Earnings Report /
Saudi Arabia

Almarai: Dairy sales growth offsets other segments’ decline

  • Revenues increased 1.5% yoy to SAR3.6bn in Q1 21, in-line with our estimates

  • Gross margins contracted by 100bps yoy to 33.9%, in line with our estimates

  • Operating expenses declined 1.0% yoy to SAR733mn, in-line with our estimates

SNB Capital
11 April 2021
Published by

Almarai reported an in-line set of Q1 21 earnings, with net income increasing 0.8% yoy (14.9% qoq) to SAR386m. This compares to the NCBC and consensus estimates of SAR378mn and SAR352mn. Revenues increased 1.5% yoy to SAR3.6bn, mainly driven by growth in the dairy segment. Gross margins contracted by 100bps yoy to 33.9% mainly due to the removal of subsidies and higher cost of imported alfalfa.

Revenues increased 1.5% yoy to SAR3.6bn in Q1 21, in-line with our estimates.

The growth was led by higher revenue of fresh dairy (7.3% yoy), long-life dairy (4.7% yoy) and other items (49.0% yoy). Poultry revenue declined 1.1% yoy, as growth in the food services channel was offset by a decline in the retail channel. Bakery revenue declined 9.7% yoy mainly impacted by school closures. Juices and Cheese & Butter segments also declined 2.8% yoy and 4.4% yoy, respectively. Revenues from Saudi and other GCC declined 1.6% yoy and 8.9% yoy respectively, while revenue from other non-GCC countries grew 47.0% yoy.

Gross margins contracted by 100bps yoy to 33.9%, in line with our estimates.

The yoy contraction is due to higher cost of imported alfalfa and the removal of subsidies on non-alfalfa input feed.

Operating expenses declined 1.0% yoy to SAR733mn, in-line with our estimates.

The yoy decline was driven by 2.5% yoy reduction in G&A expenses and 1.2% yoy reduction in S&D expenses. Net other expenses declined 10.2% yoy to SAR117mn, coming lower than our estimates of SAR146mn, mainly driven by a 29.0% yoy reduction in finance costs to SAR89mn (vs our estimates of SAR125mn).

Net profit of Dairy and Juices category increased 6.5% yoy driven by higher sales.

Net profit of the Bakery category declined 35.7% yoy due to lower sales and a change in the channel mix. Poultry profits were down 24.3% yoy mainly due to lower subsidies on input feed. The “Others” category turned a profit of SAR2.6mn from a net loss of SAR21.6mn in Q1 20, supported by the return to profitability of the subsidiary “Premier Food”.

We are currently Neutral on Almarai, with at PT of SAR51.8.

The stock trades at a 2021f PE of 25.9x, vs the sector average of 24.9x.