Introduction
Al Marai is a leading food and dairy company in Saudi Arabia. In the MENA region, it has the largest vertically integrated dairy business. Its extensive portfolio of brands, large distribution network, and commitment to quality and innovation make it a significant force. Al Marai is a dairy industry leader, supplying customers in Saudi Arabia and other countries with a diverse range of products, including milk, cheese, eggs, juice, and yogurt.
Industry Analysis
Saudi Arabia’s dairy sector is highly competitive, with numerous national and international players vying for market share. The industry is further subdivided into two major categories: fresh and processed dairy products. Al Marai is a significant player in both categories, with a strong presence in fresh dairy products (milk, yogurt, cheese, and eggs) and processed dairy products (UHT milk, cheese spread, and flavored milk).
The Saudi dairy sector has experienced significant growth and is projected to continue expanding in the years to come. The industry is fueled by the country’s growing population and increased demand for dairy products. The Saudi government has also supported the sector, providing incentives to encourage dairy product production. Saudi Arabia’s dairy industry is highly regulated, with numerous government regulations in place to ensure safety and quality.
Peer Analysis
The following Al Marai peer analysis helps assess the company’s market position and growth potential in relation to its peers.
Growth
It exceeds the industry average of 8.9% growth. Al Marai’s net profit climbed at an 8.2% CAGR throughout the same period, exceeding the industry average of 6.7%, meaning that the company outperformed its counterparts regarding revenue and profit growth.
Financial Performance
Al Marai has a higher return on equity (ROE) than the industry average. This implies that the firm is utilizing its capital more effectively than its competitors. The company’s net profit margin of 10.8% is also greater than the industry average of 8.2%, indicating that Al Marai has successfully increased its sales income. Its current ratio of 1.5 is higher than the industry average of 1.2, indicating that the company is better positioned to meet its short-term obligations. Al Marai’s debt-to-equity ratio of 0.5 is also lower than the industry average of 0.7, indicating that the firm is more capable of managing its debt effectively.
Portfolio of Products
Al Marai’s product portfolio includes dairy, juice, bakery, and prepared dishes. The company’s dairy products are well-known and popular in the Middle East. Its juice goods are likewise well-liked and have a considerable market presence. Bread and pastries from Al Marai are very prominent and have a significant presence in the region. The company’s prepared food products are popular in the region and have a considerable market presence.
Markets
The company’s goods are well-known and famous in the Middle East, where it is the top food and beverage firm. The corporation has also expanded into Africa and Asia, with a substantial market presence. Overall, Al Marai Company’s peer research indicates that it has outperformed its counterparts in terms of revenue and profit growth. The company’s product range is diverse, has a significant presence in the Middle East and other foreign markets, and has a greater return on equity than the average in the industry.
Competitor Profile
Al Marai is a leading dairy company in Saudi Arabia and the Middle East. It is the greatest vertically integrated dairy company in the MENA region, boasting a strong portfolio of brands, a broad distribution network, and a steadfast commitment to innovation and quality. Its main competitors in the Saudi Arabian market include Saudi Dairy & Foodstuff Company (SADAFCO), Al Safi Danone, Al Mulla Group, and Al-Fozan Group.
SADAFCO
It is the sector’s second-largest player, producing a diverse range of dairy products, including milk, cheese, yogurt, and ice cream. SADAFCO has an extensive distribution network that covers the MENA region. SADAFCO has also made significant investments in research and development (R&D) and has a diverse product portfolio.
Al Safi Danone
It is a joint venture between Nestlé and Almarai that manufactures a wide range of dairy products, including milk, yogurt, and ice cream. The company has a strong presence in the MENA region and has successfully created a diverse product portfolio. Al Safi Danone has established an efficient distribution network and invested in research and development.
The Al Mulla Group
As a major participant in the Saudi dairy industry, the company produces a diverse portfolio of products, including milk, cheese, and yogurt. This entity has successfully introduced innovative products to the market and possesses a well-developed distribution network spanning the MENA region, supported by considerable investments in R&D.
Al-Fozan Group
The Al-Fozan Group is a key entity in the Saudi dairy industry, offering a variety of products, including milk, cheese, and yogurt. The company maintains a strong presence across the MENA region, supported by significant R&D investment and a robust distribution network. A consistent focus on consumer satisfaction has enabled the company to successfully launch new products.
Income Statement
Table 1 – Income Statement
The Al Marai Company’s income statement provides information about the company’s performance over a specific period. This statement enables investors and analysts to assess the company’s financial health and performance. It provides an overview of how the company generates revenue, spends its money, and the amount of profit it makes.
According to the Al Marai Company’s income statement for the fiscal year ending December 2020, the company generated revenues of SAR 15,356,948 million, an increase from SAR 15,849,720 million the previous year. Higher sales of dairy and beverage products were primarily responsible for the revenue increase. The operating margin decreased from 16.42% to 12.71%, while EBITDA also fell from SAR 4,637,397 million to SAR 4,431,998 million. Both declines in profitability metrics were primarily caused by the increased cost of raw materials and other operational expenditures. The EBITDA margin for the company was 0.3%, down from 0.28% the previous year.
The company’s net income decreased to SAR 1,984,361 million from SAR 1,563,543 million the previous year. Increased spending on raw materials and other expenses resulted in a net margin of 13.2%, which is lower than the 10.52% reported in the previous year. The company’s capital expenditure was SAR -2,143,806 million, an increase from SAR -1,662,568 million the previous year. This increase in capital expenditure was primarily the result of investments in new manufacturing facilities and other projects. The company’s total debt (including interest-bearing debt) was SAR 11,677,969 million, a decrease from SAR 10,223,377 million the previous year. This decrease was primarily due to debt repayment. The company’s interest coverage ratio was 5.02, down from 5.77 the previous year.
The company’s net worth was SAR 15,016,037 million, up from SAR 15,489,308 million the previous year. This increase was primarily due to increased profits and a decrease in debt. The company’s total assets were SAR 32,344,306 million, down from SAR 31,754,302 million the previous year. This drop was primarily due to a decline in current assets. The company’s cash balance was SAR 1,618,331 million, up from SAR 1,892,596 million the previous year. The company’s net debt fell to SAR 8,330,781 million from SAR 10,059,638 million in the preceding year, a change largely driven by debt repayment.
Cash Flow
The company has a high current ratio, indicating its liquidity. The current ratio in 2020 was 1.56, indicating that the company had sufficient liquid assets to meet its short-term liabilities. The company’s exchange rate is predicted to increase to 1.07 in 2021 and then to 1.6 in 2022, indicating a solid financial position that will enable it to pay off its debts and obligations on time. Over the last three years, the company has had the following changes in cash flow:
- Leverage ratio decreased. It was 1.07 in 2020, indicating that it had a significant debt compared to its equity. In 2021, it fell to 0.98, and in 2022, it further declined to 0.95, indicating that the company’s financial status has enhanced, as it can now pay off its debts more quickly.
- The net debt-to-EBITDA ratio also decreased. As of 2020, the ratio was 2.17, indicating that it was highly leveraged and had significant debt relative to its earnings. In 2021, it fell to 1.88; in 2022, it fell even further to 1.72, proving that the company’s financial situation has improved, as it can pay off its debts more quickly.
- The debt-to-equity ratio decreased. It was 0.78 in 2020, indicating that the company had a considerable debt in relation to its equity. In 2021, it fell to 0.66; in 2022, it fell even further to 0.64, indicating that the company’s financial situation got better, as it can liquidate its debts faster.
- Cash flow has steadily increased. The cash flow in 2020 was 15,849,720 million Saudi Riyals, up from 15,356,948 million Saudi Riyals in 2019. It will rise to 18,722,258 million Saudi Riyals in 2021. Demonstrating the company’s improved financial position, it can generate more cash from operations.
- Decrease in the operating margin. The decrease in the operating margin in 2020 was 16.42%, indicating that the company was generating a higher profit from its operations. In 2021, it fell to 12.71%. In 2022, it fell even further to 12.16%, indicating declining profitability, as the company is no longer generating as much profit from its operations as it had in the past.
- EBITDA decreased. The EBITDA margin in 2020 was 0.30%, indicating that the company was profiting more from its operations. In 2021, it fell to 0.28%. In 2022, it fell even further to 0.25%, indicating the company’s declining profitability, as it is generating less profit than in the past.
- Decrease in the net marginality. The net margin stood at 13.2% in 2020, demonstrating efficient profit generation. This figure then dropped to 10.52% in 2021 before falling again to 9.88% in 2022. This consistent decrease highlights the company’s declining ability to convert revenue into profit from its operations.
Over the past three years, Al Marai Company’s cash flow in Saudi Arabia has increased steadily. The company’s financial position is improving, as evidenced by a solid current ratio, a decreasing leverage ratio, and a declining net debt-to-EBITDA ratio. However, its operating margin, EBITDA margin, and net margin have decreased over the last three years, indicating a decline in profitability.
Balance Sheet
It is divided into two parts: assets and liabilities. Total assets increased from 2019 to 2020, then decreased slightly in 2021, from 32,344,306 to 31,754,302. Total assets decreased from 1,618,331 to 1,892,596 and from 8,723,000 to 8,099,000 due to a reduction in cash and inventory. Cash decreased, but trade and other receivables climbed, increasing from 4,591,000 to 5,198,000 and from 6,305,000 to 6,845,000, respectively. Long-term debt decreased from 5,500,000 to 5,000,000, while short-term debt rose from 14,777,269 to 14,264,696, resulting in total liabilities decreasing from 20,277,269 to 19,264,696.
The company’s overall debt has also dropped, from 11,677,969 to 10,223,377 to 10,067,993, with an increase in Interest Coverage from 5.02 to 5.77 to 5.3. Tangible net worth increased from $15,016,037 to $15,489,308 to $15,837,264, and net debt decreased from $10,059,638 to $8,330,781 to $8,064,275, resulting in a decrease in leverage from 1.07 to 0.98 to 0.95. The company’s current ratio increased from 1.56 to 1.07 to 1.6, while the debt-to-equity ratio decreased from 0.78 to 0.66 to 0.64. Finally, the company’s net debt to EBITDA ratio fell from 2.17 to 1.88 to 1.72, while the Debt Service Coverage Ratio (DSCR) rose from 2.85 to 1.45 to 2.99.
Overall, the Al Marai Company’s Balance Sheet has undergone significant changes in the last three years, which have benefited its financial stability and performance. Increases in total assets and tangible net worth, along with decreases in debt and leverage, have contributed to the company’s overall financial health.
Debt Maturity/Liquidity
Over the last three years, the Al Marai Company has maintained a prudent debt maturity/liquidity profile. The total debt (including interest-bearing debt) as of the end of 2020 was 11,677,969, while the total assets were 32,344,306. The debt-to-asset ratio was 36.3%, within the industry’s norm, while the net debt-to-EBITDA ratio was 2.17, also within the industry’s norm. In 2021, the company reduced its total debt by 1,454,592; in 2022, it decreased by 1,155,376. The company has been able to reduce its overall debt levels, which is good for its financial health. Over the last three years, the leverage ratio has also decreased from 1.07 to 0.95, implying that the company has been able to decrease its overall debt levels.
The company’s interest coverage ratio has improved over the last three years. In 2020, the business had an interest coverage ratio of 5.02, while in 2021 and 2022, the ratios were 5.77 and 5.3, respectively. The increase in the interest coverage ratio indicates that the company can manage its debt obligations and pay off its debt on time. Additionally, in 2020, the company had a current ratio of 1.56, which decreased to 1.07 in 2021 and then increased to 1.60 in 2022. The company’s current assets have consistently covered its current liabilities over the past three years.
Conclusion
In conclusion, Al Marai is the leader of the Saudi dairy sector, with an impressive portfolio of brands, a wide distribution network, and a solid commitment to innovation and quality. Al Marai’s main competitors are well-established industry players with extensive product portfolios and well-developed distribution networks. Al Marai is well-positioned to maintain its leadership position in the industry over the coming years.