Earnings Report /
Saudi Arabia

Almarai: Q2 22 earnings call summary

  • Revenues increased by 15.1% yoy (+2.4% qoq) to SAR4.61bn in Q2 22, driven by a 42% yoy growth in bakery products

  • Gross margin declining to 31.9% vs 33.8% in Q2 21 due to higher feed prices and commodity costs

  • Almarai is focused to retain profitability margins in 2022, but will not be opportunistic behavior

SNB Capital
20 July 2022
Published bySNB Capital

Below are the key highlights of Almarai Q2 22 earnings call. I have also attached our Q2 22 results analysis and link to the presentation [almarai.com]

Business performance

  • Revenues increased by 15.1% yoy (+2.4% qoq) to SAR4.61bn in Q2 22, driven by a 42% yoy growth in bakery products, 8% yoy growth in long life dairy, 10% yoy growth in fresh dairy, 7% yoy growth in fruit juice, 5% yoy growth in foods, 30% yoy growth in poultry and 19% growth in other sales.

  • Revenue growth was across all regions, products, and channels due to improved trading conditions as COVID-19 related restrictions eased. Volume growth was driven by Ramadan, opening of educational institutions and higher number of visitors.

  • The growth in revenues included price growth of 11% yoy, volume growth of 2% yoy and a product mix effect of 2% yoy.

  • The prices increase was implemented in line with cost increase in respective categories. Dairy and poultry segment prices increased in line with its costs.

  • Geographically, Jordan recorded the highest sales growth (+26% yoy), followed by UAE (+20% yoy) and Saudi (+16% yoy). Kuwait and Egypt recorded a revenue growth of 9% yoy and 8% yoy, respectively. Bahrain and Oman recorded revenue growth of 12% and 6% yoy respectively, while other countries grew at 17% yoy. Saudi contributed 65% of total Q2 22 sales

  • In Q2 22, modern trade grew by 4% yoy vs traditional trade at 16% yoy, while food services and others grew by 30% yoy and 31% yoy, respectively. In terms of total contribution, traditional trade contributed to 57%, while Modern trade, food services and others contributed 24%, 13% and 5% respectively.

Key segments related highlights

Dairy and Juice

  • Revenue increased by 8% yoy while the segment profit decreased by 7% yoy with 11% net margin.

  • Sales were driven by performance of all products across the board with an improved Ramadan performance.

  • Cost pressures were high due to 1) higher feed (corn and soya) costs 2) higher dairy commodities costs (mainly butter) 3) higher transportation costs.


  • Revenue grew by 42% yoy, of which 7% was from M&A and 35% was organic. Volume growth was 15-20% and remaining was the price increase impact. Profits grew substantially by 125% yoy with a 14% net margin.

  • Sales growth was primarily driven by full resumption of educational institutions in Saudi and the Gulf leading to increase in single serve products sales and volume.


  • Revenue grew by 30% yoy while profits were up 15% yoy with 11% net margin.

  • Fresh poultry prices were SAR12-15 in food services while frozen poultry prices were ~SAR20-24 (doubling yoy)

  • Profitability was negatively impacted by higher corn and soya feed prices.

  • Poultry market share was down to 30% (May 2022) vs 31% in (Dec 2021) but Almarai retains its number 1 position.

Financial Performance

  • Gross profit stood at SAR1.47bn (+8.4% yoy), with gross margin declining to 31.9% vs 33.8% in Q2 21 due to higher feed prices and commodity costs which increased 19% on a yoy basis.

  • The qoq improvement in gross margin was due to 1) full pricing increase impact in Q2 22, 2) better mix including higher volumes of single serve bakery products which contributed to higher margins.

  • EBIT came in at SAR646mn (+7.4% yoy) representing a margin of 14.0%. 

  • Net income stood at SAR520mn, up 8.0% yoy and reflecting a margin of 11.3%. The yoy increase in net income was mainly driven by higher price and volume mix (SAR498mn) and was partially offset by commodity cost increase (SAR425mn).

  • Capex increased 26.5% yoy to SAR320mn in Q2 22. Capex to sales stood at 9% in TTM Q2 22, vs 9% in 2021 and 6% in 2020.

  • Working capital stood at SAR3.64bn, 21% of sales in TTM Q2 22, vs 16% and 21% in 2021 and 2020, respectively. Working capital increase was mainly due to the decision of the management to secure more inventory in Q2 22 given the current macro-economic conditions.

  • Q2 22 recorded a SAR0.5bn increase in inventory due to 1) higher valuation of alfalfa (prices up by 50% yoy) 2) the management decision of carrying 30 days of stock covers 3) carrying extra inventory in Egypt to avoid pressure due to currency devaluation.

  • Free cash flow decreased to SAR378mn in Q2 22 vs SAR1.03bn in Q2 21, impacted by 1) high collection exercise last year 2) higher inventories. Q2 22 TTM FCF came in at SAR1.92bn, 11% of sales, vs 20% and 18% in 2021 and 2020, respectively.

  • Net debt stood at SAR10.3bn at the end of Q2 22 vs SAR9.2bn at the end of 2021.

  • Net debt/ EBITDA: 2.9x as of Q2 22 (vs 2.6x in 2021).

  • Average debt maturity tenure currently is 2.9 years, the proportion of debt with banks, government institutes and Islamic bonds is 54%, 13% and 33% respectively.

Expectations and outlook

  • The management expects increasing cost pressures in Q3 and Q4 22, and accordingly will work on efficiency programs alongside pricing. The management highlighted that margins have been supported by the use of older inventory, which is relatively cheaper. As the effect of older inventory goes away, it would pressures margins.

  • Almarai is focused to retain profitability margins in 2022 and attain LT sustainable profits and will not be opportunistic in the current high commodity costs vs pricing increase scenario. The management highlight that they want to keep their EBIT margins around 15-16%, in line with their long term trend.

  • The management expects Q3 22 bakery volume to remain strong in Q3 22, but at a lower base due to partial reopening of educational institutions in Q3 21

  • FCF target to remain in the range of SAR2.5bn to SAR3.0bn.

  • The management has been agile with regards to Almarai’s inventory in securing supplies to avoid out of stock situations and will assess the conditions in Q3 22 before making decisions to normalize inventory.

  • The management is confident that in the longer run it can reach its 2016-17 levels of working capital to sales ranging between 9-10%.

  • Capex continues to decline with current 5-year plan and the new capex is mainly for maintenance.

  • The management does not foresee liquidity issues. A sukuk of SAR1.6bn maturing next year has been arranged for refinancing with maturity after 5 years, thus taking the company’s overall debt maturity to 3.5 years. Also, a sukuk of SAR1.9bn maturity in 2024 will be refinanced, further increasing the company’s debt maturity to 5-6 years. This debt profile is considering that Almarai does not do any strategic acquisitions.

  • Seafood business plans: Almarai plans to buy supplies from trusted local suppliers, invest in a processing plant (for cleaning and packaging) and then brand its seafood products. Almarai expects an investment of SAR250mn for the processing unit and should take c1-2 years for the implementation.

  • The poultry expansion project will take c3-4 years, and spending of investment will be equally phased across this timeframe.