The Gulf’s largest dairy company has announced it will invest SR21 billion ($5.6 billion) over a five-year period from 2016 to 2020.

The decision was taken by the company’s board of directors after a review of its existing investment base, the company said in a statement. The earlier plan entailed spending of SR15.7 billion between 2013 and 2017.

“The board reaffirmed its mission for Almarai to become the consumers’ preferred choice in the Arab world, providing superior, nutritious food and beverage products that best meet consumer needs,” the statement said.

It added that Almarai’s objective was to increase its presence in all segments and geographies where it operates and to double sales while improving financial performance.

It expressed confidence on strategies in place in the core businesses of dairy, juice and bakery and in the developing businesses of poultry and infant nutrition as well as in the dairy and juice operations in Egypt and Jordan undertaken through the joint venture, International Dairy and Juice.

Almarai said the latest investment plan will help deliver objectives for its core, emerging and JV businesses.

The new investment will also cover capacity expansion needs in all areas of the company’s integrated business model covering farming, manufacturing, distribution and logistics.

It also addresses investments required in product renovation and innovation, it added.

Almarai is the Gulf’s biggest dairy producer

“In addition to the company’s financing capabilities, either via traditional bank facilities, SIDF and ADF funds or via the sukuk programme currently in place, the growing operating cash-flow will be dedicated to finance these investments,” the statement said.

“This strategic review reaffirms the view of the board of directors on the key role of Almarai as a major actor in food security and on continued investment in the food and beverage industry in the kingdom.”

As well as being present in the GCC region, Egypt and Jordan, Almarai owns Fondomonte, an Argentinian farming firm which supplies feed to its dairy herd.

Q1 PERFORMANCE

Almarai reported a 12 per cent rise in Q1 net profit on higher sales. Profit was SR306.5 million ($81.7 million), above a forecast from AlJazira Capital but below one from NCB Capital. They had expected the dairy firm to make a net profit of SR297.5 million and SR323 million respectively.

Its earnings were boosted by an 11.7 per cent year-on-year increase in first-quarter sales, which rose to SR3.04 billion helped by strong growth in its poultry and dairy and juice segments.

“Barring unforeseen events, the company should continue its profitable growth for the next quarters,” Almarai said in the earnings statement.

The firm spent SR969.4 million in the first quarter on expanding its business, including improving its production capabilities, distribution, and the number of places it operates. It did not provide a comparative figure.

Bank of America-Merrill Lynch said in an April 2 note Almarai was strongly placed to benefit from higher growth rates in the healthy foods category in the Middle East and North Africa region, highlighting it as one of its two top picks in the health and wellbeing sector.

The company said on March 26 it had received a SR250 million from an insurer in compensation for a fire at one of its bakeries, which would be booked in its first-quarter earnings.

EXPANSION PLANS

Almarai plans to invest $400 million on expanding its current projects in Egypt and on acquiring food and agriculture companies, said a report in Al-Borsa.

One of the companies it is considering for acquisition is said to be Dina Farms, Egypt’s largest private farm company with farms extending to a total of 40 million sq m. It is also a leading producer of raw milk and owner of more than 16,000 head of cattle of which close to 8,000 are milking cows.

Investment Co for Dairy Products (ICDP), which markets Dina Farms’ fresh dairy products, became the market leader in its category in less than a year after its 2010 launch.

Almarai is among several Saudi companies seeking to expand their businesses in Egypt. Savola and Jannat Agriculture Investment Company also plan to invest there. Both these companies could invest as much EGP5 billion ($655.2 million) on expanding their agricultural and industrial projects, according to Saudi-Egyptian Businessmen Association (Seba) director-general Ahmed Darwish.

In June 2014, Saudi-owned company Beyti, in which Almarai owns 52 per cent, announced plans to pump EGP4 billion ($524.1 million) in new investments into Egypt including establishing a new juice plant and two milk farms. Beyti is a subsidiary of the International Company for Dairy and Juice, and is also 48 per cent owned by Pepsico.