SPECIAL PURPOSE VEHICLE
Clover refines milk plan
The company plans to help milk producers pursue a 'volume-growth strategy' through new special purpose vehicle Dairy Farmers SA
Clover has clarified its restructuring first announced in December, saying the price of raw milk will now be determined by the market. The dairy producer has in the past determined the price paid to producers for raw milk. The company said this would help milk producers pursue a "volume-growth strategy" through a new special purpose vehicle, Dairy Farmers SA (DFSA), for a "nominal amount". Initially, DFSA will be wholly owned by Clover. In a further deal on or before June 30 2017, Clover will retain 26% of DFSA, with 74% of DFSA being made available to producers. Clover’s turnover will be reduced by about R1.75bn a year, but the effect on profitability should be neutral given the fees payable by DFSA to Clover. The transaction will allow the company to focus on developing higher margin products, while limiting its price exposure to supply-and-demand cycles. "This will result in the price of raw milk being unequivocally driven by market forces," Clover said on Monday. However, DFSA w...