JSE-listed consumer packaged goods producer and supplier Libstar has declared its maiden dividend of 22c a share, for the year ended December 31, following its listing on the JSE in May 2018.
CEO Andries van Rensburg on Wednesday said the company had experienced the toughest market conditions since Libstar’s inception 14 years ago, which had led the company to focus on lowering costs of manufacturing and packaging, while offering value-added products to discerning consumers.
The company grew its revenue by 12.5% to R9.9-billion and increased its normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) by 4.6% to R984-million.
Van Rensburg pointed out that the acquisition of Sonnendal Dairies in 2017 provided the additional capacity required for the Lancewood brand to launch a new product range – taste-differentiated yoghurt products – in the third quarter of 2018, which especially bolstered organic revenue growth in the second half of the year.
He mentioned that the company critically evaluated the performance of its business units and, in so doing, took a conservative approach that resulted in an impairment of the company’s dairy-blend and fruit concentrate operations in the niche beverages category that impacted on normalised earnings a share.
“A restructuring exercise was undertaken during the second half of the reporting year, resulting in the decision to relocate the marketing and sales functions of nonbeverage products into certain of the group’s wet condiments facilities.
“This will yield future cost rationalisation benefits for the group. An impairment loss of R42-million (pre-tax) and R30-million (post tax) was recorded in respect of the residual dairy blend and fruit concentrate beverage operations.”
During the reporting period, Libstar’s perishables category remained the star performer, with a 43% contribution to the company’s normalised Ebitda at R455-million. This category contains the Lancewood and Finlar Fine Foods brands, which contribute 73% of the perishable category’s revenue.
Libstar financial and commercial director Robin Smith advised that the company was still getting its newly-built chicken plant’s throughput on track, which should soon see contributions to 2019’s earnings growth, on the back of increased volumes.
The ambient groceries category, meanwhile, contributed 32%, or R338-million, of the company’s normalised Ebitda, and contains the Cape Herb and Spice, Rialto Foods and Dick Hall Foods brands, which contributed 75% of the category’s revenue.
Further, the snacks and confectionary category, which comprises the Ambassador Foods brand, reported a 7% normalised Ebitda contribution, at R73-million.
Baking and baking aids contributed 9%, or R93-million, to normalised Ebitda and contains the Amaro Foods and Retailer Brands brands, which contributed 92% of the category’s revenue.
Van Rensburg highlighted that the company’s par-bake frozen plant was commissioned in February this year and, from the start of commercial production in April, the company will supply partially baked frozen products to 400 Woolworths outlets nationally.
The company’s niche beverages category contributed 5%, or R55-million, to normalised Ebitda and comprises the Elvin and Khoisan brands that make up 88% of the category’s revenue.
Van Rensburg said the Khoisan Gourmet range contributed to an improved full-year performance for this category.
Libstar’s household and personal care category contributed 3%, or R36-million, to normalised Ebitda, which Van Rensburg noted was a disappointing performance, owing to competitive pressures and an adverse change in product mix towards lower-margin products.
The specialised food packaging category contributed 1%, or R13-million, to normalised Ebitda, but Van Rensburg believed the business case for the category’s only brand, Multicup, was strong, since demand for paper straws is increasing, while the market is generally moving toward green packaging that is biodegradable or compostable.