Almarai Q1 results: Bakery outperforms dairy and poultry divisions

By Vince Bamford

- Last updated on GMT

Overall Almarai sales were up 13.6% year on year in Q1. Source: Almarai
Overall Almarai sales were up 13.6% year on year in Q1. Source: Almarai

Related tags Baking

Saudi Arabian food and drink business Almarai has reported a surge in profits from its bakery division, while increased costs have hit profits from its dairy business.

Announcing its results for the three months to March 31 2016, the company reported total net income up 0.7% on the same period a year ago to $82.3m (SAR 308.5m). Total sales rose 13.6 % year on year to $0.9bn (SAR 3,450.3m).

Sales from the bakery segment – which includes brands L’usine and 7 Days – were up 28% year on year to $121.4m (SAR 455.2), which the company said had been driven by availability of production capacity and successful new product launches. Profits rose 184.3% year-on -year to $16.5m (SAR 61.8m).

Analysts Euromonitor has previously reported that it expected growth in both modern and traditional grocery retailing in Saudi Arabia that would benefit the baked goods market.

"Demand for cakes, desserts and other similar items will lead to growth in the number of independent bakeries and cake shops​," it said. "On the other hand, the creation of new neighborhoods owing to population growth will lead to the growth of small-scale bakeries that offer everyday staple baked goods such as Arabic bread​."

Increased energy costs

Sales of Almarai dairy and juice products – sold under brands including Almarai, Beyti and Teeba – rose 12.2% to $0.7bn (SAR 2.6bn). Profits fell 4% year-on-year, with Almarai saying the resilience of the core business had been affected by increased energy costs and the lack of subsidy.

Poultry division losses increased 68.9% to SAR 104.3 million, and had been affected by increased competition from imported frozen products, higher energy costs and the lack of subsidy, said the company.

Competitive market conditions

“Given the very competitive market conditions driven by the economic slowdown, the performance of the company has been relatively strong in its core segments demonstrating the resilience and efficiency of its business model,“​ said Almarai in its results statement.

“Going forward, the company will exercise caution while continuing to focus on its strategic targets.”

Almarai bakery

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