Almarai Co.’s net profit fell 11.9 percent year-on-year (YoY) to SAR 582.5 million in the second quarter of 2019, missing NCB Capital and market consensus estimates of SAR 623 million and SAR 629 million, respectively, the research firm said in an earnings review.
“We believe the YoY decline is mainly due to higher than expected non-operating expenses, due to higher financing expenses, lower FX gains and losses from the sale of its dairy herd,” NCBC said.
Revenues rose 2.6 percent YoY to SAR 3.77 billion -- broadly in-line with the estimates – driven by the poultry segment, which was supported by its sale for the HORECA channels.
Gross margins contracted by 50 basis points (bps) YoY to 38.9 percent, backed by higher cost of imported alfalfa.
Opex rose 6.5 percent YoY to SAR 729 million, mainly driven by a 5.1 YoY increase in selling and distribution expenses.
NCBC recommended a “Neutral” rating on the stock with a target price of SAR 53.2 per share.
While the poultry segment is a key positive, the weakness in dairy and juice segments remains a key concern, the firm added.
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