Almarai: How Are Rising Costs Limiting Profits Despite Revenue

Almarai announced its preliminary financial results for the third quarter of 2026, reporting revenue of SAR 6.19 billion, up 11.43% from SAR 5.55 billion in the same quarter of the previous year.

The company attributed revenue growth to higher poultry sales volumes following an expansion in production capacity, growth in dairy sales in Egypt, and the contribution of its expansion in the water segment.

Net profit, by contrast, rose just 0.74% to SAR 617.79 million, affected by higher feed freight costs for the dairy segment, as well as transportation and energy expenses.

For the first nine months of the year, revenue rose 9.68% to SAR 18.22 billion, while net profit fell 0.28% to approximately SAR 1.99 billion, compared with the same period of the previous year.

To examine the performance and the balance between operational expansion and cost pressures, Al Yamamah University students and analysts offer their views below:

Growth drivers and the cost of rising logistics expenses

Student "Zaid Darweesh" @Zaid Darweesh opened the analysis, saying:

"As for record revenue growth, the poultry segment and a recovery in food services (amid a tourism boom) are at the forefront of this growth. The pressure on profits is an expected cost of higher shipping expenses (due to Red Sea tensions), raw material price inflation, and higher financing costs.

As for reinvestment, I believe the best use of cash would be to accelerate expansion into red meat and seafood, and form major supply partnerships with flagship Vision projects to ensure sustainable growth.

Finally, the strategic inventory policy has served as a safety net: it absorbed global and logistics-related price shocks and gave Almarai significant flexibility to maintain stable production and prices, strengthening its market share at competitors' expense."

Supply chain resilience and the risk of tying up cash

Student "Nouf Alajian"@Nouf Alojayan explained the role of inventory management:

"Maintaining strategic inventory and diversifying supply sources help Almarai avoid raw material shortages and mitigate the impact of higher shipping and feed costs.

This gives the company greater flexibility in responding to crises and regional changes, ensuring uninterrupted production and meeting consumer demand. Supplier diversification also reduces reliance on a single source and mitigates the risk of shipment delays.

But it is important for the company to balance inventory levels against storage costs, because excess inventory can tie up some of its cash and increase expenses. Good inventory management therefore helps Almarai reduce risks and maintain stable operations and profitability."

Automation and support for the goals of Vision 2030

Student "Rabiah Almuqait" @Rabiah Almugait discussed expansion and operational technologies, saying:

"Almarai's revenue growth came from the diversity of its segments, particularly dairy and poultry, as well as its expansion into markets and acquisitions. However, higher shipping, energy, and feed costs affected profits despite increased sales.

I believe reinvesting in the development of local production, expanding the poultry segment, and using modern technologies to improve operational efficiency could help the company reduce costs and achieve sustainable growth.

A strategic inventory and flexible supply chains also help the company meet challenges and ensure products remain available, supporting food security and aligning with the goals of Saudi Vision 2030."

Factory development and food product diversification

Student "Rand Alkhalaf" @Rand Alkhalaf shared her analysis:

"In my view, Almarai's revenue growth is due to its diverse product range and rising demand, especially for dairy, juices, and poultry. However, higher production, transportation, and energy costs may be among the reasons profit growth lagged despite higher sales.

I believe the company can invest its profits in developing factories and modern technologies and expanding its food products. In addition, strategic inventory and diversified supply sources help it address crises and rising shipping costs and ensure products remain available in the market."

Rising cost of revenue and the challenge of converting sales into profits

Student "Mohammad Alghaihab" @Mohammad Alghaihab highlighted profit margins:

"Almarai's results are positive in terms of growth, especially as the company achieved record third-quarter revenue of SAR 6.19 billion. What stands out, however, is that revenue rose 11%, while net profit increased by just 1%. Cost of revenue rose 14.3%, faster than sales growth, explaining the pressure on profit margins.

Nevertheless, Almarai's ability to maintain profit growth despite higher shipping, feed, and energy costs is a positive sign. As for expansion, I see poultry as one of Almarai's most important future opportunities, given the Kingdom's focus on increasing domestic production.

But the company should also focus on improving production efficiency and supply chains, because expansion alone is not enough if costs continue to grow faster than revenue. The challenge now is turning revenue growth into higher profits."

The gap between net profit and comprehensive income

Student "Ghadah Alwallan" @Ghadah Alwallan raised questions about exceptional items:

"What stands out is that Almarai's net profit for the first nine months was almost unchanged, down 0.3%, while comprehensive income fell 9.6%.

This difference warrants closer attention, especially since comprehensive income includes additional items that directly affect shareholders' equity. The key question is whether this decline is due to temporary factors or is likely to continue."

Protecting market share and consumer confidence

Student "Rahaf Alanazi" @Rahaf Alanazi emphasized the importance of operational safeguards:

"Strategic inventory management and diversified import sources are Almarai's primary safety net amid regional volatility and fluctuations in global shipping prices. Having sufficient stocks of grains and feed not only protects the company from price shocks, but also ensures production lines continue operating without interruption.

In addition, flexible supply chains and multiple shipping routes directly help protect the company's market share and prevent products from disappearing from retail shelves. This sustains consumer confidence and protects the stability of cash flows and sales."

Smart agriculture and investment in food security

Student "Ryouf Alsewailim" @Ryouf Alsewailim shared her investment perspective:

"Almarai's record-high revenue reflects the strength of its fresh milk and poultry segments and its steady expansion. But the main challenge is pressure on profit margins: revenue rose 11%, while net profit grew only slightly, by no more than 1%, due to input and operating cost pressures.

I believe redirecting the remaining share of profits toward smart agriculture and developing local supply chains represents a golden investment opportunity aligned with food security goals. The company's reliance on strategic inventory and flexible supply chains has also served as a genuine safety net against global shocks."

Balancing supply security and inventory costs

Student "Albatool Bedairi" @Albatool Bedairi commented on cash management:

"Almarai's reliance on strategic inventory and flexible supply chains is an important factor in maintaining operational stability. Holding sufficient stocks of essential materials such as feed helps the company avoid production stoppages or having to buy at inflated prices during crises.

On the other hand, holding large inventories increases storage costs and ties up some cash. Therefore, effective inventory management and balancing uninterrupted production with costs will be among the most important factors in preserving Almarai's profitability and financial stability."

Investment in renewable energy and operational automation

Student "Zikra Abdulkarim" @Zikra Abdulkareem added her analysis of expansion:

"Almarai's record revenue growth is due to the diversity of its operating segments, particularly dairy, juices, poultry, and bakery, as well as the strength of its brand. The slower growth in net profit compared with revenue was linked to higher raw material, feed, energy, transportation, and shipping costs.

As for reinvestment, I believe expansion into agricultural and food technologies, automation, renewable energy, and supply chain development offers important opportunities to improve efficiency, reduce costs, and support future growth in line with the goals of Saudi Vision 2030.

Finally, maintaining strategic inventory and diversifying suppliers ensure production continuity, provided the company balances supply security with storage costs to ensure sustainable profitability."

Protecting profit margins through greater efficiency

Student "Yazan Hamoud" @Yazan Hamoud pointed to the heart of the financial challenge:

"Revenue growth of 11% compared with net profit growth of just 1% shows that Almarai's current challenge is not sales, but converting sales growth into actual profits, because of higher shipping, feed, and energy costs.

It would be better to direct some reinvested profits toward projects that will reduce these costs in the future, such as improving supply chain efficiency, increasing reliance on local production, and investing in energy solutions and operational technologies to protect margins over the long term."

Product diversity and sustainable growth

Student "Meshail Alanazi" @Meshail ALANazi explained the sources of growth:

"Almarai's revenue growth is due to its diverse product range and rising demand for dairy, juices, and poultry. Limited profit growth despite higher revenue, meanwhile, is linked to higher feed, shipping, energy, and distribution costs.

I believe reinvesting profits in modern technologies, increasing local production, and diversifying products will support future growth. Strategic inventory and supplier diversification also help reduce the risk of supply disruptions and maintain stable operations."

Meeting market needs and improving quality

Student "Raneem Asiri" @Raneem Asiri shared her vision for factory development:

"Almarai's revenue growth is due to increased demand for its diverse products, such as dairy, poultry, and bakery goods, while profits have been affected by higher production, transportation, and energy costs.

I believe investing part of its profits in developing factories, increasing production, and adding new products will help the company expand and achieve better profits in the future, while strategic inventory will ensure product availability during crises."

Turning sales into sustainable profits

Student "Nada Asiri" @nada Asiri concluded the students' comments:

"Almarai's revenue growth is due to increased demand for its products and expansion into new markets, but higher operating costs are limiting profit growth.

I therefore believe that improving production efficiency, developing modern technologies, and managing inventory effectively are essential to reducing costs, boosting profitability, and turning sales growth into sustainable profits."

Diversifying income sources and strategic acquisitions

On the subject of growth drivers, student "Ahmed Al Jadaan" @AHMED ALJADAAN discussed the diversity of the company's segments:

"When it comes to growth drivers, Almarai is implementing a well-crafted diversification strategy: revenue surged 11% as a result of expansion in poultry projects, increased dairy sales in Egypt, and a strong entry into the water segment through an acquisition.

Diversifying income sources is the main factor that has enabled the company to achieve the highest revenue in its history."

Record expansion versus operational pressures

Student "Fahad Alruwaished" @Fahad Alruwaished described the operational picture:

"Almarai's record revenue growth was primarily driven by the expansion of poultry projects, increased dairy sales in the Egyptian market, and the acquisition in the water segment, alongside an improved revenue mix and growth in overall sales across various markets.

Despite this strong 11% jump in revenue, net profit rose only slightly, by 1%, due to operational pressures from inflation in feed freight costs, transportation, and energy."

Strategic automation and a logistical shield

Student "Fay Aldossari" @Fay Aldossari continued the analysis:

"I believe the poultry segment is the clear winner and the biggest driver of the sales surge, given strong and sustained demand, alongside core products such as dairy, which also enjoy steady demand. But strong sales do not necessarily mean high profits: inflation, rising global feed prices, and transportation, energy, and financing costs absorbed a large share of profits.

I believe the smartest investment would be to expand further in poultry and food security, supported by government priorities, while introducing supply chain automation technologies to reduce waste and improve operational efficiency.

As for strategic inventory, it is the company's primary protective shield: it guards against sudden shocks in global raw material prices and ensures uninterrupted operations and smooth supply."

Analyzing profit margins and the effectiveness of strategic inventory

Student "Jana Aljebali" @Jana Aljebali shared her direct financial analysis:

"In the third quarter, the pressure came specifically from cost of revenue, not operating expenses: cost of revenue rose 14.3%, compared with revenue growth of 11.4%, causing the gross profit margin to fall from 31.5% to 29.7%. By contrast, operating expenses grew by just 6.9%, easing the impact somewhat, while the operating margin declined by about one percentage point (from 13.6% to 12.6%).

Although the poultry segment contributed to revenue growth, the protein segment's profitability declined. This means expansion lifted sales but has not yet improved margins, while profits in the dairy, juice, and bakery segments improved thanks to a better product mix. The figures also show that although strategic inventory protects product availability, the fact that cost of revenue rose faster than sales proves that it did not fully protect margins.

Finally, net profit growth of 0.7% was below operating growth of 2.8%. With a dividend policy of 40% to 60%, the key question remains: will retained earnings be directed toward reducing unit costs, particularly in shipping and feed?"

Early disclosure and the challenge of cost control

Commenting, expert "Abdulaziz Khrais" summed up the company's financial position and transparent performance:

"In a move consistent with expectations, Almarai published its financial results just four days after the start of the reporting window, reaffirming its strict commitment to its approach of reporting results early to investors.

The company recorded the highest revenue in its history, at SAR 6.187 billion for the quarter. However, cost inflation resulting from higher feed freight costs for the dairy segment, as well as higher transportation costs driven by increased energy expenses, directly affected net profit and prevented record revenue growth from being reflected in the company's bottom line."

Maritime route pressures and future cost structures

In an analytical review, financial and economic analyst "Hamad Alsaeed" @Hamad Alsaeed added his perspective:

"Almarai's third-quarter results come in a year when regional tensions have repriced everything passing through the region's maritime corridors. The company relies on imports for its green feed, so higher shipping and insurance costs have flowed directly into production costs. This was compounded by an 8% increase in local diesel prices at the start of the year, adding to distribution expenses. I therefore view 11% revenue growth alongside net profit holding steady at SAR 618 million as the result of two forces at work: demand expanding across segments and markets, while input costs rose even faster, cutting the gross profit margin by 1.8 percentage points.

In the poultry segment, the company is expanding capacity in a market where local production grew 16.5% in the first half of the year. This development supports self-sufficiency while also putting pressure on prices, meaning volume growth is outpacing returns until the ramp-up phase is complete.

I believe the most important signal came days after the results: the 2026–2031 strategy, backed by investments exceeding SAR 15 billion, is focused on supply chain resilience and local manufacturing—targeting the very source of cost pressure—alongside a dividend policy of 40% to 60% of net profit. In my view, gross profit margin, ahead of sales growth, will be the true measure by which the results of this phase should be judged."