Branded consumer goods and beverages group Clover’s sales volumes had fallen since instituting consumer price increases of between 8% and 10% across its product portfolio in mid- January, CEO Johann Vorster told Engineer- ing News.

“However, this is a soft market and our business is very seasonal. As we enter the stronger demand period from September and competitor pricing aligns with ours, we are confident volumes will recover,” he commented.

Sales volumes of certain products had already started to regain lost ground, as competitor product pricing adjusted upwards in response to the price increases instituted by Clover in mid-January.

The group outlined in its interim results for the half-year ended December 31, 2012, that it had spent R345.7-million on capital expenditure during the period which, in combination with inflationary cost pressures and a strong promotional marketing strategy, had narrowed profit margins and driven the implemented price increases.

Vorster said that, while it was unlikely that the R27-million spent on associated advertising, in combination with aggressive price promotions, would be recovered by the financial year-end, he expected an improvement during the company’s strong seasonal months between September and April.

“It is difficult to recover all costs over such a short period – you can’t run a business in six-month intervals, and you can’t introduce a product and not advertise it. We continue to believe that the long-term benefits of our strategic investments will far outweigh the short-term pressures on earnings that are currently being experienced,” he said, referring to the 33.5% decrease in headline earnings to R72.9-million for the period.

The first half of the financial year saw Clover making extensive investments in new products and technologies to further entrench the group’s products and grow market share.

These included the introduction of an 18-day extended-shelf-life milk, compared with the industry standard of 12 days, and prisma packaging for milk and beverage products.

In addition, the company acquired the Real Juice Company and a minority stake in Clover Manhattan.

While revenue for the period increased by 10.8% from the previous comparative period to R3.98-billion, this was insufficient to compensate for the higher-than- normal marketing expenses and sharp spikes in fuel and related costs.

Profit for the period decreased by 23.9% from R110.2-million in the first half of 2012 to R83.9-million for the half-year under review.

The group declared an interim gross cash dividend of 10c for the period.