Libstar share price falls after its interim headline earnings decline
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LIBSTAR groceries and perishable foods categories boosted turnover growth in the six months to June, but normalised headline earnings a share fell 0.8 percent to 24 cents.
The share price slipped 4.22 percent to R6.13 yesterday afternoon after the release of the interim results. In the six months, group revenue increased 10.5 percent to R4.74 billion.
The group’s food categories, which represent 93 percent of its revenue, benefited from the much-improved food service channel demand and a resilient performance in the retail channel.
Although the upper-income consumer brackets where Libstar mainly operates were less affected than middle- and lower-income consumers, demand constraints became more evident at all levels, the group said at the release of its results yesterday.
Chief executive Andries van Rensburg said their decentralised model and culture of entrepreneurship and innovation enabled the group to respond with agility to changing consumer habits.
He said new product development to meet consumer lifestyle trends was evidenced in the 316 new and renovated products launched during the reporting period.
“Our focus on the relatively more resilient upper end of the market and limited exposure to volatile commodity products in our portfolio, as well as our world-class, low-cost manufacturing and portfolio optimisation, stand us in good stead,” said Van Rensburg.
The household and personal care category, which comprises 7 percent of revenue, saw demand for sanitiser and bleach products in the retail channel benefit from stockpiling in the first half of last year.
Reduced demand off this high base, high cost-push inflation and service level disruptions brought about by facility consolidation resulted in the category reporting a 9.6 percent decline in revenue and a R15 million loss at the earnings before interest, tax, depreciation and amortisation level.
The group said the period was characterised by rising input costs, with South African food inflation averaging 6 percent through the six months, up 1.8 percentage points from the 4.2 percent average inflation increase for the period.
The R20.1m foreign currency translation gains of last year also reduced to a R3.2m loss in the 2021 first half due to lower average foreign exchange rates.
Other income and foreign exchange gains therefore fell 84 percent to R13m from R80.9m, which significantly impacted operating profit, earnings a share and headline earnings a share.
Van Rensburg said consumer spending remained constrained, with both market and Libstar volumes trading lower, and pricing and mix changes largely driving growth.
“Our diverse product portfolio, comprising own-branded, dealer-own brand, private label and principal brands continued to assist us in responding to changing consumer behaviour,” he said.
In response to rising input costs the company had focused on cost containment, with cost increases remaining at much lower levels than those of the comparative period.
“Although the upper-income bracket of consumers have been impacted by the effects of Covid and the weak economy, it has shown some resilience relative to other income brackets due to better job security, accumulated savings and lower debt servicing costs. Our exposure to this customer base therefore offered some underpin to our results,” said Van Rensburg.
Cash generated from operating activities increased by 47.6 percent to R332m mainly due to improved cash flow from operations, reduced net finance costs and a lower working capital investment compared to the prior period.
Perishables, which comprise 48 percent of group revenue, increased revenue by 12.5 percent, while the groceries category, which makes up 32 percent of group revenue, saw its revenue increase by 12.9 percent.
Revenue from snacks & confectionery, which comprises 5 percent of group revenue, fell 11 percent, with a 33 percent decline in volumes, while the baking and baking aids category (8 percent of group revenue) saw its revenue up 5.8 percent.