Baladna's 2023 Triumph: Gross Profit Margin Decline Offsets Sales Increase, But Fair Value Gain Pushes Net Profit Up
• The company's sales revenue increased 7% year over year.
• Medicare Group’s share price decreased as much as 20% during 2023.
• Net profit increased, driven by the positive impact of the fair value adjustment for financial investments.
Baladna's stock price experienced a sharp decrease throughout the year 2023. Starting at 1.53 riyals per share, the stock closed the year at 1.22 riyals per share, representing a decrease of approximately 20%. During the same year, significant insider activity was recorded, with insiders purchasing the company's shares amounting to 5.6 million QAR.
Here are the key numbers:
● Sales Revenue: 1057 million QAR vs. 986 million QAR in 2022 (a 7% YoY increase).
● Gross Profit: 210 million QAR, the same as in 2022 (no YoY change).
● Net Profit: 109 million QAR vs. 81 million QAR in 2022 (a 36% YoY increase).
● Earnings per Share: 0.058 QAR/share vs 0.042 QAR/share in 2022 (a 38% YOY increase).
● Dividend per Share: 0.070 QAR/share (no cash dividend in 2022).
Baladna, Qatar’s largest dairy and beverage manufacturer, plays a crucial role in ensuring sustainable, self-sufficient food security within the country. However, similar to many other companies in Qatar's food sector, Baladna relies heavily on government subsidies.
In 2023, Baladna recorded a profit of 109 million QAR. This profit is notably close to the total government subsidies received by the company in the same year, amounting to 110 million QAR. This suggests that Baladna's profitability is significantly supported by these subsidies, and without them, the company would have likely operated at a break-even point.
This reliance on subsidies presents a key challenge for Baladna's management: how to transition towards self-sustainability and profitability without the need for substantial government support.
In 2023, Baladna experienced significant sales growth, with a 7% increase in sales revenues compared to the previous year. This growth had a positive effect on the company's net profit, which amounted to 15 million QAR. However, despite the increase in revenue, there was a decrease in the gross profit margin, which dropped from 21.3% in 2022 to 19.9% in 2023. This decrease offset the positive impact of the revenue increase on profit.
This situation presents Baladna’s management with a critical challenge: they must take decisive action to restore the gross profit margin to its previous level or a comparable one. This will likely involve implementing strategies to reduce direct production costs, optimize the sourcing of key inputs, and possibly adjust the pricing policy. Addressing these areas effectively will be crucial for Baladna to maintain its profitability and financial health in the future.
In 2023, the company's financial investments, which are measured at fair value through profit or loss, saw a highly positive adjustment. This adjustment had a substantial impact on the net profit, amounting to 53 million QAR. Maintaining these investments is part of a sound strategy, providing income source diversification. However, the outcomes of such investments can be somewhat predictable to a limited extent and often fall outside the company’s control. Given this scenario, management must maintain focus on the core business and seek out opportunities to increase profitability in those areas.
Analyzing the expenses, it is evident that both general administrative expenses and finance costs experienced an increase. This had a negative impact on the net profit, reducing it by 7 million QAR and 11 million QAR, respectively.
For more comprehensive information, please refer to the reliable financial information source, http://sahmik.com.