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Almarai's first quarter fails to wow investors

What's Down: Analysts have maintained their 'hold' rating on Almarai, the Saudi food and drinks company, so for those not already invested it may be one to overlook for the time being.

Analysts have maintained their "hold" rating on Almarai, a Saudi food and drinks company, so it may be one to forgo for the time being.

The reason is that the company, while doing well, is not performing beyond already established expectations.

Almarai's first-quarter results were in line with the Kuwaiti lender NBK's forecasts.

The company reported revenue of 2 billion Saudi riyals for the quarter, a 17 per cent growth over the same period last year, but only 1.3 per cent above forecast.

Investors were disappointed by the company's first quarter. Almarai reported a 2.9 per cent increase in profit to 242.1 million riyals for the period.

That fell short of the 278m riyal median estimate of three analysts, according to data compiled by Bloomberg.

The shares decreased 4.9 per cent to 68.25 riyals last week when the results were posted, the biggest fall since March last year. They are now down to about 66.75 riyals.

As might be expected, recent high commodity prices are putting a strain on profit margins.

Gross profit improved 11.5 per cent in the first quarter to 707.3m riyals.

The gross profit margin dropped by 1.7 per cent. Any further sharp rises in commodity prices would have a negative impact.

Almarai's profit margin before deductions margin fell 1.1 per cent in the first quarter compared with the same period last year.

NBK analysts do not expect Almarai to show an improvement in operating margins until the third quarter of this year, mainly because of the company's strategy of procuring inventory three to six months in advance.

lmiller@thenational.ae

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