Almarai [2280.SE] announced that it has secured 100% of its alfalfa supply from outside KSA, in compliance with the ban on the cultivation of fodder crops in Saudi Arabia by the beginning of 2019. The imports were sourced from various locations, including USA, Argentina, Spain and Eastern Europe, from selected third-party suppliers, and from the company's own farms. Almarai’s total investments in its agriculture companies for this purpose is cUSD500mn between 2014-18. The incremental annual cost impact of the new sourcing is cSAR350mn over a period of two years, given a large fodder stock, but we expect a portion of this will be offset by government subsidies (SAR300mn received in 2017, the company expects them to be cSAR50-60mn higher in 2018), unless there are changes to the subsidy regime. Almarai is also considering relocating its arable assets to its farming entities outside KSA, which would result in a one-time write-off net effect of SAR50mn from this discontinuation to be recognised in the year-end financial statements. (Tadawul, Nada Amin, Hatem Alaa)
 
Almarai: SAR49.0 as of 01 Nov 2018, Rating: Buy, TP: SAR56.00/share, MCap: USD13,067mn, ALMARAI AB/2280.SE