Consumer goods group Libstar said it managed solid volume growth for its core product offerings in the six months to end-June, but accounting changes will weigh somewhat on its interim headline earnings per share (Heps) growth.
Heps for the period is expected to rise 45%-55% after the accounting changes, the group said. Without the new accounting rules, Heps would have risen 78.4%.

The group, whose brands include Lancewood cheeses and Denny mushrooms, reported gross organic revenue growth of 4.5% during the period, saying changes in its sales mix of value-added dairy products were favourable.

“Against the backdrop of a weak retail and consumer environment, the group is reasonably satisfied with its overall performance,” the statement reads.

New accounting rules will result in a decrease in rental expenses of R58m, helping to boost earnings before interest, taxation, depreciation, and amortisation (Ebitda) 17.8%-22.8%.

The same rules will cause depreciation costs to rise R46m, and reduce profit before tax by R13m.

Core categories, which represent 88% of group revenue, are expected to deliver mid to single-digit revenue and volume growth, the company said.

This was mainly due to strong performances in dry condiments, snacks and confectionery, and baking and baking aids. 

Trading conditions in the non-core categories, which represent 12% of group revenue, remain subject to significant competitive pressures. These product categories are expected to deliver a 1.5% decline in revenue and a 19.1% decline in volume, the statement read.

Libstar’s revenue growth was a bit underwhelming compared to recent updates, said Anthony Clark, an independent analyst from Small Talk Daily, but the company seemed on track for a solid second half of its financial year.

“In this environment for any company to show margin improvement and increase core growth in key categories … many other companies such as Pioneer Foods or AVI would kill for numbers like this,” said Clark.

“All in all the numbers are quite good, I would maintain my view that Libstar is one of the most attractive large-cap food companies,” he said. 

Source: Business Live>