Libstar shares move after buy

The share price of JSE-listed consumer packaged goods group Libstar opened at R5.35 on Wednesday, jumped over 12% on the announcement of its acquisition of Cape Foods, and closed the day 6.54% up at R5.70.

Libstar announced it has concluded an agreement to acquire the herb, seasoning and spice manufacturer in a trading statement for the half-year to 30 June.

Commenting on the share price, which sat at R5 a few weeks ago, Small Talk Daily analyst Anthony Clark says: “The trading update was exactly in line with my expectations and the very fact that the stock at the end of the day ended up at 6.54% to R5.70 clearly shows that the market did not expect this news.”

The group did not reveal the value of the deal, explaining that the acquisition falls below the threshold for categorisation in terms of the JSE’s listings requirements.

It noted that the transaction forms part of its strategy to grow its basket of non-commoditised food products in existing categories, and is expected to be finalised by 30 November, after regulatory suspensive conditions are fulfilled. The group says the acquisition of Cape Foods, which has been operating since 2002, will give it access to new markets and value-added products in the dry condiments category.

“Its facilities are accredited locally and internationally by, inter alia, the British Retail Consortium, Business Social Compliance Initiative and United States Food and Drug Administration,” it adds.

The Cape Foods product range is marketed for sale to retailers in more than 30 countries.

Clark says the acquisition is a natural addition to Libstar’s existing range. “Cape Foods has a growing offshore market to 30 countries and again that fits in extremely well with Libstar which has a growing presence in international markets for condiments, herbs and spices.”

Trading update

Libstar, which will release its interim results in September, says its performance in the first half was impacted by supply chain disruptions, significant cost inflation and consumer pressures.

It notes unrealised foreign currency translation gains/losses reduced from a gain of R1.1 million to a loss of R12.6 million. Other income for the period reduced from R15.1 million to R9.4 million. Net finance charges (excluding IFRS 16) increased by 3% from R45.8 million to R47.1 million.

The group expects to report an increase of between 3.6% and 5.6%.