Libstar shares jump on hopes it could be turning a corner

Libstar’s shares jumped as much as 16% on Monday morning after the consumer goods group said the decline in its sales volumes slowed in the second half of the financial year from the first half, raising hopes that it could be turning a corner.

The share price initially rose as much as 16% on the JSE before pulling back to trade 8.5% higher at R3.70 by early afternoon. However, the share price is a fraction of where it was in 2018 when it listed at about R12.

Its sales volumes declined 2.7% in the six months ended-December, after they fell 7% in the first half, which was marred by elevated stages of load-shedding and led to a surge in diesel-related costs to run generators.

Libstar, whose brands include Lancewood dairy products and Denny Mushrooms, operates in the highly competitive consumer foods market where it supplements its income by also working in the private label space.

Tiger Brands, AVI, PepsiCo and Premier Group are some of big players in the fast-moving consumer goods market.

Libstar said in a trading update that volumes declined 4.8% for the year as whole, citing a constrained consumer environment. However, revenue rose 5.8% after the company increased selling prices to counter the effects of high input costs.

Improved capacity utilisation, production efficiencies and cost management assisted in delivering improved gross margins, the company said.

Full-year normalised headline earnings per share (HEPS) from continuing operations are expected to decline by between 9.7% and 12.7% year on year to 57c-59c. Normalised HEPS strips out impairments and the insurance payout that the company received for the fire at its Shongweni mushroom farm in KwaZulu-Natal.

The group received insurance proceeds of R120m during the reporting period relating to the Shongweni fire.

“Following consideration of the reduced total mushroom production from its two remaining mushroom farms, the group recognised an impairment charge of R73m (2022: R98m) net of tax in the 2023 financial year as part of its annual impairment assessment of this business unit,” it said.

mahlangua@businesslive.co.za