SOUTH AFRICA – Libstar, one of South Africa’s leading Consumer Packaged Goods (CPG) manufacturers and distributors has reported an 8.7% rise in half year revenue to R5.1 billion (US$360m), boosted by growth from the food categories, which represent 93% of group revenue.
The food category, comprising of perishables, groceries, snacks & confectionery and baking products, registered a revenue growth of 10.5%, benefiting from the much-improved food service channel demand and a resilient performance in the retail channel.
The producer of Lancewood dairy brand and Finlar meat products, highlighted that revenue from perishables increased by 12.5%, steered by a volume growth of 0.7%.
Meanwhile, earnings from groceries, the group’s second largest contributor to revenue, increased by 12.9%, whilst volumes declined slightly by 0.2%.
The continued strong performance of value-added meal ingredients and a recovery of food service and contract manufacturing channel sales relative to the prior year was offset by lower exchange rate-related export margins of herbs and spices.
Its baking & baking aids category attained a 5.8% rise in revenue, propelled by 5% increase in volume due to continued strong retail channel demand for rolls and artisanal breads.
Food service channel demand for wraps relative to the prior period, when COVID-related lockdown restrictions applied to quick-service restaurants, also improved strongly.
However, its snacks & confectionery category which includes cereals, nuts, snack bars and confectionery, lagged behind with a revenue dip of 11% and volume decline of 33.3%.
This was mainly due to continued subdued retail demand for premium nuts and nut mixes, granolas and snack bars.
Commenting on the results, Libstar CEO Andries van Rensburg, said, “We continued to carefully navigate challenging market conditions. Consumer spending remains constrained, with both market and Libstar volumes trading lower, and pricing and mix changes largely driving growth.
“We were able to address the subdued market demand by continuing to launch new innovative products which cater to growing market trends. 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. “
Despite the impressive top line performance, Libstar’s earnings fell by 27.8%, mainly impacted by unfavourable foreign currency movements.
Its diluted headline earnings per share, the main profit measure in South Africa, fell to 12.2 cents
“The first half of this year also saw increasing industry input costs and selling price inflation. In response, we continued our relentless focus on cost containment, with cost increases remaining at much lower levels than those of the comparative period.
“Although the upper-income bracket of consumers has 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 Andries.
The company has indicated it will remain steadfast in its resolve to maintain improved cost control whilst capitalising on the cost-saving impact of its projects during the second half of the year.