Saudi food giant Almarai reports negative growth in Q2

Almarai said the dairy, juice and bakery segments have seen a 'marked slowdown' in 2018.
Saudi food giant Almarai reports negative growth in Q2
By Bernd Debusmann Jr
Mon 09 Jul 2018 09:14 AM

Dairy and food production firm Almarai reported negative growth of 1 percent in Q2 2018, which the company attributes to a number of factors, including higher energy and transportation costs, the closure of shops and the introduction of VAT.

In a statement, Almarai announced that it ended the quarter with a reduction in topline growth from SAR 3,760 million in 2017 to SAR 3,731 million in 2018.

This one percent reduction translated to a two percent decrease in the company’s bottom line, reducing profit attributable to shareholders from SAR 674 million in 2017 to SAR 660 million in 2018.

In the statement, the company said that the dairy, juice and bakery segments have seen a “marked slowdown” in 2018 and “have shown the greatest sensitivity to changes in market dynamics.”

“We have achieved moderate volume led growth, but the increase in operating costs, mainly due to input cost of feed, expatriate levy costs and energy and transportation costs, together with a high level of promotions and discounting activities led to significant market erosion,” the statement noted.

These factors, the company added, led to an 8 percent reduction in profits stemming from dairy and juice, and a 45 percent reduction in profits from the bakery segment.

Conversely, the poultry segment achieved record quarterly sales of SAR 437 million and profits of SAR 67 million.

The company’s cash flow generation for the period remains strong, at SAR 425 million, which Almarai says is mainly attributable to a reduction in capital investments.

After six months of the year, the total reduction in top line growth attributed to a 3 percent reduction in top line growth, which translates to roughly SAR 180 million.

In May, Almarai set its five year capital investment at SAR 10.6 billion ($2.83 billion) as it navigates “persistent challenging economic conditions” in the region.

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