CFO’s
Review

Alongside poultry, we continue to invest in our core dairy and juice platforms and the critical capabilities needed to fuel expansion. We are also investing in adjacencies such as water, seafood, red meat, and ice cream. While we do see encouraging early momentum, at this stage, these initiatives do not materially move the Group’s results – and we do not manage these as short-term earnings drivers. Our objective today is to build capability and consumer franchise to understand how and where Almarai can scale. Over the next five years, we expect that two or three of these adjacencies will emerge as real contributors, while others may remain niche, which is the nature of portfolio expansion.

The acquisition of the Pure Beverages water business is a case in point. As expected, the business is currently dilutive to Almarai’s EBIT margin. Our focus is on integrating and scaling the operation, and we expect its contribution to improve as the business matures within the Group.

A meaningful portion of our investment is going toward the capabilities that sit behind the product: the parts of the value chain that protect quality, reliability, and cost efficiency. In our markets, vertical integration is not simply a choice, but the most effective way to manage execution and reduce risk. There is a clear capital trade-off. In more mature environments, companies can rely more on third parties and buy these services as needed. But in our context, investing directly in critical parts of the value chain often delivers better outcomes, even when it requires higher capital intensity. As supplier and logistics ecosystems develop, some activities may shift to third parties, but we will continue to invest where control delivers the most value to our customers and where it protects long-term economics.

This program requires a period of elevated capital expenditure (CapEx) as we expand capacity, particularly in poultry, and build out new growth platforms. Over the trailing twelve months, CapEx has been approximately 20% of revenue, reflecting the scale and sequencing of these investments. CapEx is expected to remain elevated through this delivery phase as major projects are executed and commissioned. As the program matures, we expect CapEx intensity to normalize toward our recurring range of approximately 7% to 8% of revenue.

Almarai has historically operated with a conservative balance sheet and has been underleveraged for long periods. We consider a level of around 2.5x net debt to EBITDA to be the Group’s optimal leverage, offering the right balance between flexibility and efficiency. At the end of 2025, net debt to EBITDA stood at 2.48x, remaining within the Board’s strategic leverage limits. As we enter the value harvesting phase of this current investment cycle, including the Pure Beverages acquisition and elevated capital expenditure, we are using the balance sheet more actively by design. This approach is backed by the underlying cash generation of the business and clear leverage limits.

This shift in funding posture is signaled not only in elevated CapEx, but also in temporary working capital absorption as we scale operations and integrate acquisitions. Over the year, working capital has been slightly elevated, driven by the consolidation of the Pure Beverages acquisition into the balance sheet and a deliberate decision to hold additional safety stock given heightened supply chain uncertainty. We expect working capital levels to normalize as integration progresses and inventory management stabilizes.

We maintain a strong liquidity position through committed facilities and diversified funding sources, providing flexibility through the investment cycle. During the year, we issued a USD 500 million Sukuk, with the order book reaching USD 2.3 billion, allowing pricing to tighten from initial guidance of Treasury plus 120 to 125 basis points to T+85 basis points. Around 90% of investors were international, highlighting the Group’s access to global capital markets and supporting the continued diversification of our funding profile. Today, close to 40% of our debt portfolio is in bond-like instruments, with the remainder in bilateral funding and government-supported facilities at attractive rates.

Cash flow from operating activities was X 5.5 billion during the year. At year end, unutilized banking facilities and available government financing amounted to approximately X 7.5 billion. This liquidity position provides the capacity to execute the investment cycle while managing cash flow through the period. 

Free cash flow was impacted during the year by the combination of elevated capital expenditure and acquisition-related payments, including the acquisition of the Pure Beverages water business. This reflects the investment phase the Group is currently executing, rather than a change in the underlying cash-generating capacity of the business. The acquisition payment amounted to X 1.04 billion, and excluding this one-off outflow, free cash flow would have been positive over the period. The integration of the business has also increased near-term working capital requirements as we bring the operations into the Group.

Almarai continued to enjoy a strong credit standing with government and non-government lenders, as well as fixed income investors in domestic and international markets. This favorable position reflects Almarai’s predictable positive operating cash flows and a clear strategy for sustainable growth.

Existing financing amounted to X 12.5 billion at the end of 2025, in the form of Shariah-compliant Murabaha banking facilities (excluding the banking facilities of foreign and GCC subsidiaries), government funding, and Sukuk. These agreements are executed on normal commercial terms with customary guarantees, including mortgages over assets and production lines amounting to X 367.5 million in favor of government financial institutions. Financing facilities granted by banks and other financial institutions are guaranteed by secured promissory notes issued by the Company.

Funding Classification by Tenor (X million)

Funding Maturity Profile (X million)

Due to the continuing need to finance Almarai’s current operations and future expansion, Almarai manages its liquidity and maintains access to cost-effective financing facilities. The volume of unutilized banking facilities and available government financing amounted to X 7,482.7 million at the end of 2025.