Almarai: announces Q3/2015 Financial Results

Riyadh / SA. (ac) Almarai Company is pleased to announce its interim consolidated financial results for the period ended on 30 September 2015 (Nine Months) as below.

For the third quarter Almarai consolidated net income reached 595.1 million SAR, an increase of 10.3 percent compared to the corresponding quarter of the previous year (539.4 million SAR) and an increase of 12.2 percent compared to the previous quarter (530.4 million SAR).

The total gross profit for the third quarter amounted to 1’446.5 million SAR, an increase of 10.4 percent compared to the corresponding quarter of the previous year (1’310.7 million SAR).

The operating income for the third quarter amounted to 672.7 million SAR, an increase of 4.3 percent compared to the corresponding quarter of the previous year (644.7 million SAR).

The consolidated net profit for the nine months ended 30 September 2015 amounted to 1’432.0 million SAR, an increase of 14.9 percent compared to the same period of last year (1’246.3 million SAR).

The Diluted Earnings Per Share (EPS) based on the Net Income attributable to Shareholders for nine months ended 30 September 2015, reached 2.33 SAR compared to the corresponding period of the previous year of 2.01 SAR. Please note that the Diluted EPS is calculated by dividing the net income for the period by the number of issued shares (600.0 million shares which represent the weighted average number of issued shares at 30 September 2015 and 30 September 2014), and the Net Income attributable to shareholders is the Net Income after deduction of profit attributable to Perpetual Sukuk holders. The Diluted Earnings Per Share, based on 600.0 million shares, is 2.39 and 2.08 before the profit elimination to Perpetual Sukuk holders at the end of September 2015 and September 2014 respectively.

The total gross profit for the nine month ended 30 September 2015 amounted to 3’944.9 million SAR, an increase of 14.1 percent compared to the corresponding period of last year (3’458.8 million SAR).

The operating profit for the nine month ended 30 September 2015 amounted to 1’689.5 million SAR, an increase of 14.6 percent compared to the corresponding period of last year (1’474.0 million SAR).

The growth in net income for the third quarter of 10.3 percent, compared to the corresponding quarter of the previous year is due to:

  • Growth in sales of 7.8 percent, as a result of continuous sales growth in the main segments from Poultry of 15.1 percent, Bakery by 9.2 percent and Dairy + Juice of 5.9 percent.
  • In addition, cost of sales increased at a lower rate due to better costs management leading to 10.4 percent growth in gross profit. The result of core business segments was as follow; Dairy + Juice decreased by 3.0 percent, Bakery increased by 30.7 percent and Poultry losses declined by 44.8 percent. Poultry losses declined to 49.1 million SAR which represents 15.6 percent of segment sales compared to 2014 losses of 88.9 million SAR which represented 32.5 percent of segment sales.
  • The group selling and distribution expenses grew by 16.8 percent to support the growth in key product categories, distribution outlets and geographical spread. General and Administration expenses grew by 11.4 percent to support the general business growth.
  • In addition, the net evolution of Share of Results of Associates and Joint Ventures, Others expenses, Finance Cost-Net, Zakat and Foreign Income Tax, and Non-Controlling Interest was a favorable effect on net profit for the third quarter 27.7 million SAR.

The growth in net profit for the nine month ended on September 30, 5102 of 14.9 percent compared to the corresponding period of the previous year is also due to:

  • Growth in sales of 10.1 percent, as a result of continuous sales growth in the main business segments: Poultry by 27.6 percent, Dairy + Juice by 9.7 percent, and Bakery by 1.1 percent.
  • In addition, cost of sales increased at a lower rate due to better costs management, leading to 14.1 percent growth in gross profit. The result of core business segments was as follows; Dairy + Juice increased by 2.5 percent, Bakery increased by 22.1 percent and Poultry losses declined by 49.3 percent. Poultry losses declined to 165.1 million SAR which represents 17.6 percent of segment sales compared to 2014 losses of 325.3 million SAR which represented 44.3 percent of segment sales.
  • The group selling and distribution expenses grew by 13.9 percent to support the growth in key product categories, distribution outlets and geographical spread. General and Administration expenses grew by 12.2 percent to support the general business growth and depreciation grew by 10.0 percent in view of the ongoing infrastructure expansion.
  • On the other hand, Share of Results of Associates and Joint Ventures, Others expenses, Finance Cost-Net, Zakat and Foreign Income Tax, and Non-Controlling Interest had an unfavorable effect on net profit for the period 5.92 million SAR.
  • The final settlement of the bakery fire insurance claim was finalized during the second quarter 2015, which resulted in a net gain of 442.9 Million SAR. Correspondingly, the company also booked various charges including goodwill impairment charges amounting to 328.2 Million SAR, and write-off charges related to “available for sale investment” of 194.0 Million SAR including the alignment of Almarai’s investment in Mobile Telecommunications Company – Saudi Arabia (“Zain”) to its par value for a total value of 179.8 Million SAR. Note that the net impact of these charges was neutral on the group results, after considering the non-controlling interest. The full amount of 790 Million SAR was received by Almarai by the end of Q3 2015.

The growth in net profit for the third quarter of 12.2 percent compared to the second quarter 2015 is due to:

  • Seasonal movements as part of Ramadan sales were made in Q2 in the current year. As a result the sales declined by 3.5 percent but better operational management resulted in a net profit increase for the quarter.
  • Almarai believes that the comparison for the quarter against the same quarter of the past year is more relevant since it is more aligned to similar market conditions and demand patterns.

A summary of the third quarter result and the Interim Consolidated Statement of Income, during the period ended 30 September 2015 as follow:

  • The Sales increase by 7.8 percent to 3’523.6 million SAR during the third quarter, compared to 3’269.4 million SAR in the same quarter of 2014. Thus, the sales for nine months ended on the 30 September 2015 is 10’210.4 million SAR compared to 9’274.8 million SAR for the corresponding period of 2014 that shows an increase of 10.1 percent.
  • The sales growth in the third quarter in Saudi Arabia, GCC countries, and other countries is 5.6 percent, 6.7 percent, and 25.7 percent respectively. For nine month, sales growth in Saudi Arabia, GCC countries and other countries is by 8.8 percent, 10.3 percent, and 18.8 percent respectively.
  • During the third quarter, Earnings Before Interest, Taxes and Zakat, Depreciation and Amortization (Ebitda) reached 950.5 million SAR, an increase of 9.7 percent compared to 866.2 million SAR in the same quarter in 2014. Ebitda for Q3 of 2015 reached 27.0 percent of sales compared to 26.5 percent during the same quarter 2014. For the nine months ending in 30 September 2015 Ebitda amounts to 2’495.0 million SAR, which is an increase of 12.6 percent compared to 2’215.4 million SAR for the corresponding period in 2014. Ebitda for the nine month ended 30 September 2015 reached 24.4 percent of sales compared to 23.9 percent for the corresponding period of last year.
  • The Gross profit, Operating income and Net income are representing 41.1 percent, 19.1 percent and 16.9 percent of sales for the third quarter of 2015 respectively compared to 01.1 percent, 19.7 percent and 16.5 percent in the same quarter of 2014 respectively. The Gross profit, Operating income and Net income are representing 38.6 percent, 16.5 percent and 14.0 percent of sales for the nine month ended 30 September 2015, compared to 37.3 percent, 15.9 percent and 13.4 percent in the same period of last year respectively.

A summary of Interim Consolidated Cash Flows Statement, during the nine month ended 30 September 2015 is as follows:

  • The Cash Flow Generated from Operating Activities (OCF) reached 3’277.1 million SAR for the nine month ended 30 September 2015, an increase of 46.2 percent compared to 2’241.1 million SAR in 2014. OCF now represents 32.1 percent of sales compared to 24.2 percent in 2014./li>
  • During the nine month ended 30 September 2015 2’801.8 million SAR were used in Investing Activities principally due to the continuation of the capital investments projects as per the strategic plan. The funds are mainly used in expansion of production capabilities of farms, factories, and distribution facilities. Investing activities represents 27.4 percent of sales compared to 24.5 percent in 2014./li>
  • The Cash Flows generated from Financing Activities reached 834.6 million SAR during the nine month ended 30 September 2015, compared to 653.3 million SAR used in 2014 in the same period. The key event during the period for financing activities was the Sukuk issuance of 1’600.0 million SAR./li>
  • Net Cash generated during the period, after foreign exchange translation effects, was 1’291.0 million SAR, bringing the balance of cash and cash equivalents at the period ended 30 September 2015 to 2’087.8 million SAR.

A summary of the Interim Consolidated Balance Sheet as at 30 September 2015 is as follows:

  • Total assets amounted 26’420.4 million SAR compared to 24’220.1 million SAR in 2014, an increase of 9.1 percent compared to 30 September 2014.
  • Net working capital, amounted to 2’003.8 million SAR compared to 1’844.9 million SAR in 2014, an increase of 8.6 percent compared to 30 September 2014.
  • Total liabilities amounted to 14’149.2 million SAR compared to 12’780.1 million SAR in 2014, an increase of 10.7 percent compared to 30 September 2014.
  • Net debt amounted to 9’274.6 million SAR compared to 8’781.6 million SAR in 2014, an increase of 5.6 percent compared to 30 September 2014. Net Debt now represents 75.6 percent of the total equity compared to 76.8 percent in corresponding period in 2014.
  • Total shareholders’ equity attributable to shareholders, amounted to 9’991.0 million SAR compared to 8’993.9 million SAR in 2014, an increase of 11.1 percent. The book value of a share as of 30 September 2015 reached 16.65 SAR.

The business performance for the company during the Q3 reached a satisfactory level. Despite a slowdown in top line growth during the quarter, the group’s profitability growth both at gross profit and net income levels momentum has continued, demonstrating the resilience and efficiency of the business model. The company will continue during the next quarter to focus on its strategic priorities and barring unforeseen events, the company should continue its profitable growth for the next quarter.

Some prior comparatives have been regrouped to conform to current period classification. This classification did not affect either the net profit or shareholders’ equity of the period of comparison.