THE BOTTOM LINE
Never mind, Libstar, Xmas is just around the corner ... oh
Given the recession, the holiday period may be bleak enough to hurt the consumer foods company further
Perhaps Libstar should not have gone public, as some commentators have opined. Certainly, the consumer packaged foods group that owns food brands like Lancewood cheese and Denny mushrooms, and which makes ready meals for the likes of Woolworths, was mis-priced when its sponsors took it to market at R12.50 a share, in the process raising R3bn, half of that to pay down debt.
But at least investors now have a maiden set of numbers with which to work – which may have been a reason the company had a positive day on the JSE on Tuesday while most other SA Inc stocks fell in a heap.
While operating profit fell almost 14% to R223m, partly due to foreign exchange losses, Libstar has been able to drive through positive growth in volumes as well as an increase in organic sales.
Libstar will need to make good on its margin promises though. Its gross profit margin fell to just under 21%, partly due to lower mushroom prices.
But the company says price increases that it’s passed onto customers, as well as cost cuts, have restored margins to previous levels and these should be maintained to the end of the year. Any disappointment here will take a further toll on the company’s share price, now down more than 20% since its May debut.
Libstar’s earnings are weighted toward the second half of the year and the crucial Christmas trading period, which, given SA’s recession, may be bleak. Investors will also want further clarity on Libstar’s ability to pay dividends, which, unsurprisingly given its debt, were not forthcoming in the half year.