CFO
2023 financial year was a significant milestone in the history of Baladna, achieving revenue of more than QR 1 billion for the first time, thanks largely to volume growth.
Baladna grew its top-line 7% to QR 1,057 million, boosted by notable revenue growth in both our Retail and HORECA channels, which improved 9% and 4% respectively.
Higher sales volumes reflected improved market share across most of our product categories, driven by operational excellence. Overall, market share is at 53.5% compared to 51.0% in 2022, and our share of the Qatari dairy segment reached 60%. The best performing product categories in terms of revenue were cream, which grew by 18%; labneh, which was 17% higher; and yoghurt increased by 16%. Newly acquired detergent processing business E-life, in which we hold 75% stake, contributed to 1% of our total revenue.
Strong bottom-line performance
The net profit attributable to Baladna’s shareholders grew by 36% to QR 110 million for the year compared with QR 81 million in 2022. As a result, the net profit margin improved to 10.4% in 2023 compared to 8.2% in 2022 and generated earnings per share of QR 0.058 in 2023 compared to QR 0.042 in 2022. The reported double-digit growth in net profit is mainly attributable to the increase in sales volumes. Stringent cost controls applied across the business kept spending on a tight rein, and this in turn had a positive impact on net profits. Efficiency improvement throughout the entire value chain and normalisation of commodity prices towards the latter part of 2023 also contributed to this achievement. The investment in securities also boosted the bottom line largely as a result of the increase in market prices of securities held by the Company.
For the same period, Baladna reported EBITDA of QR 325 million, which accounted for an EBITDA margin of 30.7%. This confirms that Baladna remains a regional industry leader in terms of its EBITDA margin in the sector.
Exploring new opportunities
As part of our growth and diversification strategy, Baladna continues to explore opportunities to extend its presence beyond Qatar via suitable international acquisitions. In 2023, we increased our shareholding in Juhayna Food Industries to a substantial 15%, following our first share purchases in 2021.Our larger equity position in Juhayna was in line with the broader Egypt strategy.
Our mega project of a dairy venture in Algeria made significant progress in 2023, with discussions continuing with the Algerian Government primarily aimed at establishing a large-scale milk powder production facility to support the country in become self-sufficient. Algeria is considered the world’s second largest importer of milk powder. This collaboration will ensure substantial market growth for Bandana and set the Company to create significant shareholder value in the future.
Cash flow management and financial position
Efficient working capital management, particularly related to inventories, generated better operating cash flows compared to 2022, while our steadfast management of capital expenditure contributed to a strong free cash flow to the firm (FCFF) position at the year end. The generated FCFF of the year represents 7.4% of revenue.
Our capital expenditure programme is primarily focused on business improvements where necessary. In past years, Baladna invested significantly in infrastructure for the business to function efficiently. During 2023, Baladna was able to commission the new factory, designed to produce evaporated milk and sterilised cream. This project began in 2021 for the purpose of enhancing the country’s selfsufficiency and Baladna has invested around QR 425 million.
Investment in equities were in line with the Company’s growth strategy and was a main contributor to the improvement in the total asset position at year end. A substantial component of this investment was represented by the purchase of additional Juhayna shares, which provided Baladna with a QR 2 million dividend and a fair value gain of QR 26 million for the financial year 2023.
Our debt-to-equity position remained at a similar level and expectation is to bring down the exposure and improve the gearing by repaying the Islamic financing facility, which started during the year. The financing methods of any new projects will be decided based on the project feasibility studies.
Pausing and resuming the dividend payments
In 2023, the Board felt it would be more prudent to reinvest the cash profits for 2022 for the sustainable growth of the business. This approach enabled the Company to begin the repayment of the Islamic financing facility, which started in 2023, and funded most of our capital expenditure and equity investments through our internal cash flows.
Despite pausing the dividend payments in 2023, I am pleased to mention that the Board of Directors has proposed a dividend payment of QR 132 million for the year 2023, which will be paid in 2024. The distribution will be done following the approval of the General Assembly.
Baladna’s management is fully committed and is targeting solid growth in revenue and profitability for the coming years and the distribution of dividend will be carried accordingly.
Governance and risk management
In terms of corporate governance, Baladna has developed a comprehensive risk register and relevant initiatives have been taken to mitigate all identified risks. This includes written policies and procedures developed in line with local regulations and industry best practices.
Baladna’s exceptional commitment to the highest standards of corporate governance were recognised in 2023 by the region’s most prestigious award. At the 15th Middle East Investor Relations Association (MEIRA) awards, Baladna placed first in the digital category, and second in the print category for its investor relations reporting. This is the third consecutive year that Baladna has received these awards, consolidating its reputation for exceptionally high standards of communication with shareholders.
As a strategic measure, Baladna maintains a strict inventory of all the major materials, which ensures operation continuity in the face of any supply disruptions. We are mindful of the regional warfare situation and make every effort to minimise the risk to our business. During 2023, Baladna was able to secure attractive financing rates from our financing partners. Risk related to the distribution of our products is minimal as we are managing our own distribution channels without third-party intervention. Exchange risk is minimal as we are currently catering to the local market with minimal exports. Our main exposure is the Qatari Riyal and the US Dollar, on which the exchange rate is pegged. Other foreign exchange rate exposure is negligible.
Looking ahead to 2024
The coming year is expected to deliver moderate growth in the dairy market. Baladna aims to drive growth by continuing to grow its market share in existing product lines and through the introduction of new products. Along with protecting our market share in the dairy category, we will focus on developing our presence in juice segment in which we have greater chance to grow our market share. Operations at the evaporated milk and sterilize cream processing factory began as a soft launch in 2023. The work will be increased to cater to retail and HORECA channels and we expect a reasonable contribution to the top-line growth of the Company. The E-life detergent segment is also expected to further strengthen the top line.
Baladna’s continuous focus on increasing efficiencies and operational excellence look set to boost our bottom line in 2024. Business automations, advancements and adopting industry best-in-class technology is a priority for the Company. This will streamline the entire value chain and reporting process, strengthen compliance and controls and fast track the decision-making process.
Baladna’s ongoing concentration on expansions beyond Qatar will remain pivotal for the sustainable growth of the business. We intend to increase our shareholding in Juhayna and advance our expansion in Algeria, and we anticipate significant shareholder value creation. Similarly, we will remain focused on furthering our diversification agenda by evaluating new opportunities.
We continue to pursue the strong backing of our shareholders in addition to our solid financial position and operational cash flow generation. In light of these positive outcomes, Baladna’s management is targeting solid growth in revenue and profitability for the coming year, and we expect to resume the dividend distribution accordingly.
