Almarai Company (Almarai)

Transcription

1 Market Data Bloomberg Code: ALMARAI AB Reuters Code: 2280.SE CMP (20 th Mar 2010): SR181.7 O/S (mn): 115 Market Cap (SRmn): 20,901.2 Market Cap (US$mn): P/E 2010e (x): 14.2 P/Bv 2010e (x): 3.4 Price Performance 1-Yr High / Low (SR): / Average Volume: 141,761 Market Data 1m 3m 12m Absolute 5.0% 12.5% 22.0% Relative -0.8% 3.2% -32.2% Price Index Performance 7,000 6,500 6,000 5,500 5,500 4,500 4,000 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 TASI - LHS Source: Tadawul & Zawya (SR) - RHS Company () Global Research - Saudi Arabia Concentric diversification leading to expansion of target market & product lines. Strategic alliances to expand geographical network. Operational synergies to improve margins. Investment Update Hold Target Price SR Acquisition & infant food segment - Expanding production line & target market Company () recently completed Hail Agriculture Development Company (HADCO) takeover, which will diversify its current production line from dairy to poultry products and enable it to serve the exiting target market with poultry products. Based on the given information, the company is expected to make an investment of SR2.0bn in HADCO during to increase its chicken handling and processing capacity and improve its existing distribution network. In addition, the expected completion of infant food segment during 1H2011 will not only expand the target market but also help the company to place itself in a better way to capture the benefits of a rising regional population. Marketing strategy - Improving operational synergies The company has a competitive edge over the other players in the local market with the ability to place its products in an effective manner through the retail outlets of Savola i.e. Hyper Panda. The acquisition of HADCO will strengthen the distribution network and allow the company to derive value out of the supply chain by using the production of grains and animal feed for in-house production of milk. The company is also likely to adopt product bundling strategy with in the GCC region.jv with Pepsi Co. in Egypt will help the company to expand geographically i.e. Middle East (excluding GCC), Southeast Asia and Africa. In addition, we cannot rule out the possibility of product bundling with Pepsi Co. for the agreed regions. Improving profitability - Increase in product prices and population to drive growth We expect the company s gross and net profit margins to show improvement during to 41.8% and 22.1% respectively in 2013 as compared to 40.3% and 18.7% respectively recorded in The expected improvement in the company s profitability margin is mainly on the back of (i) expected increase in average price of dairy products at a CAGR of 6.9%, (ii) expected increase in regional population at a CAGR of 2.3% and (iii) benefits arising out of product and geographical diversification. Valuation We have updated our DCF base valuation to SR185.9, which offers a potential upside of 2.3% from the current market price of SR181.7 (as on 20th ). Moreover, the stock is trading at the prospective 2010E and 2011E price-earnings multiple of 14.2x and 12.7x, respectively. We, therefore, recommend HOLD for the stock. Syed Taimure Akhtar Senior Financial Analyst sakhtar@globalinv.com.sa Phone No:(966) Ext.: 950 Table 01: Investment Indicators Net Profit (SRmn) EPS (SR) BVPS (SR) ROA (%) P/E (x) P/BV (x) 2013 (E) 1, (E) 1, (E) 1, (E) 1, (A) 1, Source: Company Annual Reports & Global Research *Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on closing prices on the Tadawul as of 20 th. 1

2 Valuation & Recommendation DCF Method We have used discounted cash flow (DCF) methodology to value stock and used Capital Asset Pricing Model (CAPM) to calculate the cost of the equity, which is based on the following assumptions: Risk-free rate of 5.6% Market risk premium of 6.0% Beta of 1.0 Cost of equity of 11.6% Cost of debt of 7.0% The Weighted Average Cost of Capital (WACC) based on the above assumptions is 10.4%. We have assumed a terminal growth rate of 3.5%. We have arrived at the DCF base value of SR185.9 for based on earnings projections till Table 02: DCF Base Valuation (SR Mn) 2010 (E) 2011 (E) 2012 (E) 2013 (E) FCF 1, , , ,760.2 Discounted Cash Flow 1, , , ,215.9 Terminal Value 26,532.9 Primary Value 4,949.2 Terminal Value (discounted) 18,329.4 Company s Net Present Value 23,278.6 Long-Term Debt (3,503.4) Add: Investments & Cash Equivalents 1,606.3 Net Worth 21,381.5 Shares Outstanding ('000) 115,000 Fair Value Per Share Source: Global Research Sensitivity Analysis A sensitivity analysis for different estimated long-run future growth rates and weighted cost of capital is shown in table below. The table provides estimated DCF based fair values for share based on a range of varying inputs. The shaded area at the center shows the most probable range of alternatives. Table 03: DCF Base Valuation Terminal Growth Rates 1.50% 2.50% 3.50% 4.50% 5.50% 8.37% % % % % Source: Global Research WACC Valuation Based on our valuations, at present, the stock is trading at a prospective 2010 and 2011 P/E of 14.2x and 12.7x, and offering the potential upside of 2.3% from the current market price of SR as on 20th. We, therefore, recommend HOLD for the stock. 2

3 Company - Financial Update HADCO & Egyptian JV - Expanding product line & geographical network We expect the acquisition of HADCO and JV with Pepsi Co., under the name of International Diary & Juice Company (IDJ), are expected to play a vital role in the company s future growth. The acquisition and JV also offers ample room for the company to come up with the effective marketing strategies i.e. product bundling, effective distribution and promotional activities. The company is expected to make an investment of SR2.0bn, during , in HADCO with the aim to (i) double the production & handling capacity of chicken and (ii) make further improvement in the distribution network of the company. On the other hand, the company is targeting to expand its geographical network through the JV with Pepsi Co., which will cover African, Southeast Asian and Middle East (excluding GCC) markets. Chart 01: Sales Revenue 9, , , , , , , , , % 6.3% 3.9% 4.3% 33.4% 25.1% 16.7% Sales Revenue (SR mn) - LHS Growth - RHS 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: Company Reports & Global Research We expect the company to record sales revenue of SR7.3bn in 2010 as compared to SR5.9bn recorded in The growth in the company s sales revenue is mainly based on the expected increase in production by 7.7% during 2010 on account of additional sales revenue from HADCO acquisition and the weighted average impact of 16.0% based on the expected average improvement in the product prices by 19.6% during Going forward, the company s sales revenue is expected to increase at a CAGR of 9.5% during to SR8.4bn in 2013, which is mainly based on (i) the expected increase in production at a CAGR of 3.1% during on the back of effective implementation of the company s marketing and expansion strategies, (ii) weighted average impact of 6.0% on the back of the expected increase in product prices at a CAGR of 6.9% during and (iii) local & regional population growth at a CAGR of 2.0% and 2.3% during , respectively. Chart 02: Sales Revenue Composition 2009 Chart 03: Sales Revenue Composition 2013 Bakery Products 10.5% Others HADCO 0.6% 1.2% Bakery Products 10.2% Others 0.5% HADCO 4.5% Chesse & Butter 19.5% Fresh Dairy 48.0% Chesse & Butter 21.2% Fresh Dairy 43.6% Fruit Juice 10.6% Fruit Juice 10.3% Long Life Dairy 9.6% Source: Company Reports & Global Research Long Life Dairy 9.8% Source: Company Reports & Global Research 3

4 The company s sales revenue during 2009 remained highly concentrated on fresh dairy products, contributing 48.0% of the company s total sales revenue. We expect the fresh dairy products to remain the major component of the revenue pie. However, the addition of poultry products in the company s existing production line is expected to dilute contribution from fresh dairy product to 43.6% in Infant food segment- Expanding target market The incorporation of Baby Food Company in July 2009 is among one of the major milestones that the company has achieved during The expected commencement of commercial production from Baby Food Company in 1H2011 will make the addition of infant products in the company s existing product profile. Hence, this will lead the company to expand its target market from dairy, poultry, bakery and other products to infant market. Furthermore, we cannot rule out the possibility to adopt product bundling strategy i.e. promotion of baby food along with dairy products or vice versa. Cattle stock - In house milk production The company has ended the year 2009 with the capacity to handle around 52,000 milk producing cattle stock with the per cattle production capacity of 13.0tons of milk per year (365 days). Accordingly, the company s total raw milk production is 676,000 tons. Besides 52,000 milk producing cattle, the company also has the capacity to handle around 55,000 of young cattle stocks, which indicates 100.0% cattle stock replacement ratio. Improving gross margins - Higher economies of scale The company has posted gross profit of SR2.4bn, during 2009, as compared to SR1.9bn in The gross margin was recorded at 40.3% as compared to previous year s gross margin of 39.7%. This indicates the company, during 2009, has successfully utilized the benefit of (i) well integrated production structure i.e. in house milk production and (ii) strong brand image to increase the sales revenue. We believe these factors have allowed the company to restrict the increase in cost of sales to 15.6% in 2009 over cost of sales of SR3.0bn recorded in Furthermore, the company has posted EBIT margin of 21.8% during 2009 as compared to 21.1% in Chart 04: - Gross Margins Chart 05: - EBIT Margin Growth 4, , , , , , , % 41.5% 41.9% 41.8% 42.0% 40.8% 41.5% 40.3% 41.0% 39.7% 40.5% 39.6% 40.0% 39.5% 39.0% 38.5% 38.0% Gross Profit (SR mn) - LHS Gross Profit Margin - RHS 2, , , , % 23.2% 23.2% 22.1% 21.8% 21.1% 20.7% EBIT (SR mn) - LHS EBIT Margins - RHS 23.5% 23.0% 22.5% 22.0% 21.5% 21.0% 20.5% 20.0% 19.5% Source: Company Reports & Global Research Source: Company Reports & Global Research Based on the recent acquisition, product expansion and JV, we believe the company s diversification strategy is mainly based on the expansion in the related market, which will lead the company s ability to run its operation with well-integrated production process. Consequently, the company s gross margins is expected to remain on higher level at the average of 41.5% during , which will help the company to manage its marketing 4

5 and administrative costs to keep its EBIT margin at the average of 22.8% during as compared to the 4-years historical average of 20.7% during Profitability Growth-Relatively immune to economic downturn Despite facing lot of challenges during 2009, including the world economic recession and swine flu, the company managed to post after tax profit of SR1.1bn, an increase of 20.5% YoY. The net profit margin also improved to 18.7% as compared to 18.1% recorded in Chart 06: Profitability & ROAA Chart 07: Profitability & ROAE 2, , , , , , % 12.5% 13.0% 11.4% 14.0% 14.7% 15.3% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 2, , , , , , % 27.3% 24.4% 25.4% 24.9% 23.7% 22.3% 28.5% 27.5% 26.5% 25.5% 24.5% 23.5% 22.5% 21.5% 20.5% % % Profit after tax (SR mn) - LHS ROAA - RHS Profit after tax (SR mn) - LHS ROAE - RHS Source: Company Reports & Global Research Source: Company Reports & Global Research Going forward, the company s profitability is expected to show a growth of 33.9% during 2010, while in terms of CAGR the bottom line is expected to increase at a CAGR of 14.2% during On the other hand, the company s ROAA and ROAE are expected to remain at the average of 14.3% and 24.1% during , respectively. 5

6 Food & Agriculture Sector World Milk & Dairy Sector Based on the Food & Agriculture Policy Research 2009 (FAPRI), the overall production of milk & dairy products (including butter, cheese, whole milk powder & skim milk) around the globe by the end of 2009 was recorded at 742.3mn tons, which is expected to increase by 1.9% in Going forward, the world production is expected to increase at a CAGR of 1.7% to 794.3mn tons. We believe the growth in the milk and dairy products is mainly associated with the forecasted increase in the world s population at a CAGR of 1.8% during Chart 08: World Milk & Dairy Production 820, , , , % 2.1% 1.9% 1.6% 1.6% 1.7% 2.5% 2.0% 1.5% 740, , % 1.0% 700, , % 660, % Milk & Dairy Products ('000' tons) - LHS Growth - RHS Source: FAO & Global Research Based on FAPRI 2009, majority of the milk and dairy production is directed from European Union (EU) and India, where the production has recorded at 147.0mn tons and 111.6mn tons, respectively, during Furthermore, the production from EU and India is expected to reach 149.3mn tons and 115.2mn tons during 2010, respectively, followed by US where the production is forecasted to reach 91.8mn tons. Table 04: Country-Wise Contribution to World Milk & Dairy Production Argentine 1.4% 1.5% 1.6% 1.6% 1.6% 1.6% 1.7% Australia 1.5% 1.4% 1.4% 1.4% 1.4% 1.4% 1.5% Brazil 3.9% 4.2% 4.3% 4.4% 4.5% 4.7% 4.8% Canada 1.2% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1% China 5.7% 5.4% 5.8% 6.0% 6.3% 6.4% 6.6% Colombia 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Egypt 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% European Union 20.0% 19.9% 19.8% 19.7% 19.4% 19.1% 18.7% India 14.2% 14.9% 15.0% 15.2% 15.3% 15.4% 15.5% Japan 1.2% 1.1% 1.1% 1.1% 1.1% 1.1% 1.0% Mexico 1.5% 1.5% 1.5% 1.6% 1.6% 1.6% 1.6% New Zealand 2.4% 2.4% 2.4% 2.4% 2.4% 2.5% 2.5% Peru 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% Romania 0.7% 0.6% 0.6% 0.5% 0.5% 0.4% 0.4% Russia 4.6% 4.6% 4.6% 4.5% 4.5% 4.5% 4.5% South Korean 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% Switzerland 0.6% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% Ukraine 1.9% 1.6% 1.4% 1.3% 1.3% 1.2% 1.2% Uruguay 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% United States 12.5% 12.7% 12.4% 12.1% 12.0% 12.0% 11.9% Production From Other Countries 24.8% 24.3% 24.3% 24.3% 24.3% 24.3% 24.4% Source: FAPRI & Global Research 6

7 Furthermore, the weighted average per capita consumption of the world s dairy products, as per FAPRI 2009, has shown improvement during 2009 and recorded at 58.8Kg as compared to 57.6Kg in Going forward, the weighted average per capita consumption of dairy products is expected to continue its upward trend and reach at 60.0Kg by the end of We believe the increase in per capita is mainly based on the expected massive marketing alliance and promotion campaigns coupled with the expansions of retail outlets in major consuming areas of the world, which will lead to the easy availability of these products in the market. Milk & Dairy Product Prices The main feedstock price in dairy food industry is the price of corns and grains, which are used to feed the cow. Moreover, prices of these products have a major impact on the cost of producing raw milk, which consequently have an impact of the prices of end of products. In addition, the price of corns is correlated with the price of crude oil, since corn is also use to make ethanol fuel (alternative fuel). Hence, higher the price of crude oil the higher the demand for ethanol, which requires corn as a feedstock. Consequently, this creates shortage of corns for cow feeding thus leading to an increase in prices. We expect the average price of corn to remain in the range of US$100.0 to US$105.0 per ton during 2010, while we have updated the average long-term prices of corn to remain in range of US$100.0-US$120.0 per ton during Chart 09: Feedstock & Crude Oil Prices Chart 10: Raw Milk Price (US$ per ton) Corn Price (US$ per ton) - LHS Crude Oil Pirces (US$ per barrel) - RHS Source: USDA & Global Research Source: Agriculture & Applied Economics & Global research According to California Department of Food & Agriculture (CFDA) pricing mechanism the price of raw milk is differentiated on the basis of end use, which provides the basis to classify raw milk into different classes. Moreover, the prices of each class of milk are different and again based on the end use of that particular milk class and hence represent as the feedstock for dairy products. Chart 11: Dairy Product Prices 6, , , , , , , , , , , , , , , Butter (US$ per ton) - LHS Skim Milk (US$ per ton) - RHS Cheese (US$ per ton) - RHS Dry Whey (US$ per ton) - RHS Dry Milk Powder (US$ per ton) - RHS Source: Bloomberg, Agriculture & Applied Economics & Global research 7

8 Middle East Milk & Dairy Sector - High Potential We expect the regional milk and dairy market to increase at a CAGR of 2.6% to 7.7mn tons, which is mainly based on the (i) expected increase in the Middle East population at a CAGR of 2.6% during to 115.5mn and (ii) strong spending power in the regional countries, particularly in GCC member countries. Table 05: Regional Milk & Dairy Consumption 000 tons * 2010E 2011E 2012E 2013E Saudi Arabia 3,950 4,029 4,110 4,193 4,277 4,363 4,451 Kuwait Bahrain Qatar UAE Oman Iraq Yemen Jordan Lebanon Total 6,641 6,798 6,974 7,156 7,343 7,536 7,734 Source: Prospectus & Global Research *Based on our calculations It is worth mentioning that Saudi Arabia is expected to remain the leading consumer of the milk and dairy products in the region followed by UAE, which is mainly due to the population size in these two countries. However, the lower spending power in the other regional countries like Yemen and Iraq is the major factor of low consumption though the population is high in these areas. Chart 12: Regional Product Wise Consumption Composition Butter Ghee, 12.9% Condensed, 0.3% Evaporated Mike, 7.0% Other Cheese, 10.8% Milk-Short, 5.7% Milk-Long, 19.7% Laban, 8.9% Natural Cheese, 25.0% Yoghurt, 3.8% Labneh, 0.5% Cream, 5.3% Dairy Desert, 0.3% Source: Company Reports & Global Research Based on our calculations, by the end of 2009, the regional milk & dairy product consumption is mainly based on the long-life products i.e. cheese, milk-long and butter. Since the taste preference & demographic factors are rigid to change, we are expecting constant product wise composition during

9 Saudi Arabia Milk & Dairy Sector - Leading Regional Market Among the regional countries Saudi Arabia has the largest in-house milk production facility. Based on our calculations, Saudi Arabia has a capacity to handle cattle stock of more than 138,000 by the end of 2009 with the annual capacity to produce 7.8 tons of per head. Going forward, the Kingdom s cattle stock is expected to increase at a CAGR of 3.1% during , while the per head annual production is expected to remain constant at 7.8 tons per head during Table 06: Regional Milk & Dairy Consumption * 2010E 2011E 2012E 2013E Milk - Short Milk - Long Laban Yoghurt Labneh Cream Dairy Desert Natural Cheese 1,038 1,058 1,079 1,101 1,123 1,146 1,168 Evaporated Milk Condensate Milk Butter Ghee Other Cheese Ice Cream Total 3,950 4,029 4,110 4,193 4,277 4,363 4,451 Source: Prospectus & Global Research *Based on our calculations We believe the consumption in Saudi dairy market is expected to increase at a CAGR of 2.0% during , which is proportionately linked with expected growth in the domestic population. It is worth mentioning that majority of the consumption inside the Kingdom is associated with fat rich and long life dairy products i.e. butter and cheese. 9

10 Balance Sheet Company- (SR 000 ) Current Assets Cash & Bank Balances 137, , , , , , ,841 Derivates Financial Instruments 938 6, Receivable & Prepayments 367, , , , , , ,021 Inventories 733,573 1,096,723 1,218,575 1,230,761 1,243,068 1,255,499 1,268,054 Total Current Assets 1,240,296 1,759,733 2,181,733 2,432,231 2,508,601 2,528,206 2,630,916 Non-Current Assets Investment & Financial Assets 471, , , , ,218 1,002,140 1,012,161 Property, Plant & Equipment 4,041,132 5,343,308 6,282,208 6,502,404 6,696,206 6,752,740 6,785,795 Intangible Assets-Goodwill 548, ,636 1,528,157 1,604,565 1,684,793 1,769,033 1,857,484 Deferred Charges 34,692 40,270 31,766 33,354 35,022 36,773 38,612 Total Non-Current Assets 5,095,534 6,421,551 8,805,262 9,122,716 9,408,239 9,560,686 9,694,052 Total Assets 6,335,830 8,181,284 10,986,995 11,554,948 11,916,840 12,088,891 12,324,968 Current Liabilities Short-Term Loans 182, , , , , , ,527 Payables & Accruals 575, , ,585 1,218,392 1,385,799 1,493,481 1,600,875 Derivative Financial instruments 10, ,072 82,153 90,368 99, , ,280 Total Current Liabilities 767,718 1,288,795 1,440,272 1,664,741 1,823,386 2,008,644 2,106,683 Non-Current Liabilities Long-Term Loans 2,409,428 3,132,956 3,981,193 3,503,450 2,837,794 1,901,322 1,064,740 Employees Termination Benefits 104, , , , , , ,010 Total Non-Current Liabilities 2,514,331 3,260,997 4,147,007 3,694,136 3,057,083 2,153,505 1,354,750 Total Liabilities 3,282,049 4,549,792 5,587,279 5,358,877 4,880,469 4,162,149 3,461,433 Share Capital 1,090,000 1,090,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 Share Premium 612, ,000 1,600,500 1,600,500 1,600,500 1,600,500 1,600,500 Statutory Reserves 325, , , , , , ,253 Other Reserves (9,095) (83,161) (81,390) (20,348) (2,035) 4,070 8,139 Retained Earnings 1,034,878 1,581,614 2,187,164 2,774,730 3,595,821 4,479,147 5,410,881 Total Shareholders' Equity 3,053,446 3,617,142 5,382,635 6,178,136 7,017,539 7,906,969 8,842,773 Minority Interest ,350 17,081 17,935 18,832 19,773 20,762 Total Liabilities & Shareholders' Equity 6,335,830 8,181,284 10,986,995 11,554,948 11,916,840 12,088,891 12,324,968 Source: Company Reports, Global Research 10

11 Income Statement Company - (SR 000 ) Sales 3,769,833 5,029,904 5,868,805 7,339,465 7,800,499 8,102,618 8,448,466 Cost of Sales (2,276,495) (3,030,947) (3,503,013) (4,346,506) (4,565,478) (4,709,780) (4,917,964) 15.6% Gross Profit 1,493,338 1,998,957 2,365,792 2,992,959 3,235,021 3,392,838 3,530,502 Selling & Distribution Expenses (570,149) (750,878) (887,147) (1,100,920) (1,170,075) (1,215,393) (1,267,270) General & Administrative Expenses (142,451) (187,108) (199,735) (268,167) (283,693) (294,467) (306,560) Income Before Bank Charges, Zakat & Minority Interest 780,738 1,060,971 1,278,910 1,623,872 1,781,253 1,882,979 1,956,672 Bank Charges (94,860) (125,489) (147,518) (115,783) (95,279) (69,214) (43,508) Loss from Associate (2,003) Income Before Bank Zakat & Minority Interest 685, ,482 1,129,389 1,508,089 1,685,974 1,813,764 1,913,164 Zakat (18,079) (24,662) (29,229) (37,702) (42,149) (45,344) (47,829) Income Before Minority Interest 667, ,820 1,100,160 1,470,387 1,643,824 1,768,420 1,865,335 Minority Interests (530) (558) (3,438) (1,470) (1,644) (1,768) (1,865) Net Income 667, ,262 1,096,722 1,468,917 1,642,180 1,766,652 1,863,470 Appropriation Account Opening Balance 634,336 1,034,878 1,581,614 2,187,164 2,774,730 3,595,821 4,479,147 Transfer to Share Capital Transfer to Statutory Reserves (66,727) (91,026) (109,672) (146,892) Dividend Paid (200,000) (272,500) (381,500) (734,458) (821,090) (883,326) (931,735) Retained Earnings 1,034,878 1,581,614 2,187,164 2,774,730 3,595,821 4,479,147 5,410,881 Source: Company Reports, Global Research 11

12 Cash Flow Statement Company- (SR 000 ) Profit for the year 667, ,262 1,096,722 1,468,917 1,642,180 1,766,652 1,863,470 Depreciation 227, , , , , , ,677 Other Operating Activities 114,899 40,129 37,169 (71,637) (98,914) (131,830) (160,541) Change in Working Capital (284,653) (313,223) 163, , , ,375 90,341 Net Cash from operating activities 725,199 1,016,136 1,802,156 2,176,676 2,381,269 2,518,991 2,619,946 Investing Activities Plant & Property (1,099,196) (1,655,619) (1,334,987) (878,010) (910,820) (827,328) (859,732) Derivates Financial Instruments - (5,710) 6, Investment & Financial Assets - (18,263) (473,794) (19,263) (9,824) (9,922) (10,021) Intangible Assets-Goodwill - - (979,521) (76,408) (80,228) (84,240) (88,452) Derivative Financial instruments - 98,039 (25,919) 8,215 9,037 9,941 10,935 Other Investment Activities (389,007) 83,531 (376,015) 164, , , ,580 Cash Flows from Investing Activities (1,488,203) (1,572,088) (1,711,002) (713,592) (726,664) (632,345) (663,151) Financing Activities Increase in Loan 1,127,596 1,052, ,625 (517,297) (683,454) (868,836) (856,873) Bank Charges (94,860) (125,489) (147,518) (115,783) (95,279) (69,214) (43,508) Dividend Paid (199,396) (270,173) (379,977) (734,458) (821,090) (883,326) (931,735) Other Financing Activities (387) 7,879 7,797 20,727 (24,834) (39,971) (39,023) Cash Flows from Financing Activities 832, , ,927 (1,346,811) (1,624,657) (1,861,347) (1,871,138) Increase/Decrease in Cash 69, , , ,273 29,947 25,298 85,656 Cash Beginning Balance 68, , , , , , ,185 Cash Ending Balance 137, , , , , , ,841 Source: Company Reports, Global Research 12

13 Fact Sheet Company- Liquidity Ratios Current Ratio Cash Ratio Profitability Ratios Gross Margin 39.6% 39.7% 40.3% 40.8% 41.5% 41.9% 41.8% EBITDA Margin 30.4% 30.7% 30.4% 31.1% 32.0% 32.8% 32.9% EBIT Margin 20.7% 21.1% 21.8% 22.1% 22.8% 23.2% 23.2% Net Profit Margin 17.7% 18.1% 18.7% 20.0% 21.1% 21.8% 22.1% ROAE 27.0% 27.3% 24.4% 25.4% 24.9% 23.7% 22.3% ROAA 13.2% 12.5% 11.4% 13.0% 14.0% 14.7% 15.3% Leverage Ratios Debt to Equity Debt to Asset 40.9% 44.5% 39.8% 33.4% 26.7% 19.1% 11.8% Liabilities/Total Assets (x) Growth Rates Revenue Growth Rate 36.7% 33.4% 16.7% 25.1% 6.3% 3.9% 4.3% Net Income Growth Rate 43.6% 36.4% 20.5% 33.9% 11.8% 7.6% 5.5% Equity Growth Rate 60.9% 18.5% 48.8% 14.8% 13.6% 12.7% 11.8% Total Asset Growth Rate 68.0% 29.1% 34.3% 5.2% 3.1% 1.4% 2.0% Ratios Use for Valuation Number of Shares (mn) Par value per share (SR) BV per share (SR) EPS (SR) Market Price (SR) Market Cap in (SR mn) 12,862 14,715 18,975 20,901 20,901 20,901 20,901 EV (SR mn) 15,841 18,411 22,449 23,781 23,085 22,123 21,201 EV/EBITDA P/E Ratio (x) P/BV Ratio (x) Source: Company Reports, Global Research *Historical P/E & P/BV multiples pertain to respective year end prices, while those for future years are based on closing prices on the Tadawul as of 20th. 13

14 This Page is Intentionally Left Blank (For Printing Purpose Only) 14

15 This Page is Intentionally Left Blank (For Printing Purpose Only) 15

16 The following is a comprehensive list of disclosures which may or may not apply to all our researches. Only the relevant disclosures which apply to this particular research has been mentioned in the table below under the heading of disclosure. Disclosure Checklist Company Recommendation Ticker Price Disclosure Company () Hold ALMARAI AB 2280.SE SR , did not receive and will not receive any compensation from the company or anyone else for the preparation of this report. 2. The company being researched holds more than 5% stake in. 3. makes a market in securities issued by this company. 4. acts as a corporate broker or sponsor to this company. 5. The author of or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct ownership position in securities issued by this company. 6. An employee of serves on the board of directors of this company. 7. Within the past year, has managed or co-managed a public offering for this company, for which it received fees. 8. has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 9. expects to receive or intends to seek compensation for investment banking services from this company in the next three month. 10. Please see special footnote below for other relevant disclosures. Global Research: Equity Ratings Definitions Global Rating Definition Buy Hold Reduce Sell Fair value of the stock is >10% from the current market price Fair value of the stock is between +10% and -10% from the current market price Fair value of the stock is between -10% and -20% from the current market price Fair value of the stock is < -20% from the current market price This material was produced by - Saudia, a firm regulated by the Capital Market Authority of KSA. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities Information and opinions contained herein have been compiled or arrived by Global -Saudia from sources believed to be reliable, but Global- Saudia has not independently verified the contents of this document. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document. Global - Saudia accepts no liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Global shall have no responsibility or liability whatsoever in respect of any inaccuracy in or omission from this or any other document prepared by Global- Saudia for, or sent by Global- Saudia to any person and any such person shall be responsible for conducting his own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this or other such document. Global investment house- Saudia is authorized and regulated by the Capital Market Authority (CMA) in the Kingdom of Saudi Arabia. License Number

17 Website: Global Tower Sharq, Al-Shuhada Str. Tel. + (965) Fax. + (965) P.O. Box: Safat, Kuwait Brokerage Yousef S. Fahed Alebrahim (965) yalebrahim@global.com.kw Research Faisal Hasan, CFA (965) fhasan@global.com.kw Index Rasha Al-Huneidi (965) huneidi@global.com.kw Wealth Management - Kuwait Rasha Al-Qenaei (965) alqenaei@global.com.kw Wealth Management - International Fahad Al-Ibrahim (965) fahad@global.com.kw Global Kuwait Tel: (965) Fax: (965) P.O.Box Safat, Kuwait Global Abu Dhabi Tel: (971) Fax: (971) /4 P.O.Box Abu Dhabi, UAE Global Bahrain Tel: (973) Fax: (973) P.O.Box 855 Manama, Bahrain Global Saudi Arabia Tel: (966) Fax: (966) P.O. Box Riyadh 11586, Kingdom of Saudi Arabia Global Dubai Tel: (971) Fax: (971) /1/2 P.O.Box Dubai, UAE Global Qatar Tel: (974) Fax: (974) P.O.Box Doha, Qatar Global Egypt Tel: 20 (2) Fax: 20 (2) P.O.Box 7 Abdel Hadi Saleh St., El-Nasr Tower, Giza Global Jordan Tel: (962) Fax: (962) P.O.Box 3268 Amman 11180, Jordan Global Wealth Manager contactus@global.com.kw Tel.: (965) Disclaimer This document and its contents are prepared for your personal use for information purposes only and is not an offer, or the solicitation of an offer, to buy or sell a security or enter into any other agreement. Projections of potential risk or return are illustrative, and should not be taken as limitations of the maximum possible loss or gain. The information and any views expressed are given as at the date of writing and subject to change. While the information has been obtained from sources believed to be reliable we do not represent that it is accurate or complete and it should not be relied on as such., its affiliates and subsidiaries can accept no liability for any direct or consequential loss arising from use of this document or its contents. At any time, or its employees may have a position, subject to change, in any securities or instruments referred to, or provide services to the issuer of those securities or instruments.