Saudi Arabia's Almarai second-quarter profit jumps 8% on higher revenue

Revenue increased more than 15% as the dairy company recorded growth across all product categories

Riyadh-based Almarai on Sunday reported a rise in its Q2 net profit. Reuters

Saudi Arabia's Almarai, the Middle East's largest dairy company, reported an 8 per cent increase in second-quarter net profit as revenue rose with the easing of Covid-19-related restrictions.

Consolidated profit attributable to shareholders climbed to 520.4 million Saudi riyals ($138.77m) in the three-month period ended June 30, the company said in a filing to the Saudi stock exchange Tadawul on Sunday.

Almarai's second-quarter profit beat SNB Capital's consensus estimate of between 451m and 482m riyals.

Revenue during the period rose more than 15 per cent year-on-year to 4.61 billion riyals, driven mainly by bakery, poultry and fresh dairy product sales.

“Although revenues were broadly in line with our estimates, we believe the variance is mainly due to strong gross margins,” SNB Capital said in a note.

“This was slightly offset by an increase in impairment of financial assets and higher losses from the sale of dairy herd.”

Positive revenue growth was “evident in all categories due to improved trading conditions post Covid-19 movement restrictions, opening of educational institutions and a higher number of visitors in the region”, Almarai said.

Saudi Arabia’s economy has bounced back strongly from the coronavirus-induced slowdown and is forecast to grow 7.7 per cent in 2022, from 3.2 per cent last year, according to Jadwa Investments.

Meanwhile, consultancy KPMG expects the Arab world's biggest economy to grow 6.7 per cent this year, it said in a report on Sunday.

A continued easing of Opec+ related oil supply limits and high international crude prices will be key to boosting the kingdom's economic outlook in 2022, it said.

Almarai said profit from its baked goods division more than doubled in the second quarter due to higher sales driven by single-serve products, the opening of schools, product innovation and leveraging economies of scale for manufacturing.

The poultry category's profit rose more than 15 per cent, driven by 30 per cent growth in revenue.

Top line growth was helped by increasing volumes in the food service segment, but the rise in profitability was lower than revenue growth due to the continued increase in the cost of soya and corn, Almarai said.

Profit from dairy and juice products declined more than 7 per cent due to higher cost inflation, mainly in dairy and feed, the company said.

In terms of regions, Saudi Arabia recorded close to a 16 per cent rise in revenue, while GCC sales grew by more than 13 per cent.

Earnings before interest, taxes and zakat, depreciation and amortisation increased almost 7 per cent year-on-year to 993.7m riyals in the second quarter.

Selling and distribution expenses increased by 5 per cent, in line with higher sales activity, Almarai said.

General and administration expenses also rose by 5.8m riyals, as back office activities grew to support sales growth.

Impairment costs on financial assets increased by 18.2m riyals, “in line with general increase in trade debtors” in the food services sector, the company said.

Consolidated profit attributable to shareholders for the first half of the year rose by more than 8 per cent year-on-year to 940.8m riyals. Revenue increased by just more than 19 per cent to 9.1bn riyals during the period.

“We expect this positive momentum to continue, albeit at a lower rate in the coming quarters as we will enter normalised trading patterns in the second half of the year, from a comparison perspective,” the company said.

“The key risk remains surging cost inflation for dairy and commodity feeds, although the trend is normalising and even reversing for some commodities.”