First Mills CEO says impact of durum mill to appear in Q1 2024

Abdullah Ababtain CEO of First Mills Co.

First Mills Co. recorded growth in revenues and net earnings while maintaining double-digit profit margins through retail and distribution channels targeting individual and institutional customers, CEO Abdullah Ababtain told Argaam.

He added that the company launched the PESA mill and the pre-mix factory during the third quarter of 2023. This is to add many varieties to the company’s diverse product portfolio, including Chakki Atta flour, 100% whole wheat flour, and other pre-mix products.

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The impact of the newly-introduced durum mill is expected to appear from Q1 2024 onwards, Ababtain said.

He predicted higher demand given the developments taking place in the Kingdom and future potentials, which will reflect positively on First Mills’ top and bottom lines.

Here is the full interview with the CEO of First Mills:

Q: First Mills’ profits increased to SAR 58 million in Q4 2023, compared to SAR 20.3 million in the year-earlier period. How do you see these results?

A: First Mills recorded growth in revenue and net profit during the fourth quarter of 2023, while maintaining a double-digit profit margin. This reflected the company’s financial strength and ability to implement its strategy through retail and distribution channels to individual and institutional clients. Its Q4 2023 profit soared year-on-year (YoY) by 183.4%, or SAR 37.2 million, to SAR 57.5 million, compared to SAR 20.3 million in the year-ago period.

The annual profit hike was primarily attributed to the 8.8% YoY growth in gross revenue, supported by the launch of new products from the pre-mix plant and PESA mill (Chakki Atta Flour and 100% whole wheat flour), besides recording one-off expenses of around SAR 19 million in Q4 2022 related to depreciation adjustments, legal provisions, and other public offering costs.

Q: What are the reasons behind higher flour and bran sales?

A: Flour sales accounted for 57.3% of total sales in 2023, compared to 55.5% in the previous year. This increase was primarily driven by the launch of new product projects and sales volume growth resulting from improved product mix diversity and progress in the sales of "Aloula" brand. Bran sales amounted to 14.6% of the total since the beginning of 2023, compared to 14.5% during the same period of the previous year, driven by the company's successful strategy in building and diversifying its customer base and increasing its geographical coverage in the Kingdom.

Q: What are your expectations for demand and company performance in the first quarter of 2024?

A: In 2024, we expect soaring demand given the developments in the Kingdom and the potential positive outlook that will reflect on First Mills’ revenues and profits. In addition, the expansions we are undertaking by entering sectors with higher profit margins and targeting higher daily production capacities of the company's products through upgrades that are mainly undertaken to raise production and sales levels and boost production capacity utilization rates.

Q: How do you assess the uptick in sales due to seasonal factors such as Ramadan and others like the back-to-school and Hajj seasons?

A: Indeed, seasonal fluctuations may have a positive impact on sales growth throughout the year. At First Mills, by leveraging our extensive experience in the sector, we are fully prepared to adapt to any seasonal changes, seizing opportunities to elevate sales during seasons like Ramadan and Hajj. It is essential to note that the company has a clear long-term strategy to achieve sustainable growth in all sectors and at all times, given that we do not rely solely on these seasonal periods.

Q: How about the total production capacity of First Mills factories in 2023?

A: The company covers four strategic regions in the Kingdom through four branches in Makkah (Jeddah Governorate), Qassim (Buraydah Governorate), Tabuk (Tabuk City), and Eastern Province (Al-Ahsa Governorate), with a total grinding capacity of 4,900 tons per day. The company increased its capacity by 250 tons per day following the development of Mill-C in Jeddah factory and 300 tons per day through launching the durum mill. It also upped the capacity by 150 tons per day through the operation of PESA mill. This is in addition to a feed manufacturing capacity of 900 tons per day.

Looking forward, First Mills aims to expand its capabilities and enhance its local market leadership. It also seeks to complete the expansions of Mill-A and Mill-B to raise their production capacities by 250 and 100 tons per day, respectively.

Q: How did Mill-C contribute to the fourth-quarter production?

A: We completed the upgrading of Mill-C in the Jeddah factory, and it resumed operations with a full production capacity in December 2023. Accordingly, the mill added 250 tons per day to its previous capacity of 300 tons per day, an increase of nearly 11% to the Jeddah factory's total daily production capacity. Meanwhile, Mill-C contributed 15% to the factory's total daily production capacity in December 2023.

Q: You highlighted the company's plans to start operating the durum mill in Q4 2023. When will we see the financial impact of this mill? Where is it located?

A: Expansion into new segments with higher profit margins to support and enhance First Mills’ revenues and earnings is among our strategic priorities. We launched the PESA mill and the pre-mix plant during the third quarter of 2023. This aims to add several varieties to the company's diversified product portfolio such as Chakki Atta flour, 100% whole wheat flour and other pre-mix products.

The firm also started the trial operations of its durum mill in the Jeddah factory during the fourth quarter of 2023. The commercial sales were announced after receiving its final license in early 2024.

The impact of this mill is expected to be reflected in the Q1 2024 results and the following quarters, as our other expansion projects recorded sales from the PESA mill and the pre-mix plant for the first time in Q4 2023.