First Mills’ product growth drives revenue boost in Q2 2024: CEO

Ababtain explained that these gains resulted from the company's efforts to enhance the presence of its products in new regions, leading to improved product mix and profit margins.

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First Mills commenced the expansion of Mill A at its Jeddah plant, poised to boost production capacity by 250 tons per day (tpd) for wheat milling. This expansion, slated for completion in Q4 2024, will also enable the company to meet the growing demand, the CEO said.

The company continues to pursue its strategy by expanding into new segments with favorable profit margins, which will support elevating the top and bottom lines, he added.

Below is the full interview with Abdullah Ababtain:

*First Mills’ earnings amounted to SAR 45.51 million by the end of Q2 2024, a 30.4% increase from SAR 34.91 million in Q2 2023. What is your comment on these results?

- First Mills delivered an outstanding performance in the second quarter of 2024, achieving a double-digit year-on-year (YoY) growth rate of 30.4%, which lifted the second-quarter earnings to SAR 45.5 million. We also saw a notable uptick in our net profit margin from 15.1% in Q2 2023 to 18.8% in Q2 2024.

This robust performance was driven by substantial sales growth across all product categories for the second quarter of this year, paired with the whopping 21% growth in sales of small-package products for the same period.

These gains resulted from our relentless effort to enhance the presence of our products in new regions, leading to improved product mix and profit margins. We will continue to work towards even more success in the future.

*What were the key drivers of the 13.3% YoY revenue hike in Q2 2024?

-During the second quarter of 2024, we achieved strong growth across all product categories, which in turn significantly boosted our revenues. We witnessed robust growth in the feed segment’s second-quarter sales, which increased by 36.3% due to rising demand. Additionally, flour and bran sales continued to grow during the same period by 6.7% and 5.5%, respectively, driven by the success of our strategy to build and diversify our customer base and expand our geographical coverage Kingdom-wide.

What pushed the Q2 2024 earnings lower on a quarterly basis?

- Overall, First Mills achieved annual growth during the first two quarters of this year, translating into strong double-digit growth in net profits for the first six months.

Our revenues soared YoY by 10.5% to SAR 518.8 million in Q2 2024, while net profits grew by 13% YoY to SAR 123.2 million. However, earnings declined quarter-on-quarter (QoQ) mainly because of seasonal factors. While Ramadan sales saw higher demand for flour products, this surge is often followed by a notable decrease in consumption patterns in the subsequent quarter, affecting the overall demand for flour and related products.

-The growth achieved across all our product categories in the second quarter of 2024 underpinned the success of our strategy to diversify our customer base and expand our Kingdom-wide presence, while also offering products that meet consumers’ various needs. We achieved a 6.7% YoY growth in flour sales for the three-month period, driven by the expansion of Mill C at our Jeddah plant and the double-digit growth in small-package products, supported by our distribution network and expansion into new regions.

Additionally, the company recorded a remarkable 36.3% growth in the second-quarter sales of feed products, thanks to the favorable market conditions compared to the year-ago period, along with the rollout of a new product range in the feed segment which saw the foray into the poultry feed market. We also saw increased bran sales for the same period, driven by higher demand and our enhanced ability to deliver our end products to the market in general.

*What was the total production capacity of First Mills’ plants during the second quarter of this year?

- First Mills operates through four plants covering four strategic regions in Saudi Arabia: Makkah Province (Jeddah), Qassim Province (Buraydah), Tabuk Province (Tabuk), and the Eastern Province (Al-Ahsa). The total milling production capacity reached 4,900 tpd of flour, following the recent addition of 250 tpd for Mill C; 300 tpd of durum; and 150 tpd for the PESA Mill at the Jeddah plant. Additionally, we have feed mixing capacities of up to 900 tpd.

We have begun the expansion of Mill A at our Jeddah plant, which will ramp up its production capacity by 250 tpd for wheat milling once completed in Q4 2024, enabling the company to meet the growing demand.

*How will be the impact of the operational capacity upgrade at the Jeddah plant on sales?

- At our Jeddah plant, in particular, the recent expansion of Mill C stepped up its production capacity by 250 tpd for wheat milling, alongside improving efficiency levels in various aspects. The mill resumed its operations and commercial sales in the first quarter of 2024, and we have already seen some positives such as the significant rise in the mill's revenues during the first half of the year.

This growth was supported by improved efficiency, thus raising the utilization rates of production capacity. The elevated production capacity also contributed to strong growth in sales of small-package products, which jumped 21% YoY in Q2 2024, enhancing our product mix and profit margins. We look forward to further augmenting our production capacity through the upcoming expansion of Mill A, which will add another 250 tpd for wheat milling without affecting sales.

*How has the diversification of the company's products and the commencement of commercial operations for new projects helped uplift revenues?

- As part of the company's strategy to expand into new high-margin segments bound to strengthen revenues and profits, we launched the PESA Mill and the Pre-Mix Plant in the third quarter of 2023, starting with the production of 100% whole wheat Chakki Atta flour.

Additionally, in the last quarter of 2023, we commenced operations of the Kingdom's first Durum Mill at our Jeddah plant. All these projects aim to support our top and bottom lines, leveraging the company's leading market position and its strategy through retail channels and distribution to both individual and institutional customers.

We are already reaping the fruits of this strategy, with sales of our small-package products climbing by 21% YoY in Q2 2024, now accounting for 11% of our flour product sales, reflecting our improved margins for this quarter.

*What are your expectations for the company's performance in Q3 2024?

- During the third quarter of this year, we look forward to continuing to achieve outstanding results and forge ahead in implementing our strategy through expansions into new high-margin segments, which shall bolster revenues and profits.