Saudi Arabia's Almarai, the Middle East's biggest dairy company, said net income for the fourth quarter of 2021 fell 14.7 per cent year-on-year owing to lower subsidies, the cost of importing feed and cost inflation for farm and dairy commodities.
Net profit attributable to the company’s shareholders for the three-month period to the end of December dropped to 286.5 million Saudi riyals ($76.1m), compared to 335.9m riyals in the same period a year ago, Almarai said in a statement on Sunday to the Tadawul stock exchange.
Fourth-quarter revenue rose an annual 11.5 per cent owing to improved market conditions compared to a prior-year period that was affected by pandemic-related restrictions, the company said.
The results were affected by “subsidy reduction driven by no subsidy in 2021 on corn and soya and without the benefit of subsidy overlap in poultry in 2020", Almarai said. “The second adjustment related to change of alfalfa feed consumption to 100 per cent imported basis. In addition, general cost inflation for farm and dairy commodities further impacted the gross margin, mainly during the second half.”
Almarai's improved revenue levels were “insufficient to offset severe cost pressures”, Egyptian investment bank EFG Hermes said in a research note on Monday.
The rise in revenue was mainly driven by a 21.5 per cent growth in bakery products and 12 per cent growth in dairy products in all of its markets except Bahrain, which was flat owing to the VAT introduction earlier in the year, the dairy company said.
Gross profit decreased by 3.2 year-on-year to 1.23 billion riyals due to farming and dairy commodity cost increases and higher international freight and packaging costs.
The company's general and administrative expenses rose 7.6 per cent in line with business growth, while selling and distribution expenses increased 4.9 per cent in line with volume and revenue growth, it said.
In terms of business categories, profit for Almarai’s dairy and juice business decreased by 6.2 per cent due to higher commodity and feed expenses, while income of the poultry division fell 23.6 per cent because of increased feed cost. However, profit from baked goods increased by 6.8 per cent mainly owing to partial reopening of schools, it said.
The company's annual net income for 2021 fell 21.2 per cent to 1.56bn riyals. Revenue for the year rose 3.2 per cent.
“2021 has proven to be another challenging year. The year did witness further relaxation in Covid-19 related travel movement. However, the continual evolution of the pandemic has caused disruption in the global supply chain and consumer market,” Almarai said.
The company said it will focus on process and cost efficiency and expects 2022 to be a “positive” year.
“We expect the next 12 months to be equally challenging for commodity costs, however, we believe that it will be partly offset by a rebound and resilience in consumer market,” Almarai said.
Despite market headwinds, Almarai plans to invest 6.6bn riyals to expand its poultry business in Saudi Arabia over the next five years.
The company’s board has already approved the investment, which will help double its market share in the segment, it said in a statement last year.
The dairy company is also looking at inorganic growth. Last June, it said it was buying Binghatti Beverages Manufacturing's production complex in the UAE for Dh215m ($58.54m).
Last May, Almarai's subsidiary Western Bakeries bought an additional stake in Riyadh-based snacks maker Modern Food Industries for 150m riyals, pushing its stake to 75 per cent in the company.
Almarai also acquired Bakemart's business in the UAE and Bahrain for $25.47m in March 2021.
UAE'S%20YOUNG%20GUNS
%3Cp%3E1%20Esha%20Oza%2C%20age%2026%2C%2079%20matches%0D%3Cbr%3E%0D%3Cbr%3E2%20Theertha%20Satish%2C%20age%2020%2C%2066%20matches%0D%3Cbr%3E%0D%3Cbr%3E3%20Khushi%20Sharma%2C%20age%2021%2C%2065%20matches%0D%3Cbr%3E%0D%3Cbr%3E4%20Kavisha%20Kumari%2C%20age%2021%2C%2079%20matches%0D%3Cbr%3E%0D%3Cbr%3E5%20Heena%20Hotchandani%2C%20age%2023%2C%2016%20matches%0D%3Cbr%3E%0D%3Cbr%3E6%20Rinitha%20Rajith%2C%20age%2018%2C%2034%20matches%0D%3Cbr%3E%0D%3Cbr%3E7%20Samaira%20Dharnidharka%2C%20age%2017%2C%2053%20matches%0D%3Cbr%3E%0D%3Cbr%3E8%20Vaishnave%20Mahesh%2C%20age%2017%2C%2068%20matches%0D%3Cbr%3E%0D%3Cbr%3E9%20Lavanya%20Keny%2C%20age%2017%2C%2033%20matches%0D%3Cbr%3E%0D%3Cbr%3E10%20Siya%20Gokhale%2C%20age%2018%2C%2033%20matches%0D%3Cbr%3E%0D%3Cbr%3E11%20Indhuja%20Nandakumar%2C%20age%2018%2C%2046%20matches%3C%2Fp%3E%0A
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Race card
5.30pm: Maiden (TB) Dh82,500 (Turf) 1,400m
6.05pm: Handicap (TB) Dh87,500 (T) 1,400m
6.40pm: Handicap (TB) Dh105,000 (Dirt) 1,400m
7.15pm: Handicap (TB) Dh105,000 (T) 1,200m
7.50pm: Longines Stakes – Conditions (TB) Dh120,00 (D) 1,900m
8.25pm: Zabeel Trophy – Rated Conditions (TB) Dh120,000 (T) 1,600m
9pm: Handicap (TB) Dh105,000 (T) 2,410m
9.35pm: Handicap (TB) Dh92,500 (T) 2,000m
Disclaimer
Director: Alfonso Cuaron
Stars: Cate Blanchett, Kevin Kline, Lesley Manville
Rating: 4/5
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
ACL Elite (West) - fixtures
Monday, Sept 30
Al Sadd v Esteghlal (8pm)
Persepolis v Pakhtakor (8pm)
Al Wasl v Al Ahli (8pm)
Al Nassr v Al Rayyan (10pm)
Tuesday, Oct 1
Al Hilal v Al Shorta (10pm)
Al Gharafa v Al Ain (10pm)
