Saudi food group Almarai posted a 25.14% drop in net profit to 482 million riyals ($128.5 million) for the three months through June compared to the same quarter last year.
The company said in a bourse filing on Sunday (July 11) its revenues were hit by the base year effect of COVID-19 and tripling of VAT to 15% that started in July 2020.
Almarai’s revenues dropped by 1.9% year-on-year to 4.006 billion riyals driven mainly by food, poultry and bakery products.
The company’s business segments include dairy, juices, bakery, poultry and infant nutrition.
Almarai’s food services channel recorded more than 50% gain, driven by opening of hotels and restaurants, but retail posted a double digit drop due to a one-off purchase pattern in Q2 2020, said the Riyadh-headquartered company.
Almarai Q2 2021 categories results:
- Dairy and juice: higher imported alfalfa cost, lower subsidy and adverse channel mix resulted in lower profits, despite improved performance in Jordan and Egypt
- Bakery: Profit down by 9.4% primarily due to lower single serve sales and continuation of school closures
- Poultry: Profit dropped by 45.1% due to lower subsidy (one-off subsidy gain in 2020) and adverse channel mix driven by more sales in food service versus retail
- Others: Loss of 8.7 million riyals for Q2 2021 compared to a loss of 25.2 million riyals in Q2 2020 as overseas farming operations continued to stabilise.
Almarai is 34.52% owned by Saudi food group Savola, 23.69% by Prince Sultan Mohamed Saud Al Kabeer al Saud, and 16.32% by SALIC, the state-owned Saudi Agriculture and Livestock Company.
The food group has been stepping up its local production, and merger and acquisition activity in line with the Saudi government's increased focus on food security.
Last month it acquired the production facility of UAE-headquartered Binghatti Beverages Manufacturing and in May announced it is investing 6.6 billion riyals ($1.76 billion) to double its market share in poultry over the next five years.
It is also beefing up its bakery business. One of it subsidiaries in May increased its ownership in bakery company Modern Food Industry, after Almarai in March agreed to buy the UAE and Bahrain operations of Bakemart.
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