Food and beverage producer Libstar Group’s business model and strategy continued to be robust, allowing it to deliver resilient results for the year ended December 31, 2019, when markets remained under pressure.

For the period, normalised earnings before interest, taxes, depreciation and amortisation increased by 5.1% year-on-year, normalised earnings a share increased by 14.3% and normalised headline earnings a share increased by 14.1%.

“It is in the most challenging economic climates that a business is best able to put its value proposition, cultural mettle and strategic resolve to the test. South African organisations have been challenged with weakening macroeconomic conditions, lower consumer confidence, high levels of unemployment, Covid-19 and electricity supply and infrastructure constraints.

“However, the past year has underscored the resilience of Libstar’s business model and the importance of its culture and value proposition in the market,” Libstar CEO Andries van Rensburg said in a webcast on Wednesday.

He indicated that the group’s strategic focus had been to grow the four key food categories in its portfolio through value creation, expanding its manufacturing capabilities, improving its commercial efficiencies and by forging deeper partnerships with its customers.

Libstar had also optimised its portfolio and sales mix, reduced volumes on commodity lines, and focused on its value-added products and brands.

Van Rensburg said Libstar’s food categories would, going forward, remain focal to the group’s growth strategy.

“Despite the difficult market conditions in which we operate and the headwinds we are all facing, we are confident of our low-cost manufacturing capabilities, our ability to capitalise on key consumer trends, our value of customer centricity and the delivery of returns from capital projects during 2020 and beyond,” he said.  

FINANCIAL REVIEW

Group revenue was 2.4% higher year-on-year.

Revenue growth from food-related categories, which contributes 92% of the group’s revenue, was 3.3%, while revenue within the high-performance computing cluster, which represents 8% of the group’s revenue, declined by 6.8%.

Gross profit margins held firm or improved in each of the group’s five business categories – perishables, groceries, snacks and confectionery, baking and baking aids and household and personal care – during 2019. As a result, the group’s gross profit margin increased by 1.6 percentage points to 24% from 22.4% the previous year.

Lower dry condiment input costs, favourable sales mix changes in dairy, value-added groceries, baking products and baking aids, as well as the group’s continued focus on procurement practices, production efficiencies and overall equipment effectiveness contributed to the improved margin result.

Normalised operating profit increased by 3.8% at an improved margin of 8.6%, mainly as a result of the group’s improved gross profit margin performance.