S.African food producer Premier flags low single-digit revenue growth in H2

JOHANNESBURG (Reuters) – South Africa’s Premier Group flagged low single-digit revenue growth in its second half as consumer spending remains under pressure, after the food producer reported a 25.4% increase in profit in the first six months of its fiscal year.

The maker of Blue Ribbon bread and Snowflake flour said on Monday while consumers remained under significant stress, which has been compounded by low economic growth, inflation is expected to flatten as prices for soft commodities continue to decline and stabilise.

It said it offered price relief in wheat and maize products to consumers in the six months ended Sept. 30, “providing some respite from the inflationary impact on staple foods experienced in the recent past”.

The packaged goods industry has for over two years hit shoppers with higher prices, citing increased input costs that started with the COVID-19 pandemic and were exacerbated by Russia’s invasion of Ukraine.

The relief and lower commodity prices resulted in softer revenue growth in its maize and wheat milling business, which grew by 8.1%, Premier said.

Overall group revenue rose by 7.1% to 9.4 billion rand ($502.89 million), driven by growth in the milling, groceries and international businesses.

“Further price relief is expected to be muted by the rising fuel prices, high interest rates and the weakened Rand,” the group said.

Premier, which competes with bigger rival Tiger Brands, said revenue growth was likely to moderate in the second half compared with the prior year which was impacted by significant inflation in prices of soft commodities.

It projected low single-digit revenue growth but said “margins are expected to remain in line with those achieved for the first half of the year”.

The group’s earnings before interest, tax, depreciation and amortization (EBITDA) margin improved by 150 basis points to 10.9%, while normalised headline earnings per share grew to 331 cents.

($1 = 18.6919 rand)

(Reporting by Nqobile Dludla; Editing by Emelia Sithole-Matarise)