|17 February, 2019

Saudi Almarai 'satisfied' with Moody's, S&P ratings, outlook: CFO

Moody’s assigned a ‘Baa3’ rating with a stable outlook to the Saudi dairy and foodstuffs firm

A worker stands near trucks with advertisements of Beyti juice and Almarai dairy products at a new factory at Nubaria city in El-Beheira Governorate, east of Cairo, Egypt, March 12, 2016. Image for illustrative purposes.

A worker stands near trucks with advertisements of Beyti juice and Almarai dairy products at a new factory at Nubaria city in El-Beheira Governorate, east of Cairo, Egypt, March 12, 2016. Image for illustrative purposes.

REUTERS/Ehab Farouk

Riyadh – Mubasher: Almarai Company on Sunday revealed that it has been assigned investment grade credit ratings by international agencies Moody’s and Standard and Poor’s (S&P).

Moody’s assigned a ‘Baa3’ rating with a stable outlook to the Saudi dairy and foodstuffs firm on Thursday, while S&P assigned a “BBB- with a Stable Outlook/A-3” rating, Almarai said in a filing to the Saudi Stock Exchange (Tadawul).

It said it was “satisfied” with the ratings given by the two agencies.

The ratings position Almarai “with a leading credit rating among regional companies,” commented Almarai chief financial officer (CFO) Paul-Louis GAY, adding that these ratings affirm Almarai’s “strong financial position, balance sheet as well as its status on a regional and international level[s].”

In its report, S&P said its analysis of Almarai's business “balances the company's leading market positions in Saudi Arabia and the GCC region, well-known local brands, extensive distribution network, good product diversity, and a high and relatively stable profitability for the sector against its high geographical concentration to Saudi Arabia, which is seeing moderate economic growth and a capital expenditure(capex)-intensive business model.”

S&P forecast that Almarai’s free operating cash flows would range between SAR 1.2 billion and SAR 1.3 billion per annum on the back of stable earnings and lower expansion investments compared to the previous year.

Almarai’s “S&P Global Ratings-adjusted debt leverage should remain around 3.0x-3.2x in 2019-2020, assuming a consistent financial policy,” S&P stated, noting that its issuer credit ratings for the Saudi dairy and food products firm were ‘BBB-' long-term and 'A-3' short-term with a ‘stable’ outlook. S&P explained that the outlook reflected Almarai’s operating performance, which is expected to remain stable over the next two years, with low revenue growth being offset by solid pricing power and cost-saving initiatives.

On Thursday, Moody’s said its rating reflected Almarai’s leading positing in the Saudi market as well as its higher earnings before interest, taxes, depreciation, and amortisation (EBITDA).  

“Almarai's Baa3 issuer rating is supported by its strong market positions in products such as milk, cheese, butter, bakery, its well-recognised brands, its high margins thanks to a vertically integrated supply chain, manufacturing efficiencies and strict control of operating expenses, [and] its good liquidity and a prudent financial policy,” Moody's stated.

Almarai last reported a 28% year-on-year drop in its net profit after zakat and taxes in the fourth quarter of 2018 to SAR 369.6 million ($98.54 million), while it’s 2018 results also declined 8% to SAR 2.009 billion from the previous year.

Almarai’s stock last closed Thursday in the green, adding 0.54% to end at SAR 55.40.

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