Saudi Arabia’s Almarai warns of tough times as it posts flat Q3 profit

Saudi Arabia-listed Almarai, the Arabian Gulf’s largest dairy producer, warned of “adverse” market conditions ahead as it posted flat third quarter net profit, in line with analysts’ expectations.

The company warned of “continuous adverse market conditions and higher operating costs” for the rest of the year because of factors such as expat levy fees, devaluation of the Egyptian pound, lower exports and weak consumer sentiment.

Consolidated profit for the three months ended September 30 rose 0.4 per cent to 667 million Saudi riyals (Dh653.2m) from 664.3m riyals in the corresponding quarter of 2016, Almarai said yesterday.

The company attributed the performance to “tough market conditions” since last year, which have continued into the third quarter of this year.

Revenue was down 4.5 per cent to 3.37 billion riyals from 3.53bn riyals a year earlier, the company added.

This was slightly lower than estimates made to Bloomberg by analysts including EFG Hermes (3.721bn riyals ) and Saudi Fransi Capital (3.658bn riyals).

EFG Hermes said in a briefing note yesterday that the results were “exactly in line with our estimate, as slower top-line (minus 4 per cent year-on-year) was offset by operational cost efficiencies and lower commodity costs that helped to reduce poultry segment losses significantly”.

Results were negatively affected by a 23.4m riyals decline in forex gains and higher net interest costs of 11m riyals, while revenues “remained weak”, the note added.

Almarai said it had launched a productivity improvement and cost-cutting programme at the end of 2016 to reduce the company cost base by 500m riyals over the next two years.

“The benefits of this programme have already been felt during the first nine months of 2017,” it said.

Consumer spending in Saudi Arabia, Opec’s top oil producer, has declined amid lower oil prices and slower economic growth, which has affected retailers in the region’s biggest economy.