Almarai Company€¦ · Almarai Company 2019 Q2 Earnings Presentation 3 Market Update • Core...

Almarai Company

1st Half 2019

Business Performance

Main Events – 1st Half 2019

Almarai Company 2019 Q2 Earnings Presentation 3

Market Update• Core Markets continue to stabilize in first half, returning to growth

• Juice market continues to decline….consumers are trading down

• UHT discounting continues to stabilize in general

• VAT implemented in Bahrain

Company Highlights • New Board, along with 4 sub-committees for Executive, Remuneration & Nomination, Audit and Risk, successfully nominated

• Continued strong performance in the Poultry Segment of 20% yoy driven by HORECA channel expansion (over 50% of

Poultry Sales volume)

• Bakery and Dairy growth has stabilized post Q1 2018 VAT implementation impact

• Fresh milk, laban and zabadi market share remains strong

• USD 500 M international sukuk issued in Q1 which was oversubscribed 11 times

• Sukuk Series II amounting to SAR 1.0 B was successfully repaid in Q1

• High financing cost due to a) higher rate environment & b) revised Almarai capital structure post perpetual sukuk repayment

• Almarai continues to focus on controlling input costs, reducing operating cost, reducing capex and maximizing FreeCashFlow

• Acquisition of Premier Foods finalised

Market Share

• Almarai market share is stable in

most categories in KSA on MAT

basis.

• Most of the categories, Almarai

stands at #1 position in the KSA

market.


CategoryMAT Value

Growth %

Almarai MAT Value

Share Change

Almarai Rank

(Value)

Total Laban +1.8 -3.4 1

Fresh Milk -1.5 -5.4 1

UHT Milk +3.4 -6.4 2

Zabadi -2.4 -5.6 1

Fresh Ghista +12.1 +12.9 1

Total Juice +1.9 -9.6 1

Processed Cheese +5.3 +4.5 1

Total Natural Cheese +11.9 +9.9 1

Total Whip & Cooking Cream +21.6 +20.1 1

Total Bread +8.5 +5.4 1

Total Fresh Chicken +12.6 +13.2 1

Total Infant Formula +10.6 +8.0 7

• A C Neilsen, May 2019


Innovation Pipeline – 1st Half 2019

Segment YTD 2019

Dairy & Juice

Bakery

Poultry

Infant

Nutrition

Financial Performance

Financial Performance – 1st Half 2019(SAR in Millions) Revenues

EBIT

Net Income

3,307 3,767

7,074

Q1, 2019 Q2, 2019 YTD Q2, 2019

2.6%

3.1%

3.8%

336

583

919

Q1, 2019 Q2, 2019 YTD Q2, 2019

-11.9%

-8.7%

-2.6%


Revenue• Market returning to growth

• Stable & increasing market share

• Poultry continues double digit growth

EBIT• Higher feed cost, driven by alfalfa

• Higher marketing spend, mainly in bakery

• Higher labour costs

• Timing difference for overseas crop plantation

Net Income • Higher funding cost due to higher SIBOR (SAR

35M), Higher debt due to capital re-structuring

SAR 35M) and lower capitalization due to lower

capex• Normalised net income, excl higher funding costs,

is ~1.7% lower yoy

• Full year funding cost is expected to be higher by

SAR ~150 M due to higher SIBOR and

capital re-structuring

481 739

1,219

Q1, 2019 Q2, 2019 YTD Q2, 2019

-3.3%

-2.4%

-0.9%

Results by Segment – 1st Half 2019

Almarai Company 2019 Q2 Earnings Presentation

Revenues by Segment Dairy &Juice• Stable market share

• Higher feed & labour costs

• Higher funding costs impacting profitability

Bakery • Volume led improved performance

• Higher market spend

Poultry • Volume led strong performance in first half ,

through HORECA channel expansion

Other • Infant Nutrition continues to perform well.

However, timing difference due to rotational

crops impacted the first half numbers, which

are likely to reverse later in the year

Profit Attributable to Shareholders

5,109

783 855 112

5,117

816 1,027 115

Dairy & Juice Bakery Poultry Others

YTD Q2, 2018 YTD Q2, 2019

0.1%

4.2% 20.0%3.2%

828

87 92 (1)

753

76 125 (35)

Dairy & Juice Bakery Poultry Others

YTD Q2, 2018 YTD Q2, 2019

-13.1%

16% 15%

11% 9% 11% 12%

-9.1%

36.2%

(SAR in Millions)

Growth YOY by Category and Geography – 1st Half 2019


Revenue By Category Revenue By Geography

Fresh Dairy ,

2,720 , 38%Cheese, Butter

& Cream , 1,131 ,

16%

Poultry , 1,027 ,

15%

Bakery , 816 ,

12%

Long-Life

Dairy , 602 , 8% Fruit Juice ,

663 , 9%

Other Sales ,

115 , 2%

SAR 7,074

Million

2%

2%

20%

4%

(10%)

3%

3%

KSA , 4,832 ,

68%

UAE , 692 , 10%

Egypt , 377 , 5%

Oman , 373 ,

5%

Kuwait , 358 ,

5%Bahrain , 167 ,

3% Export /

Others , 149 ,

2%

Jordan , 128 ,

2%

SAR 7,074

Million

4%

0%

6%

1% (1%)

(7%)

5%

7%

(SAR in Millions)

Growth YOY by Category and Geography – 1st Half 2019


Revenue By Geography & Category(SAR in Millions)

Q2 YTD YoY

SAR in Million Fresh Dairy

Long Life

Dairy Fruit Juice

Cheese,

Butter &

Cream

Bakery Poultry Other Sales Total

35 (11) (42) 20 23 146 3 174

2% (4%) (10%) 3% 4% 19% 6% 4%

(12) 6 (18) 25 8 19 (1) 27

(2%) 5% (11%) 9% 6% 27% (100%) 2%

19 15 (15) (14) 2 7 1 14

12% 8% (10%) (20%) 122% 39% 2% 2%

41 10 (75) 31 33 171 4 215

2% 2% (10%) 3% 4% 20% 3% 3%

Export / Others

GCC

KSA

Total

219

4,755 (848)(1,700) 1,876 (1,000)

276 (2,418)

(850)9 320

Cash 30 June

2018

Operating Cash

Flow (Net of

Working Capital)

Working Capital Perpetual Sukuk

Repayemnt

International

Sukuk

International

Sukuk

Repayment

Loans Payment /

Others

Capex Dividend Others Cash 30 June

2019

(SAR 101 Million)

CAPEX and FCF


Capital Investment 2014-Present

Cash Flow Bridge Rolling 12 Months

CAPEX

• Capex continues to declines as company previous investment

cycle has come to an end

• Remaining Capex is comprised of mostly maintenance Capex

YTD Q2 2019 Free Cash Flow = SAR 775M

• OCF: +3.9B in line with profit growth however OCF is reduced by

more than SAR 0.8B due to investment in alfalfa feed stock to

manage the green forage ban in KSA from Nov 18

• ICF: -2.4B and is in line with our reduced capex guidance

• FCF: +1.5B & expected to continue to increase in the short and

medium term

2,879 3,986 4,389

2,844 1,923 1,884

23% 29% 30%20%

14% 14%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2014 2015 2016 2017 2018 Last 12 Months

Net Cash Used in Investing Activities

Debt Movement = SAR -548MOCF = SAR 3,907M

Net Debt


Net Debt and EBIT/EBITDA Margins

EBIT and EBITDA Margins

Net Debt Trend

Almarai leverage target is to reach 2.5x-2.7x Net Debt to EBITDA in the next 2-3 years

8,762 9,34410,883 10,910

12,659 13,025

75% 74% 81% 73% 87% 88%

2.9x 2.8x 2.9x 2.8x

3.3x 3.4x

-1

-1

0

1

1

2

2

3

3

4

2 ,000

7,000

12 ,000

17,000

2014 2015 2016 2017 2018 Last 12 Months

Net Debt Net Debt / Equity Ratio Net Debt / EBITDA

12,60613,795

14,339 13,936 13,559 13,774

15.8% 16.4% 17.6% 18.5% 18.2% 17.7%

23.9%24.2%

26.0%28.1% 28.5% 28.0%

2014 2015 2016 2017 2018 Last 12 Months

Net Sales EBIT % to Net Sales EBITDA % to Net Sales

Key Share Data

2019 Q2 Earnings Presentation 13Almarai Company

35%

24%

16%

25%

Savola

HHPrinceSultan binMohammedPIF

Others

0%

50%

100%

150%

200%

250%

300%

350%

400%

Almarai TASI Food & Beverages

15%

10%

15%

20%

25%

30% Year to date total shareholder's

return since listing

Key Statistics for Almarai (30 June 2019)

Share Price (SAR) 53.50

Current P/E Ratio (ttm) 27.82

Earnings Per Share (SAR) (ttm) 1.92

Market Cap (SAR Million) 53,500

Shares Outstanding (Million) 1,000

Dividend Yield 1.59%

Appendix

Almarai Company 2019 Q2 Earnings Presentation

Profit & Loss Statement


Change Change

Revenue 3,672 1 0 0 .0 % 3,767 1 0 0 .0 % 2.6% 6,859 1 0 0 .0 % 7,074 1 0 0 .0 % 3.1%

Cost of sales (2,224) (60.6%) (2,300) (61.1%) (3.4%) (4,202) (61.3%) (4,445) (62.8%) (5.8%)

Gross Profit 1,448 39 .4 % 1,467 38 .9 % 1.3% 2,658 38 .7% 2,629 37.2% (1 .1%)

Selling and Distribution Expenses (558) (15.2%) (586) (15.6%) (5.1%) (1,108) (16.1%) (1,148) (16.2%) (3.7%)

General and Administration Expenses (99) (2.7%) (100) (2.6%) (0.9%) (195) (2.8%) (195) (2.8%) 0.3%

Other Expense, net (34) (0.9%) (45) (1.2%) (33.6%) (78) (1.1%) (68) (1.0%) 13.6%

Impairment (Reversal) / Loss on Financial Assets 6 0.2% 2 0.1% (63.8%) (27) (0.4%) 0 0.0% n.a

Operating Income 764 20 .8 % 739 1 9 .6 % (3.3%) 1,249 1 8 .2% 1,219 1 7.2% (2.4%)

Exchange Gain / (Loss) 26 0.7% 1 0.0% (96.8%) 7 0.1% 10 0.1% 45.2%

Finance Costs - net (95) (2.6%) (136) (3.6%) (43.4%) (197) (2.9%) (266) (3.8%) (35.1%)

Share of Results of Associates and Joint Ventures (4) (0.1%) 0 0.0% n.a (7) (0.1%) 0 0.0% n.a

Profit Before Zakat and Income Tax 691 1 8 .8 % 603 1 6 .0 % (12.7%) 1,052 1 5.3% 963 1 3.6 % (8.4%)

Zakat and Foreign IncomeTax (28) (0.8%) (19) (0.5%) 31.1% (48) (0.7%) (42) (0.6%) 12.0%

Profit for the Period 663 1 8 .1 % 584 1 5.5% (12.0%) 1,004 1 4 .6 % 921 1 3.0 % (8.2%)

Profit Attributable to Non Controlling Interest (2) (0.0%) (1) (0.0%) 26.6% 3 0.0% (2) (0.0%) n.a

Profit Attributable to Shareholders 661 1 8 .0 % 583 1 5.5% (11.9%) 1,006 1 4 .7% 919 1 3.0 % (8.7%)

Earnings Per Share (Basic) 0.65 0.59 (9.1%) 0.98 0.93 (5 .1%)

Profit Attributable to Shareholders % 18.0% 15.5% 14.7% 13.0%

2018 2019

2nd Quarter YTDSAR in Millions

2nd Quarter

2018 2019

Results by Segment


SAR in Millions Dairy & Juice Bakery Poultry Other ActivitiesAlmarai

Consolidated

1st Half 2019

Revenue 5,117 816 1,027 115 7,074

Depreciation and Amortisation (654) (123) (176) (69) (1,021)

Profit Attributable to Shareholders 753 76 125 (35) 919

Percent to Revenue of Profit Attributable to Shareholders 14.7% 9.3% 12.2% (30.6%) 13.0%

Growth versus 1st Half 2018

- Revenue - 2018 5,109 783 855 112 6,859

- Revenue Growth 0.1% 4.2% 20.0% 3.2% 3.1%

- Profit Attributable to Shareholders - 2018 828 87 92 (1) 1,006

- Profit Attributable to Shareholders Growth (9.1%) (13.1%) 36.2% 3,159.3% (8.7%)

Q2 2019

Revenue 2,785 395 527 61 3,767

Depreciation and Amortisation (323) (61) (90) (35) (508)

Profit Attributable to Shareholders 483 27 83 (10) 583

Percent to Revenue of Profit Attributable to Shareholders 17.4% 6.7% 15.7% (16.7%) 15.5%

Growth versus Q2, 2018

- Revenue - 2018 2,783 386 438 64 3,672

- Revenue Growth 0.0% 2.2% 20.2% (5.3%) 2.6%

- Profit Attributable to Shareholders - 2018 547 47 67 1 661

- Profit Attributable to Shareholders Growth (11.6%) (43.7%) 24.2% n.a (11.9%)

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