Libstar achieves strong food sales despite logistics challenges

LIBSTAR, a food producer whose brands include Denny mushrooms and Lancewood cheeses, said yesterday it had delivered a resilient interim performance despite supply chain disruptions, particularly in import and export shipment delays.

Its results for the six months to June 30 showed that its largest category, Perishables, delivered revenue growth of 14.6 percent and an increase in normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) of 27.8 percent, supported by strong volume sales of pre-packed hard cheese by Lancewood and efficiencies in the value-added meat processing division, Finlar.

The second-largest category, groceries, grew revenue by 2.2 percent and normalised Ebitda fell 17.7 percent due to supply chain disruptions and increased logistics costs in the Cape Herb & Spice export division.

Libstar group revenue increased by 9.6 percent, with volume sales up 6.9 percent for the period. Sales volumes improved in all categories. Price increases and changes in sales mix contributed 2.7 percent to group sales growth.

Normalised headline earnings per share increased by 14.1 percent, while diluted headline earnings per share, which include discontinued operations, increased by a massive 101.6 percent.

Cash and cash equivalents fell by 96.7 percent to R23.4 million, while higher prices for raw materials, packaging, labour and energy were adding to production costs.

Chief executive Andries van Rensburg said: “Our low-cost manufacturing capability combined with our category-led approach has assisted in mitigating the unprecedented local and global operating conditions.”

Normalised core earnings increased 3.8 percent to R544.1m, but snacks and confectionery increased by 18.4 percent.

The group said the disposal of Libstar’s interest in Glenmor Soap shortly after the close of the first half of 2022 was an important milestone for the group as it repositioned its portfolio towards value-added food products.

“Whilst the group is pleased with the improved operating results of its remaining HPC divisions, Che Chemicals and Contactim, the board continues to evaluate the strategic positioning of the HPC business to optimise the group’s portfolio composition and returns,“it said.

Libstar said it had concluded an agreement to acquire Cape Foods.

This deal was in line with Libstar’s strategy to grow its basket of non-commoditised food products in existing categories and would provide access to new markets and value-added products in the dry condiment category.

“The group continues to experience significant inflationary pressures relating to raw materials, packaging, labour and energy. These are not expected to subside in the second half of 2022.

“Within this context, the group continues to leverage its systems, procurement expertise, and trade relationships to balance cost-push inflation and selling prices,” Libstar said.

Independent analyst Anthony Clark said the interim results were the best that had been seen in the food producer sector on the JSE in the past six months.

“We’ve seen very weak or tepid results from the likes of Tiger Brands, Avi and Rotes. Lipstar came out with a 14.1 percent growth in headline earnings per share,” he said.