Almarai Net Misses Estimates as It Fails to Gain From Costs

Almarai Co. (ALMARAI), the Saudi Arabian company that operates a joint venture with PepsiCo Inc. (PEP), revised its 2012 profit forecast as third-quarter earnings missed analysts’ estimates.

The company reduced its profit growth forecast for 2012 to 7 percent from as much as 10 percent due to a delay in poultry plant building and the effect of commodity prices, Chief Financial Officer Paul Gay said in a conference call today. Third-quarter profit advanced 4.7 percent to 450 million riyals ($120 million) from 430 million riyals a year earlier, the company said in a statement to the Saudi bourse today.

The mean estimate of nine analysts was for a profit of 472 million riyals, according to data compiled by Bloomberg. Operating profit rose 6.6 percent to 509 million riyals, while sales increased 27 percent.

“While revenue for the quarter stood in line with our projection,” earnings before interest and taxes were 12 percent below estimate, Shuaa Capital (SHUAA) analysts including Asjad Yahya said in an e-mailed note today. It suggests “the positive impact of reduced commodity prices on margins was lower than we had anticipated,” the analysts wrote.

Almarai was poised to benefit from a drop in feedstock costs, Riyad Capital said in a note last month. Crops including corn and soybeans comprise nearly a third of Almarai’s material costs, according to NCB Capital Co. The average price of corn fell 2.4 percent in the first six months of 2012 from the year earlier, data compiled by Bloomberg show.

Bakery and Poultry

Profit was boosted by “the strong performance in all sectors, especially bakery and poultry, as well as the consolidation of International Dairy & Juice Ltd. for this period,” Almarai said. Sales were also helped by “the seasonal impact of summer and the holy month of Ramadan.” Almarai and PepsiCo jointly operate International Dairy & Juice.

Gay said today the company may raise as much as 1.3 billion riyals from the sale of Islamic bonds this year as it seeks financing to increase production and make acquisitions.

Six analysts recommend buying Almarai shares, while 10 say hold and one says sell, according to data compiled by Bloomberg. The company’s shares have surged 19 percent in 2012, compared with an advance of 6.1 percent for the benchmark Tadawul All Share Index (SASEIDX) and 34 percent for Savola Al-Azizia United Co. (SAVOLA), which processes food and manufactures packaging.

To contact the reporter on this story: Zahra Hankir in Dubai at

To contact the editor responsible for this story: Claudia Maedler at

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