Almarai Co., the Saudi food producer operating a joint venture with PepsiCo Inc., (PEP) is considering tapping global debt markets for about $500 million as it seeks to expand in the U.S., Argentina and Ukraine.
The company plans to sell the bonds in the next 12 months to diversify its funding sources and to invest in facilities, overseas farms and its distribution network, Chief Financial Officer Paul-Louis Gay told reporters in Riyadh today. The debt may be an Islamic bond or a hybrid sukuk, he said.
Almarai, Saudi Arabia’s largest food producer, said in April it raised 1.3 billion riyals ($347 million) from the private placement of Islamic bonds with investors in Saudi Arabia. The sale was part of a 2.3 billion-riyal sukuk program it set up last year. Almarai has a 15.7 billion-riyal, five-year investment program to boost output and develop products.
Companies and governments in the six-nation Gulf Cooperation Council are tapping the Islamic bond market as borrowing costs decline. The average yield on sukuk in the region has fallen 68 basis points in the past 12 months to 3.23 percent May 7, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index. Sales in the region have reached $9.5 billion, little changed from the year-earlier period.
Almarai’s first-quarter profit rose 5.4 percent to 255.1 million riyals, missing the 292.9 million-riyal mean estimate of 10 analysts compiled by Bloomberg.
The company’s shares have increased 3.5 percent this year compared with a 6 percent gain in Saudi Arabia’s benchmark index. The stock rose 0.4 percent to 65.75 riyals, the highest on a closing basis since April 3, at 12:42 p.m. in Riyadh.
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