Libstar battles record-high cost pressures

Libstar, a leading food producer, has reported a double-digit increase in operating profit for the year ended December 31, 2021. Despite facing significant challenges such as supply chain disruptions and increased input costs, the group's Normalised HEPS rose by 18.8%. In an interview with CNBC Africa, Charl de Villiers, Libstar CFO, shed light on the factors contributing to the company's performance in such a challenging operating environment. De Villiers highlighted the impact of volatile raw material prices and supply chain constraints on the company's operations. He emphasized the importance of managing efficiencies to deliver returns to shareholders. The CFO expressed concern about cost inflation, particularly in light of rising pressures stemming from global events like the conflict between Ukraine and Russia. However, Libstar is proactively working to mitigate these challenges by optimizing its manufacturing processes and focusing on higher margin, value-added food categories. De Villiers explained that the company's product range includes items like cheese, yogurt, and cooking sauces, which have a high value-add component and are less exposed to commodity market fluctuations. This strategic shift towards value-added products aligns with Libstar's DNA as a consumer packaged goods business that caters to evolving customer preferences and market dynamics. While a portion of Libstar's input costs are imported, the company also faces indirect exposure to global commodity pricing. De Villiers acknowledged the difficulty of predicting inflation levels but noted that Libstar has managed to reduce operating expenses year on year, despite inflation rates exceeding official statistics. The CFO emphasized the need for responsible pricing strategies to balance rising costs with consumer affordability. Libstar's resilience in the face of record-high cost pressures underscores the company's commitment to sustainable growth and value creation for all stakeholders. As the food industry continues to navigate a complex operating landscape, Libstar's strategic focus on innovation and efficiency positions it well for future success.