- 3.9% rise in Revenues for the six months ended June 30, 2016, with revenue growth in Kuwait, Jordan, and Qatar
- The creation of the Saudi JV is on-track, transaction closing in 4 weeks
Dubai, UAE, August 8, 2016: Mezzan Holding KSC, one of the largest manufacturers and distributors of food, beverage, FMCG and pharmaceutical products in the Gulf, today announced the company’s financial results for Q2 2016. Second quarter Revenue increased to KD52.8 million, representing a 2.4% increase on the same period in 2015, thus bringing its year-to-date Revenue to KD108.5 million, representing a 3.9% increase on the same period in 2015.
Mezzan Holding CEO, Garry Walsh, said: “We were pleased with our overall performance given some of the macro-economic challenges across the markets we operate in as we highlighted earlier in the year. Our consumer staple portfolio demonstrated its resilience in these market conditions, while new business, distribution gains, and market share gains in some of our key businesses in Kuwait, Jordan and Qatar added to the growth momentum.
We are also pleased to announce that we are making good progress on the creation of the our previously announced joint-venture in Saudi Arabia that will give Mezzan Holding access to the Gulf’s largest food and consumer market. We expect to finalize the transaction in four weeks.”
In June, the company announced that it is in talks with Saudi Arabia’s Al Faisaliah Group, a leading diversified business group, for the establishment of a joint venture in Saudi’s food manufacturing and distribution sector.
The joint venture will enable Mezzan Holding to manufacture, market and distribute food products in the Kingdom of Saudi Arabia, and award it exclusive rights to continue to manufacture, market and distribute Al Faisaliah Group’s bakery and snacks products line, as well as the exclusive rights to import, manufacture, sell and distribute all Mezzan Holding brands. The JV company will be headquartered in Riyadh, the capital of the Kingdom of Saudi Arabia.
Under the terms of the JV agreement, Mezzan Holding will acquire a 70% stake through a capital increase in a food and beverage manufacturing and distribution entity, Al Safi Food Company, currently owned by Al Faisaliah, which will retain the remaining 30% stake. The transaction is expected to close in four weeks subject to satisfying certain precedent conditions and obtaining regulatory approvals. Mezzan Holding’s investment in the JV is expected to be between KD7 million and KD7.7 million.
Walsh said, “Our full year outlook on underlying performance remains the same with high single digit and low double digit revenue growth, with some leverage on the Net Profit line, which is in line with the targets we set at the beginning of the year. We expect to see a stronger second half to the year as new business comes on stream and we begin to lap the Catering declines in the second half of 2015. We will continue to invest prudently in our brands and infrastructure to ensure we deliver quality products to our customers and consumers, while continuing to insist that we spend wisely as we seek to maximize shareholder value.”
H1 2016 Financial Highlights:
- Revenue: KD108.5 million, up 3.9% from H1 2015
- Underlying Net Profit: KD10.3 million, down 2.2% from H1 2015*
- Reported Net Profit attributable to Equity holders of the Parent Company: KD10.0 million, down 19.9% from H1 2015
*2015 Underlying Net Profit is adjusted for a non-recurring gain of KD2.2 million from net insurance proceeds recorded in Q2 2015.
Q2 2016 Financial Highlights:
- Revenue: KD52.8 million, up 2.4% from Q2 2015
- Underlying Net Profit: KD5.0 million, down 1.1% from Q2 2015
- Reported Net Profit attributable to Equity holders of the Parent Company: KD4.8 million, down 31.6% from Q2 2015
H1 Financial Performance Review:
- Food Business Line: The Food Business Line generated KD77.4 million in Revenue, or 71.3% of Group Revenue, representing an increase of 2.9% compared with the same period in 2015. The Business Line comprises three divisions, and they are Manufacturing and Distribution (52.0% of Group Revenue), Catering (11.7%) and Food Services (7.7%).
- Manufacturing and Distribution: H1 Revenue increased 8.2%, with broad based growth across our key operating units. This was largely driven by our company owned brands, rather than our partner brands as well as new business.
- Catering: H1 Revenue declined by 13.0% due to the completion of long term contracts in Kuwait, as we highlighted in previous earnings disclosures. Our catering business in Qatar continued to perform well, where we expect to see continued progress.
- Services: H1 Revenue declined by 1.9% where growth in Jordan was offset by declines in Afghanistan and Iraq. As previously disclosed, the nature of the tender business in Jordan will result in quarterly fluctuations.
- Non-Food Business Line: The Non-Food Business Line generated KD30.9 million during the period, or 28.5% of Group Revenue, representing an increase of 5.6% compared with the same period in 2015. This Business Line comprises two business divisions, and they are FMCG and Pharmaceuticals (25.7% of Group Revenue) and Industrials (2.8% of Group Revenue).
- FMCG and Pharmaceuticals: H1 Revenue grew by 7.2% as all key agencies performed well.
- Industrials: Industrials revenues declined by 7.0% driven by oil price-driven declines in KLOC and plastics.
Regional Business Highlights:
- In Kuwait: H1 Revenue grew by 5.2%, despite the impact of losses in the Catering business. Food Manufacturing and Distribution and FMCG all contributed to drive growth.
- In UAE: H1 Revenue declined by 6.4% as macroeconomic headwinds impacted the discretionary elements of our portfolio, although the non-discretionary parts of the business fared better.
- In Qatar: H1 Revenue grew by 14.2% with our Water and Catering businesses both posting double digit growth.
- In Jordan: H1 Revenue grew by 25.5% as we tendered successfully for new United Nations World Food Program business.
- In Saudi: Mezzan Holding is investing KD7-7.7 million to acquire a 70% stake in food and beverage manufacturing and distribution entity, Al Safi Food Company, currently owned by Saudi-based Al Faisaliah Group, which will maintain the remaining 30% stake. The transaction is expected to close in four weeks.