Farm Superstores reports disappointing figures in Q3, says Albilad Cap

Saudi Marketing Co.’s (Farm Superstores) net profit of SAR 7 million in Q3 2017 missed Albilad Capital’s estimate of SAR 17 million and the consensus forecast of SAR 20 million, the brokerage said in an earnings review.

Farm Superstores attributed the slump in profits to several reasons, including lower topline due to lengthy school and summer vacations, higher operating with the opening of new branches, and an increase in non-operating expenses, especially financing expenses.

“Compared to Q2 2017, the results highlighted the seasonal nature of the company's sales, with the previous quarter coinciding with the month of Ramadan, when demand for food products hit its peak,” Albilad Capital said.

Farm Superstores reported revenue of SAR 419 million in Q3 2017 compared to SAR 433 million for Q3 2016 and SAR 516 million in Q2 2017.

The company increased the number of stores by eight compared to September 2016, increasing its network to 70 stores from 62. 

In addition, the number of Adventure World outlets increased from 9 to 11 branches compared to September last year, but remained unchanged from Q2 2017. 

“The financial statements were disappointing in terms of financial indicators, with the quarterly profit falling below levels not achieved since at least 2011,” the report said.

Debt also mounted significantly to SAR 538 million, compared to SAR 389 million in Q3 2016 and SAR 24 million in Q2 2017, which may cripple the firm’s ability to distribute higher dividends or expand significantly in the medium term.

Albilad Capital recommended a “neutral” rating and set the stock’s target price at SAR 24.