Almarai : Financial Statements Documents

ALMARAI COMPANY

A SAUDI JOINT STOCK COMPANY

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AND REVIEW REPORT

FOR THE THREE-MONTH PERIOD ENDED

31 MARCH 2024

ALMARAI COMPANY

A SAUDI JOINT STOCK COMPANY

ALMARAI COMPANY

A SAUDI JOINT STOCK COMPANY

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2024

1. THE COMPANY, ITS SUBSIDIARIES AND ITS BUSINESS DESCRIPTION

Almarai Company (the "Company") is a Saudi Joint Stock Company, which was converted from a limited liability company to a joint stock company on 2 Rajab 1426 A.H. (8 August 2005). The Company initially commenced trading on 19 Dul Hijjah 1411 A.H. (1 July 1991) and operates under Commercial Registration No. 1010084223. Prior to the consolidation of activities in 1991, the core business was conducted between 1977 and 1991 under the Almarai brand name.

The Company's Head Office is located at Exit 7, North Ring Road, Al Izdihar District, P.O. Box 8524, Riyadh 11492, Kingdom of Saudi Arabia ("Saudi Arabia").

The Company and its subsidiaries (together, the "Group") are a major integrated consumer food and beverage Group in the Middle East with leading market share in Saudi Arabia. It also operates in Egypt, Jordan and other Gulf Cooperation Council ("GCC") countries.

Dairy, Fruit Juices and related food business is operated under the "Almarai", "Beyti" and "Teeba" brand names. All raw milk production, Dairy and Fruit Juice product processing and related food product manufacturing activities are undertaken in Saudi Arabia, United Arab Emirates ("UAE"), Egypt and Jordan.

Dairy, Fruit Juices and related food business in Egypt and Jordan operates through a fully owned subsidiary International Dairy and Juice Limited ("IDJ"). The Group manages IDJ operations through the following key subsidiaries:

Bakery products are manufactured and traded by Western Bakeries Company Limited and Modern Food Industries Company Limited under the brand names "L'usine" and "7 Days", respectively.

Poultry products are manufactured and traded by Hail Agricultural Development Company under the "Alyoum" and "AlBashayer" brand names.

Seafood products are traded under the "Seama" brand name. Ice cream products are traded under the "Almarai" brand name.

Infant Nutrition products are manufactured by Almarai Baby Food Company Limited and traded by International Pediatric Nutrition Company under "Nuralac" and "Evolac" brand names.

In territories where the Group has operations, final consumer packed products are distributed from manufacturing facilities to local distribution centres by the Group's long haul distribution fleet. The distribution centres in GCC countries are managed through subsidiaries in UAE, Oman and Bahrain and an agency agreement in Kuwait and Qatar as follows:

In other territories, where permissible by law, export sales are made through other subsidiaries.

The Group owns and operates arable farms in Argentina and in United States of America (USA), collectively referred to as "Fondomonte", through the following key subsidiaries:

The Group's non-GCC business operations under IDJ and Fondomonte are managed through Almarai Investment Holding Company W.L.L., a Company incorporated in the Kingdom of Bahrain.

The Group owns 93.5% shareholding in Pure Breed Poultry Company whose main operations are focused on poultry grandparent farming.

The Group owns 100% shareholding in Premier Foods Industries Company LLC ("Premier Foods") in Saudi Arabia. Premier Foods is primarily engaged in providing value added products (meat and poultry) to the food services industry in the Middle East.

The Group owns 100% shareholding in Bakemart FZ L.L.C and Bakemart L.L.C, based in UAE and Bakemart W.L.L based in Bahrain (collectively "Bakemart"). Bakemart is primarily engaged in frozen bakery business in UAE and Bahrain.

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ALMARAI COMPANY

A SAUDI JOINT STOCK COMPANY

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2024

1. THE COMPANY, ITS SUBSIDIARIES AND ITS BUSINESS DESCRIPTION (Continued…)

During the period ended 31 March 2023, the Group received an additional subsidy of Saudi Riyals ("SAR") 114.7 million related to food security measures to secure import of feed materials in KSA, out of which SAR 76.7 million was recognised in the Condensed Consolidated Statement of Profit or Loss for the period ended 31 March 2023 in line with the accounting policy mentioned in Note 5.22 to the last annual Consolidated Financial Statements for the year ended 31 December 2023.

Acquisitions

1. On 21 Jumada Al-Thani 1445 (5 December 2023), the Group entered into an agreement to buy warehouse facilities from Etmam Logistics based in Saudi Arabia for a value of SAR 182 million.
   The closure of the acquisition is subject to completion of certain conditions outlined in the agreement. It included certain approvals from regulatory authorities, appointment of Board of Directors and key management personnel and settlement of consideration payable with the counterparty.
   On 27 March 2024, the Group obtained General Authority for Competition ('GAC') approval for acquisition, however, other required conditions were not met as at 31 March 2024 and therefore management concluded that the financial impact of the acquisition will be incorporated in Group's Financial Statements on successful completion of these conditions.
2. On 26 Rajab 1444 A.H. (17 February 2023), the Group acquired the remaining share of 48% in IDJ, owned by PepsiCo, for a total consideration of SAR 255 million paid in cash, resulted in an increase in its shareholding from 52% to 100%. Immediately prior to the purchase, the carrying amount of the existing 48% non-controlling interest ('NCI') owned by PepsiCo was SAR 264.6 million. The purchase was accounted for as an equity transaction with owners with no impact on the profit or loss account for the period ended 31 March 2023. The difference of SAR 9.6 million between the carrying value of NCI and consideration paid was recorded under equity as part of other reserves.

Devaluation of Egyptian Currency

During the quarter ended 31 March 2024, the Egyptian Pound recorded an average 53.6% devaluation in rate against the SAR (31 March 2023: 20%). As a result, currency translation adjustment has been recorded in relation to the translation of foreign operations in Egypt.

2. BASIS OF PREPARATION

1. Statement of Compliance
   These Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standard IAS 34 'Interim Financial Reporting' that is endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements that are issued by Saudi Organization for Chartered and Professional Accountants ("SOCPA") and should be read in conjunction with the Group's last annual Consolidated Financial Statements for the year ended 31 December 2023. These do not include all of the information normally required for a complete set of Consolidated Financial Statements; however, accounting policies and selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since 31 December 2023.
2. Preparation of the Financial Statements
   These Condensed Consolidated Interim Financial Statements have been prepared on the historical cost basis except for the following material items in the Condensed Consolidated Statement of Financial Position:
3. • Derivative financial instruments are measured at fair value.
   • Equity Investment at Fair Value through Other Comprehensive Income ("FVOCI") is measured at fair value.
   • The employee retirement benefit is recognised at the present value of future obligations using the Projected Unit Credit Method.
   • Biological Assets, where fair value is reliably measurable, have been measured at fair value.

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ALMARAI COMPANY

A SAUDI JOINT STOCK COMPANY

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2024

1. BASIS OF PREPARATION (Continued…)
   2.3 Use of Judgments and Estimates
   In preparing these Condensed Consolidated Interim Financial Statements, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
   The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual Consolidated Financial Statement
2. FUNCTIONAL AND PRESENTATION CURRENCY
   These Condensed Consolidated Interim Financial Statements are presented in Saudi Riyals ("SAR"), which is the Company's functional and Group's presentation currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
3. MATERIAL ACCOUNTING POLICIES

4.1 New Standards, Amendment to Standards and Interpretations

There are new standards and number of amendments to standards which are effective from 1 January 2024 and have been explained in Group's annual Consolidated Financial Statements, but they do not have a material effect on the Group's Condensed Consolidated Interim Financial Statements.

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