Consumer goods companies globally have lifted prices in the
past two years to cope with surging costs for almost all raw materials, energy
and packaging after Russia's invasion of Ukraine compounded COVID-19
pandemic-related supply chain logjams.
South African companies are also grappling with persistent
power cuts as state power utility Eskom fails to keep the lights on. Libstar
incurred 45 million rand ($2.38 million) in diesel costs to power generators in
the first six months of 2023.
"Challenging market conditions are expected to continue
to impact consumer behaviour in (the second half), placing strain on
particularly retail channel volumes," Libstar said.
This is despite July data released in August showing food
inflation dropped to 9.9% year on year from 11%, continuing to ease from 14% in
March, the largest annual increase in 14 years.
The Denny Mushrooms and Lancewood dairy products maker's
normalised headline earnings per share from continuing operations fell to 19.6
cents.
It recorded revenue growth of 4% at 5.7 billion rand
($301.17 million), with selling price inflation and product mix changes
contributing 11% to sales growth.
Sales volume however declined by 7% due to weaker consumer
and customer demand in the group's retail, export and industrial channels, as
well as the discontinuation of unprofitable lines in the household and personal
care portfolio.
"Pricing and mix changes could only partly mitigate the
impact of significant raw material, packaging material and production cost
inflation", Libstar said.
These inflationary pressures were exacerbated by lower
volume production, resulting in weaker gross profit and operating margins, it
added.