China’s infant formula enthusiasm = top profits for Clover
China’s enthusiasm for baby formula from down under is about more than just milk — Clover Corp pointed to its nutrient-rich additives as a big reason for a doubling of profit.
Clover (ASX:CLV) makes oils and powders that can be added to foods, including milk powder.
It said profit doubled from $3.6 million last year to $7.6 million in fiscal 2018, thanks to the infant formula market.
“Demand for Clover’s products has grown strongly across the year, with regulatory stability in the Chinese infant formula market, and consumers in this market preferring imported formula over locally made products,” the company said.
Their customer base had benefited from that demand and therefore, so had Clover.
Revenue rose 31.5 per cent to $63 million and they reported having $7.9 million in cash on hand at the end of June.
Infant formula stocks generally on the ASX have largely doubled in value in the last year after China bedded down rules to weed out the bad players.
Playing the long game
Clover chief Peter Davey said the results were years in the making, with many of their newer customers starting trials three years ago before committing to buying.
Mr Davey took home a package of $1.2 million in the 2018 financial year. It was made up of a $394,018 salary, super, short term incentives and $514,392 worth of performance rights.
If China is a growing market for Clover’s customers, New Zealand is the growing market for Clover.
Significant investment in dairy processing for infant formula, which is subject to strict controls especially in China, has created demand in New Zealand for milk powder additives.
Clover did a deal with New Zealand Food Innovation Waikato to build a spray drying facility in 2014. Now it’s at full capacity they’re thinking about going deeper into milk processing, with a contract to buy a share of a spray drying facility in Hamilton.
The stock fell after the results were released by 4 per cent to touch $1.53.