Almarai to invest SAR 13 bln in production, expansion by 2022

Saudi Arabia’s Almarai Co. has earmarked around SAR 12.5 billion in capital investments from 2018-2022, as part of its new five-year plan, it said in a statement on Sunday.

The investments will be used to raise production in farms, increase distribution centers, and enhance geographical expansions. They will be funded by operating cash flows and other financing options.

Almarai’s board of directors approved last week a five-year business plan for 2018-2022, under which the company seeks to enhance its market foothold, in addition to its conventional retail portfolio in dairy, juice and bakery segments.

Almarai’s poultry segment will likely reach a breakeven point in 2017, while the baby formula division will break even next year. Both segments are expected to generate sustainable profit over the coming years.

Meanwhile, the performance of the dairy and juice businesses in Egypt and Jordan, managed through the joint venture International Dairy and Juice, had been affected by the situation in the region. However, the board remains committed to the venture, the statement said.

Almarai reported a net profit of SAR 328.3 million for Q1 2017, a 13.7 percent year-on-year (YoY) jump, attributed to lower cost of sales, decreased costs of commodities, and a SAR 28.5 million drop in selling, general and administrative (SG&A) expenses.

Looking ahead, sales are expected to grow at a CAGR of about 7 percent over the coming five years, lower compared to last year's plan.

Accordingly, the dairy giant plans to focus on boosting efficiency and cutting expenses in order to cope with an increasingly competitive environment.

Meanwhile, Almarai’s central processing plant in Al Kharj is expected to launch entire operations in H2 2017, the company said.