adopting a mature growth strategy almarai company - Search Center ...

More documents

Recommendations

Info

ALMARAI GCC dairy market is expected to grow at CAGR of 9.5% March 05, 2012 DAIRY MARKET INITIATION OF COVERAGE EQUITY RESEARCH GCC demand for dairy products reached 1.9 billion liters in 2011, 23.1% out of them are fresh milk. Chart 4: GCC Dairy Market by Products Source: Nielsen Company, 2011 Reflecting its demography, KSA represents around 63% of total GCC demand, followed by UAE (17.5%) and Kuwait (6.9%). Chart 5: GCC Dairy Market Breakdown Source: Nielsen Company, 2011 The GCC dairy market was valued at USD 3.2 billion in 2011, and it is expected to grow at a CAGR of 9.5% in the coming 3 years. Overall, Almarai has the leading market share with 35.3%, followed by Nestle (7.5%) and Alsafi (7.3%). This market share changes from one product to another. Chart 6: GCC Top 3 Players by Products Source: Nielsen Company, 2011 4
ALMARAI Lack of pricing flexibility negatively affects Almarai 2011 performance Backward integration in Argentina March 05, 2012 INITIATION OF COVERAGE EQUITY RESEARCH The dairy food business operates under Almarai brand name. Almarai has 7 dairy farms and 2 manufacturing facilities located in KSA. It produced 867 million liters of milk in 2011. The dairy segment is divided into 2 main sub-segments: 1 Fresh dairy products: including fresh milk, laban, zabadi, yogurt, cream and dairy desserts. Almarai successfully introduced to the market a range of new products as flavored milk and fruit yogurts. 2011 sales increased 9.7%, y-o-y basis, to reach SAR 3,475 million. 1 Long life dairy: comprising of evaporated and UHT milk and whipping, cooking and sterilized cream. Sales grew by 15.5% in 2011 to reach SAR 761 million, due to improving marketing and focused distribution, in addition to product development. During 2011, the Saudi government introduced several regulations that highly impacted the food sector: 1 Fixing the selling prices of the main food products including dairy products. 1 Increase (almost double) the feed subsidies. 1 Import the alfalfa feed requirements for the export of dairy products. Negatively affected by the global inflation of food prices which increases the company’s cost of sale, Almarai increased the prices of some products including fresh dairy in early July 2011. Few days later, the Saudi Ministry of Commerce and Industry interfered to fix the price. Accordingly, Almarai was obliged to drop the fresh milk and laban prices back and so it failed to pass the increase of input cost to consumers. In late July, however, the government almost doubled the feed subsidies, an action that helped the company to partially improve its profitability margins. This lack of pricing flexibility, combined with food inflation, negatively impacted Almarai which return on sales for the Dairy and Juice segment dropped from 20.4% in 2010 to 18.3% in 2011. The company is in talk with the government but it does not plan to increase prices in 2012. On the other hand, IMF forecasts that food prices are expected to drop by an average of 5% in 2012. In addition, fresh milk subsidies will double in 2012. Such drop in input cost will help the company to improve its profitability margins. Also in 2011, the Council of Ministers decided to import 40% and 80% the alfalfa feed requirements for the export of dairy products in 2011 and 2012, respectively. Almarai, which is importing 100% of alfalfa feed requirements, declared that it fully endorsed this decision. In this context, the company acquired, in December 2011, 100% of Fondomonte S.A., a company that owns and operates 3 farms in Argentina totaling 13,306 hectares dedicated to the production of corn and soybean. This backward integration will help the company to: 1 Assure 25% of its corn needs, 1 Better control the quality and the time of supply, 1 Be less affected by commodity inflation. The payback period of this SAR 312 million investment is expected in 3 to 4 years. Almarai is acquiring a team of professional farmers in order to build a platform to acquire additional lands in the mid term. 5
Page 1 and 2: ENTITY OF AUDI SARADAR GROUP CURREN
Page 3: ALMARAI The food retail sector in K
Page 7 and 8: ALMARAI Almarai is well positioned
Page 9 and 10: ALMARAI High expenditure in the pou
Page 11 and 12: ALMARAI IPNC is going to be the fir
Page 13 and 14: ALMARAI March 05, 2012 DIVIDEND AND
Page 15 and 16: ALMARAI March 05, 2012 VALUATION DI
Page 17 and 18: ALMARAI March 05, 2012 FINANCIAL AN
Page 19 and 20: ALMARAI FAIR VALUE DEFINITION March

adopting a mature growth strategy almarai company - Search Center ...

Create successful ePaper yourself

Delete template?

Save as template?