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Value Through Innovation the GCC’S Strongest Food and Beverage Brand Almarai Is the Best-Loved Food and Beverage Brand in the GCC Region

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Value Through Innovation the GCC’S Strongest Food and Beverage Brand Almarai Is the Best-Loved Food and Beverage Brand in the GCC Region Annual Report 2017 Value through innovation Almarai Annual Report 2017 We are the Middle East’s best-loved food and beverage brand. Every day 42 million consumers choose Almarai. Value through innovation The GCC’s strongest food and beverage brand Almarai is the best-loved food and beverage brand in the GCC region. Read more on page 8 >> Innovation is in our DNA Innovation has an equally important role to play in cost rationalization and operational efficiency, an area in which we have a strong track record. Read more on page 10 >> From farm to table We are the world’s largest vertically integrated dairy company, operating across the value chain. From farm to table, it’s all Almarai. Read more on page 12 >> Our innovation process Our ability to continuously deliver new ideas, pre-empt market changes and provide the consumer with exciting enhancements to their shopping basket is at the heart of our ‘Quality you can trust’ promise. Read more on page 14 >> Delivering innovation every day Thanks to years of investment and innovation, our transport and logistics team is larger than any logistics company in the Middle East. Read more on page 16 >> Strategic Report 1 Mission Vision Values To provide quality and nutritious To be the consumers’ preferred • Adaptable • Innovative food and beverages that enrich choice by leading in chosen • Sharing • Respect consumers’ lives every day. markets with superior food • Passionate • Excellence and beverage products. Highlights of the year Net Cash Generated from Market capitalization* Profit attributable to Shareholders** Operating Activities SAR 4,614M SAR 53,750M SAR 2,182M 2017 4,614 2017 53,750 2017 2,182 2016 4,473 2016 54,790 2016 2,147 2015 4,932 2015 46,940 2015 1,915 * Market capitalization calculation reflects price adjustment due to capital increase, all figures reflect the Company’s current outstanding shares. ** 2017 and 2016 are based on IFRS accounting standards and 2015 numbers are based on SOCPA accounting standards. Strategic Report Directors’ Report 1-45 46-87 Highlights of the year 1 Board of Directors 46 Remuneration and Nomination Committee 75 Almarai at a glance 2 Executive Management 48 Audit Committee 77 Chairman’s Statement 4 Almarai organization chart 50 Results of annual internal audit procedures 79 Value through innovation 6 Tadawul announcements 51 Related party transactions 81 CEO review 20 Almarai and its subsidiaries 52 Disclosure and transparency policy 83 Market overview 22 Share price and Shareholder information 54 Board of Directors certification 84 Business model 24 Main transactions, investments and other events 56 Financial review 85 Our strategy 26 Important events in 2018 57 Divisional review 28 Preparation of the Financial Statements 58 CFO review 34 Dividend policy 59 Financial Statements Internal Control and Risk Management 36 Statutory payments, penalties and sanctions 62 88-152 Sustainability 43 Corporate Governance Rules 63 Independent Auditors’ Report 88 Rights of Shareholders and the General Assembly 64 Consolidated Statement of Financial Position 93 Board of Directors formation and functions 65 Consolidated Statement of Profit or Loss 94 Ownership of Board of Directors members, spouses and minors 68 Consolidated Statement of Comprehensive Income 95 Ownership of Senior Managers, spouses and minors 69 Consolidated Statement of Changes in Equity 96 Details of paid compensation and remuneration 70 Consolidated Statement of Cash Flows 97 Board of Directors Committees 73 Notes to the Consolidated Financial Statements 98 Executive Committee 73 2 Almarai Annual Report 2017 Almarai at a glance Region’s largest food company Founded in 1977, Almarai has grown to become the Middle East’s largest food manufacturer and distributor. With headquarters in Riyadh, Saudi Arabia, our production and distribution footprint covers the GCC states, Egypt and Jordan. Sales by location 2% 4% * 2% Saudi Arabia 5% UAE 5% Oman 5% Kuwait Poland on Forbes’ the world’s 100 Daily consumers SAR 13,936 Egypt most innovative companies 10% million Bahrain 67% Jordan Ukraine Exports/Others * 42 million is an approximation based on market penetration and market share analysis throughout the GCC (Gulf Cooperation Council), Jordan and Egypt. USA Locations Arable farms Dairy farms Poultry farms Manufacturing Sales depots Head Office Jordan Poland Ukraine USA Kuwait Jordan Kuwait Bahrain Egypt Saudi Arabia UAE Bahrain Oman Egypt Saudi Arabia UAE Oman Argentina Argentina Strategic Report 3 We delight consumers Dairy* Fruit Juice in five categories across the Middle East and North Africa: Sales by category 1% 10% The Almarai brand has been trusted Fresh Juices in the GCC are led 13% by consumers for 40 years. We are by Almarai, offering consumers a market leaders in fresh milk, laban, popular range of mixed and 100% flavoured milk, milkshakes, UHT milk, juices, as well as children’s juices 11% evaporated milk, cream, yoghurts, marketed under the Nijoom 65% desserts, natural and processed sub-brand. In 2017, Almarai entered cheeses, butter and ghee. the long life juice segment under the Joosy Life brand. Dairy Fruit Juice Bakery Poultry 4.0M 1.3M Infant Nutrition liters of our milk is enjoyed daily bottles of juice are distributed by consumers. every day. Bakery Poultry Infant Nutrition Poland Ukraine USA Jordan Kuwait Bahrain Egypt The Middle EastSaudi relies Arabia UAE on us for 40% of fresh poultry consumers Our Infant Nutrition products support bakery products, marketedOman under choose Alyoum as a guarantee of mothers and children across Saudi the L’usine and 7Days brands. quality and innovation. We deliver a Arabia and the GCC. Our brands From white bread to chocolate comprehensive selection of whole, include Nuralac and Nuralac Plus, coated cakes, Almarai is providing part and value added products with Nurababy cereal and the Nuraplus consumers with exciting and a high nutritional value and, above Suregrow supplement for children. innovative everyday treats. all, outstanding taste. Our new Ready To Drink range is a game changing innovation. Argentina 1.3B 98.0M 1.0B bread and pastry items produced packs sold annually. SAR invested in the infant every year. nutrition sector. * Dairy category includes: Fresh Dairy, Long Life Dairy and Dairy Foods. 4 Almarai Annual Report 2017 Chairman’s Statement years of innovation On behalf of the Board of Directors, it gives me great pleasure to present Almarai’s Annual Report for the year ending 31 December 2017. Almarai performed well in 2017, finishing successful innovation over many years the year slightly ahead of 2016 in terms of has equipped Almarai with the net income. Almarai is proud of its status resilience to perform well even SAR 53,750M as the leading integrated food and during periods when the economic Market capitalization beverage company in the Middle East. environment is more challenging. The power of innovation Strategic review Over many years, our ability to innovate During 2017, we formulated Almarai has been the cornerstone of our 2025, a fundamental review of our SAR 750.0M Cash distribution success. It has propelled us into our long-term strategy. This initiative (which equals SAR 0.75 per share strong leadership position and fueled supplements our normal five year plan and 34.4% of Net income) our proven ability to create compelling process and has allowed us to identify value for our consumers and our specific measurable goals, determine shareholders. Our commitment to the best markets in which Almarai challenges. While we have a new innovation is plainly evident in our should compete and detail how we internal structure, we retain our long- advanced production facilities, such should win. We now have a clear picture established corporate culture with its as our poultry production plant in Hail, of how Almarai should look in 2025 unwavering commitment to ‘Quality you one of the world’s largest facilities of its and the strategic and tactical path can trust’ and its proven ability to deliver kind, and our new SAR 1.2 billion dairy our operations will follow to achieve outstanding innovation and leadership processing plant at Al Kharj that was continued profitable growth. for the benefit of our consumers. commissioned in November 2017. Our investment in people likewise Our strategic review resulted in Aligning with Saudi Arabia’s underlines our belief in innovation. a new organization structure from Vision 2030 Almarai has always sought the best 1 October 2017 that realigns Almarai Almarai has strengthened its strategic technical experts in the food and around specific businesses rather than platform at a time when Saudi Arabia beverage industry from around the functions. This new structure has clear has set out its ambitious Vision 2030. world. This deep-rooted understanding reporting lines as well as defined As the roadmap for the Kingdom’s of the value of innovation, and the responsibilities and accountabilities. developmental and economic objectives, determination to implement it at every Vision 2030 expresses the nation’s opportunity and at every level of our We believe this major shift will allow us long-term goals and expectations, company, has allowed us to deliver the to adapt successfully to the changing and reflects our country’s strengths quality our customers trust. Moreover, economic environment and other and capabilities. The National Strategic Report 5 “ Over many years, our ability to innovate has been the cornerstone of our success. It has propelled us into our strong leadership position and fueled our proven ability to create compelling value for our consumers and our shareholders.” HH Prince Sultan bin Mohammed bin Saud Al Kabeer Chairman Transformation Plan associated with term of his predecessor in the current Valuing our stakeholders Vision 2030 is building the institutional session, which began on 7 August 2016 Looking ahead to 2018, our strategic capacity needed to take Saudi Arabia and ends on 6 August 2019. review will help us secure our future forward.
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