Changing it’s structure from a co-op to a listed business, South African dairy foods maker Clover raised R575 million in its initial public offering during December 2010. Shares in Clover first traded at R10.98 and today Clover shares closed at R17.20.
Of the R575 million raised R350 million was earmarked for its Project Cielo Blu – which is intended to address logistical inefficiencies associated with a “mismatch” in the location of its production facilities and the predominant areas of milk farming. In other words Clover needs to move closer to it’s milk producers, the majority of whom are along the coast as transporting the finished product to the North is more productive than transporing the raw product from the coast to the North.
Clover cites regulations previously enforced by the Dairy Marketing Board as precluding it from locating its facilities in coastal regions where the majority of milk is produced.
To date R100 million of the capex released for Project Cielo Blu has been spent on expansions to Clover’s long-life milk production facility in Port Elizabeth.
Clover non-executive Chairman, Mr Werner Büchner, commented; “We considered a number of locations which had to meet Project Cielo Blu’s investment criteria. The Nelson Mandela Bay Municipality’s investment promotion initiative offered a compelling proposition, which settled our decision.”
The additional UHT milk production platform was relocated from Midrand in Gauteng to bring it closer to the milk source, improving and reducing transport requirements. Application of modern technologies has resulted in a water consumption decrease of 27%, and an energy consumption decrease of 36%, compared with the old Midrand facility, thereby drastically reducing the environmental footprint of the new facility. In addition to this, warehousing and distribution infrastructure has been expanded to support growth expectations, on the back of increased UHT production.
Apart from unlocking supply chain efficiencies, the larger facility will also produce fresh milk, UHT cream, UHT Tropika, custard and artificial cream. As a result of the expansion, production capacity at the facility will increase from 100 million units in June 2011 to an expected 178 million units by June 2013.
Councilor Chippa Ngcolomba, Portfolio Chairperson for Economic Development and soon to be Deputy Executive Mayor said; “As part of our economic development strategy and job creation plan that was approved by the Council in 2012, investment promotion has been lifted as one critical pillar that will help this region achieve its economic objectives. We are excited that Clover agreed to invest in our region at a crucial time when the country has amongst other things declared war on unemployment.”
Ngcolomba closed off his wlecome to Clover by declaring; “Let there be milk!”
“A total of 17 skilled, 45 semi-skilled and 40 unskilled employment opportunities were created. More importantly, Clover has spent 711 man days on training and skills transfer since 2011? continued, Clover non-executive Chairman, Werner Büchner.
Further pipeline expansion projects at Clover’s Perseverance facility include additional warehousing plans. The proposed 10 000 pallet station warehouse valued at an estimated R70 million is expected to be completed by October 2013.
Let’s hope that the Municipality’s Trade and Investment directorate have already staretd negotiating for the relocation of Clover’s cheese making business – in June 2011 Clover announced plans to spend another R277 million in capital expenditure which includes includes the relocation of Clover’s cheese factory to the coast, where the milk source is. Asked about the possibility of relocation of this cheese factory to Port Elizabeth, Manie Roode, Deputy Chief Executive and Managing Director Africa said; “We haven’t finalised which area it’s going to be!” MyPE thinks it should be in Port Elizabeth over any site in Kwa-Zulu Natal as we are closer to the good wines of the Western Cape AND we are so friendly!
Just one request – can you do something with the hair nets? Very unflattering – see below:
Image courtesy (I think!) of Jacques Arendt.