Libstar FY’24 basic HEPS dips 16.2%

Libstar Holdings, a food producer and distributor, has recently announced a 3.1% revenue growth for its 2024 financial year. The company, known for owning popular brands such as Lancewood and Denny Mushrooms, experienced strong performance in its Ambient Products category with a growth rate of 5.4%. However, challenges in the Perishable Products category, which saw only a 1.2% increase, were highlighted, attributed to the loss of a major Food Service customer and margin pressures in dairy and value-added meats. The overall profitability was impacted by impairment charges totaling R508.7 million as well as volume declines in key channels. To provide insights into this performance, CNBC Africa recently hosted Libstar CEO, Charl de Villiers, for an interview to unpack the company's operational performance and strategic initiatives. Charl shed light on the various aspects that contributed to the positive results in the midst of challenges. One notable highlight was the strong revenue growth in the wet condiments and dry condiments subcategories driven by factors such as operational efficiencies, distribution improvements, and new product launches. The own branded revenue from Cape Herb and Spice also saw significant growth of 53%, showcasing Libstar's commitment to expanding its branded exports. This success was attributed to strategic resource allocation and participation in international trade shows to promote their offerings. Despite challenges in the perishable products segment, characterized by the loss of a major beef customer and margin compression in dairy, Charl expressed optimism about recovery plans and diversification strategies. The company aims to diversify revenue streams both locally and internationally, with a focus on the Middle East market. Additionally, the resolution of the fresh mushroom division and successful portfolio simplification reflective of exit strategies from certain businesses were discussed during the interview. Libstar's criteria for divesting businesses were outlined, emphasizing a focus on enhancing cost competitiveness and return on investment. The company's commitment to refocusing its portfolio to a food-only range that aligns with long-term return metrics was also reiterated. The conversation delved into the expectations for food service recovery in 2025, considering changing consumer behaviors and economic pressures. Despite the challenges, there are indications of growth in the food service sector driven by strategic initiatives and market segmentation. Balancing value offerings with premiumization remains a key focus for Libstar, ensuring a diverse product range that caters to various consumer segments. Financially, despite challenges, Libstar's cash conversion improved to 80%, strengthening its balance sheet with gearing at 1.5 times. This improved financial health opens up possibilities for increased investment in high-growth categories and potential returns for shareholders. With gearing ratios back in the lower end of the target range, discussions at the board level are ongoing regarding the optimal capital allocation strategy and potential returns to shareholders. The interview with Charl de Villiers provided valuable insights into Libstar's operational performance, strategic initiatives, and future growth prospects amidst industry challenges.