SADAFCO profits up 60% to SR86 mln in Q2‎

The Saudia Dairy and Foodstuff Co. revealed an increase in net profit after zakat and tax in the second quarter to SR 86.1 million, compared to 53.7 million in the same quarter of last year, at a rate of 60.3%, this came after today’s announcement of the preliminary financial results for the period ending on 30 September 2022 (six months).

The operational profit amounted to 114.5 million riyals in the second quarter, compared to 59.2 million riyals in the same quarter of the previous year, a growth of 93.5%.

The net profit after zakat and tax in the 6-month period amounted to 142.4 million riyals, compared to 91.7 million riyals in the same period last year, an increase of 55.2%.

Earnings per share in the current period reached 4.37 riyals, compared to 2.88 riyals in the same period last year.

• SADAFCO delivers a significantly higher net profit margin of 12.4% vs 10.1% in the same quarter last year as a result of:
• Higher sales of 31% driven by back to school activities; opening of new sales routes; efficiencies in route to market; induction of new sales vans, and ice cream freezers and innovations. These initiatives generated incremental sales across all categories i.e milk (28%), ice cream (25%) and tomato paste (28%); Mlekoma Group also contributed 90% higher sales due to increased commodity prices.
• Gross Margin of 32.2 % vs 30.5% last year was achieved due to higher selling prices; increased focus on sale of high margin SKU’S primarily in ice cream; production efficiencies in Jeddah factories through automation and prudent sourcing of raw materials.
• Selling & distribution expenses as % of sales reduced (11.5% vs.14.4% last year), while in value terms increased by SAR 3.9Mln due to increased sales related activities e.g hiring of new salesmen, depreciation on new sales vehicles and freezers etc.
• General & administrative expenses as % of sales reduced (4.2% vs. 5.2% last year) while amount increased by SAR 1.8Mln a 6.8% increase reflecting the inflationary trend. The major components of this increase are employee related.
• Finance income increase of SAR 4Mln vs last year reflect higher deposit rates on our deposits.
• Finance cost increase of SAR 29.5Mln is due to higher fair value of Put Option driven by positive operating performance of Mlekoma Group of SAR 17Mln (compared to SAR 26 Mln in Q1), and exchange losses due to depreciation of Polish Zloty and lease liabilities of SAR 12.5 Mln.
• Zakat & income tax expense has declined by SAR 2.7 Mln vs last year due to a positive impact of deferred tax on the Put Option expense.

Net profit for this quarter is SAR 86Mln which increased by SAR 29.8Mln (53% vs. previous quarter) due to 10 % higher sales, reduction in some expenses categories as part of savings and efficiency programs and increasing in finance income by SAR 2.2Mln.

Sales increased by 10% due to initiatives mentioned above and seasonality of some categories.

Gross margin almost in line 32.2% vs. 32%.

Net Profit of 12.4% versus 8.9 % last year.

Net profit of SAR 142.4 Mln is higher by 55% (SAR 50.7 Mln) vs last period as a result of:

– higher sales value driven by increasing sales routes & distribution of more freezers all over the kingdom, and higher selling prices for selected SKU’s.

Gross margin increased (32.1% vs. 30.5%) despite the higher raw material costs due to favorable product, channel mix and prudent sourcing of raw materials.

Selling & distribution expenses of SAR 160.7Mln were higher than last year by 4.9% (SAR 7.6Mln) due to deprecation and distribution expenses for the new routes.

General & administrative expenses of SAR 61.2Mln were higher than last year by SAR 4.4Mln mainly due to enhancement of IT infrastructure and staff costs.

Finance income increased by SAR 5.2Mln due to increase in deposit rates.

Finance cost of SAR 58.6Mln due to Put Option liability as explained above.

Additional Information:

Our market shares remain robust with positive trending lines: Milk 61.3%, Tomato Paste 54.2% and Ice cream 29.1%

Whilst inflationary pressures persist across the business world, we are cautiously optimistic regarding the decline of inflationary trend in the raw materials.

We continue to delight our consumers through new offerings especially in the ice cream category. New five SKU’s were launched in dairy and Ice Cream categories during the quarter.

As a part of our growth strategy a new depot was opened in Al Kharj. This is the 20th depot in KSA. We are confident it would generate additional revenue.

Work on Makkah Depot project of SAR 27 Mln is in progress and is expected to finish in the current Financial Year.

Our focus on ESG continues and during the quarter have achieved the following reducing electricity through solar panels, water saving and recycling of water and packaging materials.

We continue to generate positive cashflows. Our cash position is SAR 605 Mln.

Shareholders’ equity at a healthy 1.582Bln vs 1.540Bln on 31 March 2022.

The earnings per share is computed as follows:

Profit attributable to owners of SADAFCO SAR 139,879,000

Total shares 32,500,000

Treasury shares held by the Company 500,250.

Total shares outstanding 31,999,750

EPS 4.37