South African food company Libstar has warned first-half earnings will decline, with impairments and other non-recurring items holding back profits.
In a trading statement for the six months ended 30 June, Libstar said EPS is expected to be between eight and 9.6 cents per share, down 36.8%-47.4% from 15.2 cents a year earlier.
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Headline EPS (HEPS) is forecast at 12.1-13.7 cents, representing a decline of 18%-27.5% from 16.7 cents in the prior period.
Normalised HEPS from continuing operations is expected at 23-25.4 cents per share, compared with 24.8 cents a year earlier.
Normalised EBITDA is forecast to come in at R446.1m-R460.3m ($27.9-28.8m), down 2.8%-5.8% from R473.8m.
Libstar said the expected decline in total EPS and HEPS should be considered “in the context of non-recurring, non-trading and non-cash items recognised during the period”.
The group recognised impairment charges of R16.3m in the half, compared with R10.4m a year earlier.
It also booked a loss of R8m on the scrapping of property, plant and equipment in Dickon Hall Foods, versus a R1.4m gain in the prior period.
In addition, Libstar recorded unrealised foreign-exchange losses of R10.3m and retrenchment costs of R12.3m.
The company had already flagged weaker trading in a voluntary pre-close update in June, when it said its performance for the 21 weeks ended 31 May had been “below original expectations”.
At the time, Libstar pointed to a “severely constrained” consumer environment and “sharp increases in petroleum-linked input costs”, particularly in packaging and distribution. Revenue for that 21-week period rose 0.9%, with volume growth of 0.3%.
Libstar said the underperformance relative to expectations was “predominantly concentrated in Dickon Hall Foods and exports of dry condiments”.
In Dickon Hall Foods, labour challenges and water shortages disrupted production and led to a significant under-recovery of manufacturing costs. Dry condiments exports were affected by shipment timing, the strength of the rand and weaker demand in Australia and Asia.
In Thursday’s statement, Libstar said four of its seven food sub-categories – including dairy, value-added meats and baking – are expected to report normalised EBITDA growth.
Libstar, owner of brands including Lancewood, Cape Herb & Spice and Goldcrest, has been reshaping its portfolio and manufacturing footprint under CEO Charl de Villiers.
In an interview with Just Food in June, de Villiers said the group wanted to be “a food business, and more specifically, we want to be a value-added food business”, with site consolidation “high on the agenda” as it looks to improve efficiency across its branded and private-label operations.
In the latest statement, Libstar added the first half “reflects a period in which management and the board continued to build on the benefits of the group’s portfolio simplification initiatives executed over recent years, while accelerating the implementation of major capital projects and applying disciplined focus to improving historically underperforming sub-categories.
“While the disruptive effects of the Dickon Hall Foods integration into Montagu Foods and intensified export market pressures weighed on earnings during the period, the strategic rationale, expected benefits and return profiles of these projects remain intact and are expected, together with operational projects and channel growth initiatives, to support second-half recovery and improve the quality of earnings, cash generation and returns over the medium term.”
Last month, Libstar appointed Lancewood managing executive Cornél Lodewyks as group COO.
Libstar’s interim results for the period ended 30 June are due to be published on 8 September.
