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Sat 11 Oct 2008 11:26 PM

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Saudi Almarai Q3 profit rises, beats forecasts

Quarterly net income up 58% to $78.3 million, shares buck market trend.

Saudi Arabia's Almarai Co, the Gulf's largest dairy company by market value, said third-quarter profit rose 57.8 percent on higher sales, beating analysts' forecasts.

Net profit in the three months to Sept. 30 was 293.7 million riyals ($78.3 million) compared with 186.2 million riyals in the year-earlier period, Almarai said in a statement on the Saudi bourse website.

The profit increase was the result of "Almarai's ability to forecast growing consumer demand and further invest in its efficient production and distribution model," it said, adding that it benefited from higher volumes in summer sales.

Analysts' forecasts for Almarai's third quarter ranged from 255 million riyals to 275 million riyals, according to a survey conducted last month by newswire Reuters.

"This stronger-than-expected profitability... is due to the conjunction of continued cost-control efforts by the company and high volumes during the period, notably given that Ramadan was this year falling fully in one quarter," said Laurent Gally, analyst at Dubai-based Shuaa Capital.

Turnover in the third quarter rose 37.5 percent to 3.76 billion riyals, and operating profit advanced 42.6 percent to 796.2 million riyals.

For the nine months to Sept 30, Almarai's net profit rose 45.7 percent to 691.1 million riyals.

Almarai has been diversifying its revenue sources through acquisitions and said it plans to spend 6 billion riyals in the five years to 2013.

The firm announced in the third quarter two acquisitions of juice and dairy manufacturers in Egypt and Jordan.

Almarai is expected to finalise the Jordanian acquisition before the end of November, Shuaa's Gally said.

"Our various discussions with the company indicate Almarai has already secured financing with banks and its expansion plans are not put into question," he said.

Last year, Almarai began consolidating the earnings of the acquisition of Western Bakeries and International Bakery Services Co in 2006. It paid 709 million riyals in stock for the companies.

The dairy firm is part of a group led by Kuwait's telecom firm Zain that paid $6.1 billion last year for a licence to start Saudi Arabia's third mobile telephone firm, Zain Saudi Arabia.

Almarai could post about 20 percent earnings growth next year, Gally said.

Almarai's shares are up 0.85 percent since the start of the year against a 47.5 percent drop in the all-share <.TASI> index. (Reuters)

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