JSE-listed dairy products firm, Clover, on Wednesday said it would not reinstate its “supply and service” contracts with its partner, Danone Southern Africa.
This is Clover’s attempt to release itself from legacy constraints and allow the company to search for other prospects, including new product advancement.
On Wednesday, Clover said most of the contracts with Danone will come to an end in December next year.
The dairy maker started operations on 10 December 1993 in South Africa and later forming a joint venture partnership with Compagnie Gervais Danone (Danone) in 1995.
A holding company for Clover was then established in 1997, and the following year Danone and Clover formed the Danone Clover joint venture.
At present, Clover supplies a number of services for Danone, including yoghurt and other fermented products and raw milk.
“Clover is of the view that the decision not to extend the contracts in its current form is unlikely to have a materially negative impact on Clover’s earnings potential in the medium to long-term,” it said in a statement.
The fact that Clover made the decision to withdraw from the contracts 15 months earlier is aimed at allowing for even changeover for the two companies.
This spacious lead time before the end of the contracts will permit Clover to make strategic investment plans, it said.
Johann Vorster, the CEO at Clover, said this move will allow the company to push for other high growth product categories.
Clover on Tuesday said one of its targets in the current financial year was to spread out its investment in the “rest of Africa.”