A. Qualitative Analysis of Financial Reporting and Analysis of Almarai Company
a) Company Background of Financial Reporting and Analysis of Almarai Company

v Almarai Company

a) Description of Financial Reporting and Analysis of Almarai Company

Almarai Company was established in 1977 as a food and beverage selling the company. The company currently operates in the markets of North Africa and the Middle East. Almarai Company has some brands which include L’usine, ALYOUM, 7Days, and Nuralac. However, the product portfolio includes juices, bakery, dairy products, and poultry products.

b) SWOT Analysis of Almarai Company

Strengths of Almarai Company	Weaknesses of Almarai Company
v Highly Qualified Staff members are having an understanding of market requirements and customer demand. v The brand has strong customer equity. v The distribution system of Almarai Company is highly efficient and advanced.	v The operating cost of Almarai Company is quite high which can reduce profit margin. v Limited products included in the product portfolio
Opportunities of Almarai Company	Threats of Almarai Company
v Advanced technology is an opportunity for Almarai Company to interact with customers and build customer equity v Increasing the population rate is an opportunity to enhance sales.	v Changing trends in the targeted market are threats against Almarai Company v New entrants in the market are a threat to business.

v NADEC

a) Description of Almarai Company

NADEC is the abbreviated name of National Agricultural Development Company. NADEC is working in Saudi Arabia as a food and beverage selling company. The company is headed quartered in Riyadh. NADEC was founded in 1981 by royal decree.

b) SWOT Analysis of Almarai Company

Strengths of Almarai Company	Weaknesses of Almarai Company
v NADEC has huge financial resources that enable the company to operate well in the targeted market. v NADEC's goodwill is a positive factor for the growth of business operations.	v Limited availability of flavors and a fixed product line. v The company is not paying enough attention to geographical expansion.
Opportunities of Almarai Company	Threats of Almarai Company
v Increase in population is a positive opportunity for growth v The company can have a partnership with many companies working in the international market to expand business operations.	v Changing prices of raw materials v Dynamic requirements of customer markets. v Advancement of technology is shifting business from physical markets to e-markets.

b) Macro Environment Forces
PESTLE Analysis of Almarai Company

Political of Almarai Company

The political factors play a major rule in the development and growth of the business. The political stability in the country is needed by the corporations so that they can perform their operations efficiently. Saudi Arabia is currently facing political stability, and the government of Saudi Arabia has created such laws that support the food & beverage industry.

Economical of Almarai Company

The economic outlook of Saudi Arabia indicates that in the future the economy of the country will experience growth. The Saudi vision of 2030 has created positive outlook in the Saudi economy and many industries including Food & beverage industries will experience growth in near future.

Social of Almarai Company

Almarai Corporation will have to focus on the needs and preferences of the customers. The customers’ needs keep on changing with the passage of time, and these changes have huge impact on the performance and sales of the organization. Therefore Almarai should keep on performing market analysis to get deeper insights into the market.

Technological of Almarai Company

With the passage of time, the technology around the world is rapidly changing. Almarai uses the latest technologies and software to improve its production. So it can be said that the technological factor won’t have much impact on the performance of the corporation.

Legal of Almarai Company

Saudi Arabia laws support the food and beverage industries that operate in Saudi Arabia. The Operations of Almarai organization are in accordance with the rules and regulations which Saudi Government has created regarding the food beverage industries. So it can be said that Alamari does not need to worry about the legal factors (Fridson & Alvarez, 2011).

Environmental of Almarai Company

The global warming across the globe has become major issues, and many corporations around the world are now implementing such measures through which they can control their overall carbon footprint. Almarai operations are sustainable, and the company is taken steps for controlling the environmental pollution.

c) Microeconomic Forces of Almarai Company

Employees of Almarai Company

The employees are the ones who perform the business activities of the organization. Due to employee activities the organization meets its desired goals. If the performance of the employees is not great than the corporation cannot experience growth. Almarai Corporation pays special attention to its employees and provides them various incentives so that the employees remain motivated. The performance of the employees at Almarai remains high because the employees get all the facilities that are required in the corporation.

Customers of Almarai Company

The customers are the ones who are responsible for the sales of the corporation. The variety of products which Almarai provides to its customers is one of the main reason for higher revenues (Campbell, Edgar, & Stonehouse, 2011).

Level of competition of Almarai Company

The competition in the food industry is moderate. The food companies compete with each other so that they can enhance their market share.

d) Industry Research of Almarai Company

The Saudi Arabia Food industry is experiencing growth with the passage of time. The revenues of the industry in the year 2018 were 19% higher than the last year's revenue, which is sign of industry growth. The market segment penetration in the year 2018 was 15.3%, which is expected to reach 18.3% in the upcoming years. The average amount of purchase regarding the food product in Saudi Arabia is $28.68 which is growing with rate of 10.3%.

e) Industry Revenues of Almarai Company

The Saudi Arabian food industry earns $150 million in revenue in the year 2018. The total market size is estimated to be around $12 billion. Saudi Arabia accounts for 90% of the total food & beverage in the GCC. Saudi Arabia is the largest consumer market in the GCC (Fridson & Alvarez, 2011).

f) Characteristics of the Industry of Almarai Company

The Saudi Arabia Food industry is experiencing growth with the passage of time. The revenues of the industry in the year 2018 were 19% higher than last year's revenue, which is sign of industry growth. The Saudi Arabian food industry earns $150 million in revenue in the year 2018.

B. Quantitative Analysis of Almarai Company

1) Analysis of subject company on the basis of:

a) Growth of Almarai Company

In the following table sales growth rate for the last 3 years is presented for Almarai Company and NADEC.

Source: (Morning Star, 2019)

Key Ratios -> Growth
	2009-12	2010-12	2011-12	2012-12	2013-12	2014-12	2015-12	2016-12	2017-12	2018-12	Latest Qtr
Revenue %
Year over Year	16.68	18.1	14.72	24.3	13.52	12.36	9.43	6.55	-5.19	-1.53	6.01
3-Year Average	28.64	22.51	16.49	18.97	17.42	16.6	11.76	9.42	3.4	-0.17
5-Year Average			23.59	21.26	17.4	16.52	14.76	13.08	7.11	4.11
10-Year Average								18.22	13.97	10.56
Operating Income %
Year over Year	20.54	14.12	3.4	5.74	11.96	8.58	16.6	12.37	9.94	-2.02	-0.9
3-Year Average	33.73	23.19	12.46	7.66	6.97	8.73	12.33	12.47	12.93	6.57
5-Year Average			23.06	15.37	10.99	8.69	9.16	10.99	11.86	8.91
10-Year Average								16.87	13.6	9.94
Net Income %
Year over Year	20.18	15.6	-9.84	26.42	4.27	11.46	14.41	8.6	4.89	-7.95
3-Year Average	33.04	23.76	7.8	9.63	5.93	13.69	9.97	11.47	9.23	1.6
5-Year Average			19.67	16.66	10.55	8.9	8.67	12.79	8.66	5.99
10-Year Average								16.18	12.59	8.24
EPS %
Year over Year	13.91	15.6	-48.16	119.78	3.33	8.87	15.19	7.77	4.66	-7.58	-4.92
3-Year Average		21.57	-11.95	9.62	5.59	35.22	9.02	10.56	9.12	1.39
5-Year Average				15.41	9.17	8.18	8.1	25.14	7.89	5.5
10-Year Average									11.58	7.32

Source: (Morning Star, 2019).

Key Ratios -> Growth
	2008-12	2009-12	2010-12	2011-12	2012-12	2014-12	2015-12	2016-12	2017-12	2018-12	Latest Qtr
Revenue %
Year over Year		-0.31	8.47	7.47	11.04	9.53	13.59	-2.45	-11.5	3.13	0.65
3-Year Average		16.15	10.14	5.14	8.98	10.03	10.87	7.37	-0.65	-3.8
5-Year Average				12.81	9.78	9.2	10.21	8.1	3.31	3.27
10-Year Average								10.43	6.49	4.59
Operating Income %
Year over Year							32.02	-8.24	-41.83	46.45	5.98
3-Year Average									-11.01	-7.88
5-Year Average
10-Year Average
Net Income %
Year over Year				772.46	4.8	5.86	31.84	-29.11	-60.13	-95.64
3-Year Average			-54.75	9.88		5.5	13.89	1.16	-28.04	-76.9
5-Year Average				1.18	-3.26		68.31	1.88	-16.03	-48.69
10-Year Average								1.53	-9.87	-30.76
EPS %
Year over Year				772.46			60.17	-29.46	-60.17	-95.74	41.46
3-Year Average			-60.47	9.88		-1.04			-23.37	-77.13
5-Year Average							68.4	1.83
10-Year Average									-13.48	-30.95

According to the following graphs, the overall sales growth trend in 2017 was negative for both companies. However, sales growth for 2018 and 2016 is positive.

b) Profitability of Almarai Company

Profitability ratios include gross profit and profit margin ratios. According to the following table, the gross profit margin ratio of Almarai Company and NADEC are almost the same. The lower Gross profit shows that companies are inefficient in controlling the cost of operations therefore a high percentage of revenue is spent to cover the cost (Tadawul.com.sa, 2019).

Source: (Morning Star, 2019)

Key Ratios -> Profitability
Margins % of Sales	2009-12	2010-12	2011-12	2012-12	2013-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Revenue	100	100	100	100	100	100	100	100	100	100	100
COGS	59.69	60.53	62.31	64.47	64.78	64.02	61.7	60.31	59.93	60.32	61.57
Gross Margin	40.31	39.47	37.69	35.53	35.22	35.98	38.3	39.69	40.07	39.68	38.43
SG&A	18.52	18.42	6.69	6.8	6.53	6.23	7.15	7.6	5.06	4.74	5.26
R&D
Other			12.01	12.58	12.77	14.35	14.75	14.79	14.95	14.98	14.49
Operating Margin	21.79	21.06	18.98	16.15	15.93	15.39	16.4	17.29	20.05	19.95	18.69
Net Int Inc & Other	-2.55	-1.83	-4.14	-1.06	-2.18	-1.47	-2.88	-2.62	-4.25	-4.81	-4.97
EBT Margin	19.24	19.23	14.84	15.09	13.75	13.92	13.52	14.68	15.8	15.14	13.71

Profitability	2009-12	2010-12	2011-12	2012-12	2013-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Tax Rate %	2.59	1.95	2.81	3.42	2.72	4.05	3.53	3.45	1.92	3.39	3.62
Net Margin %	18.63	18.24	14.33	14.58	13.39	12.87	13.52	13.71	15.15	14.23	12.77
Asset Turnover (Average)	0.61	0.59	0.56	0.56	0.52	0.53	0.54	0.52	0.46	0.43	0.43
Return on Assets %	11.41	10.73	8.07	8.19	7.02	6.87	7.27	7.15	6.93	6.08	5.52
Financial Leverage (Average)	2.03	2.03	2.33	2.59	2.3	2.2	2.27	2.23	2.2	2.32	2.31
Return on Equity %	24.21	21.82	17.66	20.19	16.98	15.43	16.26	16.06	15.34	13.75	12.96
Return on Invested Capital %	14.21	13.07	10.11	10.5	9.26	8.82	9.34	9.55	9.36	8.29	7.95
Interest Coverage	8.66	12.05	9.74	10.47	7.88	9.44	9.12	7.14	6.48	5.94	4.82

In the above charts it can be seen that Almarai Corporation is generating profit however there is a lot of room for improvement. Almarai Corporation can improve its profitability by increasing its sales. The declining trend in profitability should be a matter of concern for the organization. The reason behind declining trend in profitability might be underutilization of its assets (SINHA, 2012).

Source: (Morning Star, 2019)

Key Ratios -> Profitability
Margins % of Sales	2008-12	2009-12	2010-12	2011-12	2012-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Revenue	100	100	100	100	100	100	100	100	100	100	100
COGS	64.37	68.31	66.95	64.78	63.15	62.6	60.21	58.24	64.03	63.02	62.37
Gross Margin	35.61	31.69	33.05	35.22	36.62	37.4	39.79	41.76	35.97	36.98	37.63
SG&A	69.68	61.74	61.09	55.21	59.54	30.27	31.5	33.96	0.18	10.79	10.82
R&D
Other	1.82								30.66	18.91	18.01
Operating Margin	-35.87	-30.04	-28.04	-20	-22.7	7.13	8.29	7.79	5.12	7.28	8.79
Net Int Inc & Other	41.6	27.84	26.85	26.7	29	-1.92	-1.95	-3.18	-3.27	-7.05	-8.46
EBT Margin	5.73	-2.21	-1.19	6.7	6.31	5.21	6.33	4.62	1.86	0.22	0.33

Profitability	2008-12	2009-12	2010-12	2011-12	2012-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Tax Rate %	10.23			12.49	12.19	0.68	5.2	5.5		62.75	34.07
Net Margin %	5.14	-2.88	0.72	5.87	5.54	5.17	6	4.36	1.97	0.08	0.22
Asset Turnover (Average)	0.62	0.54	0.59		0.66	0.6	0.65	0.59	0.5	0.52	0.53
Return on Assets %	3.17	-1.55	0.43		3.66	3.13	3.9	2.56	0.99	0.04	0.12
Financial Leverage (Average)	2.31	2.57	2.44		2.41	2.72	2.8	2.81	2.87	2.74	2.73
Return on Equity %	6.48	-3.78	1.07		8.83	8.52	10.77	7.18	2.8	0.12	0.32
Return on Invested Capital %	8.37	-1.18	3.1		7.13	5.01	6.33	5.36	3.06	1.66	1.93
Interest Coverage	4.07	0.22	0.3	4.89		3.87	4.26	2.57	1.63	1.07	1.1

The profitability condition of NADEC is not as much better as Almarai. There is a need to take steps on urgent basis to improve the profitability of the corporation. The increasing trend in the profitability of the company is good sign for NADEC (Spender, 2014).

c) Asset Management of Almarai Company

Return on asset ratios of Almarai Company and NADEC is less than 1. Comparatively, Almarai Company has a return on asset ratio better than NADEC. However, the overall trend is negative and declining, which is not a suitable trend. According to ratios. Companies are earning less than their assets capacity to generate profit. A major reason behind this can be the inefficiency of managerial staff in utilizing resources (Tadawul.com.sa, 2019).

The efficiency ratios of the organization are indicating that the organization is utilizing its assets efficiently for generating sales. However, the corporation has the opportunity to further improve its efficiency. The declining trend in efficiency indicates that the organization is not utilizing its assets accurately for generating sales (Jonathan, 2010).

Source: (Morning Star, 2019)

Key Ratios -> Efficiency Ratios
Efficiency	2009-12	2010-12	2011-12	2012-12	2013-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Days Sales Outstanding	26.91	28.15	25.33	20.1	20.14	19.78	19.9	20.77	25.38	28.55	62.1
Days Inventory	120.62	109.54	110.37	114.97	122.11	120.17	120.18	123.61	137.46	154.25	169.18
Payables Period	85.03	96.41	78.05	66.82	68.77	57.76	57.83	63.81	71.66	66.69	130.77
Cash Conversion Cycle	62.49	41.29	57.65	68.25	73.48	82.2	82.24	80.56	91.18	116.11	100.5
Receivables Turnover	13.57	12.96	14.41	18.16	18.12	18.45	18.35	17.58	14.38	12.78	5.88
Inventory Turnover	3.02	3.33	3.3	3.17	2.99	3.04	3.04	2.95	2.66	2.37	2.16
Fixed Assets Turnover	1.01	0.98	0.87	0.83	0.79	0.81	0.79	0.73	0.64	0.61	0.62
Asset Turnover	0.61	0.59	0.56	0.56	0.52	0.53	0.54	0.52	0.46	0.43	0.43

Key Ratios -> Efficiency Ratios
Efficiency	2008-12	2009-12	2010-12	2011-12	2012-12	2014-12	2015-12	2016-12	2017-12	2018-12	TTM
Days Sales Outstanding	73.51	76.79	67.3		57.1	56.26	51.99	53.8	44.58	37.66	86.89
Days Inventory	127.86	154.94	136.22		106.94	133.69	125.64	147.3	169.83	170.26	162.55
Payables Period	156.94	61.31	54.23		96.21	95.21	101.77	139.63	136.17	98.3	154.53
Cash Conversion Cycle	44.42	170.42	149.3		67.83	94.73	75.85	61.46	78.24	109.63	94.91
Receivables Turnover	4.97	4.75	5.42		6.39	6.49	7.02	6.78	8.19	9.69	4.2
Inventory Turnover	2.85	2.36	2.68		3.41	2.73	2.91	2.48	2.15	2.14	2.25
Fixed Assets Turnover	1.12	0.97	0.99		1.14	0.93	0.99	0.88	0.78	0.86	0.93
Asset Turnover	0.62	0.54	0.59		0.66	0.6	0.65	0.59	0.5	0.52	0.53

d) Coverage of Almarai Company

Coverage ratios include cash coverage ratio and interest coverage ratios. The cash coverage ratios of Almarai Company and NADEC are 2.3 and 0.47, respectively. A ratio of less than 1 indicates that the company has interest expenses lower than available cash thus company would not have difficulty to meet its interest expenses. While interest coverage ratios of Almarai Company and NADEC are 5.2 and 2.5 in order (Tadawul.com.sa, 2019).

Coverage of Almarai Company
Cash Coverage Ratio
	Total Cash	1182902	2.32184
	Interest Expense	509467	2.32184
Interest Coverage Ratio
	EBIT	2,652,155	5.20574
	Interest expense	509,467	5.20574
Coverage of NADEC
Cash Coverage Ratio
	Total Cash	35,219	0.472186842
	Interest Expense	74587	0.472186842
Interest Coverage Ratio
	EBIT	193,435	2.593414402
	Interest expense	74,587	2.593414402

e) Leverage of Almarai Company

According to the following table leverage and debt ratios of Almarai Company and NADEC are relatively similar. Debt to asset ratio of less than 1 for both companies indicates that the company has more assets than liabilities. While on the other hand, the debt-to-equity ratio of greater than 1 shows that both companies have debt more than equity. Such a situation indicates that companies need to have attention to debt control strategies.

Source: (Morning Star, 2019)

Liquidity/Financial Health	2009-12	2010-12	2011-12	2012-12	2013-12	2014-12	2015-12	2016-12	2017-12	2018-12	Latest Qtr
Current Ratio	1.51	1.15	0.92	0.97	1.44	1.21	1.28	1.11	1.18	1.31	1.29
Quick Ratio	0.67	0.45	0.27	0.28	0.66	0.44	0.62	0.37	0.57	0.49	0.58
Financial Leverage	2.03	2.03	2.33	2.59	2.3	2.2	2.27	2.23	2.2	2.32	2.31
Debt/Equity	0.74	0.7	0.85	0.96	0.82	0.71	0.77	0.78	0.73	0.84	0.79

Liquidity/Financial Health	2008-12	2009-12	2010-12	2011-12	2012-12	2014-12	2015-12	2016-12	2017-12	2018-12	Latest Qtr
Current Ratio	0.33	0.59	0.68		0.95	0.84	0.92	0.75	0.76	0.65	0.96
Quick Ratio	0.24	0.23	0.31		0.42	0.35	0.42	0.29	0.27	0.23	0.5
Financial Leverage	2.31	2.57	2.44		2.41	2.72	2.8	2.81	2.87	2.74	2.73
Debt/Equity						0.76	0.91	0.77	0.75	0.46	0.78

In the above table and charts, the liquidity ratios of both organizations can be seen. Almarai Corporation has enough cash to pay its short term obligations however NADEC needs to improve its liquidity position. NADEC currently does not have enough cash from which it can pay its short term loans.

C. Valuation Conclusion of Almarai Company

It is concluded that Return on asset ratios of Almarai Company and NADEC is less than 1. Comparatively, Almarai Company has a return on asset ratio better than NADEC. However, the overall trend is negative and declining, which is not a suitable trend. According to ratios. The profitability condition of NADEC is not as much better as Almarai. There is need to take steps on urgent basis to improve the profitability of the corporation. The increasing trend in the profitability of the company is good sign for NADEC. Almarai Corporation has enough cash to pay its short term obligations however NADEC needs to improve its liquidity position. NADEC currently does not have enough cash from which it can pay its short term loans.

References of Almarai Company

Campbell, D., Edgar, D., & Stonehouse, G. (2011). Business Strategy: An Introduction (3 ed.). Macmillan International Higher Education.

Fridson, M. S., & Alvarez, F. (2011). Financial Statement Analysis: A Practitioner's Guide. John Wiley & Sons.

Jonathan, B. (2010). Financial Management. Pearson Education, India.

Morning Star. (2019). Almarai Co. Retrieved from http://financials.morningstar.com/ratios/r.html?t=2280

Morning Star. (2019). National Agriculture Development Co. Retrieved from http://financials.morningstar.com/ratios/r.html?t=6010&region=sau&culture=en-US

SINHA, G. (2012). FINANCIAL STATEMENT ANALYSIS. PHI Learning Pvt. Ltd.

Spender, J.-C. (2014). Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. OUP Oxford.

Tadawul.com.sa. (2019). Almarai Co. Retrieved from www.tadawul.com.sa: https://www.tadawul.com.sa/wps/portal/tadawul/market-participants/issuers/issuers-directory/company-details/!ut/p/z1/04_Sj9CPykssy0xPLMnMz0vMAfIjo8zi_Tx8nD0MLIy83V1DjA0czVx8nYP8PI0MDAz0I4EKzBEKDEJDLYEKjJ0DA11MjQzcTfW99KPSc_KTIGZllJQUWKkaqBqUJKYklpfmqBroRy

Tadawul.com.sa. (2019). National Agricultural Development Co. Retrieved from www.tadawul.com.sa: https://www.tadawul.com.sa/wps/portal/tadawul/market-participants/issuers/issuers-directory/company-details/!ut/p/z1/04_Sj9CPykssy0xPLMnMz0vMAfIjo8zi_Tx8nD0MLIy83V1DjA0czVx8nYP8PI0MDAz0I4EKzBEKDEJDLYEKjJ0DA11MjQzcTfW99KPSc_KTIGZllJQUWKkaqBqUJKYklpfmqBroRy