Saudi salary cuts hurt Almarai’s Q4, says CEO

Saudi Arabia’s move last year to reduce allowances for public sector employees weighed on Almarai’s dairy and juices segment in fourth quarter due to its impact on consumer spending, chief executive Georges Schorderet told Argaam.

The Gulf region’s largest dairy producer saw its dairy and juice segment’s sales decline 2 percent year-on-year in fourth quarter on the back of “adverse market conditions.”

Looking forward, Schorderet said the plan is to expand the company’s outreach and product range to counter the slowdown in sales.

“We continue to work on new products, maintain quality of both our products and our services, and extend our distribution reach to satisfy customer,” he added.

Analysts believe that a drop in Almarai’s core segment led to lower than expected revenue, which stood at SAR 3.6 billion in Q4. Overall, the company’s FY16 profit rose 9 percent YoY.

Commenting on the company’s Q4 profit margins, which touched a five-year high at 40.5 percent, Schorderet said cost control measures were already set out in the company’s 2016 budget, and later revised after utility, energy, and fuel costs were raised in the kingdom.

“We launched further initiatives aiming at improving our operational efficiencies, such as packaging redesign, (and) optimization of our logistic costs,” he said.

Almarai is also working to improve the performance of its poultry segment, which has narrowed losses in Q4 2016 from the same period a year earlier.

To that effect, Almarai plans to improve on its poultry farming efficiencies, optimize processing facilities, reduce distribution costs and introduce new products, along with better wastage management across the value chain and greater leveraging of the company’s infrastructure.

Schorderet said Almarai will also look to reduce its exposure in Egypt in order to check its decline in foreign exchange gains.

“We were able to generate foreign exchange gains during 2016 out of our flow of currencies,” he said.

“The reduction in gain in 2016 versus 2015 is due to the losses incurred in Egypt as a consequence of the devaluation of the EGP. Going in forward we will aim at reducing our USD exposure in Egypt,” he added.

Almarai reported a decline in foreign exchange gain by SAR 14.7 million for the fourth quarter.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com