Saudi Arabia’s Almarai reports 51% rise in first-quarter net profit on higher revenue

Dairy company’s revenue during the quarter rose 12.5 per cent annually to $1.3bn

Almarai said sales in all categories, including dairy and juice, bakery and poultry, rose in the January to March period. Satish Kumar / The National

Saudi Arabia’s Almarai, the Middle East’s largest dairy company, reported a nearly 51 per cent rise in first-quarter net profit, boosted by growth in revenue and operating profit.

Net profit, after zakat and tax for the three-month period ending March 31, climbed to 635.95 million Saudi riyals ($169.6 million), compared with 422.5 million riyals during the same period last year, the company said in a statement on Sunday to the Saudi stock exchange Tadawul, where its shares are traded.

Revenue during the period rose 12.5 per cent to 5.06 billion riyals.

“Positive revenue growth was observed in all product categories and in all geographies in local currency terms,” Almarai said in the statement.

“We expect this positive momentum to continue on the top line driven by capacity expansion in poultry and stable macroeconomic momentum.”

The company's quarterly net profit was boosted by a one-off benefit due to the advancement of 10 days of Ramadan and a subsidy related to food security measures taken by Almarai.

These one-off benefits amounted to 149 million Saudi riyals and accounted for 35 per cent growth in net profit year on year, the company said.

Meanwhile, normalised net profit growth, up by about 16 per cent annually, was supported by strong sales.

Sales in all categories, including dairy and juice, bakery and poultry, rose during the period. Revenues from the poultry section rose 25 per cent, while those from bakery increased 9 per cent, the company said.

Dairy and juice sales jumped 6 per cent, but income from the business was offset by “cost inflation, mainly in dairy and feed commodities”.

“The key risks related to dairy and feed commodities inflation are continuing to show signs of stability for the last couple of quarters,” Almarai said.

It plans to manage this risk by hedging activities and leveraging its stock cover, the company said.

Almarai reported a 19 per cent growth in operating profit during the first quarter of 2023. Sammy Dallal / The National

“The current quarter has seen stabilisation of global commodities cost at a higher level relative to historic costs [mainly corn, soya and alfalfa], however higher inventory cover continued to impact cost of goods sold expenses,” the company said.

“Better cost control, mainly for sales and marketing as well as for general and administration expenses, greatly assisted the growth in operating profit.”

The company's strong results come as Saudi Arabia's economy continues to post strong growth, boosted by the non-oil sector.

Business activity in Saudi Arabia’s non-oil private sector economy remained robust in March as output and new business continued to expand, further supporting employment growth in the kingdom at the end of the first quarter.

The reading for the Arab world’s largest economy on the Riyad Bank purchasing managers’ index hit 58.7 in March, slightly lower than 59.8 recorded in February.

Saudi Arabia’s economy grew by 5.5 per cent on an annual basis in the fourth quarter of last year, driven by a surge in the kingdom’s oil and non-oil sectors, according to government estimates.

Non-oil activities for the October-December period jumped 6.2 per cent, oil activities grew 6.1 per cent, while government services activities expanded by 2.9 per cent, the General Authority for Statistics (Gastat) said.

The kingdom’s gross domestic product exceeded $1 trillion for the first time in 2022 as its economy grew by 8.7 per cent, according to data released by Gastat.

Its preliminary estimates for 2023 indicate GDP growth of 3.1 per cent.

The International Monetary Fund expects the Saudi economy to grow by 2.6 per cent this year and by 3.4 per cent next year.