Almarai’s Q2 2019 profit hit by weakness in juice segment: Falcom

Saudi Almarai posted a drop of 11.9 percent year-on-year (YoY) in Q2 2019 net profit to SAR 583 million due a continuous weakness in the juice segment, Falcom Financial Services said in a note.

The dairy producer recorded the highest quarterly revenue since Q2 2016 in the same period.

Almarai’s core business markets stabilized as the bakery and dairy segments steadied, following the imposition of value-added tax (VAT) in Q1 2018.

On revenue level, with the exception of juice, the poultry segment continued its double-digit growth. The bakery and dairy segments contributed with a single-digit rise. 

In addition, growth was broad based as revenue grew across all countries, except in the export business.

“However, concerns remain regarding the performance of the Fruit Juice category, which constituted almost 9 percent of total revenue for 1H19 at SAR 663 million, down 10 percent YoY,” Falcom added.

“Furthermore, the segment continues to reel under higher feed, labor, and funding costs and largely offsets positive contributions from the other segments,” the investment firm noted.

Falcom added that it maintained its “neutral” rating on the stock, but cut its target price to SAR 55 as concerns over the performance of the juice division persist.