Almarai third quarter net profit drops amid pandemic headwinds
Almarai in Saudi Arabia, the largest dairy company in the Middle East, said third quarter net profit fell 34% per year due to lower margins and headwinds from Covid.
Net profit attributable to shareholders of the company for the three-month period ending in late September fell to 409 million Saudi riyals ($ 109.1 million), compared to the same period a year earlier, Almarai said. in a statement released Sunday on the Tadawul Stock Exchange, where its shares are traded
Gross profit for the period decreased by approximately 16% to 1.27 billion riyals in the quarter, compared to the same period a year earlier. Overall third-quarter revenue, however, grew 2 percent annually to 3.94 billion riyals, the company said.
“Almarai faced a difficult quarter due to the base year effect of Covid-19 and rising raw material costs,” the company said. “Despite continued trade standardization after Covid-19 restrictions, commodity revenues fell 3% in GCC countries. “
The decrease in turnover was even more pronounced for food sales due to a one-time purchase made in this category last year.
“The decline in GCC revenues was partially offset by the growth in bakery sales due to the partial opening of educational establishments,” the company said.
The company said its gross margin had slipped mainly due to lower margins due to adjustments related to reduced subsidies, driven by “no subsidies in 2021 on corn and soybeans and without the benefit of the subsidy overlap. for poultry in 2020 “.
The decline was further exacerbated by rising feed costs as the company meets all of its alfalfa needs from imports and “the higher cost of commodities as the hedge cover in the first half of 2021 does not was not available in the third quarter of 2021, “Almarai said.
In terms of business categories, profits from the dairy and juice businesses fell 30 percent, while revenues from the company’s poultry division fell about 51 percent. However, the profit of the bakery division increased by 19%, mainly due to the partial opening of educational establishments in Saudi Arabia and other GCC countries.
Despite the challenges in the markets, “Almarai continued to exercise cost control across its entire supply chain to deliver value to its customers,” the company said.
Almarai said he was developing “several scenarios to manage these impacts and will roll out additional plans in the coming quarters.”
The company’s revenue from operations in Saudi Arabia fell by around 2%, while in other GCC countries it fell 5% in the third quarter. In markets beyond the Gulf, revenues increased by 32%,
The company’s net profit for the first nine months of the year fell about 22% to 1.28 billion riyals. During the same period, revenue fell 4% year-on-year in Saudi Arabia. It fell 6 percent in the other GCC market, while it rose about 39 percent in markets beyond the Gulf region.
Despite the headwinds in the market, Almari plans to invest 6.6 billion riyals to expand its poultry business in Saudi Arabia over the next five years.
The company’s board of directors has already approved the investment, which will help double its market share in the segment, he said in a May 3 statement.
The dairy company is also considering inorganic growth. In June, he announced that he was buying the Binghatti Beverages Manufacturing production complex in the United Arab Emirates for 215 million dirhams ($ 58.54 million).
In May, Almarai’s subsidiary, Western Bakeries, bought an additional stake in Riyadh-based snack maker Modern Food Industries for 150 million riyals, increasing its stake in the company to 75%.
Almarai also acquired Bakemart’s business in the United Arab Emirates and Bahrain for $ 25.47 million in March.
Updated: October 10, 2021, 8:08 AM