Almarai’s Profits to Rise to 2 Levels, during 2022 & 2023, respectively -Al-Rajhi Capital Outlook

The profits of Almarai company are expected to rise to SR1766 million by the end of the Year 2022, at a growth rate of 12.9%, compared to its profits in the Year 2021, at SR1564 million, and it will jump to SR2216 million, in the next coming Year 2023, with an increase of 25.5% compared to profit for the Year 2022, Al-Rajhi Capital revealed.

On the other hand, Al-Rajhi Capital revised down the target price for Almarai company’s share to SR50, from SR55 in the previous evaluation, with a recommendation of neutrality, adding that Almarai’s profits for the 4th quarter of 2021 were running contrary to its expectations, which indicated that it would record SR309 million, with the key reason based on a 425 basis point gross profit margin relief (28.0% in Q4 2021 versus 32.3% in Q4 2020), due to the gross margin erosion resulting from the increase in agricultural and dairy prices and another increase in international freight and packaging charges.

Operating expenses increased by 9% compared to the previous year, against the background of increased volume and revenues.
Revenue’s growth was positively supported by growth across all channels and countries, except for Bahrain, which recorded flat revenue, due to the introduction of VAT earlier in the year.

On the other hand, Oman recorded positive revenue growth after 2-year of decline due to higher competition.

Leverage and interest environment helped lower the interest expense, thus supporting net margins to a certain extent, according to Al-Rajhi Capital.

Total revenues increased by 11% year-on-year to SR4.257 billion, mainly due to a 10% / 8% / 21% increase in revenues from Saudi Arabia/GCC member states/ and other countries, respectively.

It showed that in terms of the distribution of revenues according to the main categories; The bakery segment had the strongest growth at 22%, followed by dairy and juices at 10%, all on the basis of YoY.

On the other hand, the poultry sector grew by 8% on an annual basis and the other sectors grew by 17% on an annual basis.

However, the operating profit decreased by 22% on an annual basis to SR392 million, posting a decrease in the gross profit margin, but the company reduced its debts during the period, leading to a decrease in total interest expenses, supporting net income to a certain extent, and the total net income decreased by 15% on an annual basis, as it stood at SR287 million, in the 4th quarter of 2021.