Premier Group reported a sharp rise in earnings for the six months ended 30 September, with revenue up 39 percent to ZAR 14.3 billion and headline earnings per share up 27 percent to ZAR 7.11, according to coverage by Investing.com. The South African food producer, which distributes its bread, milling and grocery brands into Eswatini, Lesotho and Mozambique, delivered the results on the back of the first full six-month contribution from its Culinary division.
The company's shares rose 5.84 percent to 19,120, within 3.1 percent of their 52-week high of 19,739. Group CEO Kobus Gertenbach told investors the period marked a strong phase of integration following the completion of the RFG acquisition in March.
What the numbers show
The interim figures point to a business expanding on several fronts at once. Earnings before interest, tax, depreciation and amortisation rose 51 percent to ZAR 2 billion, while the EBITDA margin widened by 120 basis points to 13.9 percent. Net profit climbed 62 percent to ZAR 1.2 billion.
Operating cash flow reached ZAR 1.8 billion, up 43 percent, and the group kept its leverage ratio at 0.7 times, well below the level of one times that management has set as its ceiling. Return on invested capital recovered to 20.6 percent from 17.6 percent at the time of the acquisition, and return on equity reached 23.5 percent.
Chief Financial Officer Fritz Grobbelaar said the company had repaid ZAR 234 million of voluntary debt during the period and bought back 1.1 million shares worth ZAR 207 million. He said the group ended the half-year with ZAR 380 million in cash at the bank and a ZAR 1.5 billion revolving credit facility available for future expansion.
A larger footprint across the region
Premier now operates 43 factories and 28 distribution depots across South Africa and its neighbouring markets, including Eswatini, with more than 12,000 employees and 52 brands. Gertenbach said the group had seen “a little bit of an uptick” in product going into the Mozambican market, and that the onboarding of the Culinary portfolio had added further scale to operations there.
The company consolidated its export sales teams from the Culinary and legacy Premier portfolios, which Gertenbach said gave the business a wider product basket and a stronger position to compete in adjacent countries on the African continent.
Synergies still building toward 2028
Management guided the market in a September trading update to earnings growth of 22 to 32 percent, a range the final result of 27 percent satisfied. Gertenbach said the merger benefits from the RFG deal, now renamed the Culinary division, would continue to build.
“We will see an acceleration of merger-related benefits coming through as all the changes that we have made and the things that we have implemented start to gain traction,” he told the earnings call.
The company still expects ZAR 100 million to ZAR 150 million in cost savings from the merger, with the full-year benefit to be realised in 2028 once the enterprise resource planning rollout across the acquired factories is complete. Gertenbach said there was “a chance that we will end up better than that range.”
Challenges facing the business
The results were not without pressures. Fuel costs are adding more than ZAR 20 million a month to the group's expenses, which forced price increases of 3 to 4 percent across the portfolio. More than 400 spaza shops in KwaZulu-Natal remain closed following anti-immigration protests, a disruption Gertenbach said had stagnated volumes in specific geographical areas since June.
“The people will continue to eat, so the route to market will change,” he said in response to an analyst's question. He said Premier did not expect a major revenue impact but anticipated a shift in the mix between informal and formal retail.
The company also confirmed the permanent closure of its Tulbagh fruit canning plant after the conclusion of the season. Gertenbach said Tulbagh and the Langeberg facility had both been running below 50 percent production capacity, making it impossible to compete against Chinese producers in export markets. Premier has agreed voluntary separation packages with 403 employees at a cost of roughly ZAR 40 million, double the statutory requirement, and reached agreements with 82 farmers to remove peach orchards for ZAR 67 million.
On the Competition Commission's inquiry into the closure, Gertenbach said Premier had been fully transparent and the matter would now be heard in the next calendar year rather than urgently before the tribunal.
Outlook for the second half
Looking ahead, management expects grain price deflation to continue through year-end, with inflationary pressure possible from April if El Niño weather conditions emerge. Capital expenditure will remain at a run rate of about ZAR 1.5 billion a year through 2028 and 2029, directed at bakeries, distribution and Culinary-related projects.
“You don't sustain 20% plus EPS growth if you don't invest in your core operations and core capability,” Gertenbach said.
On market share, he was firm that Premier does not buy growth through price cuts. “Top-quality product delivered every day, on time, on the shelf, and get it in the hands of people to taste it and experience the quality,” he said.
The group remains underrepresented in Gauteng, which accounts for 35 percent of the country's bread volume, with an inland market share still below 20 percent. Management sees that gap as its main growth opportunity in the inland bread market for the periods ahead.