South African food producer Libstar expects core earnings to rise as much as 22.8% in the first half, helped by a strong performance in its dry-condiments, snacks and confectionery and baking and baking aids businesses.
The producer of Denny mushrooms said on Monday that the impact of new accounting standards would also boost earnings.
Despite pressure on the local retail sector from a slow growing economy with high levels of unemployment, rising fuel prices and an increase in value added tax curbing consumer spending, Libstar said it expected organic revenue growth to be 4.5% higher than a year earlier.
It has increased capacity and entered high-growth categories over the past year, buying Sonnendal Dairies, ready-to-eat food manufacturer Millennium Foods and Khoisan Tea.
Libstar, which is due to release first half results on September 4, expects normalised earnings before interest, taxation, depreciation and amortisation (Ebitda) for the six-months to the end of June to rise between 17.8% to 22.8% when the impact of IFRS 9 and 16 is included.
Excluding the change in accounting standards, normalised Ebitda will grow between 3.4% to 8.4%.
The company also said it had entered into a binding agreement to sell its non-core dairy-blend and fruit concentrate beverage operations for an undisclosed amount.
As a consequence of the disposal, a further impairment loss of R72 million ($4.67 million) pre-tax or R59 million post-tax has been recognised during the first half.
Libstar said that would contribute to a decline in total basic and diluted earnings per share (EPS) of between 23.7% and 33.7% from 12.2 cents.
However, basic and diluted normalised headline EPS from continuing operations would rise between 4.4% to 9.4% from 27.5 cents.
Libstar launched a frozen speciality bread facility in July, and plans a new plant to toast granola. It is also undertaking manufacturing initiatives in perishables and specialised food packaging.