Earnings Report /
Saudi Arabia

Almarai: Q3 22 profits in-line with expectations

  • Revenues increased by 21.0% yoy (+3.4% qoq) to SAR4.77bn and is higher than our estimates of SAR4.48bn

  • Gross margins contracted by 115bps yoy (-66bps qoq) to 31.2%, but were higher than our estimates of 30.9%

  • Net operating expenses came in at SAR910mn, higher than our estimates of SAR794mn

SNB Capital
10 October 2022
Published bySNB Capital

Almarai reported an in-line set of Q3 22 earnings, with net income increasing by 13.2% yoy (-11.0% qoq) to SAR463mn. This compares with the SNB Capital and consensus estimates of SAR465mn and SAR466mn, respectively. The yoy growth in earnings was supported by 1) strong growth in revenue and 2) positive impact of the review of existing zakat provisions. However, it was partially offset by 1) higher COGS due to the impact of global inflation, 2) one-off charge related to an oversees farming investment and 3) higher interest expense. 

  • Revenues increased by 21.0% yoy (+3.4% qoq) to SAR4.77bn and is higher than our estimates of SAR4.48bn. The growth was recorded across categories due to improved trading conditions after the ease of COVID-19 related restrictions, higher number of visitors in Saudi and the opening of educational institutions. Poultry revenue grew by 43.2% supported by volume growth and capacity addition, while the Bakery segment was up 31.8% yoy driven by single serve products mainly supported by schools opening. Dairy & Juice revenue grew 15.4% yoy driven by improved trading conditions and higher number of visitors in Saudi.

  • Gross margins contracted by 115bps yoy (-66bps qoq) to 31.2%, but were higher than our estimates of 30.9%. The yoy decrease in gross margins is mainly due to the higher input costs (corn, soya, and dairy commodities) due to the ongoing cost inflation and higher transportation costs.

  • Net operating expenses came in at SAR910mn, higher than our estimates of SAR794mn. Opex-to-sales stood at 19.1% vs our estimates of 17.7% and 17.9% in Q2 22. The increase in expenses was due a one-off charge related to an oversees farming investment, this was partially offset by stronger cost control measures by Almarai.

  • In Q3 21, EBITDA increased 8.2% yoy to SAR951mn, while FCF increased 12.0% yoy to SAR931mn, driven by better operational performance, working capital management and higher inventory valuation due to costs inflation.

  • Profits from the Dairy and Juices category increased due to an improved sales mix. This was partly offset by higher commodity costs. Poultry profits increased driven by revenue growth, operational efficiencies, and subsidy receipts in Q3 22. Bakery profits increased due to better economies of scale.