Mill IPO in Saudi Financial Market: Comprehensive Information and Recent

The mill IPO is part of Saudi Arabia's efforts to privatize key industries under Vision 2030. Before 2017, all milling companies were under direct government supervision through the Food Security Authority or the Public Investment Fund. The Saudi government launched a program to privatize the wheat milling sector, leading to the establishment of new milling companies such as the first, second, third, and fourth mills. The mill IPO is the process of offering a portion of the capital of these companies for public subscription in the Saudi financial market (Tadawul), allowing individuals and institutions to participate in their ownership. This step aims to raise additional funding to expand operations and stimulate sector efficiency while ensuring private sector participation in the food industry. The IPO process typically involves determining a percentage of the offered shares, dividing them between individual and institutional investors, and setting the subscription period and offering price based on market valuations and the company's financial indicators.

The year 2024 witnessed a boom in IPOs of milling companies in Saudi Arabia. For instance, the fourth mill announced its intention to offer 30% of its capital for public subscription. The modern mill offered about 15 million shares (30% of its capital) at a price of 48 SAR per share, with approximately 2.45 million shares allocated for individuals. In the Arab mills, the number of shares offered to individuals was about 1.54 million shares at a price of 66 SAR per share, also at 30% of the capital. These figures reflect a nearly unified privatization strategy among various milling companies, with differences in offering prices and the number of shares based on the size and production capacity of the company. These offerings attract diverse categories of investors and contribute to enhancing liquidity in the Saudi financial market.

Production capacity and market share are among the most critical factors in evaluating milling companies post-IPO. For example, the total flour milling capacity of the fourth mill is approximately 3,150 tons per day, alongside an animal feed production capacity of up to 450 tons per day. The company covers about 80% of the kingdom's population through its network of factories. As for market share, figures indicate that the fourth mill captured about 18.3% of the flour market in 2022, while its brand "Foam" achieved a consumer share of approximately 31.1% of the local market, the highest among local brands. These indicators highlight the importance of the listed companies and their competitive ability within the Saudi food sector.

After the listing of milling companies on Tadawul, analysts and financial institutions monitor stock performance and key indicators such as share price, market value, price-to-earnings ratio (P/E), and dividend yield. For instance, the share price of the fourth mill recorded an initial price of approximately 3.5 SAR, with a market value estimated in the hundreds of millions of SAR. The P/E ratio tends to be moderate due to sustainable growth prospects. By the end of 2024, newly listed companies had not started distributing cash dividends, as they initially focused on reinvesting returns for greater growth. These indicators are updated periodically and depend on trading results and profits achieved in subsequent financial periods.

To understand the position of newly listed milling companies, it is worth comparing them with industrial companies that have been listed for years, such as Hail Cement Company (symbol: 3001). The share price of Hail Cement ranges between 10 and 15 SAR, with a market value reaching several billion SAR, along with regular dividend distribution to shareholders. This illustrates clear differences between emerging companies in the milling sector and established companies in other industries such as cement. Although there is no direct competition between the milling and cement sectors, the comparison highlights differences in financial indicators, distribution policies, and the maturity of companies in the market.

The milling sector belongs to the food manufacturing industries directly related to national food security. The demand for flour and animal feed products is stable due to consumers' daily reliance on them. Government policies play a pivotal role in supporting the sector by ensuring stable wheat prices, providing logistical support, and stimulating investments in modern technologies. The Saudi milling sector is characterized by its flexibility in responding to fluctuations in global grain prices, with the ability to hedge through wheat storage or long-term contracts.

Within the kingdom, major milling companies such as the first, fourth, modern, and Arab mills compete, along with smaller local companies. Competition focuses on product quality, manufacturing efficiency, and selling prices. Brand names also play a role in attracting consumers, such as the "Foam" brand owned by the fourth mill. Internationally, Saudi companies face competition from imported flour from large production countries like Australia and the United States. However, local companies cover the majority of national demand and sometimes resort to exporting surplus, especially with abundant investments in the sector.

Newly listed Saudi milling companies seek to enhance the sustainability of their operations by obtaining quality certifications such as ISO 17025, expanding production lines, and investing in research and development. The fourth mill obtained ISO 17025 certification in 2024, reflecting its commitment to international quality standards. Companies have also announced plans to expand production capacity and cover new geographical areas. These initiatives support the competitiveness of the sector and increase investor and consumer confidence in the companies' products.

The profitability of milling companies is affected by fluctuations in global wheat and grain prices. When prices rise, production costs increase, which may pressure profit margins. Companies resort to hedging strategies such as futures contracts and storing large quantities of wheat. The government also seeks to store strategic wheat to mitigate the impact of price fluctuations. Stability in global prices positively reflects on the performance of milling companies and enhances the prospects for future dividend distributions to shareholders.

The mill IPO process goes through several stages: announcing the prospectus, opening the subscription for individuals and institutions, allocating shares, and then listing on Tadawul and starting free trading of the shares. Companies and receiving banks determine the subscription terms, such as the minimum and maximum number of shares allowed for individuals or institutions. After allocation, investors can monitor the stock's performance in the market and may achieve capital gains if the price rises above the offering price. Cash dividend distribution depends on the company's results and policies in the years following the listing.

The second half of 2024 witnessed intense activity in the IPOs of milling companies in Saudi Arabia. The modern and fourth mills successfully completed the individual subscription and began trading their shares in the main market. Companies also announced high coverage ratios for the IPO, indicating significant interest in this sector. Some companies obtained new quality certifications and launched sustainability initiatives, while others announced expansion plans and the launch of new products. This momentum reflects the sector's importance and expectations for its future growth in parallel with changes in the local and global markets.

The milling sector is expected to continue its growth, supported by rising food demand and an increasing population. Continued development of smart technologies and improving production efficiency will enhance the competitiveness of Saudi companies. Some companies may also expand their activities in exporting flour and feed. Conversely, fluctuations in global grain prices and market conditions affect the sector's profitability, but ongoing government support enhances stability. Financially, dividends are expected to become more regular as companies' performance stabilizes after several years post-listing.