Premier Foods powers ahead: Earnings up 27% as efficiency and smart pricing pay off

Key topics:

• Earnings up 27%, margins expand despite grain price deflation

• RFG acquisition to boost revenue by nearly R8 billion

• Strong cash flow, lower debt, and growing international sales

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BizNews Reporter

Premier Group Limited (Premier) has reported unaudited interim results for the six months ended September 30, 2025, demonstrating the continued success of its business model and strategy. The results showcase strong earnings growth driven by enhanced operational efficiencies, effective price point management, and disciplined procurement, even as the company navigated global grain price deflation.

The Good: Financial and operational strength

The financial highlights reveal a period of significant earnings uplift and margin expansion across the group.

Key financial metrics:

• Net profit and earnings: Net profit surged by 27.4% to R719 million. This translated into substantial growth in earnings per share (EPS), which increased by 27.4% to 558 cents per share (cps). Headline earnings per share (HEPS) rose by 27.9% to 560 cps.

• Revenue and operational earnings: Revenue increased moderately by 6.4% to R10.3 billion. This growth was effectively converted into a notable uplift in operational earnings. Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) grew by 13.6% to R1.3 billion, and operating profit rose by 17.0% to R1.1 billion.

• Margin expansion: Group margins saw considerable improvement, reflecting operational efficiency gains. The EBITDA margin improved by 80 basis points to 12.7% (H1 2025: 11.9%), while the net profit margin improved by 120 basis points to 7.0% (H1 2025: 5.8%).

• Capital efficiency and leverage: The company’s return on invested capital (ROIC) improved by 210 basis points to 24.8%, and return on equity (ROE) increased to 32.3%. Furthermore, net finance costs decreased by 28.7% due to reduced debt levels. The Group leverage ratio fell significantly to 0.7x, down from 1.0x in the prior comparable period (H1 2025).

• Cash flow and capital return: Cash generated from operations increased by 34.7% to R1.3 billion, attributed to EBITDA growth and improved working capital management. Premier also announced a once-off interim cash dividend of 159 cps, stemming from the proposed RFG transaction. A general share repurchase programme was initiated, primarily as a response to strong free cashflow generation.

Segment performance and strategic wins:

The Millbake division, contributing 83% of revenue, delivered excellent results, with revenue growing by 6.0%. This growth was balanced, consisting of a 2% contribution from price/mix and 4% from volume growth. The Groceries and International division also performed well, growing revenue by 8.1% and EBITDA by 13.8%. The UK International business saw encouraging growth outside its core tampon business, with Amazon becoming its biggest customer, supporting performance alongside the Middle East and new USA markets.

RFG acquisition:

A major strategic development was the firm intention announced on October 16, 2025, to acquire RFG Holdings Limited via a share swap. The acquisition is expected to add scale, increasing Premier’s revenue by almost R8 billion and EBITDA by R1.1 billion, making Premier the second largest food producer on the JSE with revenue exceeding R29 billion. The rationale highlights RFG’s complementary product portfolio, strong market positions, and the opportunity to unlock significant synergies with limited integration risk.

The Challenges: Navigating headwinds

While growth was strong, Premier faced several external and internal challenges during the period:

• Deflationary environment: The company experienced only moderate revenue growth due to deflation in global grain prices, particularly maize and rice. This situation required Premier to pass through notable savings to consumers, placing a strain on management to balance affordable pricing for essential staples with ensuring sustainable profitability.

• Macro-economic headwinds: The CIM business in Mozambique encountered significant macro-economic headwinds. Despite an uptick in trading, foreign currency supplies in the country remain low, necessitating active management engagement with commercial banks to mitigate foreign exchange exposure.

• Increased capital expenditure: Premier significantly increased its investment in infrastructure to secure future growth and efficiency. Cash outflows from investing activities were R508 million, mainly covering ongoing capital expenditure (capex) on site upgrades, including the Aeroton mega-bakery and HPC production lines. The capex to revenue ratio increased markedly to 4.9% (H1 2025: 2.9%).

• Competitive pressure: The Millbake division noted an increase in price-based competitor activity impacting the iconic Snowflake brand, despite achieving encouraging wheat flour volume growth.

Overall, the interim results showcase Premier’s strong capability to convert revenue into operational earnings through efficiency gains, successfully navigating deflationary cycles while positioning the Group for future scale via substantial infrastructure investments and the proposed RFG acquisition.