Almarai reports 4.3% drop in fourth quarter net income as sales slump

Saudi Arabia's Almarai, the biggest dairy producer in the Arabian Gulf region reported a 4.3 per cent drop in fourth-quarter net profit missing analysts' estimates as revenues fell on the back of declining sales in regional markets.

Almarai net profit fell to 513 million riyals ($136.8m) for the three month-period to end of December 2017 from 536m million riyals recorded in the fourth quarter of 2016, the company said in a regulatory filing to the Saudi Stock Exchange (Tadawul), where its shares are traded. The profit is 23.1 per cent lower than 667m riyals reported at the end of the third quarter last year. However the full-year 2017 net income climbed 1.6 per cent to 2.18 billion riyals from 2.14bn riyals at the end of 2016, according to the bourse filing.

Cairo-based investment bank EFG-Hermes had forecast Almarai fourth-quarter net profit at 613m riyals and its annual net income at 2.28bn riyals.

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“A decline of 2.6 per cent in revenue is mainly due to the loss of sales in the GCC [countries],” the company said in the bourse filing, adding that profits from its dairy and juice divisions also fell 11.9 per cent due to “adverse market conditions”.

Net income from the company's bakery segment slumped 17.1 per cent, as volume growth stalled across markets, while finance expenses increased 8.2 per cent due to overseas funding costs, which hurt profitability.

The company, which posted flat third quarter net profit in October had warned of continued weakness in the markets it operates as margins decline and competition rise. The company is trying to protect its balance sheet through stricter cost controls. Almarai had launched a productivity improvement and cost-cutting programme at the end of 2016 to reduce the cost base by 500m riyals over the next two years.

Saudi Arabia's Public Investment Fund in October became the third largest shareholder of the Riyadh-based dairy farm operator with 163.2 million shares, or 16.3 per cent stake, according to an October regulatory filing that did not disclose the identity of the seller. Bloomberg had valued the stake at about 9bn riyals based on Almarai's share price at the time.