Recent acquisitions worth $386 million and planned facilities worth $226 million are helping Almarai diversify in the food industry after a $1.6 billion investment budget was approved last year.

In one of the biggest deals signed recently, Almarai reached an agreement to acquire Hail Agricultural Development Company (Hadco) for $253.2 million. The firms have fixed a November 30 deadline for conclusion of the acquisition that will back Almarai’s bid to enter Saudi’s Arabia’s lucrative poultry market.

Hadco is the fourth-largest poultry producer in the kingdom, with the capacity to produce 10 million chickens annually.

The company specialises in the production of various other agricultural products besides poultry and meat.

Hadco’s shareholders got one new Almarai share and SR2.5 ($ 0.665) for five Hadco shares in a share-swap deal.

In a bid to explore greener pastures outside the GCC region, Almarai bought Egyptian firm Beyti for $115 million and acquired a 48 per cent stake in a new venture with PepsiCo. The new company, International Dairy and Juice Ltd, which is held 52 per cent by PepsiCo, will operate from Egypt and focus on investment opportunities in the juice and dairy business in Southeast Asia, Africa and the Middle East.

Second acquisition since December
Beyti was Almarai’s second acquisition since December when it bought a 75 per cent stake in Jordanian dairy and juice firm Teeba for $126.4 million. The company is eyeing more acquisitions in Egypt.

Almarai is also set to start up facilities worth $226 million in Saudi Arabia before the end of next year. A $173.3 million infant formula plant will begin production toward the end of the last quarter of 2010 and is expected to generate revenues of up to $70 million.

The company has placed a 24-million-euro ($35 million) order with the process technology segment of GEA Group to cover the engineering, manufacturing, supply, installation and commissioning of a complete processing plant for infant formula.

A $53 million baked goods factory will become operational in the first quarter of 2010.

A 22.1-per cent rise in second-quarter net profits for the period ending June 30, 2009 is attributed to the success of the company’s investment plans and expanding customer base.

Turnover for the first six months ended 30 June 2009 amounted to SR2.7 billion, an increase of 17.2 per cent compared to the same period last year.

Almarai, the Gulf’s largest dairy company by market value, has been diversifying its revenue through acquisitions, and had raised its investment budget to $1.6 billion to feed its expansion plans in the five years to 2013.
 
Part of a consortium
The company is also part of a consortium of Saudi agricultural companies that have launched a $40 million project to support food security. The group called Jenat plans to invest in food production in Africa, the Saudi Agriculture Ministry has announced.

Jenat was set up to lead investments abroad for a group of local firms which, besides Almarai, include Tabuk Agricultural Development Co (Tadco), Food Products Co and Aljouf Agricultural Development Co.

Food security topped the agenda after rampant inflation in 2008 emphasised the need to ensure supplies of staples like rice and wheat and cut dependence on food import.

Almarai was established in 1976, its major shareholders being HH Prince Sultan bin Mohammed bin Saud Al Kabeer, Saudi Arabia, and the Savola Group Saudi Arabia.

Its portfolio includes Almarai Company, Bahrain; Arabian Planets for Trade and Marketing, Oman, and the Saudi-based establishments Al Safwa Dairies, Green Farms Dairies, International Baking Services Company; Riyadh Dairy Company and Western Bakeries Company.