Libstar, which owns the Lancewood, Goldcrest, and Denny brands, said rising input prices and power cuts kept a lid on profit growth even as revenue increased.
The food producer, which will publish annual results on March 16, also said in a trading update on Friday that earnings will plummet due to impairments and writedowns.
Revenue for the year to end-December rose 10.7%, while gross profit was up just 3.9% due to an “underrecovery of overhead costs”, the company said.
Libstar, which makes ready-made meals, sauces and bakery goods for Woolworths, Pick n Pay and Checkers, could not pass on rising input costs it faced from packaging, diesel and maize prices to retailers, indicating its lack of pricing power.
By contrast, Tiger Brands, SA’s largest processed food producer and the owner of brands such as All Gold, Jungle Oats, Beacon, Tastic, Albany and Koo was able to raise prices 18% in the four months to end-January, it said in a recent trading update.
SA’s largest drinks manufacturer, Distell, which owns Durbanville Hills, Savanna, Hunters and Amarula, last week also reported much lower profit than revenue as operational costs bite.
Distell reported revenue growth exceeding 15%, but earnings before interest, tax, depreciation and amortisation were up just 5.4%, excluding currency fluctuations.
Libstar said it also faced disruption due to unprecedented levels of load-shedding, particularly in its second half, from June to December. It spent R39m on operating generators and diesel, with R31m of that in the second half of 2022.
“This directly impacted the group’s gross profit margin.” The group invested R13.1m more in increasing generator capacity.
It said continued shipment delays at ports slowed imports of condiments and spices from Europe. Mining firms have been most vocal about port issues affecting their ability to get exports to market.
The group is writing down the investment at its Denny mushroom plant in KwaZulu-Natal by almost R100m after arson related to worker protests. Impairments amounted to R277m, reflecting an accounting change and projected lower earnings.
Earnings per share, which includes impairments, are expected to be 65.4%-70.4% lower at 17.3c-20.3c a share
Headline earnings per share, which strips out one-off and exceptional items, is forecast at 43.7c-46.3c, a decline of 8.6%-13.6%.
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