Clover drops after earnings warning
The company's higher input costs are behind the expected 65% decline
Investors skimmed 7% off Clover’s share price in intraday trade on Monday after the dairy products group said that it expected to report a drop of as much as 65% in full-year headline earnings. Clover said that the drought and currency fluctuations had resulted in above-inflation input costs, which it had been unable to recover through price increases. The company, which is headed by Johann Vorster, said while the expected results were not desirable, management remained optimistic about the company’s future. Kagiso Asset Management associate portfolio manager Dirk van Vlaanderen said Clover’s trading update echoed the themes seen throughout the reporting season, namely: inflation, input costs and pricing. "There has been significant cost inflation for food producers which has not been fully offset through higher pricing, combined with much lower volumes due to weak consumer demand. The latter is resulting in a material margin squeeze," said Van Vlaanderen.