Saudi Arabia's Almarai Co., the biggest integrated dairy foods producer in the Middle East, said Wednesday it fully acquired Argentinian farm operator Fondomonte for SR312 million ($85 million) to help secure feed sources abroad for the Saudi firm's cattle and chicken operations. Almarai, in a statement posted on the Saudi bourse website, said the 100 percent acquisition of Fondomonte will be financed from operational cash flow and from Islamic banking facilities. The Riyadh-listed dairy producer said the deal was in line with the direction of the Saudi government “toward securing supplies and conserving local resources.” Saudi Arabia imports the bulk of its food needs. Its overseas investments in farmland in recent years are in Pakistan, Sudan and Ethiopia. In 2008, the Kingdom decided to reduce wheat production by 12.5 percent a year – abandoning a 30-year-old program to grow its own – having achieved self-sufficiency but at the cost of depleting the Kingdom's limited water supplies. Almarai has cited rising costs of raw materials, including feed, as one of the main pressures on its margins this year. The company in October reported a slight third-quarter net profit increase of 1.2 percent year on year to SR429.7 million. The deal was more about securing raw agricultural material abroad, rather than drawing down Saudi Arabia's own natural resources by growing it at home, NCBC equity analyst Farouk Miah said. The Fondomonte deal is the company's first outright buy of a supply source of raw materials abroad, as part of a larger trend of Saudi producers turning to farms abroad for raw stocks, he added. Fondomonte owns and operates three farms in Argentina, covering more than 12,00 hectares and producing barley, maize, soybean, wheat, sorghum and sunflower, according to the company website. Almarai shares were last trading up 2.1 percent at SR98.50 in a positive overall market.
