Tanmiah Food Company, a market-leading provider of fresh and processed poultry and other meat products, has seen its nine-month (9M) net profit attributable to owners of the company decline 21.9% YoY to SR49.6 million ($13.22 million).

 

The decline was as a result of the continued investments in capacity and expansion of food franchise operations.

 

The company however demonstrated a solid 21.5% year-on-year (YoY) increase in revenues to SR1.52 billion, supported by an 18% rise in fresh poultry sales. EBITDA remained at the same level, reflecting a margin of 12.1%. 

 

More investments

Building on the foundation laid by the Memorandum of Understanding signed earlier this year between Desert Hills Veterinary Services Company Limited (DHV), a wholly owned subsidiary of Tanmiah, and MHP SE will see more than SR200 million invested in farming operations with the capacity of more than 1 million parent stock expected to produce approximately 175 million hatching eggs annually, a state-of-the-art hatchery and a poultry feed mill. 

 

DHV will hold a 55% and MHP 45% stake in the joint venture, respectively. Furthermore, the recent MoU with Vibra Agroindustrial will enable Tanmiah to potentially expand its production capacity, thus reinforcing the kingdom’s food security and self-sufficiency objectives.

 

Zulfiqar Hamadani, CEO of Tanmiah, commented: “We concluded the first nine months of the year with a robust improvement in our top-line performance, a testament to the growth delivered through our fully integrated business model. We are proud of the sustained improvement achieved across our business segments, with fresh poultry continuing to lead this growth. 

 

Success of Popeyes

“The tremendous success of Popeyes in KSA, following the launch of our food franchise vertical in 2021, continues, with revenues more than tripling during the nine months. We continue to invest in diversification initiatives for our product portfolio and have ended the period with 36 stores now in operation in KSA. Our top priority at Tanmiah is to provide high-quality products within KSA and the region through sustainable and innovative production practices while evolving our portfolio to address the changing needs of our customers.”

 

Ahmed bin Sharaf Osilan, Executive Board Member and Managing Director of Tanmiah, said: “Tanmiah continues to focus on investing for the future through strengthening our core business segments, enhancing our capacity, diversifying our revenue streams, and establishing new strategic partnerships. By collaborating with MHP SE, a leading international food and agrotech group in Europe, and Vibra Agroindustrial S.A., a leading international poultry producer and exporter based in Brazil, we aim to boost food security and self-sufficiency in the kingdom. This will be achieved through fostering innovation, increasing domestic employment opportunities, and implementing global best practices in food production and distribution. 

 

“As a leading player in the region, Tanmiah remains committed to supporting the fundamental objectives and values of Saudi Vision 2030 with a continued dedication to the highest standards of quality, innovation, and sustainability. By leveraging the favourable dynamics of the domestic ecosystem and the momentum of our operations, we remain focused on generating sustainable long-term returns for our shareholders.”

 

Segmental revenue analysis 

The growth in the topline performance was predominantly due to the expansion of sales volumes across the company’s portfolio of product and service lines.

 

Fresh Poultry sales, the most significant contributor to Tanmiah’s revenues (83%), increased 18% YoY in 9M23 to SR1.26 billion from SR1.07 billion during the same period last year. The segment’s positive performance is supported by continued growth in sales volumes as well as Tanmiah’s production capacity expansion, from 456,000 birds per day as of December 31 2022 to 500,000 birds per day as of September 20, 2023. 

 

Animal Feed and Health revenues grew by 20% YoY to SR192.6 million from SR161.1 million, primarily due to increased demand for animal health products and equipment. 

 

Food franchise operator revenues increased more than three-fold to SR 60.5 million in 9M23, from SR16.5 million in 9M22. During the period, Tanmiah opened 23 POPEYES stores across the kingdom, bringing the total to 36 operational outlets as of September 30, 2023.

 

Income statement analysis

Cost of Sales increased 24% YoY to SR1.17 billion in 9M23, from SR947.3 million in 9M22, due to Tanmiah’s fresh chicken production capacity expansion, increase in sales volumes, and expansion of Popeyes stores during the period. Gross profit increased 14% YoY to SR343.3 million from SR301.0 million in 9M22. 

 

EBITDA decreased slightly by 0.9% to SR184.2 million in 9M23, compared to SR185.9 million in 9M22, supported by the solid top-line performance

 

Net Profit attributable to the owners of the company declined 21.9% to SR49.6 million in 9M23, from SR63.5 million in 9M22. 

 

Balance sheet analysis 

Tanmiah ended the period with SR106.2 million in cash and cash equivalents.

 

Total borrowings declined to SR285.8 million as of September 30, 2023, from SR308.4 million at the end of 2022. 

 

Capex increased from SR82.7 million in 9M22 to SR125.8 million in 9M23. The planned capital expenditure in the next five years will focus on ramping up primary processing, feed milling and hatching capacities, in addition to expanding food franchise operations, thus enabling the company to seize new growth opportunities.

 

Growth strategy 

Tanmiah’s fully integrated and highly efficient business model, positions it for growth on local, regional, and global fronts, underpinned by favorable market trends. The global halal food market is expected to grow at an estimated CAGR of 10.8% during 2023-2028, according to industry reports.

 

The Saudi government continues to implement various initiatives to reinforce the domestic economy and  food sector and achieve self-sufficiency in food production. For instance, the Agricultural Development Fund has signed a memorandum of understanding with the Reef National Foundation to increase the efficiency and productivity of local farmers. 

 

This and other strategic measures are providing a favourable environment for Tanmiah to capture multiple growth opportunities and further enhance its positioning in the market. 

 

Diversification initiatives by the company include the growth of Tanmiah’s food franchise vertical, which was launched in 2021, underpinned by the company’s strategy of expanding the footprint of Popeyes across the kingdom and the broader region.--TradeArabia News Service