Saudi dairy companies face headwinds in 2021 as lower sales stifle profits
Cost of sales as a percentage of revenue also jumped by 3% as the government lifted its subsidy on some items of animal feed
Sadafco picture provided by CNBC Arabia
By Ziad Sabbah, Arab News
Saudi-based dairy companies showed a slump in profits as the sector experienced a decline in sales, according to Tadawul.
Financial reports from the Saudi stock exchange revealed National Agricultural Development Co. (NADEC) made losses of SR7.8 million ($2.1 million) in the nine months to 30 September 2021.
This was partly driven by a drop in company sales which went down by 5.1 percent due to a steep decline in agricultural sector sales following an increase in the VAT rate.
Cost of sales as a percentage of revenue also jumped by 3 percent as the government lifted its subsidy on some items of animal feed. This helped contribute to the 13.5 percent fall in gross profit.
Moreover, general and administrative expenses increased by 4 percent.
In addition, Saudi Dairy and Foodstuff Co. (SADAFCO) experienced a 35 percent decline in its net profit for the 6-month period ending on September 30 2021. Profits fell from SR140.8 million in the same period last year to SR91.7 million.
The slip in profits was, again, fuelled by less revenue, higher raw material prices and a rise in VAT rates (from 5 to 15 percent) in the second quarter of 2020.
Sales dropped by 7.2 percent when compared to the same period last year while gross profits fell noticeably by 13.4 percent. Sales and distribution expenses slightly rose from 14 percent to 15 percent as well.
Almarai, a dairy giant in the Kingdom, also saw its profits decline significantly by 22.5 percent as it was similarly hampered by the difficult conditions in the sector.
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