Snowflake-owner bets on staples as South Africans feel the pain

Premier released strong results for the 2023/24 financial year and acquired a 30% shareholding in Goldkeys International, a South African rice producer, as the company bets on staple foods in a high-cost-of-living environment.

Premier – which owns brands such as Blue Ribbon, Snowflake, Dove Cotton, Lil-let, and Manhattan – released its results for the year through March 2024 today.

The results revealed modest revenue growth of 3.6% but robust operating profit growth of 26.4% to R1.6 billion.

This comes as the company upped its operating profit margin to 8.8% from 7.2% previously.

Its EBITDA margin also grew to 11% from 9.6% the previous year, bringing its EBITDA to R2.1 billion – an 18.6% increase.

Premier said both its Millbake and Groceries and International categories contributed to revenue growth, increasing by 3.7% and 3.3%, respectively. 

The softening to single-digit revenue growth was expected, given the impact of significant soft commodity inflation in the prior year and its subsequent stabilisation.

Cash generated from operations increased by 54.8% to R2.4 billion, underpinned by the growth in the company’s EBITDA and supported by well-managed working capital with improved debtor collections and lower inventory balances on 31 March 2024.

This robust cash generation enabled Premier to substantially reduce its leverage ratio to a level of 0.9x that is significantly lower than historical levels. 

Voluntary capital repayments on borrowings of R706 million were made and a further R210 million was repaid on the bank overdraft facility during the year. 

Premier said this voluntary capital repayment remains available to drawdown for future funding requirements.

These strong results allowed Premier’s board to declare a maiden dividend of 220 cents per share.

Acquisition

After the financial year ended, Premier acquired a 30% shareholding in Goldkeys International with effect from 3 June 2024.

Goldkeys is a 1994-founded rice distributor based in KwaZulu-Natal and one of the largest rice importers into South Africa. 

It supplies branded Thai and Indian-sourced rice under its brands “Golden Delight,” “Golden Pride,” and “Light & Right,” as well as house brands, to several South African retailers and independent wholesalers. 

Premier explained that this investment builds on the relationship that commenced on 10 May 2023, when Premier entered into a Sales, Merchandising, and Route to Market Services Agreement with Goldkeys to manage their sales function and assist them in building their brands and sales outside of KwaZulu-Natal.

“The investment is aligned with Premier’s strategy to grow its branded product portfolio,” the company explained. 

“Rice complements Premier’s staple foods basket of bread, maize, and wheat products, offering synergies along the value chain.” 

It said this investment in Goldkeys will benefit Premier’s existing rice operations outside South Africa, where it sources rice for sale under its own brands.

Premier settled the purchase consideration of R313.6 million in cash on 3 June 2024 and has appointed representatives to Goldkeys’ board of directors.