(MENAFN- Mid-East.Info) Jeddah, Saudi Arabia First Milling Company (the“Company”, or“First Mills”), a market-leading Saudi milling company, today announced its financial performance for the first half (H1) and second quarter (Q2) of 2023.
TOPLINE GROWTH AND DOUBLE-DIGIT MARGINS DRIVEN BY CONSISTENT STRATEGY EXECUTION:
First Mills achieved a 4.5% year-on-year (YoY) growth in sales in H1 2023, generating a total revenue of SAR 470 million. This topline growth is attributed to the successful execution of the Company's growth strategy through its business to business and retail channels. In Q2 2023, revenue rose 3.4% YoY, reaching SAR 214 million, supported by the Company's efforts to optimize efficiencies and enhance capacities. As a result, capacity utilization for Q2 2023 reached 99%, increasing 7% compared to the same period last year.
The Company closed H1 2023 with EBITDA of SAR 166 million, flat over the same period last year reflecting healthy financial performance. In Q2 2023, EBITDA declined 18% YoY to SAR 63 million as a result of changes in seasonal sales during the Ramadan season between Q2 2022 and Q2 2023. Moreover, there was an increase in selling and distribution costs attributed to supporting the Jeddah plant with flour products during temporary shutdown of the plant's Mill C for capacity upgrades.
H1 2023 net profit declined 19% to SAR 108.7 million compared to the same period last year, mainly attributable to interest costs which began appearing in First Mills' financial statements in Q4 2022, following the completion of the merger with the parent company, Al Raha Al Safi, and the transfer of a loan to the Company which was contracted by the parent company. In spite of that, H1 2023 net profit margin reached 23%, illustrating a robust bottom-line margin. It is worth noting that excluding the impact of interest costs, the like-for-like H1 net profit of SAR 108.7 million remains in line with the previous year, indicating the robustness of the Company's core business fundamentals. Consistent with the H1 2023 performance, Q2 2023 net profit declined by SAR 26 million YoY to SAR 35 million while Q2 net profit margin stood at 17%.
MARKET LEADERSHIP, DIVERSIFIED PRODUCT PORTFOLIO, AND STRONG DEMAND FUELS GROWTH
Notably, the Company's flagship flour business achieved a 7% YoY rise in H1 2023 revenue, reaching SAR 274 million, with Q2 2023 revenue witnessing a 9% YoY increase to SAR 124 million. This was mainly fueled by the Company's ongoing strategy execution initiatives, the busy Ramadan season, and growth in the retail pack sector by 20% YoY for H1 2023 supported by Aloula brand.
Meanwhile, the bran business witnessed a 32% YoY growth in H1 2023 revenue, reaching SAR 84 million, and a 20% rise in Q2 2023 revenue amounting to SAR 41 million. These impressive gains helped offset the decline in feed revenue, which dropped 14% YoY to SAR 111 million in H1 2023 revenue.
STRONG CASH GENERATION AND ROBUST CAPEX SUPPORT SUSTAINABLE VALUE CREATION FOR SHAREHOLDERS
First Mills' unique working capital model enabled the Company to generate a robust Free Cash Flow (FCF) of SAR 120 million with an FCF Conversion Rate of 73%. This reflects the Company's commitment to efficient capital allocation and cash flow optimization.
Moreover, the strategic increase in CAPEX to SAR 17 million in Q2 2023 provides a solid foundation to propel both growth and expansion opportunities.
Commenting on the financial results, Abdullah Ababtain, Chief Executive Officer of First Mills, said,
“In the first half of 2023, First Mills demonstrated its continued ability to drive revenue growth from a firm foundation of large-scale production capabilities, high utilization rates, and efficient operations. Our commitment to operational excellence has allowed us to maximize productivity, effectively meeting the growing demand for our products.
While we acknowledge the challenges to net profit in Q2 2023, we believe we have the suitable strategy and execution plan in place to deliver on our key projects – such as the PESA Mill, the Pre-Mix Plant, Durum Mil, and Mill C expansion in the Jeddah Plant – which we collectively expect to increase our capacity, boost our product variety, and have a positive long term financial impact.
At the same time, First Mills is actively managing costs to improve its financial position by reducing net debt and progressively deleveraging the balance sheet, allowing for greater financial flexibility to fund future endeavors.
Looking ahead, we are keen to explore various avenues for future growth. As part of our strategic roadmap, we are excited to introduce new product categories, which will further diversify our portfolio to cater to a wider market. Additionally, we are upgrading our mills to enhance production capacities and increase efficiencies, which we believe will help grow our market share and solidify our position as the first partner of choice in the food and feed sectors in the Kingdom.
Through our focused approach, dedication to excellence, and clear strategic roadmap, First Mills is poised for a promising future of growth and success.”
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