LIBSTARS management expects consumer market conditions to remain challenging this year and its leadership team is focused on the groups new strategic initiatives, says chairperson Wendy Luhabe.
Writing in the food and grocery product groups annual report released on Friday, she said they would oversee the portfolio and operating model simplification initiatives agreed on last year, cost competitiveness improvements would be targeted, while earnings quality and ROIC (return on invested capital) would be improved through a divestment and consolidation strategy.
The Household & Personal Care segment disposal process was progressing, and the intention was to improve ROIC by 50 basis points once this had been completed. Interventions were under way at Denny Mushroom to improve earnings stability and to refocus the groups portfolio to value-added food products.
The board and executives had done a strategic review of Libstars portfolio composition, its category and channel participation and its operating model in the first half of last year. Libstars category structure was simplified by organising its quality food brands into two super-categories, Perishable Products, and Ambient Products.
This will result in less complexity, with standardised execution, simplified operations and team structures, and a focus on efficiency, Luhabe said.
CEO Charl de Villiers said as they started to implement the changes in the second half of last year, Libstars trading performance, operating margins and cash generation improved significantly.
In the Ambient Foods segment, comprising dry condiments, wet condiments, meal ingredients, baking, snacking, spreads and beverages, there would be focus on sustainable operations, profits, cash flows and returns.
In Dry Condiments the existing sales and marketing expertise of Cape Herb & Spice Exports would be leveraged, in particular to the Middle East, while informal and wholesale markets would be targeted, while the food service basket offering would be extended.
A consolidation of the Cape Herb & Spice and Khoisan Gourmets sales, marketing, human resources and administrative functions was completed in the fourth quarter of the year.
The site consolidation of Khoisan Gourmets manufacturing facilities into those of Cape Herb & Spice was planned upon the end of lease by 2026.
Private label dry condiment production lines, previously housed in the groups Retailer Brands business unit, were consolidated into Cape Foods at the start of 2024.
The consolidation leveraged Cape Foods existing procurement and manufacturing capabilities to provide a more cost competitive product to its customers and improve future earnings quality.
During the first half of 2024, a functional and operational consolidation of the Montagu Foods, Dickon Hall Foods, Cecil Vinegar and Retailer Brands business units would be finalised.
The consolidation of these businesses targeted improved longer-term cost competitiveness and earnings stability.
We have already delivered market-beating revenue growth from Montagu Foods and Cecil Vinegar during the year despite the earnings volatility from reduced demand for contract manufactured wet condiments at Dickon Hall Foods, said De Villiers.
The sales, marketing, human resources, technical and administrative functions of Finlar Fine Foods and Lancewood would be consolidated by the end of 2024.
The consolidation leverages the best-in-class infrastructure and expertise of the groups two largest Perishables businesses to mitigate risks, improve margins through improved cost-efficiency and to grow its product offerings in under represented channels, he said.
He said the financial targets for 2024 included to reduce gearing, consider share buy-backs and to finalise the simplification of portfolio and implement operating model change.
After a period of significant investment,. capital productivity was being closely monitored.
