Asharqiyah Development Co.’s board or directors has decided to sell its entire cow herd as its dairy business has been reporting consecutive losses for the past five years, amounting to SAR 31.5 million.
The step will help save the company’s resources, allowing it to focus on improving its agricultural activities, it said in a bourse statement on Thursday.
The Saudi company’s decision to halt raw milk operations was mainly driven by the following: lower selling prices; constant increases in costs of production inputs, energy, raw materials and labor; inability to secure loan facilities due to lack of required collaterals; costly feedstuff, causing higher cattle mortality rates; and tough competition.
No relevant financial impact can be determined at present, Ash-Sharqiyah said, adding that all related agreements signed in this regard are deemed ineffective.
“The expected results of the sale of the herd will be positive in terms of stopping the drainage on feeding and raising the herd and it will provide liquidity to develop the profitable sectors of the company,” the statement said.
Late in 2016, Ash-Sharqiyah studied the establishment of a joint stock company for the production of milk and dairy products, in collaboration with the National Committee of Fresh Dairy Producers. The project was later deemed to be unfeasible, the statement said.
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