Almarai’s Q1 broadly in line with estimates: NCB Cap

Saudi Almarai’s first-quarter net profit of SAR 328.3 million --the highest Q1 net income on record --came broadly in line with NCB Capital and the consensus estimates of SAR 348 million and SAR 337 million, respectively.

“We believe the growth came mainly from gross margin expansions due to lower commodity costs and higher efficiencies,” NCB Capital said in an earnings review.

Sales were hurt by Egyptian pound depreciation and lower exports, remaining flat year-on-year (YoY) at SAR 3.4 billion. Sales fell short of NCB Capital’s expectation of SAR 3.6 billion.

Gross margins missed NCB Capital estimate of 36.8 percent, despite an increase of 138 basis points YoY to 34.8 percent.

Poultry sales continued rising by 10.6 percent YoY to SAR 355 million in the same period.

The poultry division narrowed loss to SAR 29.1 million in Q1-2017, from SAR 104.3 million in the same period of 2016.

“We believe the increase in custom duties in Q117 on imported poultry to 20 percent vs 5 percent previously and banning Brazilian poultry imports supported the market conditions for the company,” the brokerage firm adding, expecting the division to break even this year.

Almarai’s bakery unit reported the largest profit growth of 19.6 percent YoY, driven by cost optimization and better market conditions.

Net income of the dairy and juice segment dropped 11.1 percent YoY.

NCB Capital maintained its “neutral” rating on the stock and kept its target price unchanged.