South Africa’s Libstar banks on new food products as revenues surge

SOUTH AFRICA – Libstar, a South African consumer goods manufacturer and distributor, recorded a 12.5% increase in revenues US$684.34 million during its 2018 financial year which the company attributed to the increased innovation during the period.

According to a report by Business Daily the Johannesburg Stock Exchange (JSE) listed company, whose brands include Lancewood cheese and Denny Mushrooms, launched 387 new food products in the year-to-end-December 2018.

Libstar said that the strategy had cautioned the company against the slowdown in consumer spending resulting to profits after tax of US$16.31 million in 2018, though just a percent higher than the previous year.

According to Andries van Rensburg, Chief executive at Libstar, the south African market was generally open to trying out something different, which the group capitalised on providing shoppers with new variety and ‘newness’.

He highlighted popularity of many of the group’s new products, like its recently released range of Lancewood yoghurts, as an indication of the market’s openness to variety.

Additionally, Robin Smith, Libstar chief finance officer said given the pressure consumers were under, the group “was quite pleased with its performance”.

Libstar 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, Woolworths, Spar and Pick n Pay.

The group hopes that by partnering with retailers and producing a wider range of goods under their in-house branding, it could win over cash-strapped customers looking to get more value for their money.

Libstar noted that the trading environment in the as the toughest it has experienced in more than a decade especially due to structural pressures brought about by economic uncertainty and lower levels of consumer spending.

Libstar aims to increase its penetration of independent retailers, wholesalers and exports and invest further in plants and equipment, as well as on specific earnings-enhancing capital projects to boost output.

“The group aims, with product innovation, to grow its market share and the overall size of the market in terms of new products and new utilisation of products.”

Its projects include the construction of a new tea plant for the local and export markets; a joint venture in a new Pringles plant; the expansion of its prepared-meal operations; and a new soft-cheese, value-adding and packing facility.

It used US$76.04 million from its initial public offering, which raised US$103.69 million in 2018, to pay off loans.

Libstar net debt fell from nearly US$131.34 million at the end of 2017 to US$80.88 million in 2018, while cash on hand improved from US$24.26 million to US$57.2 million a year later.

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