Almarai Co. reported a weak set of Q4 2018 results, with net income declining 27.9 percent year-on-year (YoY) to SAR 370 million, compared to NCB Capital and consensus estimates of SAR 489 million and SAR 523 million, respectively.
“We believe the weakness is mainly due to gross margin contraction and one-offs,” NCBC said in earnings note.
Almarai’s Q4 sales were flat YoY at SAR 3.4 billion, coming in-line with NCBC estimates.
NCBC expected a decline of 8.2 percent YoY in fresh dairy as a result of the expat exodus and loss of market share by Almarai, primarily to NADEC due to July 2018 price hike by Almarai on select fresh dairy products. This weakness was offset by the growth in the sales of the poultry segment, which NCBC estimated to increase by 31.7 percent YoY to SAR 515 million.
The company’s poultry segment performance continued to improve in Q4 18, led by the introduction of Al Bashayer brand, which is considered a key positive factor for Almarai’s outlook.
NCBC is currently Neutral on Almarai, with at a target price of SAR 53.2.
“We believe key positives include improvement in poultry operations, and cost optimization initiatives. However, weak sales in the dairy segment is the main cause of concern,” NCBC noted.
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