JSE-listed fast-moving consumer goods holding company Libstar has delivered robust interim results, with revenue increases reported for household and personal care products, as well as some food categories, despite Covid-19 impacts.
Libstar recorded a 1.9% year-on-year growth in group revenue to R4.7-billion for the six months to June 30.
The company’s normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 3.7%, excluding Covid-19-related expenses of about R44-million.
However, normalised Ebitda including these expenses decreased by 5.4% year-on-year to R456-million.
These expenses also impact on normalised operating profit, which decreased by 16.4% year-on-year, and normalised earnings a share, which decreased by 19% year-on-year to R142-million.
The Covid-19-related expenses included R3.5-million of donations to needy communities, personnel-related benefits of R18.5-million, which included staff transport, and R22-million in direct operating expenses, including the acquisition of personal protective equipment.
The company still generated more cash from operating activities, at R225-million, than the R178-million in cash generated in the six months ended June 30, 2019.
In the six months under review, Libstar’s businesses introduced 88 new products and renovated 36 products.
CEO Andries van Rensburg says the company will continue to capitalise on existing and new growth opportunities, enabled by its well-diversified portfolio of brands, manufacturing capabilities and category growth plans.
He adds that the company's food categories will remain at the heart of its growth strategy, while it remains well positioned to capitalise on key consumer trends and changing consumer lifestyles – including the supply of products that cater to health and wellness, home cooking and baking, convenience and eco-friendly needs.
Van Rensburg explains that the company did not come out of the hard lockdown unscathed, since major disruption to supply chains worldwide resulted in the group needing higher inventory levels of certain products and raw materials to ensure product availability.
However, he states that an increased focus on production efficiency and staff attendance helped to protect the company’s service delivery in a difficult market.
Revenue growth from the food categories – which constitute 91% of Libstar’s overall revenue – grew by 1.1% year-on-year, while household and personal care revenue increased by 11.5% year-on-year.
The company’s normalised earnings a share from continuing operations decreased by 19% year-on-year to 23.8c, while normalised headline earnings a share from continuing operations decreased by 17.7% year-on-year to 24.2c.
Van Rensburg explains that the company’s perishables category, under its food division, was most adversely impacted by the effects of Covid-19, owing to the closure of quick-service restaurants during lockdown.
This impacted the performance of meat products sold in the food service channel and led to revenue decreasing by 1.7% year-on-year and normalised Ebitda decreasing by 21% year-year.
Revenue and normalised Ebitda in the groceries category decreased by 2.1% and 2% year-on-year, respectively, but maintained Ebitda at a margin of 14%, making groceries the largest contributor to group normalised Ebitda in the reporting period.
The snacks and confectionary category achieved an 18.1% year-on-year increase in revenue, mostly owing to the full-period inclusion of revenue from the contract manufacturing of Pringles snacks.
The Pringles plant started production in June 2019.
This category recorded a 44% year-on-year increase in normalised Ebitda, as well as an improved margin of 19.1%, compared with an Ebitda margin of 15.6% in the prior comparable six months.
Libstar’s baking and baking aids category achieved a 22.9% year-on-year increase in revenue, but normalised Ebitda was down 2% year-on-year. Without Covid-19-related expenses of R6.5-million in this category, normalised Ebitda would have increased by 11.1% year-on-year.
Further, the company’s household and personal care division reported increased revenue of 11.5% year-on-year, coupled with increased normalised Ebitda of 46.8% year-on-year, as well as an improved Ebitda margin of 8.9%.
Overall, the company’s gross profit margin from food categories increased from 23.7% in the prior comparable six months to 23.8% in the six months under review, while gross profit margins from household and personal care increased from 18.5% in the prior comparable period to 19.2% in the reporting period.
Van Rensburg points out that, since the end of June, shipment fulfilment rates of exported dry condiments have improved and are expected to boost earnings in the second half of the year.
He further mentions that, although the advent of Covid-19 has hampered the company’s anticipated timely delivery of returns from recent capital projects, such as the milk-receiving, cheese packaging and distribution centre upgrades at Lancewood, these benefits will manifest during the first half of 2021.
“The impact of extraordinary increases in unemployment levels, coupled with the full impact of Covid-19 yet to be seen on the economy, has yet to fully play out in consumer demand.
"This will determine whether Libstar can achieve its traditional 40:60 [split in the] first half and second half of the year normalised Ebitda ratio in the full year ending December 31.”
Van Rensburg expects the company to continue spending between R800 000 and R1-million a week going forward on Covid-19-related expenses.
Libstar’s board declared a dividend of 25c apiece for the year ended December 31, 2019. As it only declares one dividend a year, it will take a decision about whether to declare a dividend for 2020 at a later stage.