Saudi Arabia’s Almarai posts 4% increase in Q4 profit on higher sales

Saudi Arabia’s Almarai, the Middle East’s largest dairy company, reported an increase of more than 4 per cent in fourth-quarter net profit, boosted by higher revenue led by its poultry and dairy businesses.

Net profit attributable to shareholders after zakat and tax for the three months ending December 31, rose to 370.72 million Saudi riyals ($98.85 million), the company said in a bourse filing on Sunday to the Saudi stock exchange Tadawul, where its shares are traded.

Net profit increased mainly on a 5 per cent rise in operating profit “due to revenue growth, accompanied by stabilised commodity costs and well-managed operating costs”, it said.

“Despite higher funding costs, net profit for the fourth quarter of 2023 increased by 4 per cent mainly due to the higher operating profit and partly due to the synergies driven by 100 per cent acquisition of the Egypt and Jordan business earlier in the year,” it added.

Last year, Almarai Investment Holding completed the acquisition of International Dairy and Juice Limited, its former joint venture with PepsiCo in Egypt and Jordan, in a deal worth 255 million riyals.

Almarai's revenue in the fourth quarter rose by about 2 per cent to 4.92 billion riyals annually.

The company recorded “positive” performance in its core GCC markets, led by Saudi Arabia.

However, challenges such as lower commodity sales in North America and reduced contribution from Egypt due to currency devaluation led to a slower overall revenue growth rate, it added.

Egypt has devalued its currency three times since 2022 but did not follow through on its commitment to adopt a permanently flexible exchange rate system, reverting to fixing or pegging the rate after each devaluation.

In terms of business divisions, Almarai’s dairy and juice business posted an increase in earnings in the fourth quarter due to improved sales in crucial markets in the Gulf countries and strict controls over costs.

Net profit from the company’s bakery segment also grew annually on higher sales of bread and single-serve products.

Meanwhile, increased production capacity led to a higher net profit in the poultry business.

For 2023, Almarai’s net profit increased by more than 16 per cent annually to 2.05 billion riyals. Revenue during the same period rose about 5 per cent to 19.58 billion riyals.

A stable market environment and strong trading performance supported its profit growth, Almarai said.

The rise in revenue was led by “cost control and stable commodity costs” as well as the expansion of its poultry business, the launch of several new products and “the effect of the increased direct marketing communication with consumers”.

Almarai, which previously revealed plans to enter the seafood and frozen bakery business, said it expects its core business to continue to gain market share in selected product categories and geographies.

The company also plans to “explore additional opportunities to grow inorganically and deploy capital in line with its five-year investment strategy”.