Clover's unlucky charm

Clover is forecasting a 20% drop in sales for the first half of 2013-14 as the contaminated milk powder scandal weighs on demand for its products.

Clover Corporation (CLV) issued a profit warning this morning as the contaminated milk powder scandal earlier this year is weighing heavily on demand for its products.

While Clover is not directly impacted by incident, public concern about the quality of milk products have adversely impacted on orders for Clover’s nutritional supplements from infant formula manufacturers.

Management is forecasting a 20% drop in sales for the first half of 2013-14 but reassures investors that the impact to sales will be temporary, although any recovery in sales is dependent on how long it takes for its customers to return to normal trading conditions.

Clover posted a 12.5% uplift in sales to $20.2 million for the first half of 2012-13 as net profit surged 56.6% to $2.7 million.

The stock could come under renewed pressure today even though it has already shed around 23% of its value in the past five months due to the negative publicity from the milk power product recalls in several countries.

The stock, which is part of the Uncapped 100, closed at 52 cents yesterday.