SOUTH AFRICA – Libstar Holdings, a South African consumer goods company has announced that it has entered into a binding agreement to sell its non-core dairy-blend and fruit concentrate beverage operations, for an undisclosed amount.

The producer of Denny mushrooms said in trading update that the disposal, is likely to result into a further impairment loss of US$4.67 million (R72m) pre-tax or US$3.83 million (R59m)post-tax during the first half.

Libstar, which is expected to release first half results on September 4, said that the divestment would contribute to a decline in total basic and diluted earnings per share (EPS) of between 23.7% and 33.7% from 12.2 cents, reports the Reuters.

However, Libstar is riding on a strong product mix that has seen the company say that it expects core earnings to rise as much as 22.8% in the first half of the year.

Accounting changes will weigh somewhat on its interim headline earnings per share (Heps) growth.

Heps for the period is expected to rise 45%-55% after the accounting changes, the group said. Without the new accounting rules, Heps would have risen 78.4%.

The group, whose brands include Lancewood cheeses and Denny mushrooms, is expected to report gross organic revenue growth of 4.5% during the period, saying changes in its sales mix of value-added dairy products were favourable.

“Against the backdrop of a weak retail and consumer environment, the group is reasonably satisfied with its overall performance,” the company said in a statement.

The company, which listed on the Johannesburg Stock Exchange last year, said that core categories, which represent 88% of group revenue, are expected to deliver mid to single-digit revenue and volume growth.

This was mainly due to strong performances in dry condiments, snacks and confectionery, and baking and baking aids. 

Libstar has also increased capacity and entered high-growth categories over the past year, buying Sonnendal Dairies, ready-to-eat food manufacturer Millennium Foods and Khoisan Tea.

Libstar acquired Millennium Foods to expand on its convenience meal offering, a segment dominated by upmarket Woolworths.

The company also launched a frozen speciality bread facility in July, and plans a new plant to toast granola. It is also undertaking manufacturing initiatives in perishables and specialised food packaging.

The company supplies chicken and beef products to McDonald’s, and also makes a wide range of goods under private labels for leading retailers such as Shoprite, Spar and Pick n Pay.