Nutritional ingredients producer Clover Corporation (ASX: CLV) witnessed a slight surge in its FY23 revenue, even as it battled growing inflation and falling demand, especially from China’s dwindling birth rates which hit a record low last year.
Clover achieved an increase in revenue, reaching $79.9 million in FY23, up from FY22’s $70.7 million. However, this growth was accompanied by a 13% decline in net profit after tax compared to FY22. This decrease is partially attributed to increased investments in new market opportunities.
H2 FY23 witnessed a slowdown in demand for Clover’s products due to fluctuating customer orders and declining birth rates globally, particularly in China. Sales in the Asian & ANZ region declined as customers initially built inventory and subsequently reduced orders. In the USA, Clover faced challenges due to the withdrawal of a product from the market, increased competition in the infant formula sector, and a slow return to work following the COVID-19 pandemic.
Like many other companies, Clover also grappled with inflationary pressures affecting raw materials, energy, and labour costs. To mitigate these challenges, the Company actively worked on securing customer acceptance for new raw material supply options and implemented price increases to offset rising inflation. Consequently, its operating expenses surged by 32.3% to $13.8 million, primarily driven by inflationary factors, travel expenses (to attend trade shows), and marketing costs.
It ended FY23 with $9.4 million in cash.
Managing Director at Clover Corporation, Peter Davey, stated, “We are proud of our performance in FY23, with notable revenue growth and product advancements. While we encountered challenges in the second half of the year, our commitment to innovation and diversification remains unwavering.
“We look forward to seizing new opportunities and continuing to provide valuable solutions to our customers.”
Clover’s microencapsulation technology enables nutritional oils, like tuna, fish, algal and fungal, to be added to infant formula, foods and beverages.
In 2022, this tech achieved a significant milestone. Clinical trial results for Clover’s branded product, Premneo, showed a substantial improvement in the IQ of prematurely born infants. Commercialisation efforts, including discussions with potential distributors and regulatory registrations for medical food and pharmaceutical products, are currently underway.
Moreover, Clover launched four new products during FY23, addressing specific customer needs and expanding into nutraceuticals, general foods, sports nutrition, pharmaceuticals, supplements, and plant-based milks.
Clover retains a 42% ownership stake in Melody Dairies, a spray drying facility in Hamilton, New Zealand. The Company is committed to expanding its stake in this facility and concentrating on niche product production for key markets in China and New Zealand.
Looking at FY24, two key factors will play a pivotal role in Clover’s growth. Firstly, reducing customers’ infant formula inventory will be crucial in boosting revenue in this segment. Secondly, market acceptance of key general food and nutraceutical projects will drive sales growth. Additionally, the Company plans to advance the commercialisation of its Premneo and GelPhorm (ultra-heat treatment drinks) products.
Directors have declared a fully franked final dividend for FY23 of 0.75 cents per share, delivering shareholders a full-year fully franked dividend of 1.5 cents per share for FY23.
Alinda is a Business Reporter for The Sentiment
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