SOUTH AFRICA – Libstar, a leading consumer goods manufacturer in South Africa, has posted a drop in profits and volumes in H1 of 2023 and issued a sobering warning for its full-year profit and earnings per share due to “challenging” market conditions.
Libstar said it saw revenue growth of 4% with selling price inflation and change in product mix contributing 10.7% to growth, though it suffered a 6.7% fall in volumes, with the declines seen across its retail, industrial, and export channels.
The JSE-listed company mainly operates in SA, but it exports to over 50 countries as well, with its brands also including Cape Herb & Spice, Cook ‘n Bake non-stick spray, while also producing private label brands for SA’s grocers.
Retail volumes declined predominantly due to the discontinuation of unprofitable HPC lines and lower production volumes of fresh mushrooms after its Shongweni production facility near Durban was destroyed in a 2022 fire, said the group, adding that retail channel volumes increased by 1%.
Industrial channel volumes declined significantly due to weak demand for contract-manufactured wet condiments – items like chutneys and vinegar.
Export volumes declined from a higher base in the prior year as certain global retail customers implemented strategies to ameliorate the impact of ongoing supply chain disruptions, which entails increased supplier diversification and local procurement.
Libstar noted that it “remains confident in its ability to grow its longer-term export market exposure with a dedicated and well-resourced team capability.”
Meanwhile, the group has forecast a drop in normalized EBITDA of 17.3% to 19.3%, reaching R401.3m (US$21.1m) to R411.3m for the year ending December 2023.
Headline earnings per share are expected to fall in a range of 54.9% and 59.8% in the six months to June, the group said in a trading update.
The company explained that market conditions remained challenging as “persistently high levels of inflation, interest-rate hikes, and ongoing load-shedding increasingly constrained consumer demand,” referring to the recent power outages in South Africa.
“Elevated levels of load-shedding, more severe than that experienced during H1 2022 and H2 2022, continued to have a significant impact on operational costs and the group’s gross profit margin,” Libstar added in the trading update.
“The group’s strategic focus is to explore all options to improve group returns and unlock value for Libstar’s stakeholders. These initiatives include, but are not limited to, the group’s portfolio composition, operating model and the sustainable growth of Libstar’s categories and channels.”