Saudi Arabia - Tanmiah Food Company, a market-leading provider of fresh and processed poultry and other meat products, has seen its attributable first-half net profit rise 2.2% YoY from SR31.7 million in H1 2022 to SR32.4 million ($8.8 million).

Revenues increased 26.6% YoY from SR776.7 million to SR983.1 million, supported by a 22.2% rise in fresh poultry sales. Gross margin was steady at 23%, while EBITDA of SR119.2 million (+45.4% YoY) yielded a margin of 12.1%.

Zulfiqar Hamadani, CEO of Tanmiah, commented: “Tanmiah achieved sustained revenue growth during the first half of 2023, with fresh poultry, animal feed and health, and food franchise operations all charting their upward trajectories. Our position as a prominent industry player, coupled with our collaborative association with globally renowned brands, have bolstered this performance.

Consumer preference

“With a commitment to operational excellence reflected in our sustainability and innovation initiatives, we are delighted to have been honoured with esteemed awards such as Forbes' Top 10 Innovative Companies in Sustainability and 2023's Product of the Year. These accolades mirror the growing consumer preference for our nutritious, high-quality products, produced and delivered sustainably by our dedicated team that is guiding the company’s path to success.

“Looking ahead, we remain focused on spearheading innovation and sustainability in the food sector, which will further enhance our positioning in the market, and enable Tanmiah to unlock a multitude of opportunities and reach new and exciting horizons.”

Ahmed bin Sharf Osilan, Executive Board Member and Managing Director of Tanmiah said: “Our progress during the first half of the year speaks to our dedication to fortifying the domestic food sector and supporting Saudi Arabia's journey towards becoming a global Halal hub. Our strategic partnership with Halal Products Development Company (HPDC), a subsidiary of the Public Investment Fund, is an exciting step toward reinforcing the Halal industry whilst enhancing its efficiency and innovation. Aligned with our commitment to supporting the kingdom's food security objectives, this partnership underscores our dedication to both domestic and international impact in the Halal sector.

“We look forward to continuing to collaborate with prominent public and private sector organizations and through our unwavering focus on elevating our operational efficiencies, underpinned by our circular economy model, we aim to enhance the competitiveness of our products, and grow our market share, whilst generating sustainable returns for shareholders.”

Revenue analysis

Tanmiah reported 1H2023 revenues of SR983.1 million, up 26.6% YoY from SR776.7 million in 1H2022, primarily due to continued growth across all segments, particularly fresh poultry. Food franchise operations also achieved a substantial improvement in revenues from SR9.8 million to SR37 million.

Fresh Poultry sales, the key contributor to Tanmiah’s revenues (84%), increased 22.2% YoY in 1H2023 to SR825.7 million from SR675.9 million. The growth in revenues can be attributed to a continued rise in sales volumes as well as an increase in production capacity during the period, from 456,000 birds per day as of December 31, 2022, to 500,000 birds per day as of June 30, 2023.

Animal Feed and Health revenues increased 32.4% YoY to SR120.5 million from SR91.0 million, as a result of rising demand for animal health products and equipment.

Food franchise operator revenues nearly quadrupled from SR9.8 million to SR37 million in 1H2023, and during the period, Tanmiah opened 11 POPEYES stores in the kingdom, bringing the total to 31 operational outlets as of June 30, 2023.

Income statement analysis

Cost of Sales increased 26.8% YoY to SR757.2 million in the first half of 2023, compared to SR597.1 million, as Tanmiah ramped up production and expanded its market reach.

Meanwhile, gross profit increased 25.7% YoY to SR225.9 million, from SR179.7 million, in line with the continued rise in sales volumes; however, during the second quarter the Gross Profit faced pressure due to efforts for ramping up production and distribution capacity, which, despite improved volumes during the quarter had an impact on profits.

EBITDA increased from SR82.0 million in 1H2022 to SR119.2 million in 1H2023, supported by the strong revenue performance, which has outweighed the 12.7% YoY rise in selling, general, and administrative expenses.

Balance Sheet analysis

Tanmiah ended the period with a cash position of SR285.0 million, compared to SR267.1 million as of December 31, 2022.

Total borrowings increased from SR308.4 million to SR449.5 million as of June 30, 2023.

Capex increased from SR41 million in 1H2022 to SR71 million in 1H2023. Planned capital expenditure in the next few years will focus on ramping up primary processing, feed milling and hatching capacities, in addition to expansion of food franchise operations, thus enabling the Company to seize new growth opportunities.

Growth strategy

Tanmiah’s fully integrated and highly efficient business model positions it for growth on local, regional, and global fronts, underpinned by favourable market trends. The global halal food market is expected to grow at an estimated CAGR of 10.8% during 2023-2028, according to industry reports.

The domestic operating environment is indeed conducive to growth and is driving the successful execution of the company’s expansion plans. Saudi Arabia is looking to make investments valued at $20 billion by 2035 to boost the domestic food sector. By the end of the first half of 2023, the Agricultural Development Fund approved a significant number of credit facilities worth more than SR4.2 billion, that will primarily be allocated to reinforcing the kingdom’s food security goals and ensuring the stability of food supply chains, in addition to developing the domestic agricultural sector.

Such strategic initiatives that are targeted at boosting the domestic food sector are placing Tanmiah on a solid path to capture several growth opportunities and further enhance its positioning in the market.

Diversification initiatives by the company include the growth of Tanmiah’s food franchise vertical, which was launched in 2021, underpinned by the Company’s strategy of expanding the footprint of POPEYES across the kingdom.

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