Tanmiah Food Company (“Tanmiah” or the “Company”, 2281 on the Saudi Exchange), a market-leading provider of fresh and processed poultry and other meat products, animal feed and health products, and a foods brand franchise operator, today announced its results for the first quarter ending on 31 March 2023, reporting a significant improvement in net profit attributable to owners of the company, from SAR 1.5 million to SAR 21.0 million.
As per the applicable accounting standards, the 1Q2022 financial figures have been adjusted to reflect the Tyson Foods transaction, whereby the further processed products business is now classified as discontinued operations.
Revenues increased 42.2% year-on-year (“YoY”) to SAR 484.5 million, primarily driven by a 37.4% rise in fresh poultry sales. Gross margin substantially improved from 20.7% in 1Q2022 to 24.8%, while EBITDA of SAR 66.2 million (+164.8% YoY) yielded a margin of 13.7%.
Zulfiqar Hamadani CEO of Tanmiah, commented:
“Tanmiah reported healthy financial indicators during the first quarter of 2023, with an improvement in revenues, as we are witnessing a sustained increase in sales volumes across our core business segments. Fresh poultry continued to drive the growth in revenues, while our food franchise operations are proving to be a success story, with revenues more than quadrupling when compared to last year.
Creating tangible value for our shareholders, customers, and broader stakeholder groups, is a top priority for us at Tanmiah, and we are delighted to be rolling out several strategic measures, that focus on growing our operations in a sustainable, profitable, and responsible manner. We continued to progress well in terms of achieving the objectives of our strategic partnership with Tyson Foods and are targeting to jointly invest in the expansion of the further processing capacity of SFPC to nearly 100,000 metric tons annually.
As we remain agile and cater to our customers’ evolving needs and preferences, while enhancing the innovation and quality of our product offerings, we launched Tanmiah Life – a Halal and Saudi Made fresh poultry line with plant-based nutrition, enriched with Omega-3, which is the first of its kind in the Middle East.”
Ahmed Osilan, Managing Director of Tanmiah said:
“Tanmiah Food Company achieved solid financial results during the first quarter, and in light of our focus on returning value to our shareholders, the Board of Directors recommended the distribution of cash dividends of SAR 3.5 per share for FY2022.
In line with the efforts to accelerate growth further, His Excellency the Minister of Environment, Water and Agriculture launched new projects by Tanmiah, as part of the company’s strategic plan for 2030, during the ceremony held at the Ministry’s headquarters in Riyadh. Several MoUs were signed with each of Agricultural Development Fund (ADF), Saudi Investment Recycling Company (SIRC), and National Center for Vegetation Cover Development and Combating Desertification (NCVC). Tanmiah is looking to launch the “10miah farmers initiative” with ADF and will work together with SIRC to recycle poultry waste and reduce carbon emissions, in addition to collaborating with NCVC. Furthermore, an MoU was signed between Tanmiah’s subsidiary, Desert Hills for Veterinary Services and MHP, Europe’s leading producer of poultry meat, to establish and operate a number of poultry breeding facilities across the Kingdom.
We would like to express our sincere appreciation to all government entities for such significant initiatives, that are targeted towards contributing to Vision 2030’s objectives of attaining food security and self-sufficiency in the Kingdom.”
Tanmiah reported revenues of SAR 484.5 million for 1Q2023, up 42.2% YoY from SAR 340.6 million in 1Q2022. This was essentially supported by a sustained improvement in sales volumes across all segments, particularly fresh poultry. Food franchise operations also achieved a remarkable enhancement in revenues from SAR 4.0 million to SAR 17.0 million.
Fresh Poultry sales, the most significant contributor to Tanmiah’s revenues (83.8%), increased 37.4% YoY in 1Q2023 to SAR 406.0 million from SAR 295.4 million. The growth in revenues can be attributed to a continued rise in sales volumes as well as an increase in production capacity during the period, from 456,000 birds per day as at 31 December 2022, to 475,000 birds per day as at 31 March 2023.
Animal Feed and Health revenues grew by 49.2% YoY to SAR 61.5 million from SAR 41.3 million, driven by increased demand for animal health products and equipment.
Food franchise operator revenues significantly increased from SAR 4.0 to SAR 17.0 million in 1Q2023, marking the segment’s best performing quarter since the launch of the Company’s food franchise vertical in 2021. During the period, Tanmiah opened 6 POPEYES® stores in the Kingdom, bringing the total to 26 operational outlets as of 31 March 2023.
Income Statement Analysis
Cost of Sales increased 34.9% YoY to SAR 364.5 million in the first quarter, compared to SAR 270.2 million, due to the rise in sales volumes during 1Q2023. Gross profit increased significantly by 70.3% YoY to SAR 120.0 million, from SAR 70.4 million, in line with the continued rise in sales volumes and recovery in margins, as well as enhanced utilization of assets and operational efficiencies.
EBITDA increased substantially from SAR 25.0 million in 1Q2022 to SAR 66.2 million, supported by the solid top-line performance, which has largely outpaced the 26.2% YoY rise in selling, general, and administrative expenses.
Net Profit attributable to the owners of the company jumped from SAR 1.5 million to SAR 21.0 million in 1Q2023.
Balance Sheet Analysis
Tanmiah ended the period with a cash position of SAR 232.8 million, compared to SAR 267.1 million as of 31 December 2022.
Total borrowings increased from SAR 308.4 million at the end of December 2022 to SAR 315.9 million.
Capex increased from SAR 19.4 million in 1Q2022 to SAR 37.2 million in 1Q2023. Planned capital expenditure in the next few years will focus on ramping up feed milling and primary processing capacities, thus enabling the Company to seize new growth opportunities.
Through leveraging its fully integrated and highly efficient business model and capitalizing on its extensive market expertise, Tanmiah is strongly positioned to unlock multiple growth avenues both domestically and overseas, in the rapidly expanding global Halal food market. With operational excellence at the core of everything it does, the Company will drive innovation across the entire value chain and continue to explore emerging opportunities for diversifying its product and service offerings, across new geographies. Tanmiah is putting in place wide-ranging strategic and well targeted investments, which are expected to pave the way for long-term and sustainable growth in the years to come, in line with its commitment to the Kingdom’s goals of ensuring food security and self-sufficiency.
Operating within a conducive business environment, largely supported by transformative government policies and solid underlying economic fundamentals, Tanmiah is expected to witness an accelerated pace of growth in the future. According to the recently published data by General Authority for Statistics, the Kingdom’s GDP growth in 2022 has outpaced its G20 peers, at 8.7%, which marks the country’s highest annual growth rate in the last decade.
Furthermore, Saudi Arabia has recently launched four special economic zones, namely, the King Abdullah Economic City SEZ, Jazan SEZ, Ras Al Khair SEZ and Cloud Computing SEZ, located in the King Abdulaziz City for Science and Technology. The objective of these zones is to provide financial and non-financial incentives to companies, including competitive corporate tax rates, duty-free imports of machinery and raw materials, 100% foreign ownership, and streamlined business set-up procedures, to attract large-scale foreign investments into the Kingdom, on its way to becoming a global business hub.
Tanmiah implements a strategic, and integrated approach to achieving environmental, economic, and social sustainability through its “Giving, Earning, and Sustaining model.” Commitment to sustainability is built on 3 key pillars: Sustaining People, Sustaining the Planet and Sustaining Agriculture.
The Company established its ESG Committee in 2022, which has finalized the focus areas that are aligned to the economic and social goals of the Kingdom’s Vision 2030 as well as the United Nations’ Sustainable Development Goals.
The Committee is looking to adopt a suitable international ESG reporting framework over the course of the year, whose objective is to provide meaningful and measurable disclosures to investors and other stakeholders about Tanmiah’s ESG activities, in alignment with international reporting standards.