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Mon 8 Oct 2018 09:06 AM

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Increased competition, costs sees Almarai report dip in Q3 profit

The Gulf's largest dairy company said the most significant decline was in the dairy and juice category, which saw profits plummet 14.5% over the course of the quarter

Increased competition, costs sees Almarai report dip in Q3 profit
In August, BrandIndex announced that Almarai saw a significant decline in its brand perception among Saudi residents in July following a price increase.

Profits of Saudi-based Almarai, the largest dairy company in the region, fell in the third quarter of the year, which the company credits to market conditions and increases in the costs of feed.

According in a statement filed to the Saudi stock exchange, Q3 sales remained roughly stable at SR3.37 billion ($917.5 million), while profits dropped 4.9 percent to SR634.5 million ($169.18 million).

The statement said the decrease is largely due to higher cost of sales, which is primarily driven by higher alfalfa cost, increased promotions and an increase in labour costs.

“This has been partially offset by better cost management, stable commodity costs and enhanced production efficiencies,” the statement said.

The most significant decline was in the dairy and juice category, which saw profits plummet 14.5 percent over the course of the quarter.

Almarai credits this to “adverse market conditions, expat exodus and higher Alfafa costs coupled with discounting and promotions, specifically in long life milk.”

“In this changing environment, Almarai will continue to focus on delivering innovative quality products to the consumers in the region,” said Almarai CEO Georges Schorderet.

“We will aim at achieving our Vision 2025 objectives to become the most favoured brand in the eyes of the consumers, delivering value to all our stakeholders.”

In August, BrandIndex announced that Almarai saw a significant decline in its brand perception among Saudi residents in July following a price increase.

The company became a boycott target of citizens and a social media campaign launched circulating photos of a popular yogurt drink plastered with a red X and the phrase “let it go sour” after Almarai raised the price of a litre of milk by 0.25 riyals, or 7 cents.

In a statement, the dairy said it raised prices because its own costs went up after the government cut energy subsidies and introduced new fees on foreign workers.

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