South African consumer packaged goods company Libstar has reported over R500m ($27.6m) in impairment charges, resulting in an EPS loss in 2024.
The most significant impairment, amounting to R400m net of tax, was recorded against the Finlar Fine Foods business, Libstar said in its annual results statement today (18 March).
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Libstar attributed the charge to a “supplier diversification” strategy from a “major customer”, which reduced beef volumes in the foodservice channel.
Additionally, a R98.2m net-of-tax impairment was recognised in the Denny Mushrooms division.
Further impairments were recorded for customer relationships, including a R10.5m net-of-tax impairment linked to contract terminations in Dickon Hall Foods and Cape Herb and Spice.
The impairments contributed to Libstar reporting a total diluted loss per share of 54 South African cents, compared with earnings of 38 cents in 2023.
Normalised EPS, which excludes insurance proceeds, unrealised foreign-currency movements, and other non-recurring, non-trading, and non-cash items, dropped from a profit of 38.4 cents per share in 2023 to a loss of 32.7 cents in 2024.
Libstar said it will continue to advance its portfolio and operating model simplification strategy as “consumers are expected to remain under pressure in the short to medium term”.
As part of this effort, the Lancewood brand owner plans to establish a shared-services structure within its ambient products category, specifically in the wet condiments subcategory.
The restructuring will consolidate Montagu Foods, Dickon Hall Foods, Retailer Brands, and Cecil Vinegar Works into a single operational framework, while maintaining the “unique market positions” of each brand, the company added.
Further integration efforts are set to reshape the retail, snacks, and spreads divisions.
Rialto (retail division), Ambassador Foods (snacks division), and Cape Coastal Honey (spreads division) will merge into a new sub-category within ambient products.
Libstar, which also owns the Denny and Goldcrest brands, suggested the integration of divisions “better positions the business for growth and improves customer alignment”.
Additionally, the integration is expected to “strengthen the categories’ leadership structure and succession planning”, while “advancing technical and product development capabilities”, it explained.
Despite the “isolated” challenges of 2024, Libstar’s leadership remains “confident” in the group’s long-term strategic trajectory.
The company’s board believes now is the right time to “assess further potential strategies” to unlock meaningful shareholder value.
Financially, Libstar recorded revenue growth of 3.1%, reaching R11.7bn.
However, sales volumes declined by 3.2%, primarily due to weaker demand in the retail and foodservice channels.
The impact of impairment charges and lower insurance proceeds from the prior year led to a 6.3% decline in normalised operating profit, which stood at R631.1m at a margin of 5.4%.
Normalised EBITDA remained flat at R974m, while the EBITDA margin declined slightly to 8.3% from 8.5% in 2023.
