Chairman’s Statement

On behalf of the Board of Directors, I am pleased to introduce Almarai’s Annual Report for the year ended 31 December 2018. This was a year in which the underlying quality of our work shone through, to deliver resilience in the face of headwinds. We proved our ability to succeed and grow, regardless of market conditions.

Our economic environment

Challenges exist in the macroeconomic environment in which we work. This year, Saudi Arabia and other GCC countries introduced value added tax (VAT). This new regulation, along with other factors including the introduction of dependents’ fees for expatriate workers and increased energy costs, put pressure on consumers, retailers and manufacturers. In addition, a number of expatriate workers left the Saudi labor market, which directly reduced consumer spending. These adverse factors existed for much of the year, but Almarai was ready for their impact and navigated the challenges they brought.

Meanwhile, on a positive note, improvements in oil prices gave the GCC economies a tangible boost, as they continue to structurally reform and to diversify their sources of income. Saudi Arabia remains a regional leader in this regard, with the effects of the National Transformation Plan and its parent programme – Vision 2030 – already bearing fruit. As a leading Saudi corporate, we are proud of the active role that we play in supporting the Vision, and we see our own growth and international expansion as directly linked to the national agenda. We will continue to empower and grow the Kingdom’s workforce, as together we strive for a more dynamic and vibrant economy.

Sustainability

This year, it was my privilege to write a foreword for Almarai’s first ever Sustainability Report, pertaining to 2017. The Report sets out our six pillars of sustainability: to promote responsible consumption; to ensure ethical and sustainable sourcing; to prioritize quality and safety; to reduce natural resource use and waste; to nurture and reward colleagues; and to generate significant economic value.

Today, these pillars form the basis of our sustainability strategy, focusing the Company on our key material issues. Highlights in 2018 included our successful transition to the 100% importation of animal feed requirements, relieving pressure on the Kingdom’s precious supply of water. We have also continued to grow the scale and depth of our Future Leaders and Graduate programmes, improving the effectiveness of our workforce. Furthermore, we introduced 35 new products to the market, fueling the long term value generation challenge for the Company and delighting our consumers.

Governance

In 2018, the Board of Directors continued to perform its duties with the diligence and commitment that has characterized its work. In March, the Board announced the resignation of Engr. Rayan bin Mohammed Fayez (a non-executive Board Member and representative of the Savola Group, as well as a member of the Executive Committee), along with the appointment of Engr. Anees bin Ahmed Moumina (as non-executive Board member and representative of the Savola Group, as well as a member of the Executive Committee). The appointment was approved by shareholders at the Annual General Meeting. We thank Engr. Rayan for the commitment he showed during his time on the Board, and we welcome Engr. Anees.

In October, the Company announced Board approval for the establishment of a Risk Committee, as per Saudi Arabia’s new Company Law and our own Corporate Governance Code. The standalone Committee will strengthen our governance architecture and is composed of accomplished and experienced professionals with broad business experience. The Committee is chaired by Mr. Bader bin Abdullah Al Issa, a non-executive Board member and representative of the Savola Group.

Perhaps our most important Board announcement of the year was to inform the market that Almarai’s Chief Executive Officer (CEO) Georges P. Schorderet, will retire in 2019 after 15 years with the Company. Georges very much deserves his retirement, having been an immensely important asset to our business throughout his tenure. We wish him well in his retirement and we look forward to welcoming Alois Hofbauer as our next CEO. Alois has a proven track record of successful leadership at large multinational food and beverage businesses and will bring valuable experience to the role.

Delivering shareholder value

Almarai’s total market capitalization as at 31 December 2018 reached SAR 48.0 billion, with 1 billion shares in issue. At the Annual General Meeting, to be held on 7 April 2019, the Board of Directors will propose a cash distribution of SAR 850 million, which is equivalent to SAR 0.85 per share or 42.3% of Net Income.

With thanks

It remains for me to express my gratitude to fellow members of the Board of Directors, for the steady guidance and wise judgment that they have delivered throughout the year. On behalf of the Board, I would like to thank Almarai’s management and staff, for their ongoing and tireless commitment to delivering on the Company’s promises to shareholders and consumers, and for their dedication to our future achievements.

On behalf of the Company, I would like to place on record our thanks to our two most important external stakeholder groups: our consumers and our shareholders. Both have put their trust in the quality of our operations and our products, and both expect the very best from us. The Company looks forward to continuing to meet and exceed their expectations in the years ahead.