Libstar Holdings’ new strategic direction boosted trading performance and cash generation in the second half of the 2023 financial year, the group said Friday.
The new strategy for the manufacturer, distributor and marketer of branded and private label consumer packaged goods and foods was implemented in challenging markets during the 2023 period.
Libstar’s annual results, released Friday, resulted in the share price closing 5.42% higher at R3.50 on Friday, although the price was well down from R5.20 a year ago.
The dividend fell to 15 cents a share from 22 cents in 2022. Normalised headline earnings per share fell 11% to 58 cents in the year to December 31.
Customer demand had been muted, manufacturing input cost inflation was high, and economy was also impacted by load-shedding and port congestion, CEO Charl de Villiers said on Friday.
Libstar reviewed its portfolio, operating model and its category and channel participation in the first half. The aim was to identify key value-driving initiatives (KVIs).
“We are pleased with the early benefits of the new strategic direction in the second half, that assisted in a strong improvement in results. Our actions in the last six months included better capacity utilisation, production efficiencies, pricing and cost management and focused capital allocation,” he said.
Progress had been made to exit the Household & Personal Care segment.
Progress had also been made to consolidate divisions and product lines, and to transform the operating model from a multiple division-based structure to a category-based structure comprising two super-categories: Perishables products and Ambient products.
Libstar’s Perishable products included dairy, meat, baby and convenience meals, while Ambient products include dry and wet condiments, meal ingredients, baked goods, snacks and spreads.
De Villiers said market conditions were expected to remain challenging as the weak macroeconomic climate continued to adversely impact consumer demand.
Export opportunities were being targeted to compensate for reduced beef volumes. Continued strong local demand for value-added chicken products was likely.
Demand for export herbs and spices had stabilised following a shift to dual-supply arrangements by a prominent US-based customer in the prior year.
Export margins were expected to benefit from the weakness of the rand against major currencies
In the first eight weeks of 2024, revenue growth had moderated, but margins achieved in the second half had been sustained.
Increased competitor participation in the food service channel was expected to result in slower revenue growth in the Perishables category.
However, gross profit margins should benefit from a focus on higher-margin value-added meat products.
Group selling price inflation and mix changes contributed 10% to sales growth. Sales volume declined 4.8% as the group experienced a decline in its retail, industrial and export channels.
Revenue growth accelerated to 6.2% in the second half, from strong retail channel sales, assisted by double-digit growth in the Baking & Baking Aids category.
The group margin recovered in the second half to 21.4%, compared to the 20% in the first half of 2023, and 19.6% in the second half of 2022.
This was the result of improved capacity utilisation, production efficiencies, pricing and cost management. These assisted in offsetting the load-shedding cost of R77m in diesel to operate back-up power generators.
The group received R120m (R37m) in insurance proceeds relating to the Denny Mushrooms (Shongweni plant) fire.
After considering the reduced total mushroom production from its two remaining mushroom farms, an impairment charge of R73m (R98m) was recognised as part of the annual impairment assessment of this business unit.
Group normalised operating profit margin accelerated to 6.4% in the second half, from 4.5% in the first half of 2023, to 5.5% for the full year.
Basic earnings increased mainly as a result of higher insurance proceeds and lower impairment charges relative to the prior year, despite increased borrowings.
Projects would be implemented in 2024 to expand the food service channel offering beyond the current Rialto food service and packaging offering.
BUSINESS REPORT