SADAFCO performance positive, likely to maintain current growth rates: CEO

Patrick Stillhart, CEO of Saudia Dairy and Foodstuff Co. (SADAFCO)

Saudia Dairy and Foodstuff Co. (SADAFCO) showed a positive performance in the second quarter ended September 2023, as it expanded its footprint in the consumer market by enhancing the value and volume of each purchase, CEO Patrick Stillhart told Argaam.

The progress was achieved despite SADAFCO facing challenges in its Poland business, primarily due to rising raw material costs and global market conditions.

Stillhart cited the profit growth to a significant 11% increase in revenue, excluding Poland’s Mlekoma, as well as lower input costs, especially in dairy prices year-on-year (YoY).

The company reached its sales and profit peak by the conclusion of Q2 2023, driven by higher ice cream sales and improved profit margins. The ice cream segment was the largest contributor to revenue, owing to seasonal demand.

While expecting SADAFCO to maintain similar growth rates in Q3, Stillhart admitted the possibility of a slightly lower performance.

Dairy products constitute about 70% of SADAFCO sales, while ice cream represents 15%. The remaining portion encompasses tomato paste products.

The performance of Poland’s Mlekoma was negatively affected by a decline of nearly SAR 7 million in the value of goodwill, in addition to a significant fall in raw material prices in the global market, particularly in the dairy segment.

Stillhart pointed out that the dynamics of milk pricing, along with the delay in adjusting the milk prices paid to farmers compared to global market prices, affected the segment’s profitability, with expectations of returning to profit as of Q3 2023.

 Raw material prices are stable at their current levels despite some fluctuations, he indicated, asserting favorable availability of raw materials, mainly from Europe and New Zealand.

The CEO said uncertainty on global demand trends may impact prices but remained cautiously optimistic that excess supply could lead to lower prices.

Over the past 12 months, SADAFCO has seen a notable rise in its market share, particularly in the dairy category, representing 63%, approximately 54% in tomato paste, and nearly 32% in the ice cream category.

 The company remains committed to sustaining and expanding its market share, bolstering the product portfolio, and prioritizing core segments, including ice cream, dairy products, and tomato paste.

In addition, SADAFCO aims to cater appropriate products to meet consumer needs in line with changing lifestyles, as well as expanding its culinary offerings, focusing on tomato paste and ketchup.

SADAFCO sees excellent growth opportunities and potential through diversifying its sales channels, especially in the out-of-home market, which may double the volume of business, Stillhart added.

Introducing the barista milk product, specialized for coffee, has shown promising initial acceptance, serving as a testament to the company’s market adaptability and innovation.

He revealed the launch of several products, such as hummus, baba ghanouj and tahini, are scheduled for distribution this week, with conservative sales expected to reach about 20% of tomato paste sales in the first year.

The CEO was optimistic about the company’s future performance, predicting sustained growth in market share and revenues. He emphasized the significance of adaptability, meeting consumer demands, and exploring new markets to ensure the company’s success in an increasingly competitive landscape.