JEDDAH, 19 February 2006 -- The Saudi dairy giant Almarai Company is expanding its production capacity by acquiring Al-Safwa Dairies, the milk production and processing unit of Al-Jouf Agricultural Development Co. Almarai announced yesterday that it acquired Al-Safwa Dairies for SR22 million ($5.86 million). This acquisition is part of Almarai's strategy to acquire small and non-performing Saudi dairy companies.
After acquiring Al-Safwa Dairies, Almarai expects to increase its production capacity by 60,000 liters per day, which is the existing level of Al-Safwa's milk production. Almarai currently produces 1.6 million liters of milk per day thus becoming the largest dairy producer and exporter in the Kingdom.
Al-Safwa plant was dedicated to meet the demand of milk in Al-Jouf area. Through the new acquisition, Almarai's distribution network in Al-Jouf area will expand further.
Earlier, Almarai acquired Green Farms Dairies through a SR17 million ($4.5 million) deal last year. According to Almarai's managing director, Abdul Rahman Al-Mohanna, big Saudi dairy companies are embarking on an acquisitive strategy to bail out small and non-performing companies. The main problem with these companies, he added, is that they lack financial resources that allow them to market their products. Therefore, making the acquisition would result in a win-win situation for all involved parties.
In January, Almarai announced a net profit of SR106.9 million ($28.5 million) in the fourth quarter of 2005, up 13.1 percent from a year earlier. The company's net profit for 2005 was SR386 million ($102 million), up just 4.3 percent from the previous year. Almarai's assets increased 10.5 percent in 2005 to SR1.43 billion mainly after the company invested more than SR677 million in a new plant in the Al-Kharaj province.
By Wael Mahdi
© Arab News 2006
