Almarai, Saudi Arabia, posts 7% profit jump on increased sales

Saudi Arabia's Almarai, the largest dairy company in the Middle East, announced a notable 7% rise in net profit for the second quarter.

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Almarai Records 7% Increase in Second-Quarter Net Profit

The company attributed this growth to higher sales and reduced costs. Net profit, after zakat and tax, reached 557.08 million Saudi riyals ($148.45 million) for the three-month period ending June 30, surpassing the previous year's performance. Almarai reported a nearly 4% increase in revenue during the same period, amounting to 4.79 billion riyals. The company emphasized its commitment to managing risks through improved hedging activities and optimizing stock utilization.

Diverse Segment Performance Drives Almarai's Results

While Almarai's dairy and juice business experienced a decline in earnings due to the impact of the Ramadan period and the devaluation of the Egyptian pound, the bakery and poultry segments witnessed growth in net profit. This growth can be attributed to higher sales and increased capacity. Overall, Almarai's net profit for the first six months of 2023 rose by 27% to 1.19 billion riyals compared to the same period last year. Furthermore, the company's revenue for the first half of the year increased by 8% to 9.86 billion riyals.

Focus on Mitigating Risks and Optimizing Operational Efficiency

Almarai highlighted the potential risks posed by the increasing inflation in the cost prices of feed commodities and production inputs. However, the company noted that many of these costs have come down from previous high levels. Almarai aims to manage these risks effectively by employing better hedging strategies and optimizing stock utilization. The company remains vigilant in ensuring its operational efficiency and profitability.

Favorable Market Conditions and Robust Economic Growth

Almarai's strong performance aligns with Saudi Arabia's thriving economy, which continues to exhibit robust growth, particularly in the non-oil sector. The non-oil private sector economy in Saudi Arabia maintained its momentum in June, with output, new business, and employment growth showing continued expansion. The Riyad Bank purchasing managers' index for the kingdom rose to 59.6 in June, indicating robust growth. Output experienced the steepest rate of growth since March 2015, while sales growth reached its highest level in nearly nine years.

Stability in Global Commodity Prices Supports Almarai's Performance

Almarai noted that global commodity costs remained relatively stable during the current quarter, albeit at higher levels compared to earlier periods. The company benefits from the favorable pricing environment for commodities. It remains vigilant in managing potential risks associated with fluctuating commodity prices by employing effective hedging practices and optimizing its stock utilization.

FAO Food Price Index Indicates Stable Food Prices

The UN Food and Agriculture Organisation's (FAO) food price index recorded a decline in May, reaching its lowest point in two years. The decrease was driven by lower prices of vegetable oils, cereals, and dairy products, which offset the increase in sugar and meat prices. This stable price environment for food commodities contributes to Almarai's favorable market conditions and supports its growth trajectory.

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