Almarai Q3 net profit to dip 9% to SAR 596 mln, says Riyad Cap

Almarai Co. is expected to report a net income of SAR 596 million, 9 percent lower YoY in Q3 2017, Riyad Capital said in an earnings preview.

The Saudi dairy producer’s revenue is forecast to decline 5 percent YoY to SAR 3.4 billion in the third quarter of 2017, due to the lack of growth in some key segments combined with suspension of sales in Qatar.

Cost pressures are creeping in while revenues and profit from the Egyptian subsidiary remain susceptible to currency devaluation, Riyad Capital said.

Gross profit is likely to decline 4 percent YoY to SAR 1.5 billion in Q3. Gross margins are seen at 43.5 percent for the quarter compared to 43.1 percent in Q3 2016 as the company focuses on efficiency improvements and cost controls.

“We anticipate the company will continue its emphasis on controlling operating expenses, although a Q/Q rise is expected,” the brokerage added.

Stock price moderated on the back of a block sale of 16 million shares (2 percent of issued shares) by Savola Group at SAR 70.00. It now trades at a 2017E P/E of 26.4x, as compared to multiples in excess of 30.0x earlier.

“However, we continue to maintain a Neutral as the stock trades near our SAR 68.00 target price,” Riyad Capital noted.