Consumer goods group Libstar has warned of a turbulent year ahead as global economic tensions and domestic instability heap pressure on the food manufacturing sector.
From a weakening rand to soaring input costs and growing geopolitical risks, the group said it was operating in an environment marked by unpredictability.
“Recent developments have introduced significant uncertainty around economic growth and political stability — locally and internationally,” Libstar CEO Charl de Villiers said.
“The looming threat of an international trade war, with its potential impact on global growth, interest rates, and currency stability, adds to the existing uncertainty surrounding the durability of SA’s government of national unity,” he said.
The trade war between the world’s largest economies, the US and China, started in 2018 and escalated sharply this year, with tariffs rising to record levels. The US imposed 145% levies on Chinese goods and China retaliated with a 125% charge.
For food manufacturers such as Libstar, the consequences include costlier imported raw materials, disrupted global supply chains, and restricted export access which threaten profitability and operational efficiency.
Though the rand has stabilised in the past few weeks, in April it came perilously close to the R20/$ level, peaking at R19.93/$ amid political turmoil about budget talks, highlighting currency volatility.
“Together, these factors are likely to exert increasing pressure — directly and indirectly — on SA consumers in the year ahead. As a business, our priority is to navigate these challenges strategically: managing costs effectively, exploring new markets and territories for Libstar’s products, and upholding the highest standards of quality and consumer trust,” said De Villiers.
The R2.25bn diversified food producer’s brands include Lancewood, Goldcrest and Robertsons baking aids. Its private-label and manufacturing interests are major suppliers to Woolworths and Checkers, making products such as chicken schnitzels, hot cross buns, confectionery and baked goods.
Libstar said while food inflation had moderated, high living costs, stagnant wages and electricity hikes continue to constrain consumer spending.
“Consumer behaviour continues to reflect spending constraints in shifts to smaller package sizes, ‘buying down’ to lower-cost options, buying on promotion and shopping less frequently with smaller baskets. We are also seeing a move to convenience options, with robust growth in frozen product lines, particularly through delivery channels,” the company said.
Despite these headwinds, Libstar said it was committed to managing costs, protecting brand value and seeking new markets. The group continued to invest in ESG initiatives, foreign exchange hedging and distribution optimisation to shield itself from external shocks, it said.
For the year ended December 2024, Libstar reported normalised headline earnings dipped 6.5% to 53.4c a share. Revenue grew 3% to R11.8bn, but challenging conditions trimmed the gross profit margin to 21%. Operating costs rose 7%, leading to a 6% fall in operating profit to R631m.
Its shares closed down 2.94% on Friday at R3.30.
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