Almarai's first-quarter profit rises 9% on higher revenue amid easing Covid restrictions

Revenue increased 24% as schools reopened and the number of visitors bounced back, the Saudi dairy company says

Riyadh-based Almarai recorded higher revenue across its product range, led mainly by the bakery, fresh dairy and dairy food categories. Reuters

Saudi Arabia's Almarai, the Middle East's largest dairy company, reported a nearly 9 per cent rise in first-quarter net income as revenue climbed amid easing Covid-related restrictions in the kingdom and broader Gulf region.

Net profit attributable to the company's shareholders for the three-month period ended March 31 rose to 420.5 million Saudi riyals ($122m), over the same period in 2021, Almarai said in a regulatory filing on Sunday to the Tadawul stock exchange.

The company's first quarter revenue grew almost 24 per cent year-on-year to 4.5 billion riyals.

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

Saudi Arabia’s economy has bounced back strongly as the kingdom eases pandemic-related restrictions. The Arab world's biggest economy is forecast to grow 7.7 per cent in 2022, from 3.2 per cent last year, according to Jadwa Investments.

Consumer spending grew 10.4 per cent year-on-year in February, compared with an average annual rise of almost 5 per cent in the fourth quarter of 2021, as both residents and an increasing number of visitors flock to hotels, restaurants, coffee shops and entertainment venues.

The number of Covid-19 cases is also on the decline amid the government’s mass testing and vaccination programmes.

Almarai recorded higher revenue across its product range, led mainly by the bakery, fresh dairy and dairy food categories.

Dairy and juice profit rose 6 per cent due to higher sales, although this was equally matched with higher cost inflation driven by feed and dairy commodities. The devaluation of the Egyptian pound resulted in additional charges but tighter cost controls resulted in positive growth in the segment's bottom line.

Baked goods' profit surged 79.2 per cent mainly due to higher sales, as schools reopened and the company leveraged economies of scale for manufacturing, Almari said.

Profit from poultry products increased 9 per cent on the back of a 20 per cent revenue growth. The top line growth was supported by the food service segment, however, profitability growth was affected by the continued increase in the cost of corn and soya during the quarter.

Jadwa Investments has revised Saudi Arabia's inflation rate for 2022 to 2.4 per cent, from 1.7 per cent previously, driven by a global rise in food prices triggered by the Russia-Ukraine war.

The kingdom, which imported about 45 per cent of its wheat from Russia and Ukraine last year, recorded a 40 per cent rise in the cost of buying wheat so far in 2022, the investment bank said in a new report earlier thins month.

Food and beverage prices in the kingdom rose an average 2.4 per cent annually in February compared with a 2 per cent increase in January.

Almarai said its input costs rose during the reporting period, driven by higher prices of soya and dairy commodities, while higher transport charges added to the cost of inflation.

Selling and distribution expenses increased by 43.4m riyals or 7.2 per cent year-on-year, in line with volume growth rate due to higher activity and pre-loading of products for Ramadan when food sales tend to increase.

General and administration expenses rose by 7.5m riyals, in line with back office activities to support the higher sales growth.

Almarai recorded an impairment of financial assets that increased by 10m riyals in line with a general increase in trade debtors, it said.

Finance costs are little changed as a lower debt balance is offset by higher interest rate, it added.