Assalamu alaikum, ladies and gentlemen. Welcome to the first-quarter 2026 earnings call of Almarai.

Today we have with us the senior management of the company led by Mr. Danko.

The meeting will consist of 60 minutes starting with a quick presentation followed by the Q&A. For the Q&A, the participants are requested to please raise the hands and please limit the questions to maximum of two at a time.

Without any further delay, I would hand over the mic to Mr. Abdulhadi, the head of investor relations.

Over to Abdulhadi.

Thank you, Saad. Welcome to Almarai first-quarter 2026 earnings call.

This is Abdulhadi Al-Amri, head of investor relations at Almarai. I'm here with Almarai CFO, Mr.

Danko Maras, and Almarai head of finance, Mr. Ikram Ulhaq.

First, I would like to thank Al Rajhi Capital for organizing and hosting this call, and to Mohammed Saad, our moderator. As usual, I assume that you all have downloaded the Q1 2026 earnings presentation from our website.

If not, please go ahead and download it. You can also download it from our IR app.

Before we start our call, please pay attention to the disclaimer page. I will now give you Mr.

Danko, our CFO, for the next pages of this presentation.

Thank you, Abdulhadi. Good morning, good day, good afternoon to everyone who's joining in and listening to our first-quarter 2026 result.

Nothing different to previous quarters. I'm going to go through a little bit on the market landscape, our operational business performance, and then finally some financial highlights.

You'll also find some supplemental financial data at the end of the presentation that is available for you if you want to look at that later on. Before I start, I just want to highlight one point of order for today's call.

When I'm going to go through and talk about the first-quarter performance, you will more or less see no effects of the impact of the Iran crisis in these numbers. There are maybe one or two things, and I will highlight them, but overall we are unaffected by the crisis that we are all under exposed to at the moment, and nothing of that is really coming through in the first quarter.

In order to help you and to preempt a little bit of the questions that might come later on, I will at the end of this session give you a verbal update about the Iran crisis and what Almarai is doing. Allow me to do that in the end, and then we will open up for questions and answers.

With that, moving over to market dynamics. Look about our Almarai market share position, you see February '26 there.

Overall, we continue to hold, with a little bit up or down, our number one position in our core categories. We have Ramadan behind us.

We did very well in the Ramadan. We're very happy with the execution of Ramadan, and it gave us a boost to the growth that you're seeing in the first quarter.

We'll talk a little bit about that. Overall, we are holding our positions very well in the market today.

Moving on and looking at a little bit of innovations, I can recommend the Mini Bites with pistachio. I tried it.

It's fantastic on ice cream. If you have that indulgence need or someone to comfort, please take some chocolate and help Almarai to get more revenue.

More extensions we have, of course, but there's no disruptive innovation that was launched in the first quarter. Then moving into the Q1 highlights.

On revenue, they are three key pillars for the 7% increase that you're seeing on the top left side, the SAR 393 million. It's volume growth.

Almost all of it is volume growth. In fact, we have a little bit of a negative price, all of it is volume growth.

You see that mostly in poultry. We'll come back to that.

Dairy, good delivery of dairy. Excellent execution in Egypt, you'll come back to that as well.

Then there is also inorganic growth in these numbers from water. That's about 1.7% on the top line.

Overall, a good quarter on driving volume on the top line. Then if you look at EBIT and net income, despite inflationary pressure on transportation costs—you're aware of the increase we had in diesel—and the elevated ramp-up cost.

We have a lot of factories that will get started or commissioned. Poultry is one, but we also talk about red meat and processed meat.

We highlighted that we will have a disproportionate amount of cost relative to revenue in the beginning. As we ramp up, we will get the revenue and profitability will come from that.

Those two are offset as much as we can with very strict cost control. What you see is flat or SAR 1 million increase on our EBIT margin.

That's about 14% if you look at it from an EBIT margin perspective. Last year, we had 15%.

We had a very good first quarter last year as well. Overall, we are in this 14% to 16% EBIT range that we want to operate under.

Then there's no major issue on interest or tax, the net income you see the same effect, SAR 732 million in delivery on the net income, being 731 last year. That in absolute terms is similar, but if we look at the margin, it's about 11.9% on net income.

Was slightly higher last year. On the balance sheet, we had a good mix of growth, but some of it coming from credit customers, e-commerce, modern trade.

We have a little bit of an increase in working capital, especially on the debtors side. For those of you who looked through our financial statements, you've seen we did a good reduction of our inventory, but the like-for-like comparison versus last year, we have a slight increase in receivables.

We also have water in there. However, looking at it post the closing, we have done very good cash collections in the past weeks to come.

All of it is in good order on the working capital. You see a trend of declining CAPEX.

I would say it's still very elevated. SAR 956 is a high number historically, but you are seeing a decline versus last year.

That's references that I made to before on our capital investment program where we are now perhaps peaking, and then we are going downhill from now on, but still being elevated, and will continue to be elevated in 2026. All of that bringing in positive free cash flow in the first quarter of SAR 173 million versus a negative one last year.

Then part of that is CAPEX, of course, and that of course helps in our delivery. If we dissect the revenue a little bit more, you can see the growth coming from well, three countries in particular: KSA, Egypt, and UAE.

KSA in absolute terms, a very large part, SAR 278 million, 7% growth. Egypt continues to deliver very strong double-digit growth in volume.

It's the third quarter in a row now where you see these 20%-plus or 26% in the quarter. We know there are some questions about the currency, but we are comparing this average spot rates this quarter to last year's quarter, and it's actually a small appreciation that we see there.

We know that their currency is exposed recently. We'll see how that develops.

Let's just focus on the underlying performance in Egypt is doing really, really well and also delivering bottom-line contribution. A little bit of an issue in Oman.

If all countries growing except Oman, there I would say it's a conscious choice where we've done some portfolio calibration and customer contract calibration where some of the contracts that we had in place have been discontinued, where we are trying to drive profitable growth and not only revenue growth. It's all in the profitability of it.

A little bit of work has been going on in Oman to make sure we calibrate the right portfolio with our customers. I'm confident that we will get back into the positive territory from Q2 onwards.

Remains to be seen. Maybe there will be a little bit of lag, but it is a good thought behind it with some thoughts of driving higher profitability in Oman.

Looking at it from a category point of view, also very good delivery across the board. Water is the SAR 98 million, you see there, 1.7%.

You have fresh dairy, SAR 97 million. Protein, maybe I should mention from this quarter onwards, we've changed our segment reporting, it's no longer poultry, it's protein.

For this time, I could say it's over 99% poultry. However, as we are commissioning these new factories on red meat, seafood, processed food, this will start growing and not only become poultry, and that's why we are doing this reclassification starting this year.

Over time it will start growing, and we will make sure that you have a good understanding of what poultry is doing relative to the others. Long-life dairy and fruit juice, very good delivery.

Part of that is also from Egypt, but very strong growth, double-digit on both of them. Bakery doing well.

On foods, another particular issue we've seen here in terms of the allocation during the Ramadan between channels and the phasing of it. A slight decline of SAR 55 million.

This comes on top of a growth that we had last year of about 8%. Overall, we are not concerned about foods.

Again, without saying too much, we are seeing a large, good pickup post-Q1 without maybe disclosing too much. We'll see how that goes overall, but there's no concern on our ends in terms of the food category.

Looking at channels, you can see disbalancing of Ramadan, as I was mentioning, a large effort put into modern trade in the quarter where we were growing 14%. Very good growth in our modern trade channel.

Traditional trade is also growing well, 4%. Very pleasing to see also quite substantial growth in foodservice with 8%.

Export and others is a little bit of a residual coming out, overall good delivery on all channels, and export will pick up as well, I am sure. With that, then we'll go into maybe the financial performance.

I just want to say a few things on the bridge, and then I let Ikram go through a little bit more in detail. This is the overall picture from a high level, the 731 in '25.

The pricing we are looking at, it's a blend of both ups and downs, but overall the predominant component of the drift that you're seeing there is in the poultry segment. That continues to be a contested categories.

We've seen large, good pickups. We have very good volume growth in poultry.

Actually, we sell everything we can produce, and we are expanding the production. We are continuing to commission the new factory and processing facility in Al Shamli to increase our capacity throughout the year.

However, the market situation continues to be contested, and you'll see that a little bit more when Ikram goes through the profitability. Longer-term, we are not concerned on poultry in that aspect.

We do have some favorability on feedstock and butter. Compared to last year, SAR 60 million favorable on cost of goods.

Then, of course, the volume mix and others is the main contributor. When we look at operational costs, it looks a little bit high, but in here we have the diesel charges, we also have the commissioning of the full cost for the processing facilities, and we are including water in there.

On a comparative basis, it looks a little bit high, but actually in our internal view, we are delivering a bit better than what we were expecting by stricter cost control. Overall, no concern on that area either.

That gives us the 732. Let me just give the word to Ikram to go through a little bit more in detail.

Thank you very much, Danko. I think we've discussed these graphs in detail, but let me just summarize fairly quickly.

Look, the revenue is up 7% underpinned by water, dairy, and protein, and of course by an excellent performance in Egypt. Looking at operating profits, the revenue impact is flowing through operating profits, but we had two major headwinds: A was the transportation cost, and B, which is the bigger one, is the ramp-up cost for the protein, which is on multiple factories, as Danko mentioned earlier.

Whatever growth we saw in operating profit is flowing through the net income as the odd zakat expense is getting offset by slightly lower tax expense. Let me spend a bit more time on next slide, which will talk of different segments which could be of interest to the audience.

The first one is dairy and juice. If you look at the first line, plus 4% growth.

As Danko mentioned, excellent Ramadan execution across all fronts, especially by fresh dairy as well, and driven by Egypt too. As a result, if you look at in the bottom section, the profit for the sector went up in the same proportion at around 3%, absorbing all the transportation cost as well.

Net profit income percentage is about 13%, same as last quarter. Let me now talk about bakery.

Bakery growth was also fairly decent given the fact that it was Ramadan quarter as well. We still grew by about 5%.

The profit growth was disproportionately higher, driven by the pricing adjustment done in Q3 last year. This effect will continue for the first half of 2026.

As a result, you can see the net income percentage of bakery, which is about 16%. The interesting part, the protein segment, I'm very happy to report it's the second quarter in a row we are crossing the billion-riyal mark for this segment, it's very good.

In fact, we crossed SAR 1.1 billion, which is very good for this quarter. Second quarter also in a row that we are selling more than 80 million birds.

You can see the effect of the ramp-up production. It's showing up in our volume and it's showing up in our revenue as well.

That's why protein segment is up 8% year-on-year, driven majority by volume growth. The profit margin looks a bit negative, it's minus 21%, but I would recommend the audience to look at Q4 2025 and see how the profit margin is being expanding for the last two or three quarters.

Our profit margin in Q4 was about 8%. Profit margin in this quarter is about 10%.

This reflects the competitive environment for the quarter in the protein sector has been quite stabilized. The discounting effect has been arrested, and we are starting to see the benefit of that.

Although Q1 compared to Q1 looks quite negative, but please remember that Q1 last year we did not have a major discounting activity in the market, and that's the reason the number comparatively looked bad, but if you look at Q4 '25, it looks much better, and we expect this trend to continue and accelerate in the future. With that, I will move on to the next slide, which is slide 17.

I don't mind even if you're a debtholder or equity holder, it's one of the best slides for the presentation. It's a manifestation of do what you say and say what you do.

Almarai announced three years back an SAR 18 billion investment plan, and as Danko mentioned, you are starting to see the decline. We have reached the peak last year at 20%, and depending on the next few quarters, maybe it's 19, maybe it's 20, but you're starting to see the reverse and our revenue is starting to grow because of our investment, and investment has pretty much peaked on an annualized spend perspective.

That's a manifestation of what we told the market and we delivered the same results to the market. With that, if I move to slide 18, our working capital, our business model remained the same.

We're not seeing expansion in our trading terms, very similar results compared to last year as well, 19% as a percentage of sales. Same thing goes for operating cash flow: excellent performance by the business, great Ramadan execution, and as Danko talked about, recovery in terms of the debtors, we're doing well as well, and that's why operating cash flow remains at 25%.

With that, I would like to request Danko to take us to the free cash flow and other topics.

Thank you very much, Ikram. This one is rolling 12 months, and if we look at that, there are three quarters from last year and the first quarter this year.

You see last year we started with a cash position of about half a billion, then the strong cash flow delivery of SAR 5.8 billion, hardly any working capital movement. You see we are spending that with the three quarters from last year and this quarter on fixed asset.

We acquired the water business, I believe, in July, August,

and then

biological assets. It's all used.

What does that mean? We've borrowed another SAR 3 billion from the position last year, and we don't need all of that.

That's a little bit what I would like to just elaborate a little bit on. Last year, we paid the funding cost and the dividend, and that gives us a cash position there in the end, you see SAR 1.6 billion.

It's unusual to have such a large cash position at the end of the first quarter, but this is one of the decisions we made when the Iran crisis broke out. In order to properly manage and ensure that there are no event risks, we decided to draw down from our committed credit facility already about a billion extra to make sure that we can cater for the potential dividend, which we think will be approved by the 21st of May is our EGM, and we will pay out the dividend, I think, end April or beginning May.

It was all cautious cash management on our end in case something were to be more severe. We don't see that being at disruptive cost at all.

We will keep this balance, and of course we'll get interest on that balance. It was a conscious choice on our end to draw down and make sure that we do not have any event risks from now on until the end of the year, which is actually the case.

Where if everything delivers according to our plan, we don't have any direct borrowing need for the rest of the year. If so, you can actually see here in one of the points we're making down here on the availability of the facilities, we have SAR 7.2 billion, which is very high, and about SAR 4 billion of that is SAR 4.3 billion is uncommitted, but another SAR 2.9 billion is a committed facility.

If we were to be in the need of doing something, we still have a lot of firepower if that were to be of interest for us. That's the explanation for you, for one or two of you have asked why we have such a high cash position at the end of March.

Our net debt continues, it's in a good level. It's 2.48.

It's holding from what we had in '25. It's in line with our strategy where we say 2.5 to 2.7 times, not too much to add, and that's fine.

Our EBITDA and EBIT margin also continuing the trend of where we should be, in the range of 14% to 16% and 22% on EBITDA margin. All of it on a rolling 12-month basis is according to plan.

Then if we look at the debt maturity by age and type, you see the SAR 1.6 billion need that we have in the up to one year, that's the cash position we have. The drawdowns is available, and essentially that's also part of the one to two years that you see from '27 onwards.

We feel that we are in a very safe territory in terms of maturity and refinancing. The real issue comes maybe in four to five years and beyond where we have refinancing needs.

In that area, we feel quite comfortable at this point in time with all the uncertainties. I think we have addressed this particular risk in a good way.

Then on the dividend, and that's the proposed dividend, 15% increase from last year. You can see the trend.

We used to have 64% of our net income in '21, and it was because of our improvement in net income over the years, the ratio went down to 43% in '24. Had we not decided for an increase, we would have been maybe at 40% or even below.

We're guiding that we should pay out about 40% to 60% of our net income in dividend to you, our investors. If everything goes according to plan, this will be approved, and we will pay out as I mentioned before.

Now, before we go questions and answers, allow me here to talk a little bit about that was the backward-looking unaffected by the Iran conflict. Now if we consider the impact it might have on the future financial and commercial health of Almarai, there are a few points to consider.

Please allow me to elaborate on this. Food safety in the kingdom and GCC is our priority.

Availability of supply is the number one priority for us to make sure that we are providing food and water and drinkables to our consumers. Our Almarai risk management framework already built in safety stock as a going concern policy to cater for sudden disruptions.

We've learned a lot from the past years. COVID gave us also a very good learning, but the strategy has been there to ensure that we have an overall risk management framework that could allow for this disruption, especially on raw material feed, such as alfalfa, corn, and soy.

For instance, on alfalfa, we already have a one-year safety stock in KSA. We also have corn and soy that will allow us to work for the forthcoming months without any disruption of this.

The same goes for liquidity, where we have this committed credit facility available, and you could see the drawdown we highlighted earlier in the presentation. However, Almarai is not immune against these kind of disruption in the long term.

Nobody is, and it all depends on the duration of this conflict. Currently, when we are looking at the indicative costs that are coming in, the single highest indicative cost driver among many is within the supply chain, in particular freight charges.

I'm sure you all follow that as well, and we saw that also post-COVID. There's some similarities where you can see container costs going up to almost $9,000 per container.

It's gone down a little bit again, but of course, this is a problem for us. However, the same day the Iran crisis began, we initiated our corporate crisis management team, and we have had daily meetings to assess, calibrate, and manage the commercial and financial operation with a focus on the availability of supply.

Far, I would say we have an as good grip as you can have in this very unpredictable situation, and this uncertainty continues. We'll see what happens tonight, and I'm sure you all are curious to see how whatever the outcome will be on these discussions.

With this in mind, in terms of assessing the financial impact, we have to think about time duration. The prolongation of this war is a key factor in determining the financial impact.

It is currently impossible to assess the timing with certainty, and therefore we are developing three main scenarios that we're working from on an assumed duration of the war: short-term, mid, and long-term. That you could say, as you do your calculations on this, the further out we go in time, the more complexity emerges with both direct and indirect knock-on effects on costs.

Obviously, the further out this conflict continues, the impact will increase. The anticipated cost has yet to be incurred.

I think this is important for all of you to know, that it has yet to be incurred. However, if freight charges continue at the current level throughout the year, throughout the full year, it will have a material impact on our income statement.

There could be other triggers than freight charges, if we talk about energy or fuel, etc., that could have the same amplifier depending on the duration of the war. We do not want to point out a specific number in this volatile environment at this point in time with such a high degree of uncertainty.

However, we will revert to you when there is more clarity, when there is cost incurred, and maybe if we are all in a good place and it ends up very quickly. Unfortunately, we believe there will be ripple effects even if it ends quickly, and there will be some on-cost to it.

The sooner we have more clarity on that, we will communicate so. For those who are experts and understand Almarai and have followed us for a while, please also consider the time lag on accounting effects given our size and our inventory policy.

Whatever comes in freight gets capitalized in inventory and it gets matched with the principle of revenue and cost. You will have this time lag, and therefore you will have effects on that that might actually soften the blow a little bit in the beginning, but then eventually it will all come out in the income statement.

However, in the meantime, with all of this going on, we are already developing additional cost-efficiency initiatives, and we are reviewing our pricing policy on promotions and discounts. We are looking at our CAPEX, we are looking at our OPEX, labor and overheads.

We are looking at specific initiatives on if it's procurement to make sure that we optimize our actions and drive as much shareholder protection as we possibly can in this environment. A protracted conflict might mean on a broader context a clear risk for global inflation or even stagflation.

I know there's many analysts who are talking about the risk of these sudden shocks causing stagflation. This will impact everyone, not only Almarai, and let us hope that we will not come to that point.

That's more of a macro effect that will have repercussions for any company operating in the Middle East, but also globally. Let us all hope that we will not get to that point.

With that, I would just like to stop to give you the brief on how we are looking at the situation with Iran at the moment. With this high level of uncertainty, our positioning is the following.

With that, I stop and we open up for questions and answers.

Thank you, Danko. Ladies and gentlemen, just a quick reminder.

You can raise your hand if you have any questions, and please limit yourself to a maximum of two questions at a time. The first question comes from the line of Mohammed Al Rasheed.

I'm unmuting you. Please go ahead with your question.

Thank you, gentlemen, for the call. Two questions from my side.

The first question is regarding GCC countries excluding KSA performance since the onset of the Iran crisis. If you kind of provide how's the revenue performance in these specific countries on a year-over-year comparison?

My second question is regarding your poultry production or sold volume. You mentioned that it is more than 80 million, but can you please provide us with the volume that was sold during the first quarter of 2026 and the capacity by the end of the first quarter of 2026?

Thank you.

Yes, Mohammed. Thank you.

Again, what we showed you was actual sales on the countries. We don't necessarily go forward and tell you performance of April onwards.

However, our sales, what I can say without having too much reference to forward-looking statement, is that we do not see a significant decline in sales. You have to remember when I was saying that we're doing pricing reviews, promotions, and discounts, there is actually, if one can say that in this environment, there's some positives around it because people need to eat and drink and we are selling.

What we see is a little bit of a shift in channels. If you think about it, it's perfectly logical that you have our foodservice section or business-to-business with HORECA, hotels, restaurants, etc., is declining, but e-commerce is increasing.

You see modern trade holding, you see traditional trade holding. Obviously we are in a very uncertain environment at the moment, but so far as we are seeing it, sales are not bad in that respect.

It's a shift in terms of where people are buying if I talk about GCC ex-KSA. That's what I can share with you.

On poultry, I think the production was about 81 million tons.

Birds.

81 million birds, sorry. I've been corrected here.

81 million tons would be fantastic. Then we have maybe I think that's all we are providing now.

We talked about I think we did 304 million birds in 2025, and we're going to increase that. I have to look at my head of accounting if we have disclosed it, but somewhere around 330 million birds is what we are planning to do.

Remember in the poultry expansion program, we said we would go up to about 450 million birds. We have ample capacity to serve the market, and as soon as we can get the machines up and running and the process, we will of course see if we can increase that.

Thank you.

Okay?

Thank you. That's very clear.

Our next question comes from the line of Mishal. I'm unmuting you.

Please go ahead with the question.

Hi. Thank you, management, for the presentation.

Maybe just a follow-up question from my end on Muhammad's point. You mentioned the change in channel mix.

Whatever we saw in GCC wasn't per se decline in sales, however, a change or shift in the channel mix. Now if I look at it, and I compare Q1 to eliminate any effects of seasonality, to when I look at Q1 channel mix and compare it to Q1 last year, we're seeing I'd say a shift from the traditional trade to more towards the modern trade in terms of contribution.

To what extent are we seeing this shift? How are we going to digest the change in profitability profile if such a move continues?

I think what you're seeing there is a conscious strategic choice related to Ramadan, so that is not the same as last year. We made a lot of efforts to grow in modern trade as a plan for executing Ramadan.

This one is not a trend that follows subsequently. It's an isolated event in itself whereby if you remember, I was talking about foods not growing as much as we expected.

That was part of that strategy around the channel mix we did for Ramadan. Every Ramadan we try to optimize and drive as much revenue as we can.

The way you should look at that is not a trend per se. It's an isolated event for every Ramadan we do.

There's no lag from Ramadan. If you compare overall last year with this year, there's no impact in Q2 of Ramadan.

They are both captured in Q1, but they had two different execution plans. Some of it was very successful on dairy.

On food, we can do better and we will get better in doing that, but that's really the reason behind this part. We also, although we are starting from, I would say, relatively low numbers, we're seeing a good double-digit growth in e-commerce, which we are putting into modern trade.

Maybe we will extract that out in the future so you can see the growth that we are doing in e-commerce, but currently that's also growing very well and it lies in modern trade.

Perfectly clear. Thank you.

Maybe if I can add one more question on poultry. Understand competition is there, it's still difficult, but did you see any recovery?

Since the difficult situation started end of March up until now, are we seeing any recovery, any slowdown in terms of discounts and competition?

You mean in poultry specifically?

Yeah.

I am slightly positive because we are seeing a pickup. I just have to be mindful about what I'm saying to you all, but we are seeing a little bit of a pickup.

We don't have erosion of pricing in the same way as you saw in the last two quarters last year. In fact, we are seeing a somewhat positive development on pricing.

Then we have the good underlying component of volume growing and people buying our products. I think it actually is becoming a little bit easier without saying too much.

I can say also that the conflict in itself that is currently going on with Iran is not a negative for the poultry sale in overall. Here we're actually selling, and we are also helping countries who might be in help.

We are providing that help as we are able to. Again, availability of supply is our number one priority.

KSA is very important for us, but obviously the whole of GCC, and if we can help, we will do so. Look,

if I can add just one thing, Danko. Danko talked about the container cost for our raw material like corn and soy and everything else.

If you think of the poultry sector and you think of the imports coming in from overseas as well, they are facing the same pressure for importation as we are facing for raw material. The effect of the higher transportation cost on frozen is going to be a lot more than compared to fresh because of the volume impact.

That's the benefit that you will see, and that's an added benefit that can possibly accrue, not that it did accrue in Q1, that can help in Q2 as well.

Perfect. Thank you.

That's it from my end.

You're welcome.

Thank you. Our next question comes from the line of Abdullah Buraidi.

Please go ahead with the question.

We don't hear a question.

Abdullah, please. Hello, can you hear?

Hello. Can you hear me, sir?

Yes, we can hear you.

Thank you very much for the presentation. Congrats for the good results.

This is Abdullah Al-Buraidi from Emirates NBD Capital. I have two questions regarding the poultry.

The first one is regarding the Saudi GAP. We heard some news about Saudi GAP decision being taken in March, but we didn't hear anything from that.

Do you see anything happening on this matter in terms of either restricting or putting some extra pressure on non-applicable import poultry? The other thing, you've mentioned that you have a pre-operating cost in poultry.

Could you quantify such to know how much is that and if we didn't have this, how the bottom line would look like?

Okay. On the first point, I sort of want to go back to Ikram's point.

We haven't seen any sort of import restrictions for frozen poultry, but if you think about the protraction of the conflict and that continues at $9,000 per container, importing frozen poultry I think it will be prohibitively expensive, which will benefit domestic production. You're also in some aspects seeing some restrictions on the availability of corn and soy, etc.

All of that will in a way play in our favor, but we have no desire to win in that way. We want the conflict to end like all of you.

The reality of it is that shipping costs going up, a protraction of that, we have the benefit of domestic production, sufficient stock of corn and soy for the future. If anything, it will benefit us.

The actual restrictions that we saw from the government, we haven't really seen any particular issue on that in terms of the effect on it. The other point, we do not provide if you want to have a proportionate part of the let's say the fixed cost with labor and overhead relative to revenue, we'll scale it up, but the cost we are having now at 81 million birds, as we start increasing the number of birds, it's only a variable component, and therefore you'll see an enhancement throughout the year as we are scaling it up to 330 million birds.

That's all I can say for now. Of course, there are multiple factors affecting the profitability as we were talking about the net income for poultry, but we did improve it, if you remember, from Q4 to first quarter from 8% to 10%.

Maybe you can do the math yourself and extrapolate, and then you'll get the benefits.

Thank you, Danko. We have a question from the line of Taha Javed.

Please go ahead with the question. We can't hear you.

Yeah. Hello, Taha, can you please unmute yourself locally?

I believe we will come back.

Excuse me. Sorry, you couldn't hear me?

We can hear you.

Apologies. Thank you so much, management.

Just a couple of questions from my side. One, obviously because of the conflict, has your operations in UAE been affected?

Secondly, obviously you mentioned that obviously because of the higher logistics and everything, if this prolongs, then obviously there can be a material impact. Basically, what should we think on the plan?

Would you pass it on to consumers or will you absorb it? Because again, you mentioned a bit on efficiency, but again, my understanding is that obviously there's only so much that you can do with efficiency.

Obviously, you've had to take on diesel price hike impact in the last two years as well, just your comment on how you see the margins, will you absorb them at least for this year, how we should think about it? Thank you so much.

Taha. Thank you for your questions.

Good questions. On the first one, first of all, we've had no personal injuries in GCC due to this conflict, all our people are safe and in good health at this point, and we are taking measures to ensure that they are secure.

That's now our number one priority in terms of our people. In terms of the effects of debris falling down in the GCC countries, obviously our operations have to accommodate that.

You heard today that the causeway bridge was closed for a while. We are driving trucks over to Bahrain.

It opened up again, and there's no harm to the operations. This is very dynamic and we are managing this daily and making sure that we continue with our supply to GCC.

Notes on cybersecurity, IT, we are in a good place. We have good disaster recovery scenarios.

We have our disaster recovery offsite outside Middle East to make sure that we can continue our operations and so on. There are multiple components to ensure that we can continue to operate, and we'll have to see apart from sales, in terms of making just sure that we can provide products.

I think also we've seen good collaboration from the governments. We've got a lot of support, and we are thankful for that.

We are trying to make sure, if you think about the reshipping from the east side to the west side, the government has been supportive of freeing up some flexibility to make sure that we can instead of using the Dammam port, we go to Port Rawda or where we might be on the west side. On the second question, this is the whole point about what I mentioned on the prolongation of the war.

I think you should draw some level of conclusions from COVID, although it's not exactly the same. The COVID situation was a global pandemic affecting the whole supply chain worldwide.

Currently we are seeing some additional costs on freight. It could elevate and become even further.

As I was saying, if it's prolonged in time and we have these kind of charges, we had a very, very strong inflationary component in '22 and '23, if I remember it right, and we did significant pricing to offset that. At the end of the day, the way we talk about raw material as an FMCG is that if that is an increase, it will sooner or later have to be passed on to the consumer.

We are doing everything we can to avoid it, drive cost efficiencies, but if you have material impact, you'll see not only Almarai, I think you will have an overall price increase, which is necessary. It all depends on the prolongation of this conflict.

In a good place, it ends soon and we're in a good place. What worries me the most, and I think maybe all of you who are investors, is the risk of stagflation or inflation.

Then what we have seen and what we've communicated to you is that that increase post-COVID that we saw, the reality is that the cost pressure has remained even though you have had benefits in corn and soy prices coming down. You've seen ingredients go up and there's been energy inflation because post the war of Ukraine, that was driving a lot of the cost.

Unfortunately, it's kind of sticky what happens on the cost side, and it takes a long time for it to come down. That's the big worry I have both as a professional and on a personal level, because it's not good if you have stagflation or inflation on a global level.

Hopefully that answers.

Thank you, Danko. The next question comes from the line of Nada Amin.

I'm unmuting you. Please go ahead.

Hi, everyone. Thank you, gentlemen, for the presentation.

I was just wondering if we could dig into some of the pricing, negative pricing dynamics that you had alluded to during the quarter. If you could maybe split that out into dairy and poultry as two separate discussions.

Have we seen the rolling back of promotions for dairy products since the 28th of February? I know that we talked about poultry quite extensively, maybe if we can just focus on dairy, that would be great.

Thank you.

Very clear voice, but I'm not sure I totally understood your question. What I talk about here when I said pricing for the first quarter, there's no scaling back of promotions in the first quarter.

That's executed as planned. As we move forward, there is scaling back of some promotion and pricing activities, and that we will come back to that in Q2.

The SAR 27 million that I highlight as a negative price is a mixture of price increases. Remember Ikram was highlighting bakery, you have a paratha effect of price increases we did in July last year that will continue to be positive in the first half of this year.

We also have some smaller price increases on juice and dairy on specific product, but not materially impacting anything in this context. The key component of the drift that we had in the first quarter was really about poultry.

Your specific question about 28th of February and onwards, the reality is that all of these programs are in place as we are executing them. It's more something you'll see that comes out affecting our second quarter and onwards.

Okay.

Did that answer your question? Did I understand your question right?

She's no longer has her hand raised. I'm assuming that's a sign.

Yeah. We have a lot of hands raised and lots of people in the line.

The next question comes from the line of Taher Safieddine. Please go ahead with the question.

Good afternoon, gents. It's Taher from J.P.

Morgan. Thank you for taking my question.

Just maybe the first one is just on the protein. You did talk about poultry extensively, but you did mention that moving forward maybe we will see other contributors coming in like seafood and red meat.

Just to understand, and you said that there's some ramp-up costs also associated with these, just to better maybe understand what's happening on the non-poultry proteins? I understand it's a distribution model, but has there been any changes?

How should we think about maybe this portfolio going forward in terms of revenue contribution, how significant it could be for the segment or maybe the overall group, if that's possible, please?

I leave that to Ikram, maybe you can answer.

Yeah. Taher, as Danko said, if you look at the SAR 1.1 billion for protein for the quarter, I would say roughly speaking just maybe 2% of that will be non-poultry, and that will mainly in the seafood area.

In terms of the other products, like you talk of the beef and other ones, they're yet to be started. There's a lot of work being happening.

We have hired people, we have some vans running, some experiments running as well, and some of it we would love to capitalize it all, but we can't capitalize all of it, there's some ramp-up costs coming up for the new products to be launched. The major drag in that respect is the seafood category.

We are spending a lot in terms of distribution, in terms of marketing in that category, and we will develop that further more. You will see more products coming further down the year during year 2026 as well for seafood that will expand the sector.

You will see, as you say, the launch of beef that will happen in the second half of the year. This will be an expanding portfolio.

Today, non-poultry within protein is just about 1% to 2%. We would like to see in double digits in about next let's say two to three years, and that's why the significance of this sector will be very visible going forward as well.

I think that's somewhat guidance we can give so far. As we launch these new categories, we'll describe them further and we'll give more guidance on that.

Okay. Very clear.

Just maybe another question just on the current performance, Ikram and Danko, just on the long-life dairy. It's up around 13% year-over-year.

Maybe just to get a better understanding, it is like-for-like in terms of Ramadan, and usually Ramadan is not that great for long-life. It's more of a fresh dairy type of business.

Can you just share some light what's happening there? Is it competitive landscape, you guys pushing maybe more aggressively on pricing?

If you can just maybe share some color on what drove your performance and in general, what are you seeing in the long-life dairy market in Saudi?

Look, majority of it was driven by Egypt as well, we do have to recognize that that's a big component. Egypt sales in dairy, we sell all of it long-life.

There's very little fresh dairy. Fresh dairy is in Egypt is only done by yogurts.

The majority of the milk growth that we're seeing in long-life dairy, that is coming from Egypt and that helps a lot. There is growth in Saudi as well in UAE.

They are going quite decently. UAE, the reason for the growth in UAE was panic buying, and we saw that in let's say in March, later part of Ramadan, but that's a one-off impact, it stabilizes.

Otherwise, we're seeing growth in low single digits in Saudi and other Gulf countries. That's the component of the growth in long-life dairy.

Okay. Perfect.

Thank you.

Thank you. The next question comes from the line of Fatma Al-Doseri.

Please go ahead with the question. Fatma Al-Doseri, can you please go ahead with the question?

Hi, can you hear me?

Yes,

we can hear you well. Thank you.

Perfect. My first question is regarding the poultry.

I know we talked a lot about it, but you've mentioned that you've started seeing margins improve, and you talked about the quarter-on-quarter improvement. Now aside from what's happening in March and the war and the potential impact of pricing there, what led to the improvement in margins, I would say, if it happened in the first two months of the quarter?

Is it lower export volumes or is it basically rationalization from local players? That's the first question.

The second, in terms of the impact of war on basically volumes being in line where the channel mix changed, are you seeing a shift from HORECA to retail, which could potentially lead to higher margins in the short term?

Yeah. Fatma, on the first one on the poultry question, look, the Q4, when we were starting the plant, whenever you start on that journey, you do incur a lot of one-off costs.

Q4 was very tough for us from a cost perspective to start the plant up and running. We are seeing stabilization on all fronts: costs is getting more stabilized, production in the factory is more stable, and on top of it, the market has been much more supportive.

We have seen this thing in the first two months as well. We didn't see discounting getting more steeper.

First couple of months discounting remained pretty flat, and then we are starting to see improvement in discounting in the producers' favors. That has continued throughout Ramadan as well.

It's stock pressure coming in from the frozen, it's local players as well who are actually improving, and that's something you guys can track every day online as well. You can see the poultry pricing on Carrefour, Lulu, you name it.

We have seen this thing on both fronts: costs getting better and pricing getting improved as well. Both were very good.

Your second question was I forgot.

The channel mix in terms after the war. I'm assuming there's less HORECA in certain markets and then the shift might move into retail in markets impacted.

Given that margins in retail is better.

Fatma, I think you're calling from Bahrain. I think it's good from that perspective.

Think of how many hotels in Bahrain are occupied today as they were in January, and that will give you your answer automatically. We are seeing a reduction in HORECA in the eastern seaside, in terms of Bahrain, Kuwait, UAE, there is a volume reduction on HORECA side.

We are seeing some impact on, let's say, Jeddah, Makkah. There is some impact of religious tourism coming down as well.

As you rightly said, we are seeing positive impact in retailers. In e-commerce, as Danko talked about, it's exploding from what we can see in other respect.

We do see the channel mix changing. Some of it is temporary given by what's happening in Iran conflict.

Some of it is permanent, which is the e-commerce part. For us right now, the permanent part, which is e-commerce, is beneficial to us.

We do make very good margin in e-commerce channel. We need to work on that to sustain that margin.

The HORECA shift towards retail right now is pretty neutral, but we will see how the costs develop for that trend.

If I can just add to Ikram's point there, it comes back to this prolongation of the conflict. The longer that continues, the more negative impact it will have on depopulation, and therefore less revenue on our end, less tourism and so forth.

At the same time, we also have the rationalization of promotion and discount that offsets it, and that gives us good profitability. Then if we look at the channels and where do we get good profitability, foodservice is not a bad channel in terms of profitability.

Obviously the mix will impact. I think the answer will be we have to see how this conflict develops in time, and based on that, we'll mitigate and work on that on a daily basis.

You have to work on this on a daily basis and what it means. This is what we are doing at the moment.

Overall, when we look at turnover, we do not see a significant decline at this point because of the channel shifts you see.

Thank you. I believe we are at the end of our time.

If unless the management would want to add a few more minutes so that we can take in more questions, or would you like them to email to you separately?

If you have a long queue of questions, let's take another two or three, and then we'll refer to investor relations if that's okay with everyone.

Sure. Sure, let's do that.

Our next question comes from the line of Pratik. Pratik, I'm unmuting you.

Please go ahead.

Hello. Can you hear me?

We can hear you.

Yes. Hi, I wanted to specifically talk on the long-life dairy segment.

Your thoughts on the discounting, how is it going? Is it higher with respect to, say, last two quarters or is it getting lower just on the long-life dairy?

Thank you.

Look, the discounting has stabilized, just like poultry. We are seeing, again, a stabilization of the long-life dairy discounting.

Even for evaporated milk, long-life dairy, all of it, we see the Q4 trends continuing. The growth you're seeing in Saudi is pretty much volume-led, and as I said, there was a bit of burst of growth in the Eastern Seaboard, mainly driven by people panic buying in terms of long-life because that's helps you in that respect.

Other than that, normal trend rates. As I said, we're seeing low single-digit growth rates.

We are seeing growth in the market, volume-led growth, and we're not seeing an increase in discounting. I would say even today when you go and you can check online as well, right now virtually all of the long-life dairy products we're seeing in the market is around 5.5 to 6 riyals or even more.

A lot of the discounting actually at the back end of Ramadan has dissipated. You can well imagine promotions were planned ahead of the curve, even after the Iran conflict.

Those promotions were on it, and as we are walking out on the last one or two weeks, the discounting is getting further dissipated.

Thank you. The next question comes from the line of Mohammed Al-Alwan.

Please go ahead with the question.

Do you hear me?

We can hear you.

Thanks for the presentation. I have a question on the discount on the poultry.

We run a private equity and we own some of the food companies, and what I understand is that there is scaling back on the discount by all the poultry companies in the market given the current situation. My question is, how much of the improvement in the poultry is due to the discounts, and have we seen the full impact in Q1, or we are going to see more improvement in Q2?

I think I come back to the answer there, Mohammed, on what I said about the prolongation of the war and the freight costs that you see. The only positive effect of a prolongation of the war in terms of poultry is that you will see very high costs for imports.

It is not going to be profitable to do that, and therefore you also have corn and soy that needs to be shipped to KSA. I think in some odd way, it benefits us if this conflict prolongs.

On top of that, there is something else going on, and you didn't see that really being impacted in the first quarter. What I mean impact is the Iran conflict.

It is some form of stabilization of poultry in the market. Stabilization is maybe a hard word because we continue to see very low prices to where we originally looked at.

If you look at Q1 last year, you see the big difference. There is a positive sign on that, which had nothing to do with the Iran conflict, and that to us is, again, an expected protracted but expected normalization of the market that will come sooner or later.

That's why we strategically believe that being in poultry is the right thing to do, and it's a healthy protein. We are premium because we have a quality that people trust.

We are investing heavily, as you can see, and making sure that we can provide that quality, and consumers knows that and they want to buy our product. Poultry is here to stay in the long run.

It's growing. It's a healthy protein.

What you're seeing maybe is the beginning of the end of discounts, and we see the beginning of something new coming. That's why I'm saying I'm slightly positive.

Has nothing to do with the conflict per se. It will just be further amplified if this continues with high cost of shipping.

Thank you.

A last question now, so.

Okay. The last question comes from the line of Aena Gulmarwat.

Please go ahead with the question.

Thank you so much for the presentation, management. I have two questions.

Irrespective of the Ramadan volumes in fresh dairy, overall, if you look at it on an annual basis, do you see any slowdown in demand for fresh dairy? We heard that AC Nielsen reported that the fresh dairy market is growing around 1.6% to 2% in KSA.

Is there any impact of, as we expected the population to grow due to all the mega and giga projects within KSA, populations slowing down or in turn fresh dairy demand slowing down? This is my first question.

On fresh dairy, we were actually growing more than the Nielsen-reported numbers. We do not see a decline in fresh dairy.

We are actually growing 5% on fresh dairy. I do not anticipate a decline in that sense.

The underlying fresh dairy business is very healthy and good and doing well. Of course, you will have an impact if tourism declines.

That for sure. We are expecting population growth and tourism increasing not only in KSA, but also in the whole of GCC.

I think one of the inevitable consequences of this conflict is that you will have a protracted impact on tourism in the East side, and I feel very sorry for that, but that is the reality, I think, that people will be cautious in coming for holidays. Even if you have a short ending in time, still people will hesitate for a while, and obviously that will impact.

That's more due to, let's say, the conflict situation rather than the underlying category per se that is growing healthy. You have to make sure you do high-quality products, good innovations, you adapt to consumer behaviors and consumer trends on occasions, on flavors, and these sort of things.

That's what we are good at, and we've done that for many years. I don't see that underlying reason for decline.

Right. One last question from my side would be on ice cream segment.

How could you share some light, color on where Almarai stands currently? Are there production facilities in KSA?

What are the plans for expansion within this segment?

On ice cream, we are actually seeing triple-digit growth, but it's from a very, very low number. You also have to consider the fact that we have a lot of sell-in.

We're not only in KSA, we also launched in Kuwait, and in Qatar we will launch, or I think we already have. We have new products that we are launching as I mentioned in the beginning there.

Ice cream is a long-term strategy bet. We believe we can be in ice cream.

It is closely associated category for us. It's a little bit in the early stages.

We are growing well. We are spending money making sure that we are establishing our brands in the market.

I know we are sought for. It's too early to say more than that, but the early signs of what we're seeing in terms of growth is in line with what we have planned for in our investment case, and we are making sure that we have the distribution reach currently.

Then longer-term, it's a question of establishing presence in KSA for a facility to produce. Either we do that ourselves or we do that through a joint venture.

All of these discussions are dynamic in terms of trying to find the optimal solution for Almarai. What we are doing at this point in time is to establish the brand, making sure that we have good products to offer, that we are a little bit above mainstream, as you can see with our product offerings, because they are quality that you should trust just like you do with poultry or dairy or any of our products.

That's the answer for ice cream.

Thank you, Danko. Ladies and gentlemen, if your question has not been answered, you can always reach out to the investor relations department at Almarai.

I would request Danko for his concluding remarks.

Yeah. My dear friends and colleagues, and investors and analysts.

Let us all hope that we will find an end to this conflict as soon as possible for everyone's safety, and we hope it will turn out positive. In the meantime, we have to be agile, we have to be flexible, we have to be rapid, and we have to deal with it.

That's the reality for Almarai and for all of you, I am sure. That's my wish that when we meet again for the second quarter that we have much more positive news for all of us.

That's my only plea. In the meantime, stay safe out there.

Hope everything goes well, and thank you very much for this quarter review. Goodbye.

Thank you, Danko. Thank you, Ikram and Almarai team.

Thank you, attendees. Have a great day.