Libstar reports 27.8% drop in H1 earnings

South African consumer goods company, Libstar, has recently reported a 27.8 per cent drop in diluted headline earnings per share for the first half of the year ended June. The company has attributed this decline to various factors including constrained consumer spending, increasing industry input costs, and selling price inflation. In a recent interview with CNBC Africa, Robin Smith, Libstar Executive Director, delved into the details behind the financial results and the company's future outlook. One of the key issues discussed was the impact of foreign exchange fluctuations on Libstar's financial performance. Smith explained that the company experienced losses in the foreign exchange markets due to the timing of transactions related to imports and exports. He highlighted that the significant swing in foreign exchange gains between the current and previous year was primarily a result of marking balance sheet items in foreign currency to market value at the end of June. The stronger exchange rate this year led to a lower rand value, resulting in a realized or unrealized loss for the company. Smith emphasized that while some losses were unrealized, they could impact the company's income statement once action was taken to address them. Despite challenges in the foreign exchange market, Libstar's food divisions performed well during the trading period. These divisions, which account for 93% of the company's revenue, saw a growth in revenue and EBITDA. Smith attributed the success of the food divisions to Libstar's strong presence in popular retail outlets like Woolworths, Pick n Pay, and Checkers. However, the company faced difficulties in its Home and Personal Care (HPC) division due to service level issues with customers, leading to a decline in overall performance. Smith assured that these issues were part of a one-off restructuring and not likely to be repeated in the future. Rising input costs also posed a challenge for Libstar, with labor inflation, utilities, transport, logistics, and raw materials contributing to cost pressures. Smith indicated that most of the inflation was expected to stabilize in the second half of the year, and the company had worked with partners to implement price increases while remaining competitive. Looking ahead, Libstar aims to focus on innovation and product development to drive growth. The company plans to introduce 316 new and renovated products across various categories, leveraging its brand solutions to offer unique and appealing products to customers. Smith highlighted the company's agility and ability to innovate quickly as key strengths in the competitive market. Despite economic uncertainties and political reforms in South Africa, Smith remained cautiously optimistic about the business environment. He emphasized the importance of supporting transformational changes and remaining competitive in the market. Libstar's strategic focus on innovation and efficiency will play a crucial role in navigating the challenging economic landscape and driving future growth.