Saudi food company Almarai third quarter profit drops on higher expenses, funding costs
Saudi food company Almarai’s third quarter profit dropped 8.472 per cent compared to the same period a year ago, the company reported in a bourse filing on Sunday.
Almarai’s net profit after zakat and tax reached 581.2 million riyals ($155 million) for the three months ending September 30 versus 635 million riyals for the corresponding period in 2018.
The company’s revenues rose 7.7 per cent and gross profit increased by 3.2 per cent but net profit was dragged down by a number of factors.
The company said it was hit by higher input costs, mainly alfalfa, feed and labour, similar to what it reported for the first six months of 2019.
The F&B conglomerate spent 10.1 per cent more towards selling and distribution expenses, and funding costs were also higher, by 30.3 million riyals. The company attributed this to higher interest rates drive by a higher SIBOR, accounting treatment of perpetual sukuk profit payment against equity, and lower capitalisation of funding cost for qualified capital projects.
BUSINESS SEGMENTS PERFORMANCE
Almarai's dairy and juice category was its worst-hit business segment for the three months ending September 30, with profits down 14.2 per cent due to “adverse market conditions”, said the company. It pointed out higher costs for alfalfa, and discounting and promotions specifically for Long Life Milk.
Almarai reported in September that it plans to boost its dairy and juice subsidiaries in Egypt and Jordan, when it announced it had received a loan of up to $100 million from the European Bank for Reconstruction and Development (EBRD).
The Saudi company’s bakery category saw a 29.5 per cent increase in profit due to higher sales.
Its poultry segment also saw an increase in profit, up 15.2 per cent, driven mainly by revenue growth of 7.8 per cent, said the company. This was supported by hotels, restaurants and cafes (HORECA), and “significant” profit growth was supported by consistent lower mortality and better cost control, said Almarai.
Almarai in August strengthened its poultry business when it acquired 37.6 per cent of Pure Breed Company, taking its ownership to 93.5 per cent.
Pure Breed’s main operations are focused on poultry broiler grandparent farming.
GEOGRAPHIES
Almarai’s revenue increased in Saudi Arabia, in other GCC and other countries by 7.8 per cent, 2.7 per cent, and 18.4 per cent, respectively.
The company’s biggest shareholder is Saudi investment holding firm Savola Group, which owns 34.5 per cent of the company.
($1 = 3.75 Saudi riyals)
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