On November 5, 2018, Clover Corporation Limited (ASX: CLV) came forward and made an announcement that it has made an acquisition of 35% stake in Melody Dairies which is situated in Waikato Innovation Park in Hamilton, New Zealand. This marks the company’s investment in the spray dryer technology which is helpful in converting large chunks of liquid milk into powder making it easy to use, store as well as transport. The additional dryer will improve the Clover’s capacity to manufacture the range of specialty micro-encapsulated powders that are helpful to pharmaceutical, infant formula, nutraceutical as well as functional food markets. The recent by Clover Corporation indicates the heightened demand of its products as the sales have been witnessing a rising momentum from the past four years. The management of Clover Corporation reflected positive views for recent investment in the company. According to them, the acquisition would help the company in meeting the increased demand for the products with respect to the infant formula as well as functional food markets.
According to Clover’s management, this acquisition is in line with the strategy to integrate vertically with the supply chain of Melody Dairies. This would be helpful for reducing the risks of product supply disruption for the company as well as the customers. These risks could result from the problems and issues of quality or availability at other facilities. As a result, this acquisition would be helpful for the supply chain expansion so that the new opportunities can be met.
Strong Results For FY 2018
Clover Corporation had also reported their financial results for FY 2018 which reflected strong momentum on the YoY basis. The company’s sales revenues amounted to $63 million in FY 2018 which reflects the YoY growth of 31.5%. The company also stated that the infant formula market has been witnessing a favourable momentum and its products have been able to increase its share in the highly competitive market on the back of the quality. The company also witnessed a robust momentum in its NPAT or Net Profit After Tax in FY 2018 on the YoY basis which was underpinned by the elevated volumes as well as change with respect to the customer mix and product. Its NPAT stood at $7.6 million in FY 2018 while in FY 2017 the figure stood at $3.6 million.
Throughout FY 2018, Clover’s products demand witnessed a robust momentum because of stabilizing of the regulatory conditions in regard to the Chinese Infant Formula or IF market as well as because of the consumers in this market are more inclined towards imported IF rather than dependent on the local products. As a result, the customer base of the company was substantially helped.
Additionally, Clover Corporation was able to renegotiate the contracts with the existing as well as numerous new IF manufacturers which have finally resulted in the robust demand for the company’s products in FY 2018. As a result of this, the company expects to witness strong growth momentum in the future.
In the last six months, the share price of the company increased by 16.41 percent as on 2 November 2018. CLV’s shares traded at $1.460 with a market capitalization of circa $246.12 million as on 5 November 2018 (AEST 4:00 PM).
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