Saudi Arabian dairy company Almarai reported on Sunday a drop in second-quarter (Q2) earnings for 2019, triggering a retreat in the company’s shares.

Almarai’s Q2 2019 net profit after zakat and tax amounted to 582.5 million Saudi riyals ($155.3 million), compared to 661.4 million riyals in Q2 2018, an 11.93 percent drop, in line with Arqaam Capital’s estimates.

The company’s results arrived “in line with estimates as raw material and finance cost growth impede earnings,” Michel Salameh, associate director, research at Dubai-based Arqaam Capital, told Zawya.

The company’s funding costs rose by 41.2 million riyals compared to Q2 2018, Almarai said in a bourse filing, adding that its input costs also rose, mainly driven by higher alfalfa, feed and labor costs.

Almarai’s Q2 2019 sales rose 2.72 percent to 3.77 billion riyals, compared to 3.67 billion riyals in the same period last year.

“Poultry continues to be the star performer driving sales and softening the EPS decline,” Salameh said.

The Poultry category’s profit rose by 24.2 percent according to the bourse filing.

The company’s shares were trading 2.65 percent lower at 51.5 riyals by 12:41 GST, but have gained 7.5 percent since the start of the year, according to data from Eikon.

Salameh said that Almarai currently trades at a (+) 30 percent premium compared to regional peers, noting that Arqaam Capital maintains a hold rating on the company due to “weak growth and operational challenges.”

Reporting by Gerard Aoun; Editing by Seban Scaria)


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