Africa-Press – South-Africa. Shares in food producer Libstar, the owner of Denny Mushrooms and Lancewood cheese, slumped more than 5% on Friday after it warned interim headline profits would more than halve amid a tough consumer environment in SA, a fire that destroyed one of its mushroom facilities, and risk aversion among export customers.
Higher interest rates as well as diesel costs added to the pressure.
Headline earnings per share are expected to fall in a range of 54.9% and 59.8% in the six months to end-June, the group said in a trading update, having generated R146.7 million worth of this profit measure in the prior comparative period.
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.
Valued at about R2.7 billion on the JSE, Libstar 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.
The group also has interests in household & personal care (HPC) – items like detergents – and in 2022 had sold its majority interest in Glenmor Soap.
Retail volumes declined predominantly due to the discontinuation of unprofitable HPC lines and lower production volumes of fresh mushrooms, said the group, whose Shongweni production facility near Durban was destroyed in 2022 fire.
Excluding these two effects, group 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.
But Libstar added it “remains confident in its ability to grow its longer-term export market exposure with a dedicated and well-resourced team capability”.
Group net finance costs increased by 71% to just over R82 million, it said, while diesel costs surged more than 462% to R45 million.
Libstar added that its normalised core profit – a measure of underlying operational profit that excludes non-trading items including unrealised foreign exchange movements – would fall about 17% to 19% from the prior period’s about R497 million.
“General operating expenses remained well controlled and increased less than the published inflation rate,” it said.
“The group’s strategic focus is to explore all options to improve group returns and unlock value for Libstar’s stakeholders,” it added. “These initiatives include, but are not limited to, the group’s portfolio composition, operating model as well as the sustainable growth of Libstar’s categories and channels.”
Shares in Libstar were down more than 5% on Friday afternoon, having now lost more than 36% so far in 2023.
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