SOUTH AFRICA – Libstar, one of South Africa’s leading Consumer Packaged Goods (CPG) manufacturers and distributors, has reported a 8.7% growth in revenue the full year ended December 2021, driven by increased sales within its largest product category food.
The food category which represented 93% of the group revenue, registered 10.5% revenue growth with Household and Personal Care (HPC) segment attaining a 9.6% decline in earnings.
However, its gross profit margin declined from 24% to 23%, which Libstar attributed to lower export margins and the rising costs of raw materials and packaging due to the local and international supply chain challenges.
The period under review was characterised by rising input costs, with South African food inflation averaging 6.0% during the period.
In depth analysis of performance of each category indicates that, perishables foods saw higher demand for value-added meat products and cheese in 2021, which the company attributes to fewer lockdown restrictions than the prior year.
The category posted revenue growth of 12.1% year-on-year, but a 0.5% decline in volumes.
The perishables category’s profitability was, however, impacted by low production yields from its Denny Mushrooms brand, and pressure on margins impacted by rising input costs.
Meanwhile, revenue from the groceries category remained in line with that of 2020, while volumes increased by 2.8%.
Despite the volume growth, export sales margins were adversely impacted by lower average spot rates in 2021.
The snacks and confectionary category posted 6% lower revenue and 22% lower volumes, owing to subdued retail demand for premium nuts and nut mixes, granolas and snack bars, which is largely an inherited issue from 2020.
Earnings from Baking and Baking Aids increased by 7.2% year-on-year and volumes increased by 4.1%, owing to strong retail channel demand for rolls, speciality breads and gluten-free lines at Amaro Foods.
In the year under review, the maker of Denny Mushrooms and Lancewood dairy successfully repositioned its portfolio toward higher-margin food categories, with the exit from its household and personal care (HPC) businesses allowing the group to focus more on these core businesses.
The remaining business in Libstar’s HPC category is the Glenmor Soap, in which it holds a 70% equity interest and was reported as a continuing operation for 2021.
The company is aggravating towards fast growing categories I.e., healthy, convenience and pet foods.
To this end, Libstar launched its own incubator, called Libstar Nova, to discover new businesses that are ripe for investment and that will cater to the changing landscape of the industry.
The first acquisition in this regard, for a frozen baby food manufacturer called Umatie, was concluded in January.