Denny Mushrooms, which Libstar produces, seen on a supermarket shelf. Picture: SUNDAY TIMES/KEVIN SUTHERLAND
Denny Mushrooms, which Libstar produces, seen on a supermarket shelf. Picture: SUNDAY TIMES/KEVIN SUTHERLAND

Libstar, maker of the Lancewood range of cheeses and Pringles snacks, reported a drop of almost 10% in two-month sales on Tuesday as a strong showing in its domestic market failed to offset declines in export and restaurant sales.

Libstar, which also makes private-label products for clients such as  Woolworths and Shoprite, reaped the benefits of bumper sales due to consumers stockpiling groceries before the lockdown and increased home dining while restaurants were closed.

But disruptions related to the Covid-19 pandemic hit its export sales to North America and Europe, driving sales down by nearly one-third in the two months to end-May.   

“Despite continuing logistical challenges, export channel revenue is expected to firm as shipment timing normalises over the coming months,” the company said.

CFO Charl de Villiers said the food producer is unable to quantify the full business affect brought on by the coronavirus but said the group is assessing the situation.

Graphic: KAREN MOOLMAN
Graphic: KAREN MOOLMAN

“We remain well placed to capitalise on changing consumer behaviour by offering a range of branded, dealer-own brand and private-label products within the retail and other sales channels,” De Villiers said.

The economic effect of the coronavirus has eroded consumers’ spending power as they look to preserve cash amid a deepening joblessness crisis as SA’s economy slides into one of its steepest economic declines yet.

The government-imposed lockdown has also slowed the restaurant industry, to which Libstar supplies. Sales to restaurants tumbled more than 80% during April and May due to operational restrictions placed on out-of-home dining.

It said its Finlar Fine Foods, Lancewood and Multicup divisions that also supply to restaurants took the biggest hit during the level 5 and level 4 lockdown.

It previously invested R122m at Lancewood, with some of the capital used for upgrading the milk-receiving area, distribution centre and certain hard-cheese packing lines.

The group said it expects its non-retail sales channel to get a gradual boost from the partial resumption of the quick-service restaurant sector, which has only been allowed to operate under level 3 of the lockdown that still prohibits sit-downs.

“We have also continued to protect our cash position through working capital planning, collaboration with trading partners and the deferment of non-critical capital and other expenditure. We have remained highly solvent and liquid, and continue to operate well within the facility covenants established by our lenders,” De Villiers said.

Correction: June 10 2020

An earlier version of this article stated that Covid-19 travel restrictions hit Libstar’s exports, but the effect was in fact due to the pandemic’s effect on shipment timing and associated logistical challenges.

thukwanan@businesslive.co.za

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