DUBAI: Almarai, the Gulf's largest dairy company, reported an 18.6 percent increase in second-quarter net profit on Sunday, beating analysts' forecasts, showing the benefits of stronger sales and lower commodity prices.
But the company said it would continue to exercise caution due to competitive market conditions in Saudi Arabia, where a slump in oil prices has put pressure on government and consumer spending.
"Given the very competitive market conditions driven by the economic slowdown going forward, the company will continue to exercise caution on its cash-flow generation while focusing on its strategic targets and enhance overall efficiency," it said in a statement.
Almarai made a profit of 628.8 million riyals ($167.7 million) in the three months to June 30, up from 530.4 million riyals in the year-earlier period, it said in a statement.
Four analysts polled by Reuters had forecast on average that Almarai would make a quarterly profit of 530.3 million riyals. Almarai's shares rose by 2.7 percent in early trading.
The company's sales increased by 10.3 percent, with growth strongest in poultry, bakery, dairy and juice.
The company's cost of sales rose at a lower rate than sales because low commodity prices, improvements in cost management and production savings helped to offset rises in fuel and electricity costs.
Almarai's performance was also boosted by the timing of the Islamic holy month of Ramadan, when consumers usually increase purchases of food and drink products.
This year, Ramadan took place predominantly during the second quarter, while last year there was a greater split between the second and third quarters.
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