SOUTH AFRICA – Libstar, a prominent South African Consumer Packaged Goods (CPG) company, has unveiled a comprehensive overhaul strategy in response to a 45% drop in earnings during its first-half financial results announcement.
The restructuring includes a potential divestment of underperforming business units, as the company grapples with soaring manufacturing costs and recurrent power cuts in the country.
Libstar’s half-year revenues reached US$305.8 million, marking a 4% year-on-year increase.
However, headline earnings per share (HEPS) from continuing operations plummeted by 44.9% compared to the prior year, highlighting the substantial challenges faced by the company.
According to the company, the persistent headwinds of escalating input costs, selling price inflation, interest rate hikes, and frequent load-shedding have severely constrained consumer demand.
Consequently, the company is focusing on streamlining its portfolio and operating model, aiming to simplify its operations by adopting a category-led and brand-driven approach, encompassing both proprietary and private-label capabilities.
In pursuit of its long-term goals, Libstar is seeking to accelerate growth in the retail sector while expanding its footprint in foodservice, wholesale, and export, which the company considers “under-indexed” areas.
To achieve this, the company is contemplating reducing exposure to underperforming business units, potentially through asset sales or closures. Notably, the company has already put its household and personal care division up for sale.
Furthermore, the company plans to integrate its three largest export-facing businesses, namely Cape Herb & Spice, Khoisan, and Cape Foods, early in the 2024 financial year, as part of its strategic overhaul.
In a significant development, Libstar has confirmed that its Denny mushrooms facility in Shongweni, KwaZulu-Natal, severely damaged by a fire last year, will not reopen.
The decision is attributed to the unfavorable market and operating conditions, particularly the facility’s dependency on a stable electricity supply, which is currently challenging to maintain.
Given the ongoing electricity supply challenges in South Africa, Libstar is exploring alternative energy options. While complete grid independence may not be feasible due to its production requirements, the company is actively investigating various solar and non-solar solutions.
By the end of the financial year, Libstar plans to evaluate the viability of alternative energy sources at additional sites.
Libstar’s diverse food product portfolio, encompassing snacks, confectionery, spices, and bakery products, is exported to over 50 countries, including the United States, Canada, Australia, various European destinations, and South America.
The company anticipates continued challenging market conditions in the second half of the year, which will place pressure on retail channel volumes, despite the normalization of food selling price inflation from recent highs.
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