First Milling Company, a market-leading Saudi milling company, said it achieved a 4.5% year-on-year (YoY) growth in sales in H1 2023, generating a total revenue of SAR470 million ($125.28 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 SAR214 million, supported by the company’s efforts to optimise efficiencies and enhance capacities. As a result, capacity utilisation for Q2 2023 reached 99%, increasing 7% compared to the same period last year, it said.
The company closed H1 2023 with EBITDA of SAR166 million, flat over the same period last year reflecting healthy financial performance. In Q2 2023, EBITDA declined 18% YoY to SAR63 million as a result of changes in seasonal sales during the Ramadan 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, it said.
H1 2023 net profit declined 19% to SAR108.7 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.
Excluding the impact of interest costs, the like-for-like H1 net profit of SAR108.7 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 SAR26 million YoY to SAR35 million while Q2 net profit margin stood at 17%.
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Notably, the company's flagship flour business achieved a 7% YoY rise in H1 2023 revenue, reaching SAR274 million, with Q2 2023 revenue witnessing a 9% YoY increase to SAR124 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 SAR84 million, and a 20% rise in Q2 2023 revenue amounting to SAR41 million. These impressive gains helped offset the decline in feed revenue, which dropped 14% YoY to SAR 111 million in H1 2023 revenue.
First Mills’ unique working capital model enabled the company to generate a robust Free Cash Flow (FCF) of SAR120 million with an FCF Conversion Rate of 73%. This reflects the company’s commitment to efficient capital allocation and cash flow optimisation, the statement said.
Moreover, the strategic increase in Capex to SAR17 million in Q2 2023 provides a solid foundation to propel both growth and expansion opportunities, it added.
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 endeavours," he said.
Looking ahead, the company is 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," said Ababtain.
"Through our focused approach, dedication to excellence, and clear strategic roadmap, First Mills is poised for a promising future of growth and success,” he said. - TradeArabia News Service
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