Here’s why the Clover (ASX:CLV) share price crashed 20% lower today

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The Clover Corporation Limited (ASX: CLV) share price is having a day to forget on Wednesday.

At one stage today the specialist ingredients company’s shares were down as much as 20% to $1.63.

The Clover share price has recovered slightly in afternoon trade but is still down a disappointing 14.5% to $1.75 at the time of writing.

Why is the Clover share price crashing lower?

Investors have been selling the company’s shares today following the release of a trading update after the market close on Tuesday.

That update reveals that Clover has experienced reduced demand since the release of its full year results in September. This has been driven by lower than originally forecast orders from infant formula manufacturers during the first quarter.

Management believes this is the result of the market’s recalibration following a significant increase in fourth quarter FY 2020 orders in China due to re-filling after stockpiling by consumers at the height of the pandemic.

Outlook.

In light of its soft start to the new financial year, management is forecasting a decline in sales for the first half.

It commented: “As a consequence of this continuing uncertainty, Clover now expects revenue for the first half of FY2021 to be down 15% to 25% on the first half FY2020.”

No guidance has been provided beyond the first half. Though, a further update will be given at its annual general meeting in late November.

In the meantime, the company revealed that its market position remains strong and that it will continue to pursue a number of growth projects.

This news also appears to be weighing on the shares of A2 Milk Company Ltd (ASX: A2M) and Bubs Australia Ltd (ASX: BUB) today. The infant formula producers’ shares are both trading approximately 2% lower on Wednesday afternoon.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk and BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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