Libstar shares surge 8% after mushroom business disposal and further restructuring

Libstar Holdings' share price surged over 8% on the JSE Wednesday after it announced the disposal of its fresh mushroom business and plans to restructure so that it can focus on its food businesses.

The share price traded 8.5% higher at R4.50 on the JSE in the afternoon, slightly higher than the R4.20 it traded at a year ago.

Smalltalkdaily Research market analyst Anthony Clark said Libstar's trading statement reflected a weaker performance than he had expected. He said the higher share price was likely due to the announcement of a further cleaning up of the "spider's web" of businesses the group once had. He said Libstar was still trading under a cautionary notice, and might in the future be acquired by another food group.

Libstar's fresh mushroom operations in Gauteng and KwaZulu-Natal were disposed of effective from December 1, 2025, a move that represented "a further decisive step in simplifying the group's portfolio by sharpening its focus on priority categories with sustainable growth potential."

The property situated in the Western Cape, Phesantkraal,, which is closed, would also be sold in due course. The Denny brand had been licensed to the purchaser for exclusive use in the fresh mushroom category, and value-added Denny-branded products, most notably within the Wet Condiments category, would be produced and marketed.

The fresh mushroom operations were expected to report a pre-tax loss of between R45 million and R55m in the annual results for the year ended December 31, 2025. Aligned with the strategy to exit non-food categories, Libstar's board was also evaluating expressions of interest for the potential acquisition of the remaining Household and Personal Care business, Contactim.

Meanwhile, group retail sales value growth for Libstar's Total Defined Market (excluding staples), continued to decelerate in the third quarter. Wholesale channel sales growth exceeded growth in the Retail channel.

"Consumers, therefore, continue to face financial pressure, notwithstanding moderating inflation and interest rates," Libstar's directors said for the 47-week period to November 21, 2023.

Against this background, Libstar's portfolio had sustained the resilient trading momentum of the first half, they said. Libstar's year-to-date revenue increased by 6.7%.

Excluding extraordinary items, group volumes increased by 3.1% with a price/mix contribution of 3.6%. Sales volumes were impacted by a 9% increase in group volumes as a result of the on-sale of unprocessed raw milk to Industrial channel customers in the Dairy sub-category, which facilitated the balancing of raw material and finished goods inventory levels.

Also impacting volumes were a 1.2% decrease in group volumes as a result of the closure of the Chamonix Springwater business in the prior year, and a 1.5% decline in group volumes as a result of lower Industrial channel bulk vinegar sales due to capacity constraints in the first quarter.

The Ambient Products category increased revenue by 5.6%, driven by the resilient performance of the Wet Condiments sub-category. Price and mix changes contributed 5.9% of revenue growth while volumes fell by 0.4%.

Export volumes of Dry Condiments were lower, characterised by a positive mix change to Libstar Branded products and reduced private-label sales to discount retailers in Australia, UK and Japan.

The Cape Herb & Spice brand continued its double-digit growth in local and international markets.

Perishable Products category revenue increased 8.1%, with volumes up 23.2% and a price/mix reduction of 15%.Excluding the impact of raw milk sales, category volumes increased by 1.4%.

Volume growth was driven by value-added chicken products in the Retail and Food Service channels. Volume sales of core Dairy sub-category items (cheese, butter and yoghurt) increased by 4.7%, reflecting Lancewood's market leadership.

The group's gross margins tracked ahead of the prior year.

BUSINESS REPORT