Clover Corporation Limited (CLV) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Rupert Harrington, and I am the Chairman of Clover Corporation Limited. I welcome shareholders and visitors to the 2021 Annual General Meeting of the company. The Company Secretary has informed me that a quorum is present and, therefore, I formally declare the meeting open. I acknowledge the traditional owners of the land on which we are meeting. I pay my respects to their elders, past and present and the aboriginal owners of other communities who may be here today. Thank you for attending online. We are again using the Lumi platform to host the meeting. The platform allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. Only shareholders and proxies have the ability to ask questions and submit votes. By reason of travel restrictions in place and ensuring we are -- we comply with the HHS on social distancing, your Board is not assembled in one place. Before we proceed, I would like to introduce to you the other members of your Board. With me in person today are Mr. Peter Davey, the Managing Director and CEO; Dr. Simon Green, Independent Director; and Mr. Graeme Billings, also an Independent Director and Chairman of our Audit and Risk Committee. In Sydney is Ms. Toni Brendish and Mr. Ian Glasson, who is the Chair of our Rem Committee. Also present online is -- so also present here is Mr. Andrew Allibon, the company's Secretary and CFO; and online is Mr. Steven Bradby, representing our auditor at PKF. Steven will be available to answer questions on the accounts at the appropriate time. To attend this meeting, you will have downloaded the Lumi app and enter the credentials provided to you that it you as a shareholder or proxy. Alternatively, you may have entered as a visitor or guest. In respect of the agenda, I would like to address the general housekeeping around questions and voting before we proceed further. I propose that the final Notice of Meeting dated the 15th of October 2021, which was mailed to shareholders be taken as read, unless there are any objections with the formal matters noted on the agenda. If we move to the next steps around questions and voting online to ask a question on Lumi -- in the Lumi app press the speech bubble icon. This will open a new screen. At the bottom of the screen, there is a section for you to type your question. Once you finish typing the question, hit the arrow symbol to send. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting, either when the particular item of business is open for discussion or after the close of business or before the close of voting polls. I ask that in the interest of time that -- and to allow as many questions as possible to be addressed, please try to keep your questions in a moderate length. Please also note that your questions may be moderated. And if we receive multiple questions on 1 topic, amalgamated together. If you're on the phone, as you noted on the slide, and you wish to ask a question, please note that the numbers and follow the direction of the star 1 to join the verbal question queue. Please note your webcast if you choose to use this method to avoid any audio feedback. Finally, due to time constraints, we may run out of time to answer all questions. If this happens, we will answer them in due course via e-mail and by posting the responses on our website. In accordance with current practice, voting today will be conducted by way of a poll on all items of business. I will shortly open voting for all resolutions. And if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up the list of resolutions and present you with voting options. To cast your vote, simply select one of the options. You may -- you have the ability to change your vote up to and until I declare the voting closed. In the unlikely event that we experience a loss of signal with the webcast, please do not log out from the Lumi app. We have a backup webcast stream running, which will automatically appear on your Lumi app within about 30 seconds of the initial loss of signal. Finally, voting on every resolution is held open until the end of the meeting. That concludes the housekeeping on the questions of voting. Before we move to the formal business of the meeting, I would like to present my Chairman's address. Following my address, Peter Davey will give a presentation on the operations of the business. On behalf of the Board of Directors of Clover Corporation, I am pleased to present our annual report for 2021. Shareholders would be aware that Clover like much of the world has been impacted by the global COVID-19 pandemic, which has reduced sales from many of our customers combined with challenging conditions in supplying infant formula into the China market. The company continues to see good opportunities for growth in health food segment, however, developments of these markets was constrained due to COVID-19. The company has continued to maintain a focus on the helpful safety of its employees operating under COVID-19 safe plans. Many staff have been asked to work from home for much of the year, whilst a core of operational staff have maintained the day-to-day production of the business. Thankfully, no staff has contacted COVID-19 during the year. The company has not received any financial assistance from the government. As highlighted at the half year, Clover experienced challenging trading conditions as our major customers delayed new projects, reduced their orders due to lower customer demand and the challenges as servicing the China market. The 2021 financial year summary is revenues of $60.5 million compared to the prior year of $88.3 million. Net profit after tax of $6 million compared to $12.5 million in the prior year. Excluding Melody Dairies operating loss and our lP legal defense costs, the underlying net profit after tax for 2020 would be $7.3 million. The balance sheet remains strong with cash at $9 million compared with $9.2 million in the prior year that places the business well to support growth opportunities and to service existing debt. Clover has continued its strong focus in development of new products and in expanding into new markets outside of its traditional infant milk powder customer base. The company maintains a strong global pipeline of new opportunities with new products, customers and markets. This has presented the company -- this has resulted in the company launching new products through 2021 financial year. The targeted customers are now trialing those ingredients to develop their own new products, which will be released in the future of having secured orders of sales for 2022. In addition, the company continues to work with customers in developing encapsulated products for the planned legislative changes in Omega-3 levels in infant milk formula segment in China, whilst it has experienced delays due to COVID conditions, a reasonable conversion of this pipeline should provide a base for future growth for the company. Clover has and will continue to invest in its people to ensure timely response to customer and ongoing development and growth of the business. The company also focuses on improving competitive capability with the investment in Melody Dairies expected to be fully operational and to reach cash neutral -- neutrality in 2022. The R&D facility in Brisbane has been relocated to a larger facility, and that will include a new part of production plant that will improve confidentiality of product development plans and reduce development time cycles. Based on the performance of Clover -- Clover's financial year 2021, the Directors declared a fully franked final dividend for financial year 2021 of $0.05 per share making the total dividend payable for the year ending 31st of July 2021 of $0.01. The prior year was $0.025 per share. Turning to the financial year 2022. It is clear that COVID-19 will continue to impact our business as it has -- as a slight in September with our financial year 2021 results announcement. Over recent months, we have seen more confidence in the market, and this is reflected in a more stable forward order book, albeit with little growth at this stage. We expect to reengage with our customers on a face-to-face basis during the financial year '22 as international travel opens up. This is essential to support future growth. On behalf of the Board of Directors, I would like to thank our shareholders for their continued support. I would also like to acknowledge and thank our CEO and employees for their continued hard work and dedication and commitment to Clover. I would now like to hand over to Peter Davey to present his report.

Thank you, Rupert. Welcome to the Managing Director's report for the 12 months to the 31st of July 2021. Our vision, values and purpose statement is always the way I start these presentations. And I thought I'd just read through you our purpose statement. In collaboration with key market participants, being our customers, Clover develops customized high-value nutritional ingredients that enhance the well-being and dietary needs of their customers. I think it's a really good statement around what we actually do. We work with people to develop solutions, and it's what keeps this business in front of many others in the marketplace. An overview, a look back for the year of what's happened. Our revenue was $60.5 million, down 32% on the prior year, and we'll talk more about the details of where it's gone. Net profit, $6 million, down 1.9% on the prior year. Our operating expenses of $8.7 million was down 23.7%. And we introduced a series of new products that we'll talk through that will allow us to enter new markets and find new customers. Our inventory position, whilst down slightly, it's still quite high at $30.8 million, and I'll talk more to the details around that. Balance sheet continues to be strong at $9.1 million. And overall, that the cash position allows the directors to declare additional -- a dividend of $0.05 per share, bringing the full year to $0.01. An update on COVID. We have continued to manage this business to a COVID safe plan, really the critical thing for the business is ensuring the safety of our employees, customers and all stakeholders in the business. We have had demand curtailed by COVID. So that's a significant part of the story of the year, less movement of people and less demand in the marketplace. We maintain a relatively high position in terms of inventory and that's relative really to constraints around shipping. So many ports have been closed due to COVID conditions, and it's increased the freight costs around the world, where our inventory has moved from more of a finished good back into a raw material, so we have the ability to convert and supply orders. The company has not received any government assistance during the pandemic and many of our customers and many of our employees continue to work from home. With more than 80% of our customer base located overseas, traditionally, the growth of this business has been through face-to-face visits, and it's been very difficult, obviously, with travel impossible in the current market to continue to drive business and establish those relationships. Now sales by geography. So EU sales were down slightly, a bit disappointing. EU market has been in shutdown, undergoing whole COVID conditions, they've also been impacted by the China market slowdown there. The key to our story is that the Asia and Australia and New Zealand market has been down significantly and mostly in New Zealand. Our New Zealand customers and a lot of the infant formula market is heavily reliant on the Daigou channel. The Daigou channel relies on Chinese tourists and Chinese students that live in Australia or travel to Australia and New Zealand and other parts of the world. They buy products and they send it back into China, either through the mail, through deliveries or they take it back in baggage. And of course, that marketplace has been effectively shut down due to COVID and relatively no travel. The Americas, whilst very similar to the prior year, it was a bit disappointing because we had really high hopes for that marketplace. But again, the marketplace has been curtailed because of COVID conditions. Many of our customers across America have put their projects on hold. And most of our customers are actually working from home. They're not working in their laboratories or factories or their test kitchens, so new product development has been slowed because of that. The full year result, 32% down year-on-year in revenue. A key part to that was the pantry stacking that occurred. So if you look back at the FY '20 result at $88.3 million, it was a record year for the company, significant amount of those sales came in the last quarter of the year, and that was due to people pantry stacking. So consumer going to lock down, went out and bought a lot of infant formula. They put it into their cupboards. And so we refilled the channel. And then after that, consumers utilize the product they have had at home didn't go back and buy it again. So naturally, we saw probably more than half of the year with reduced sales driven by that pantry stacking. Margin declined a little 3%, heavily driven by FX and a bit of the customer mix that we saw through the business. We managed our costs relatively well, so down significantly year-on-year. And across the entire business, we reduced our costs. Our tax position improved slightly, and that was relative to the R&D in the business. So we had R&D claims against our tax position. Net profit was $6 million versus the $12.5 million the year before. And as Rupert alluded to, if we took out the one-off costs associated with Melody Dairies, which I'll cover a bit more and our legal defense of our intellectual property. Our underlying NPAT would have been $7.3 million a lot more power. The balance sheet tends to be a good story for the business, very strong in terms of cash that allow us to pay dividends and puts us in a good position for trading. Receivables and payables are both well in line and the due sales. And inventories, whilst little bit down we're not holding quite high inventories relative to the ability to be able to bring in more materials globally, we all knew that getting raw materials into the country, either into Australia and New Zealand for our production facilities has been difficult. And even getting shipments to customers has also been difficult. We're tending to have to supply customers significantly earlier than what we would have in the past. A bit regarding Melody Dairies. You'd be aware that we own 42% of a company called Melody Dairies in New Zealand. It's in the North Island and Hamilton. That gives us access to a dryer. COVID delayed the start-up. So it's a greenfield site, brand-new build. The construction was delayed by some 3 months. And then the government accreditation to actually say we can manufacture product there that was delayed by about another 3 months. And then acceptance testing by our customers was really delayed by more than a year and still some customers haven't been able to get there. Generally, where you're dealing with food or infant formula, your customer will have to come and audit your facility. And because of the travel restrictions into New Zealand, many of our customers haven't been able to get into New Zealand. So we've been impacted by our shares, 42% of shareholders. We've had to meet some of the costs associated with the losses of that business, and that cost us $800,000 in the year. Some customer audit us, audits have now been completed. Virtually all of the local customers have been through, and we have started to manufacture successfully on the dryer late in the FY '22 year '21 year and we expect that to be much fuller in the FY '22 year and breakeven across that business for the year. So we won't see those losses reoccurring. An update on our growth platform. So we generally talk about the key platforms for growth in the business around new product development, our focus on infant formula and the new market development we do. So we tried to represent these a little bit differently this time. So in market development is really a story of how we diversify the markets for the business. So whilst at the top, infant formula is a key part of our business, we're looking for growth and expand into other general areas of the marketplace. So we've done a lot of work around customer development, product development that gets us into the general food market. And we've been quite successful going into milks in other markets. In the sports nutrition, we see that as a great potential marketplace. We've only got a small amount of business there at the moment, but we've got some specific product development that's working in there. Into pharmaceuticals, there's a crossover between a pharmaceutical, nutraceutical world called food for special medical purposes. We recently launched a new product; it's got high EPA. EPA is an extract of Omega-3 and it's renowned for reducing inflammation in human body. And so it's now being applied into food for special medical purposes and being taken up by customers in the U.S.A. and in China. Very recent, and we're starting to get some traction with that new product. Supplements, we've talked about gummies in the past, and we're getting better growth in that, but also into the press tablet area as well. And then plant-based market. People would be well aware that the plant-based market is growing rapidly. Nu-Mega has launched and has a series of products that are completely plant-based. They are considered vegan, organic, and so we are well positioned to take advantage of that marketplace, a very large U.S. market when the U.S. comes out of their sleep, they're currently in. Product development. So applications of some of our products, we've actually got in marketplace now, gummies. We've worked with a series of gummies manufacturers with our hypoallergenic product that has a 50% fish concentrate. We can now get into 1 small gummy 200 milligrams of DHA. So that's an element of Omega-3. Tiny little gummy, we can give a person a daily dosage, which is quite an amazing result. Sports bars, we're using a dry form 60% fish oil concentrated powder. We have one of the largest manufacturers in the world with a 250-milligram bar that supplies into the sports nutrition market. We have gone into extended shelf life dairy-based drinks. We now have 2 customers in that marketplace using our dry form 50 algal powder. So it's not a fish source, but the source of the oil comes from LV. And into that milk product, we're getting 125 milligrams per serve. So -- and that product is now available in the U.S.A., and it's recently been launched into China as well. We're doing compressed tablets. We're using a hypoallergenic 50% again in algal powder, so it's not a fish source that comes from an algae and into a small tablet, we're getting 180 milligrams of DHA. Again, full daily dosage in a capsule -- in a tablet. And then recently, we've developed a UHT application. It's a new product that's about to go to marketplace. It's called Gelphorm. So we've registered the brand, Gelphorm. We have registered the intellectual property around the Gelphorm product, and we are now capable of taking DHA. So the Omega-3 through the UHT process that no one has been able to achieve before. And we will set up pilot production in the FY '22 year and start supplying it to customers for samples and testing. A great deal of interest in UHT across the world. And then the final growth platform is around our focus on infant formula. Infant formula is certainly a key plank for the business and continues to provide us with opportunities especially Mainland China. China, we've spoken about previously, we ever had draft legislation. They have now legislated that policy, which will require all infant formula if you include DHA to have a minimum of 15 milligrams per 100,000 calories. That's a measure of the calories that are involved in the infant formula that's made and an equal quantity or more of ARA. So there are 2 omegas, 1 is an omega-3, the other one is an omega-6. That's been fully approved, and we're now working to transition with manufacturers to reach those levels. Many manufacturers are at only 5 milligrams today or 0. And that all products have to be transformed into that -- to meet that legislation by February 2023. So we'll see that in a year's time. What we've done with the China marketplace is we've changed our strategy. We used to go to marketplace through a distributor, who represented us with our customers. We now have our own representation in marketplace, and we've established direct customer contact with all of the major Chinese manufacturers, and we have aligned different distributors with each of those customers. So each customer has a different distribution option if they want to pursue, and we've identified those and starting to work with them. And we now represent the technical relationship with the end customer rather than having someone between us through our own staff and our own technical support. Our products have now been qualified with several of the major local Chinese infant formula manufacturers and they are doing their license submissions, which will include Clover's micro encapsulated powders. So effectively, if you want to sell a product, an infant formula product into the China marketplace through the retail channel, you have to have a license called the SAMR license. That license you have to submit with all of the ingredients associated with it. We have been included in several of those licenses as a supplier, as an optional supplier within the infant formula. So it gives us great scope for improvement in our business into Mainland China, and that will come on in February 2023 and beyond. So we'll look at our first half for FY '22, the outlook and the priorities for the business, absolutely key for the business is to maintain the safety. We've done extremely well, maintaining the safety of our people and our products and everybody associated with the business, and we're continuing to do that. We are meeting supply chain challenges, getting raw materials in and working with our customers to make sure that we don't miss an opportunity. The world is full of story is how shipping is challenged to actually get bookings, get containers and get product on time to customers. So we're working with the customers and our suppliers on a daily basis, it's really being managed by hand. The real part of what we see is the opportunity for the business is starting to reengage with customers. We haven't been able to go and visit customers and travel in marketplaces for nearly 2 years. So it's very pleasing that we've now got China opening up. So we've got our people in China being able to travel within the Mainland China. Our European travel is just started. So you've got our European staff starting to see [indiscernible] use again. And in the U.S.A., just beginning to that travel there as well. We've got plan we start to travel in Australia using international markets for the first time in 2 years. Reengaging with customers will restart a lot of the projects that have been on hold for a long period of time. And then we will start launching some of the new products we've discussed today and talking to them about them. We have a suite of products that help people with solutions that will help them get new products to marketplace, and I genuinely believe that customers will be looking at opening up and developing the opportunities to launch into the marketplace. We're always looking to increase our integration to our supply chain. Melody Dairies was a great example of that. we've signed contracts with excellent suppliers of oil, and we're looking to establish our position into our supply chain to ensure that we get the best price, quality and availability of products for the future. We are always on the lookout for strategic acquisitions and partnership opportunities. And so we will continue to pursue those into the future. My final statement is COVID conditions and associated government responses globally can be expected to continue to impact Clover's customer base. It's naturally what's going on in the marketplace with uncertainty. As the year advances, the current water pipeline still reflects little growth over the prior year, and that's the current position of the business. Thank you very much. We appreciate your attention. Thank you.

Thank you, Peter. We now move to the formal business as set out in the Notice of Meeting. Each of the resolutions will be taken in turn, I will introduce each resolution. Shareholders will have a chance to ask questions on the resolution, and I will display the proxy results for the resolution on screen before we move to the next resolution. Voting is now open. I now move to the first item of formal business. As required by the Corporations Act the financial reports of the company for the year ending the 31st of July 2021, comprising the company's financial statements and the directors' declaration, together with the directors' report and the auditor's report will be considered, and I present a copy of them to the meeting, which is signed by me for the purposes of identification. I invite you to ask any questions about these reports. I remind you that there are no resolutions required for this item. Please limit your questions at this time to matters relating to the financial statements and other reports. There will also be time for general questions at the conclusion of the meeting. Questions may be addressed to me or to Mr. Steven Bradby of PKF, the company's auditors through me. Are there any questions regarding the reports? Andrew, any questions?

So in respect of questions of the financial statements, no, we have none at the current time.

Thank you, Andrew. If there are no questions, we will move to the next item of business. I now move to item 2, resolution 1, set out in the notice of meeting, which relates to the adoption of the remuneration report for the year ending 31st of July 2021. The remuneration report is in the Directors' Report section of the company's annual report. By way of summary, the remuneration report explains the company's remuneration policy and the process of determining the remuneration of its directors and executive officers. And it sets out remuneration details for each director and each of the company's executives named in the remuneration report for the financial year ending the 31st of July 2021. Section 250 R2 of the Corporations Act requires companies to put a resolution to their members that the remuneration report be adopted. Please note that the resolution is advisory only and does not bind the Board of the company. I move that the resolution for adoption of the remuneration report for the year ended 31st of July 2021 be put to the meeting in the form of resolution set out in the Notice of Meeting. Details of the proxy votes in respect of the proposed resolution are shown on the screen. Are there any questions regarding the remuneration report?

There are no questions on the line, Mr. Chairman.

Thank you, Andrew. As there are no questions, I put the motion that the remuneration report be adopted. And I now move to the next item. The third item being the second resolution relates to the reelection of myself. I'm required to retire by rotation pursuant to the constitution and, being eligible, offer myself for reelection. At this stage, I pass the chairmanship of the meeting to Mr. Graeme Billings for this item.

Thanks, Rupert. Just by way of background, Rupert has been a Non-Executive Director of the company since 1 July 2015 and was appointed Chairman of the company on 21st of September 2017. I would now like to ask Rupert to address the meeting to discuss his background and credentials he brings to his director role.

Thank you, Graeme. I've appreciated the opportunity to work with the Board and management over the last 6 years as an independent director and as Chairman of the company in delivering returns for the shareholders. I'm also a Non-Executive Director of Integral Diagnostics an ASX-listed company and also Pro Pac Limited, an ASX company. Subject to my reelection, I confirm that I am committed to the growth strategy of the company and would welcome the opportunity to continue to work with the Board and management to deliver positive returns for our shareholders going forward. Thank you, Graeme.

The Board, with Rupert abstaining, unanimously recommends the reelection of Mr. Harrington as a Director of the company and recommends that you vote in favor of the resolution. Details of the proxy votes in respect of this resolution are shown on the screen. Andrew, are there any questions regarding resolution 2?

Thank you, Graeme. No questions.

As there are no questions, I now put the motion that resolution 2 be adopted. This concludes item 3, and I will hand the meeting back to the Chairman.

Thank you, Graeme. The fourth item being resolution 3, as set out in the Notice of Meeting relates to the approval of the acquisition of financial year '22 performance rights granted to the Managing Director under the company's long-term incentive plan to permit the company issue or otherwise provide underlying shares in satisfaction of performance rights rather than buying shares on market. The Managing Director has 353,602 outstanding performance rights in total, which includes the 140,575 performance rights, the subject of resolution 3. The terms of these performance rights are summarized in the Notice of Meeting. I move that the resolution for approval of the acquisition of the Managing Director's performance rights and the issue or other provisions of shares in satisfaction of the performance rights be put to the meeting in the form of resolution 3 set out in the Notice of Meeting. Details of the proxy votes in respect of this proposed resolution are shown on the screen. Andrew, are there questions regarding this resolution?

No questions online, Mr. Chairman.

Thank you, Andrew. As there are no questions, I move the approval to give for the bank of the performance side to Mr. Peter Davey, on the terms described in the explanatory memorandum accompanying this notice submitted. I will now move to the next item. The fifth item being resolution 4 set out in the Notice of Meeting relates to the approval of certain benefits under the Managing Directors' financial year '22 performance rights. Shareholder approval is being sought under Section 200E of the Corporations Act to allow the company to give Mr. Davey the benefit resulting from his early vesting of his financial year '22 performance rights should his employment end in certain circumstances as further explained in the explanatory notes to the Notice of Meeting. I move that the resolution for approval of certain benefits of the Managing Director's financial year '22 performance rights be put to the meeting in the form of resolution 4 as set out in the meeting. Details of proxy votes in respect of this proposed resolution are shown on the screen. Andrew, are there any questions regarding this resolution?

So there are no questions online, Mr. Chairman. And none by phone.

Thank you, Andrew. As there are no questions, and I put the motion that resolution 4 be adopted. I now move to the next item. The sixth item being resolution 5 sets out the Notice -- set in the Notice of Meeting relates to the approval of the long-term incentive plan, which is required under exception 13, Rule 7.2 of the ASX listing rules. Exception 13, Rule 7.2 applies to the issue of securities under an employee incentive scheme needing to be approved every 3 years. The plan was previously approved at the 23rd of November 2018 Annual General Meeting. I move that resolution for approval of the long-term incentive plan be put to the meeting in the form of resolution 5 as set out in the notice of meeting. Details of the proxy votes in respect of this proposed resolution are shown on the screen. Andrew, are there any questions regarding Resolution 5?

No questions, Mr. Chairman.

Thank you, Andrew. As there are no questions, I now put the resolution -- put the resolution 5 be adopted. I will now move to the next item. The seventh and final item for formal business relates to resolution 6 set out in the Notice of Meeting relating to the approval to increase the nonexecutive directors' remuneration aggregate fee limit from the current 500,000 to 750,000. I move that the resolution of approval for the proposed increase of 250,000 to the aggregate fee limit be put to the meeting in the form of resolution 6 as set out in the Notice of Meeting. Given the interest of nonexecutive directors on this matter, the directors make no recommendation regarding resolution 6. Details of the proxy votes in respect of this proposed resolution are shown on screen. Are there any questions regarding Resolution 6, Andrew?

There are no questions, Mr. Chairman.

Thank you, Andrew. I now put the motion that the resolution 6 be adopted. This brings the formal part of the meeting to a close. With the formal business of the meeting having been completed, I now open the floor for questions from shareholders to the Board. Andrew, are there questions at the meeting?

Yes, Mr. Chairman, we have 3 questions, and there's a series of questions within a question. But I'll start. The first question comes from Gary Ellis as a partner of Clover in the [ Melody ] Dairies facility, Pamu Farms is manufacturing sheep milk products. Does Clover see potential in marketing its ingredients in this growing industry?

Thank you, Andrew. I'll ask Mr. Peter Davey to respond.

Thanks, Gary, for the question. Yes, we do see a great opportunity in that field. Clover launched a microencapsulated DHA and ARA product some 3 years ago, the targeted growing milk and [indiscernible] in the market. We are the #1 supplier that does [indiscernible] manufacturers globally. We have the only product that really can suit those products, especially from an organic perspective. So yes, we think there's great prospects and it continues to be a growing segment within the China market.

Thank you, Peter. Next question, Andrew.

Gary has a couple of questions. I'll read the few [indiscernible]and the third question as well. Both Bubs Australia and Halo Foods, formerly Key Tone Dairy, have recently released ASX notices, revealing significant increases in China trade. Has Clover experienced similar resumption of China trade in recent months?

Thank you, Andrew. Peter, would you like to comment on that, please?

Yes, I've seen the reports of a number of infant formula manufacturers that have reflected improved demand. We haven't seen that reflected in the ingredients that we currently supply. Certainly, hopeful that we do see that flow on into our business in the future.

Thank you, Peter.

Gary next question and a question from Stella Wang of CTHD Investment. I'll probably address the same matter. So I'll read Stella's question, if I may. I'm a shareholder. Thanks for taking my general question. Since Thai Union has taken a strategic stake in the company, have the 2 companies discussed potential joint venture strategic projects? And also Thai Union already have a facility in Europe. Would that help Clover in expanding capacity in Europe and does Thai Union stake help Clover with raw material supply security?

If I may answer the question initially. Thai Union is a shareholder, and it's rights as a shareholder are no different to any other party who is a shareholder in Clover. They don't get any special consideration in relation to information or treatment in relation to commercial relationships. We've -- long term, we've had a commercial relationship with Thai Union in relation to the supply of oil. And as part of that program, we will also distribute oil in Europe and elsewhere for some of their products. But that is a normal commercial relationship that was part of a long-term discussion before they became a shareholder in Clover.

The third and final question comes from John Percival from Deep Moat Capital. What is the status of the legal proceedings against the competitor and former employee when will it likely resolved? And what processes has Clover implemented to protect its IP?

This is a -- this has been an ongoing legal matter, and I'm not going to discuss the details of the legal proceedings. But I think-- excuse me, that's something shareholder and Chairman shouldn't do. The -- so proceedings are ongoing. We've taken appropriate legal advice, and we are strenuously protecting and arguing the case that we have been in -- our IP has been infringed, and we intend to continue our legal proceedings to come to a satisfactory outcome to protect the interest of our shareholders.

In terms of questions, there are no further questions at this time, Mr. Chairman.

As no further questions at this time, that is the end of business. And the voting will close shortly. So I'll pause for a moment to allow people to finalize their votes. And the result of the ballot will be on our website at the ASX this afternoon. [Voting]

The voting is now closed. The results of the poll will be announced via the ASX later today. As the business of the meeting has been concluded, I declare the meeting closed. I would like to thank you all for your attendance today and your continued support of Clover Corporation Limited. I look forward to updating you on our half year results in due course. Thank you.