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Libstar’s share price falls after warning that interim earnings will be lower

Libstar is looking forward to a stronger performance in the second half of the year. Photo: Twitter

Libstar is looking forward to a stronger performance in the second half of the year. Photo: Twitter

Published Aug 21, 2023


Libstar Holdings’ normalised headline earnings per share (Heps) are expected to fall between 42.4% and 47.5% for the six months to June 30 after sales volumes declined because South African consumers face high inflation, interest rate hikes and ongoing load shedding.

Normalised Heps was expected to be between 18.7 and 20.5 cents a share, the household and personal care (HPC) and food products manufacturer said in a trading statement on Friday.

The share price closed 2.02% lower at R3.89 on the JSE on Friday after the release of the trading statement. The All Share Index fell 1.74% on the day.

The group said market conditions remained tough through the six months. Revenue growth came to 4%. Selling price inflation and mix changes contributed 10.7% to sales growth.

But volume sales declined by 6.7% after sales declines in the retail, industrial and export channels.

Retail volumes fell after unprofitable HPC lines were stopped and due to lower mushroom production volumes from the destruction of the Shongweni production facility in the second half of 2022.

Excluding the impact of lower HPC and mushroom volumes, group retail channel volumes increased by 1%.

Industrial channel volumes fell significantly due to weak demand for contract manufactured wet condiments.

Export volumes fell as certain global retailers implemented strategies to help combat supply chain disruptions that included increased supplier diversification and local procurement.

However, the group said it remained confident in growing export market exposure with a dedicated and well-resourced team capability over the longer term.

The gross profit margin declined, mainly due to the under-recovery of overhead costs resulting from lower volume sales.

Input cost inflation remained elevated across all categories. Gross profit therefore declined by 5.6%.

Some R45 million in diesel costs were incurred to operate generators, compared to R8m in the first half of 2022 and R31m in the second half of 2022. These costs were partly mitigated by price increases, the group said.

Operating expenses increased less than the published inflation rate.

Net finance costs increased by 71% to R82.1m, mainly due to the full period impact of the increase in the Johannesburg interbank average lending rate (JIBAR) in the six-month period of 11.1% compared to 7.7% in the first half of 2022.

Libstar’s interim results are expected to be published on September 12.