Libstar banks on new food products
The company's share price jumps 10.28% to R7.83, its highest one-day increase since listing in May last year
Consumer goods manufacturer and distributor Libstar, whose brands include Lancewood cheese and Denny Mushrooms, says it adjusted to the slowdown in consumer spending by launching hundreds of new food products.
Like other consumer-focused businesses, Libstar, which also supplies chicken and beef products to McDonald’s, has had to cope with SA consumers having less money in their pockets as fuel price hikes, an interest rate increase and below-inflation wage increases weigh on disposable income.
Libstar hopes that by partnering with retailers and producing a wider range of goods under their in-house branding, it could win over cash-strapped customers looking to get more value for their money.
The group, which makes a wide range of goods under private labels for leading retailers such as Shoprite, Woolworths, Spar and Pick n Pay, launched 387 new products in the year-to-end-December.
This helped boost revenue by 12.5% to R9.89bn. Libstar CFO Robin Smith said given the pressure consumers were under, the group “was quite pleased with its performance”.
The market also liked the numbers, with the share price jumping 10.28% to R7.83, its highest one-day increase since listing in May last year.
Libstar CEO Andries van Rensburg said South Africans were generally open to trying out something different and his group was looking to tap into this mindset. “Shoppers are fickle. They want variety. They want newness.”
He said this openness to variety could be seen in the popularity of many of the group’s new products, like its recently released range of Lancewood yoghurts.
The group couldn’t say how many new products it planned to launch in 2019, as many of them would be created in partnership with the retailers. Van Rensburg said one of its new products would be manufactured at its recently commissioned par-bake specialty bread facility. The facility would partially bake bread, which would then be transported to about 400 Woolworths stores, where it would be baked to completion.
Van Rensburg said besides launching new food items, the company was also adapting to the difficult market by trying to control costs. It has put in place a new IT platform which made it easier to measure costs and improve logistics.
However, despite the increase in revenue, operating profit was down 3.5% to R574.9m, while after-tax profit was up 1.2% to R235.7m. The group declared a dividend of 22c per share.
It used R1.1bn from its initial public offering, which raised R1.5bn in 2018, to pay off loans. Its net debt fell from nearly R1.9bn at the end of 2017 to R1.17bn in 2018, while cash on hand improved from R351m to R829m a year later.