The share price of Clover Corporation Limited (ASX: CLV) is up 23% in lunchtime trade to 79 cents following the release of its half yearly earnings report for the period ended 31 January 2018.
Key highlights from today's release include:
- Net sales revenue grew by 60% over the prior corresponding period to $31.0 million.
- Net profit after tax increased by 209% to $3.2 million.
- Earnings per share rose from 0.63 cents to 1.93 cents.
- A fully franked interim dividend of 0.50 cents per share was declared with a record date of April 10.
Positioned for a growing market
Clover delivers omega-3 and omega-6 products to the infant nutrition and medical foods markets. The company has benefited from rising demand for infant formula in China by supplying essential ingredients to infant formula manufacturers that represent a significant proportion of the company's revenues.
This was an excellent result for Clover which exceeded market expectations and has propelled the stock to 52-week highs. The earnings beat was attributed to a number of factors. The company managed to increase its customer base and its traditional customers also experienced substantial production growth due to rising demand for infant formula at home and in China.
Regulations in China have also been stable which has boosted confidence in manufacturers to produce and deliver their products for the Chinese market. Improved manufacturing and operating efficiencies through volume and raw material supply have also driven the growth in the company's bottom line.
Outlook
The outlook for the second half of the financial year was also bullish. Management expects second half order patterns will be consistent with first half sales based on current demand and the regulatory environment in China being stable. Regulatory instability has previously had a negative impact on the company's operations in 2016.
While the share price of Clover has not matched the gains of infant formula market darlings A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL), it certainly is one company investors ought to be considering in the small cap space.
