Saudi Arabia's Almarai, the biggest dairy company in the Middle East, reported a 7.7 per cent jump in the fourth quarter net income as revenue rose.
Net profit attributable to the company's shareholders for the three months to the end of December climbed to 335.9 million Saudi riyals ($89.57m), Almarai said in a statement to Saudi Arabia's Tadawul stock exchange, where its shares trade.
The company’s quarterly revenue rose 3.1 per cent year-on-year to 3.82 billion riyals, mainly driven by “both fresh and long-life dairy [segments] along with alfalfa sales”, with Egypt, Jordan and other export markets contributing to growth, it said in the bourse filing.
Revenue decreased in Saudi Arabia and GCC countries by 1 per cent and 3.1 per cent respectively, but increased in other markets by 41.5 per cent.
However, its full-year 2020 sales increased in Saudi Arabia, GCC countries and other export markets by 5.6 per cent, 1.1 per cent and 29.2 per cent, respectively.
“The current market conditions in Q4 are pointing towards a consolidation phase,” Almarai said.
The diary giant continues to pursue a “focused business strategy on top line growth driven by channel expansion, new product development, pricing rationalisation and new geographies, while also focusing on tight cost control”.
The positive free cash flow in 2020 is expected to continue its momentum in 2021 and “we expect to further strengthen our balance sheet with renewed focus on profitability and working capital management”, it added.
The quarterly selling and distribution expenses decreased 4.7 per cent to 30m riyals due to sales optimisation efforts. General and administration expenses increased 3.7 per cent, it said.
Impairments on financial assets rose by 9.8m riyals due to a detailed review of the company’s existing debt. Funding costs, however, declined by 20.9m riyals, largely due to lower debt and a lower funding rate, it added.
Almarai’s full year net income climbed 9.5 per cent to 1.98bn riyals on the back of a 7 per cent rise in revenue to 15.35bn riyals.
The company generated 4.2bn in cash from operating activities last year, down 11.2 per cent from 2019. The reduction of nearly 529m riyals was driven by a rise in inventory from 4.2bn riyals to 4.7bn riyals due to Almarai's “strategic purchases of raw material inventory in view of Covid-19".
Almarai’s investment activity in 2020 also declined by 73.2 per cent to 787.6m as it reduced capital expenditure. Investments represented only 5.1 per cent of total revenue compared to 20.5 per cent in the prior year, it said.