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Earnings Boost seen for Dairy Producers
Saudi Gazette
Published in The Saudi Gazette on 18 - 03 - 2008

wide price rise of fresh milk and laban in Saudi Arabia, as well as similar increases in the UAE, will help boost the earnings of dairy producers this year, a recent study said.
The increase of prices of dairy products will help Almarai - the Gulf's largest integrated food and dairy producer, operating out of Saudi Arabia - to boost both the top line and the bottom line by about 20 percent for the 2007 to 2012 period, the Shuaa Capital report said.
It said revenues and net income of Almarai is expected to top SR8.8 billion and SR1.5 billion respectively by 2012.
For 2008, it forecast year-on-year net income growth of 24.6 percent to SR831 million on the back of 24.8 percent year-on-year revenue growth to SR4.7 billion resulting from the implementation of price rise in the dairy side of the business.
Propelled by this expected growth, the firm has given Almarai a “buy” recommendation based on a target price of SR164.5 per share, implying a 21.4 percent upside to the current market price.
Shuaa Capital said growth will be further fuelled by the rise in health conscious behavior of consumers, low interest rate environment and the increasing consumer awareness across the GCC of inflationary pressures on various economic sectors, including food.
The Kingdom is the largest dairy producer in the region, followed by the UAE. It is also the largest consumer, as estimated total consumption of dairy products in Saudi Arabia was 3.58 million LME (liquid milk equivalent) tons in 2006, versus 0.75 million LME tons for the UAE market.
In terms of raw milk production as of 2005, Saudi Arabia represents just about 0.2 percent of total global fresh milk production, far behind top producing regions such as the European Union and the United States, which are responsible for a combined 42 per cent of global milk production for the year. __


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