2015
calendar year
• Industry selling prices remained low throughout the peak milk season, and this increased the overall
growth in the UHT category in particular
• Inventories increased substantially, and to protect its market shares, Clover did not increase dairy
selling prices in July as anticipated
• The total market growth of UHT was at the expense of fresh milk. Clover’s UHT grew 12,9%, while fresh
milk declined by 5,9% in the traditional markets. Clover however benefited from the recently acquired
Nkunzi Milkyway volumes to Woolworths, and this resulted in overall fresh milk growth of 2,8%
• Clover’s UHT underperformed the category growth, but was supported by strong independent
wholesaler sales and increased exports into Mozambique
• Cream declined by 3,7% as a result of machine availability constraints in November and December
24 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
CONCENTRATED PRODUCTS
Concentrated volumes were up 12,6% and MOM% down by 4,7% to 27,9% due to:
• The higher national milk flow also resulted in high cheese stock levels that negatively impacted
industry selling prices
• Pre-packed and bulk natural cheese volumes were up 29,9%
• Condensed milk volumes were up 5,4%
• Processed cheese volumes increased by 25,1% of which processed cheese slices grew by 81,3%.
MOM was however negatively impacted as Gouda offcuts had to be sold at very low prices in the bulk
processed cheese market
• Feta cheese volumes were up 20,6% as a result of Clover growing its market share (Clover has been
the market leader since September 2015)
• Branded butter volumes were up 2,5% as a result of a change in consumption favouring high protein
and high fat products
25 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
INGREDIENTS
Ingredient volumes up 10,6% and MOM% down by 17,7% to 13,4% due to:
• The national oversupply of raw milk resulting in higher inventory levels in balancing products like SMP,
butter milk powder, and whey, impacting negatively on local market prices. This was further negatively
affected by a steep decline in world commodity prices
• Volume growth was mostly due to increased sales in SMP, butter milk powder, and whey powder,
to clear high inventory levels
26 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
NON-ALCOHOLIC BEVERAGES
Beverage volumes up 14,5% and MOM% up 2,6% to 55,5% due to:
• Clover’s brands traded in line with expectations, buoyed by solid demand during
the festive season and volumes increased for most beverages categories
• Clover managed to increase its beverages selling prices in July as anticipated
(as opposed to the dairy portfolio)
• The severe heat wave and drought conditions resulted in an exceptional performance
of the beverage portfolio
• Dairy fruit mix volumes increased 15,3%
• Water volumes were up 24,9%
• Ice Tea volumes were up 13%
• Fruit juice volumes were up 2,6%
• Fruit nectar volumes were up 0,6%
• Flavoured milk volumes were up by 13,3%
27 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
FERMENTED PRODUCTS AND DESSERTS
Fermented products and desserts MOM 28,8% and volumes (no base to compare)
• Clover entered the highly competitive yoghurt and custard markets only in January 2015
and achieved higher than anticipated market share targets
• Clover’s maas volumes increased by 54,4% (this was the only product in the portfolio
with previous corresponding volumes)
• Clover’s custard market share reached 8% in December 2015
• Clover’s yoghurt market share reached 9,8% in December 2015
• Clover’s maas market share reached 6,9% in December 2015
28 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
MARKET SHARES 3
1.9
%
28
.5%
26
.9%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Fresh and UP milk
17
.0%
17
.7%
17
.6%
12 months toDec 13
12 months toDec 14
12 months toDec 15
UHT milk
4.9
%
9.7
%
12
.0%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Processed cheese slices
41
.8%
45
.4%
48
.4%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Pure juices
35
.0%
30
.4%
33
.9%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Feta cheese (incl. PnP house brand)
33
.6%
32
.7%
30
.1%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Cream
29 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
MARKET SHARES 1
0.9
%
10
.4%
9.2
%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Water brands
23
.4%
18
.7%
16
.3%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Fruit drink/nectar
22
.1%
18
.5%
18
.3%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Ice tea
74
.1%
74
.5%
78
.1%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Dairy fruit mix
25
.9%
26
.5%
26
.1%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Flavoured milk
6.6
%
8.3
%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Maas
0.0
%
30 for the six months ended 31 December 2015
SEGMENTAL PERFORMANCE
MARKET SHARES 2
8.4
%
19
.7%
19
.7%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Natural pre-packed cheese
0.0
%
0.0
%
8.3
%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Yoghurt
0.0
%
0.0
%
6.6
%
12 months toDec 13
12 months toDec 14
12 months toDec 15
Custard
32 for the six months ended 31 December 2015
35,4%
(1,4%)
87,5%
7,1%
93,6%
41,2%
89,9%
41,3%
GROUP FINANCIAL RESULTS
EARNINGS AND HEADLINE EARNINGS 7
2.9
14
1.1
19
9.3
21
9.7
1H13 1H14 1H15 1H16
HEADLINE EARNINGS (R’m)
40
.7
46
.4
77
.3
87
.0
10
9.2
11
7.8
11
7.0
11
6.1
Headline earnings per share Earnings per share
1H13 1H14 1H15 1H16
HEADLINE EARNINGS PER SHARE
AND EARNINGS PER SHARE (cents)
10,2%
33 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
HEADLINE EARNINGS CALCULATION
R’000
Six months to 31 December
2015
Six months to 31 December
2014
Profit for the year attributable to shareholders of the parent company 218 044 214 890
Gross re-measurements excluded from headline earnings 2 191 (18 542)
Loss on sale and scrapping of property plant and equipment 2 191 5 816
Gain on change of ownership of leased buildings - (24 358)
Impairment of plant and equipment - -
Taxation effects of re-measurements (519) 2 948
Headline earnings attributable to shareholders of the parent company 219 716 199 296
34 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
REVENUE
1. Revenue up 7,9%:
• Average deflation 7,7%
• Volume increase of 15,6%
2. CAGR since listing is 8,5%
3 5
90
.1
3 9
09
.5
4 3
17
.2
4 6
59
.4
5 0
25
.4
1H12 1H13 1H14 1H15 1H16
R’m
7,9%
35 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
REVENUE (SALE OF PRODUCTS)
1. Revenue up 14,4%:
• Average deflation 1,2%
• Volume increase of 15,6%
2. CAGR since listing is 10,5%
3 0
28
.6
3 3
22
.5
3 6
54
.1
4 0
57
.8
4 6
43
.3
1H12 1H13 1H14 1H15 1H16
R’m
14,4%
36 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
REVENUE (SALE OF RAW MILK) 1
73
02
5
16
8 8
31
25
5 8
25
14
6 5
53
13
47
7
1H12 1H13 1H14 1H15 1H16
R’0
00
90,8%
1. Supply of raw milk to Danone
phased out during 2014 and came
to an end at 31 December 2014
2. This was at cost to Danone with
no margin
37 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
REVENUE (SERVICES RENDERED)
1. CAGR since listing is 2,4%
2. Low overall principal volume
growth due to cessation of a
principal contract
3. Full extent of losses largely
mitigated by increased sales of
existing and new products,
as well as income from a new
principal contract entered into
38
6.3
41
5.3
40
4.8
45
3.3
36
3.8
1H12 1H13 1H14 1H15 1H16
R’m
19,7%
38 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
GROSS PROFIT %
1. Cost of sales up by 10,7% while revenue
from the sale of product up by 14,4%
2. New products launches necessitated 25,6%
(R20m) increase in cooperative advertising
3. Raw material costs up by 9,8% as a result of
higher sales volumes, inflationary increases
and the weakening Rand
4. Packaging costs up by 18,3% also as a result
of higher sales volumes, inflationary
increases and the weakening Rand
5. Milk collection down 3,4% due to phasing
out of raw milk supply to a principal that led
to more efficient route utilisation
6. Manufacturing costs up 14,4% as a result of:
• New launches that required additional
investments
7. Primary distribution reduced by 2,4%
(R5,4m) due to greater route and cost
efficiency
27
.6%
26
.4%
28
.0%
31
.0%
29
.1%
1H12 1H13 1H14 1H15 1H16
39 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
EBIT & EBITDA
1. CAGR in EBIT since listing is 14,1%
2. CAGR in EBITDA since listing is
12,5%
24
1
18
4
29
7
40
1
43
4
18
8
13
8
23
5
32
2
34
0
1H12 1H13 1H14 1H15 1H16
R’m
EBITDA EBIT
EBIT ▲ 70,3%
EBITDA ▲ 61,4%
EBIT ▲ 37,0%
EBITDA ▲ 35,0%
EBIT ▲ 5,8%
EBITDA ▲ 8,2%
40 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
EBIT MARGIN
Slight margin decline after:
1. New products necessitated
R21,3m additional investment in
research, development and R20m
more on cooperative advertising
2. 10,7% increase in administrative
costs:
• Provision for profit based
incentives raised as profit
targets were achieved*
5.5
%
3.7
%
5.8
%
7.1
%
6.8
%
5.2
%
3.5
%
5.4
%
6.9
%
6.8
%
1H12 1H13 1H14 1H15 1H16
EBIT % excl raw milk sales EBIT %
* Short term incentives are self funded
41 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
EBITDA MARGIN
We maintained the margin after:
1. New products necessitated
R21,3m additional investment in
research, development and R20m
more on cooperative advertising
2. 10,7% increase in administrative
costs:
• Provision for profit based
incentives raised as profit
targets were achieved*
7.1
%
4.9
%
7.3
%
8.9
%
8.7
%
6.7
%
4.7
%
6.9
%
8.6
%
8.6
%
1H12 1H13 1H14 1H15 1H16
EBITDA % excl raw milk sales EBITDA %
* Short term incentives are self funded
42 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
PROFIT FOR THE PERIOD
Increase in profit despite:
1. High inventory levels contributed
to increased working capital
requirements. Net finance costs
were R24,5m higher than the
previous period
Increase also attributable to:
1. The effective tax rate was 25,5%
compared to 29,1% during the
previous period
11
0
84
16
4
21
1
21
9
1H12 1H13 1H14 1H15 1H16
R’m
Increased
by 28,5%
Increased
by 4%
43 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
CASH FLOW FROM OPERATIONS
1. The 1H12 period benefitted from much lower milk intake than normal due to on-farm cost pressures
1. Clover generated R183,3 million
more net cash from operations
compared to December 2014
2. High inventory levels as at June
2015 required 21,8% less working
capital compared to December
2014
30
3
(21
0)
(2)
(47
)
13
6
1H12 1H13 1H14 1H15 1H16
R’m
44 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
CASH FLOW
65
4
38
6
(28
)
(54
)
(38
0)
31
(24
5)
(30
)
(29
)
2
13
8
44
5
47
5
44
8
(54
)
(15
)
(29
7)
0
(17
5)
(7)
(64
)
24
18
2
51
7
Openingcash
balance
EBITadjusted
for non-cashitems
Net financecosts
Tax paid Workingcapital
movements
Capitalproceeds
Capex Acquisitions Dividendspaid
Other Borrowingsraised
Closingcash
balance
R’m
1H15 1H16
45 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
GEARING 2
3.9
%
39
.9%
38
.4%
41
.3%
52
.2%
(19
.6%
)
17
.1%
20
.7%
23
.2%
33
.4%
1H12 1H13 1H14 1H15 1H16
Gearing Gearing net of cash
46 for the six months ended 31 December 2015
GROUP FINANCIAL RESULTS
DIVIDENDS
• Stated dividend policy will be applied at the end
of the financial year
• 24,2 cents per share interim dividend declared
• The dividend represents a 7,1% increase over
the interim dividend of 22,6 cents paid during
April 2015 in line with the growth in headline
earnings per share
48 for the six months ended 31 December 2015
CAPITAL PROJECTS
MAJOR CAPITAL PROJECTS
Estimated capex on replacement and major maintenance for 2015/16 estimated at 125% of 2014/15 depreciation
Description Amount
(Rm) Estimated date of completion
Clayville chilled distribution expansion 111 July 2016
Bloemfontein yoghurt capacity expansion 35 July 2016 (entire project to be completed
by June 2018)
Beverages 45 Dec 2016
IT Collaboration Project 30 May 2016
50 for the six months ended 31 December 2015
PROSPECTS
• It is anticipated that planned selling price increases will absorb
anticipated inflationary cost increases in the second half of the
year
• The current financial crisis experienced in Nigeria, is a cause of
concern, thus the Group has decided to withdraw from future
investments in Nigeria
• The Group will continue to expand its operations within the BNLS
region, and will continue to pursue export opportunities in Africa
where the currency risks can be mitigated. The capital previously
earmarked for Africa will no longer be spent
• The protracted drought in the country resulted in a shortage of
feed and an increase in on-farm costs, however, Group is
comfortable with its inventory levels for the winter and spring
51 for the six months ended 31 December 2015
PROSPECTS (CONTINUED)
• The Company remains focussed on fully utilising its capacities and the asset base that was heavily
invested in during the last five years
• The Company remains focused to continue to invest in newly launched products and to
continuously grow a portfolio that is not exposed to dairy price fluctuations
• Clover will continue to explore local consolidation opportunities to leverage its existing value
chain
• Clover's redesigned strategy since listing and management’s ability to rapidly adapt to market
changes will enable the Company to employ numerous levers to mitigate the major effects of
cyclicality in the business for the next six months
• The company remains optimistic on achieving its full year objectives
Any reference to future performance included herein has not been reviewed and reported on by the company’s auditors and
does not constitute an earnings forecast
52 for the six months ended 31 December 2015
APPENDIX
NEW PRODUCTS LAUNCHED OR ACQUIRED
January 2015
Clover Yoghurt
January 2015
Clover Custard
January 2015 Acquired
“Fruits of the Forest” from Dairybelle. This fruit
yoghurt range has been fully
migrated to Clover.
December 2015
Futurelife Smart drink
Clover’s functional smart drink in a joint venture with
Futurelife.
53 for the six months ended 31 December 2015
APPENDIX
ACQUISITIONS
June 2015
Clover Milkyway
May 2016
Clover Good Hope
October 2015
Clover acquired
Frankie’s Olde Soft
Drink Company