First Milling Company (First Mills), a market-leading Saudi milling company producing high-quality flour, animal feed, bran and wheat derivatives, has seen its first-half (H1) net profit rise 13.4% to SR123.2 million ($32.8 million).

 

Effective cost management, complemented by optimised Shariah-compliant Murabaha deposit interest income, contributed to the rise in net profit, and the company achieving a net margin of 23.8%. 

 

Meanwhile, First Mills’ Q2 2024 net profit increased by 30.4% to SR45.5 million, driven by continued growth in small pack products, which saw a 21% increase in volume. This was due to the strengthening of the company’s distribution network and expansion into new geographic areas, leading to improved product mixes with better margins.

 

Driving revenue growth

Commenting on the results, Abdullah Ababtain, Chief Executive Officer of First Mills, said: "Our strong financial performance underscores our ability to drive revenue growth and profitability, particularly through the strategic expansion of our Flour and Feed sales. This achievement is a testament to our commitment to optimising our operations, expanding our product portfolio, and diversifying our product mix.

 

“In addition to our robust financial performance, we have continued to enhance our production capabilities, particularly with the completion of Mill C and the upgrade starting of Mill A in Jeddah Plant, which will significantly improve our available capacity utilisation and efficiency. We remain focused on executing our strategic roadmap, which includes diversifying our product offerings, expanding our geographic reach, and delivering sustainable value to our shareholders."

 

In H1 First Mills achieved a 10.5% year-on-year (YoY) revenue growth, generating SR518.8 million. This topline growth was primarily driven by a 31.1% increase in Feed sales, attributed to favorable market conditions compared to the same period last year and the introduction of a new range in the Feed segment, including an entry into the poultry market. 

 

Growth in Flour sales

Despite a 6% decline in Bran sales due to strategic prioritisation of Feed production, Flour sales grew by 7.3%, particularly boosted by the Aloula “small-pack” products, enabling First Mills to capture a larger share of the competitive retail market. The positive sales momentum was further supported by the capacity enhancements at the Jeddah plant and increased demand during the busy Ramadan season 

 

For Q2 2024, revenue grew 13.3% year-on-year (YoY), driven by increases across all product categories, with Feed sales leading with double-digit growth of 36.3%. 

 

This impressive growth resulted from the company’s strategic decision to prioritise Feed production to meet rising demand. Additionally, Flour and Bran sales grew by 6.7% and 5.5% YoY. The overall strong performance across all product categories highlights the success of the Company’s strategy to diversify its customer base and expand geographic coverage across the kingdom.

 

Operating profit in the first half of 2024 reached SR158.2 million, an increase of 11.2%, while Q2 operating profit also increased by 24.4% to SR63.8 million, underscoring the Company’s robust financial performance and its ability to maintain strong sales growth across all product categories.

 

Seasonal factors

The decline in revenue and net profit in the current quarter compared to Q1 2024 (Previous Quarter) is attributed to seasonal factors, particularly the Ramadan period in Q1, which traditionally drives a spike in demand for Flour. This surge is followed by a decline in consumption patterns in the subsequent quarter, impacting overall demand for flour and related products.

 

Capital expenditure (CAPEX) investments have proven effective, evidenced by higher capacity utilisation following the completion of Mill C and the closure for capacity upgrade of Mill A in Jeddah Plant. This strategic move has significantly enhanced the Company’s production efficiency and capacity.

 

First Mills maintained healthy net profit margins of 18.8% in Q2 2024, compared to 16.3% in the same period last year.

 

In H1 2024, First Mills successfully balanced the announced closure for capacity upgrade of Mill A in Jeddah Plant with the completion of the higher-efficiency Mill C, resulting in increased capacity utilisation. This strategic investment in upgrading production facilities has paid off, enabling the company to achieve better output and operational efficiency. In the current period, the Company registered an installed wheat milling capacity utilisation of 88%, an increase from 84% recorded at the last year's same period.

 

Diversifying product mix

In Q2 2024, the company successfully diversified its product mix, closing the gap in revenue contribution by category and meeting the growing demand for Feed products. Flour sales contributed 54.5% of revenue in Q2 2024, down from 57.9% in 2023. Bran sales’ contribution to revenue decreased from 19.1% to 17.8%. Meanwhile, Feed sales saw a significant increase, contributing 27.7% of revenue compared to 23% in 2023, marking a 20.4% growth.

 

In Q2 and H1 2024, all of the company’s reporting regions experienced YoY revenue growth. In Q2, this was led by Qassim Plant which grew 26.9%, followed by Al Ahsa Plant at 10.1%, Jeddah Plant at 8.8%, and then Tabuk Plant at 4.6%.  

 

Leveraging its efficient working capital model, First Mills continues to generate substantial free cash flow, underscoring its commitment to strategic capital allocation and cash flow optimisation. 

 

In H1 2024, the company generated SR126.8 million in free cash flow, compared to SR111.9 million in H1 2023, demonstrating significant year-on-year improvement. The strategic increase in CAPEX last year fuelled the company’s downstream expansion aspirations, providing a solid foundation for future growth and expansion opportunities. 

 

This investment in CAPEX has enabled First Mills to enhance its production capabilities, optimise costs, and strengthen its market position, ensuring sustainable long-term value for shareholders.--TradeArabia News Service