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ALMARAI
March 05, 2012
INITIATION OF COVERAGE EQUITY RESEARCH
Table 1 summarizes the performance of each sector during 2011.
Table 1: Almarai Performance by Sector
SAR million
Dairy
&Juice
Bakery Poultry Arable and
Horticulture
Others Total
3 rd Party Sales 6,593 966 319 73 0 7,951
Net Depreciation (331) (90) (39) (59) 0 (519)
Income before Minorities 1,205 118 (34) 53 (35) 1,307
Assets 9,065 1,920 1,938 1,967 1,034 15,924
Return on sales (%) 18.3% 12.2% -10.5% 72.6% NA 16.4%
ROA (%) 13.3% 6.1% -1.7% 2.7% -3.4% 8.2%
Source: Company Financials, 2011
Overall, the company’s sales grew by 14.7% in 2011 to reach SAR 7.95 billion. The poultry segment
showed the biggest increase of more than 81% - a trend that it is expected to continue in the
coming years and which will increase the contribution of this sector to the company’s total
revenues. In addition, Almarai is trying to improve the efficiency of the bakery segment in 2012, the
one that reported below company average profitability margins in 2011. The fresh dairy segment,
the most mature one, reports the lowest growth but the highest profitability margins, despite the
government interaction. Even though the company is expanding in other GCC markets outside the
Kingdom, the KSA contribution slightly dropped in 2011 but remained high at 71.1% compared to
71.2% in 2010. Any expansion outside Saudi Arabia can give the company more flexibility to price
its products, will offer the necessary diversification and most importantly will open a door to grow
for its mature business lines.
As of June 2011, about SAR 3.5 billion of the company assets did not contribute to the bottom line.
During 2012, the company does not have plans to do any acquisition, instead it plans to improve
efficiency and synergy in order to optimize its benefits from the current portfolio.
BABY FOOD MARKET
Demand for the baby food in KSA reached 19.5 million kg in 2011 and it is expected to increase at
a CAGR rate of 12.5% in the coming 3 years due to population growth and changes in consumer
trends. The milk formula market value represents 79% of the total baby food market value in KSA.
Chart 14: Baby Food Market by Subsector, 2010
Source: Agriculture and Agri-Food Canada
Supply in this sector is highly concentrated and just 4 players dominate 70% of the market, and all
the supply is imported.
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