Saudi-based dairy firm Almarai Company’s net profit increased 8.9 per cent year-on-year in the second quarter of 2014 to SR433.3m ($115.5m).

Listed on the Saudi Stock Exchange (Tadawul), the firm’s quarterly revenues grew 14.4 per cent to reach SR3.3bn, with beverages and dairy products accounting for 77 per cent of the total figure.

Almarai shows better growth prospects than its peers, but Saudisation and recruitment ahead of planned expansions remain a burden, according to research by Dubai-based Shuaa Capital.

“Management has pointed to payroll costs as important drag on margins, highlighting two areas in particular: localisation programmes, driven by the government directive to increase Saudisation among companies; and hiring of employees ahead of expansion of operations at the company, with poultry standing out as a key area in this regard,” it said in a 6 July research note.

In June, Almarai announced plans to invest SR2.3bn in Egypt to create a new dairy farm including 5,000 cows. The investment will be made through Beyti, a joint venture between Almarai and US soft drinks company PepsiCo.

The firm is also planning a five-year, SR15.7bn expansion plan for its farming, manufacturing, distribution and logistics businesses.

As part of the programme, Almarai raised SR1.7bn through the sale of a $450m, five-year perpetual sukuk in October 2013, after announcing in June that it planned to increase its share capital by 50 per cent to SR6bn.