Almarai’s announcement last week revealed it was scrapping its earlier investment plan, which called for spending of US$4.19bn between 2013 and 2017. The firm said it would use its operating cash flow, along with bank loans and sukuk financing, to pay for the projects.
Grow presence, double sales
“The board reaffirmed its vision for Almarai to become the consumers’ preferred choice in the Arab world, providing superior, nutritious food and beverage products that best meet consumer needs. The objectives set by the board include increasing further its presence in all segments and geographies where it operates, targeting to double consolidated sales, while improving the financial performance,” said Almarai’s statement.
The company did not announce any specific strategies to achieve these aims, but said it was confident the plans in place across its business units would allow it to grow as planned. Along with capital expenditure on equipment and facilities, Almarai said it would also be investing in new product development.
“In addition to the replacement of the existing investment base, this programme will cover the capacity expansion needs in all areas of the company’s integrated business model (farming, manufacturing, distribution and logistics). The programme also addresses the investments required in product renovation and innovation,” said the statement.
Investment drags down profit
Almarai has seen solid growth in recent years, posting a US$445m profit for 2014, up 11% from 2013, when it made just over US$400m, up 4.3% on the year before. At the time of its 2013 results, Almarai noted its investment programme expenditures were the main factor behind profit growth lagging behind that of its sales, up 13.5% that year.
This year the firm announced a Q1 profit of US$81.7m, up 12% year-on-year, with overall sales of US$810m. Its dairy and juice operations posted 10.7% sales growth, with bakery declining 4.8%, and poultry up 46.4%.
Almarai’s poultry division is a relatively new business and yet to make a profit, due to the company’s heavy levels of investment in the sector. Early in 2014, Almarai said it would spend US$1.3bn on its poultry operations, a number now likely to rise under the new investment programme.