First Mills Co. recorded growth in revenues and net earnings while maintaining double-digit profit margins through retail and distribution channels at the level of individual and institutional customers, CEO Abdullah Ababtain told Argaam.
He added that the company launched the PESA mill and flour mixes factory during the third quarter of 2023, to add many varieties to the company’s diverse portfolio of products, such as Chakki Atta flour, 100% whole wheat flour, and other pre-mix products.
The impact of durum mill is expected to appear as of Q1 2024 and the following quarters, Ababtain said.
He predicted an increase in demand in light of the developments taking place in the Kingdom and potential expectations, which will reflect positively on the company’s revenues and profits.
Here is the full interview with the CEO of First Mills:
Q: First Mills’ profits increased to SAR 58 million by in Q4 2023, compared to profits of SAR 20.3 million in the year-earlier period. How do you see these results?
A: First Mills recorded growth in revenue and net profit during the fourth quarter of 2023, while maintaining double-digit profit margin. This reflects the company’s financial strength and ability to implement its strategy through retail and distribution channels to individual and institutional clients. Net profit in the current quarter increased by 183.4%, or SAR 37.2 million compared to the same quarter of the previous year, reaching SAR 57.5 million, compared to SAR 20.3 million. This increase is primarily attributed to an 8.8% growth in total revenue on an annual basis, supported by the launch of new products from the mix plant and PESA mill (Chakki Atta Flour and 100% whole wheat flour), as well as one-time non-recurring expenses recorded in Q4 2022, totaling around SAR 19 million. These expenses are related to depreciation adjustments, legal provisions, and other public offering expenses.
Q: What are the reasons behind higher flour and bran sales?
A: Flour sales accounted for 57.3% of sales in 2023, compared to 55.5% in the previous year. This increase was primarily driven by the launch of new product projects and sales volume growth resulting from improved product mix diversity and progress in the sales of “Aloula” brand. Bran sales reached 14.6% since the beginning of 2023 compared to 14.5% during the same period of the previous year, driven by the company’s successful strategy in building and diversifying its customer base and increasing its geographical coverage in the Kingdom.
Q: What are your expectations for demand and company performance in the first quarter of 2024?
A: In 2024, we expect an increase in demand given the developments in the Kingdom and the potential positive outlook that will reflect on the company’s revenues and profits. In addition to that, the expansions we are undertaking by entering sectors with higher profit margins and targeting increasing daily production capacity of the company’s products through updates will significantly contribute to raising production and sales levels and increasing production capacity utilization rates.
Q: What is your assessment of the increase in sales due to seasonal factors such as Ramadan and other seasons like the back-to-school season and the Hajj season?
A: Undoubtedly, seasonal fluctuations may have a positive impact on sales growth throughout the year, and at First Mills, leveraging our extensive experience in the sector, we are fully prepared to adapt to any seasonal changes, seizing opportunities to increase sales during seasons like Ramadan and Hajj. It is essential to note here that the company has a clear long-term strategy to achieve sustainable growth in all sectors and times, and we do not rely solely on these seasonal periods.
Q: How about the total production capacity of First Mills factories in 2023?
A: The company covers four strategic regions in the Kingdom through four branches in Makkah (Jeddah Governorate), Qassim (Buraydah Governorate), Tabuk (Tabuk City), and Eastern Province (Al-Ahsa Governorate), with a total grinding capacity of 4,900 tons per day. The company increased its capacity by 250 tons per day following the development of Mill-C in Jeddah factory and 300 tons per day through launching the durum mill. It also increased the capacity by 150 tons per day through the operation of PESA mill. This is in addition to a feed manufacturing capacity of 900 tons per day.
Looking forward, First Mills aims to expand its capabilities and enhance its leadership in the local market. The company also seeks to complete the expansions of Mill-A and Mill-B to increase their production capacities by 250 and 100 tons per day.
Q: How did Mill-C contribute to the fourth-quarter production?
A: We completed the upgrade of Mill-C in the Jeddah factory and it resumed operations with a full production capacity in December 2023. Accordingly, the mill added 250 tons per day to its previous capacity of 300 tons per day, an increase of nearly 11% to the Jeddah factory’s total daily production capacity. Meanwhile, Mill-C contributed 15% to the factory’s total daily production capacity in December 2023.
Q: You highlighted the company’s plans to start operating the durum mill in Q4 2023. When will we see the financial impact of this mill? Where is it located?
A: Expansion into new segments with higher profit margins to support and enhance the company’s revenues and earnings is among our strategic priorities. We launched the PESA Mill and Pre-Mix Plant during the third quarter of 2023. This aims to add several varieties to the company’s diversified product portfolio such as Chakki Atta flour, 100% whole wheat flour and other pre-mix products.
The firm also started the trial operations of its Durum Mill in the Jeddah factory during the fourth quarter of 2023. The commercial sales were announced after receiving its final license in early 2024.
The impact of this mill is expected to reflect on the results of Q1 2024 and the following quarters, as our other expansion projects recorded sales from the Pre-Mix and PESA Mills for the first time in Q4 2023.
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