SAUDIA DAIRY & FOODSTUFF COMPANY

Energy consumption to 1.45 GWh reduction of energy intensity to 653.8 KWh/MT of production employee training hours.

QUARTER

STRATEGIC AND

MANAGEMENT REVIEW

Values

PurposeVision

Mission

However, the unexpected invasion of Ukraine at the end of February changed the situation significantly. Create efficiency along the value chain: End to End project analysis Phase 1 has been completed and Phase 2 was started at the end of the financial year.

Sustainably Nurturing Generations with Goodness and Happiness

The company's total asset base grew to SAR 2.5 billion, a growth of 9% compared to last year. The company operates five factories (two in Jeddah, one in Dammam and two factories in Poland).

Our strong performance trend continues despite

Mln 26%

Mln 7%

MlnSAR 63Mln

SADAFCO Subsidiary companies’ revenue

Supply Chain

One year after the installation of the fully automatic robotic palletizing systems, the benefits are reflected in the factory's KPIs. Volume grew significantly in the second half of the year, further driving conversion costs down.

48 Mln Lt

The installation of the new extrusion line was completed in 2022-23 with the start-up of the extrusion line. The Ice Cream Factory team managed to stabilize operations, control product quality and focus on the development of new successful products (lemon mint sticks).

Commercial

Expanding retail coverage with induction freezers and consumer-focused innovation were the key growth drivers for the year. The most important event of the year was the launch of the SADAFCO cultural travel initiative with the help of Korn Ferry.

Human Resources

SADAFCO is back with employees after the COVID-19 period and business as usual. All HR activities revolved around the culture journey to ensure that it manifested in different parts of the business.

SADAFCO has seen return of its

CEO Award for Employee

Living the Co values-

TRIPLE

One of the key activities HR has been involved in was reviewing various HR policies. About SADAFCO, the CSR policy was approved by the general meeting based on the recommendation of the board.

CORPORATE GOVERNANCE

Names of Board of Directors and Committee Members - Current and Previous Positions, Qualifications and Experience

H Sheikh Hamad

THE AUDIT COMMITTEE

FINANCIAL REPORTS
INTERNAL AUDIT
EXTERNAL AUDITOR

Board Member - Future Resources Co. Board Member Sorooh Al-Madinah for Real Estate Investments Co. Board Member – Jeddah Development & Urban Regeneration Co. amp; Other Company Board Member in various companies. Ahmed Sabb Saudia Dairy & Foodstuff Co. KSA KSA

Board Committees

ENSURING COMPLIANCE

THE NOMINATION AND REMUNERATION COMMITTEE

REMUNERATIONS
NOMINATIONS

THE INVESTMENT COMMITTEE

COMMITTEE RESPONSIBILITIES
COMMITTEE AUTHORITIES
COMMITTEE DUTIES

The board of directors cannot vote on the article on the remuneration of members of the board of directors at the general meeting of shareholders. They can receive annual remuneration based on performance evaluation and the achievement of the company's annual results, which are determined by the board of directors.

Major Shareholders Owning 5% or more and Changes during the Financial Year

Announcement for the Distribution of Interim Dividends

The company is obliged to make a prompt disclosure and notification to TADAWUL whenever a decision is taken by the Board to distribute interim dividends on a bi-annual or quarterly basis. In addition, he shall provide the CMA with a copy of the Board's decision upon issuance.

Announcement for the Distribution of Annual Dividends

The company’s annual net profits shall be distributed as follows

SADAFCO’s Dividend Distribution Policy

Distribution of interim dividends

In addition to any official requirements that may be requested by any of the relevant bodies in KSA. Texts or rules, whatsoever, not stated in this policy will be subject to the application of the Saudi Corporate Law, its regulations, the Capital Market Authority Law and its executive regulations, the Company Bylaws and decisions issued by the relevant bodies.

Related Party Transactions

The Company enters into transactions with related parties according to the same criteria applied to all other parties and under the best trading conditions. SADAFCO entered into a one-year agreement with Al Buruj Cooperative Insurance Company (which offers insurance services) with a total amount of SAR 9,335,766 starting on 1 July 2022 and ending on 30 June 2023 as its offer was the most suitable in terms of the price and advantages.

Annual Internal Audit Results Review of the Effectiveness of the Internal Control Systems

Abdullah Yagoub Bishara* is a BOD member of both KIPCO and SADAFCO and Sheikh Sabah Mohammed Al-Sabah** is a BOD member of SADAFCO and a member of the KIPCO executive team (Indirect interest). Abdullah Yagoub Bishara* is a BOD member of both KIPCO and SADAFCO and Sheikh Sabah Mohammed Al-Sabah** is a BOD member of SADAFCO and a member of the KIPCO executive team (Indirect interest).

Major Decisions and Future PlansCompetition Business

INTEREST RATE RISK

The Group manages interest rate risk by regularly monitoring the interest rate profiles of its interest-bearing financial instruments. As of March 31, 2023 and March 31, 2022, the Group has no borrowings, and therefore, no exposure to interest rate risk is presented.

Financial Instruments Risk Management Objective and Policies

PRICE RISK

The group has no financial instruments that are exposed to other price risks. Credit risk is the risk that the counterparty of a financial instrument will not fulfill its obligations and cause a financial loss to the other party.

TRADE RECEIVABLES

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices (except those resulting from special commission rate risk or currency risk) or those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The Group manages credit risk by assessing the creditworthiness of counterparties before entering into transactions, as well as monitoring any outstanding exposures on a periodic basis to ensure timely settlement.

CASH AND CASH EQUIVALENTS AND INVESTMENTS

Penalties and Sanctions

Declarations

Unimplemented articles of the Corporate Governance Regulation issued by the Council of the Capital Market Authority and the reasons. Ensure the feasibility of the continuation of the Company, the successful continuity of its activities and the determination of the risks that threaten its existence during the next twelve (12) months;.

Corporate Governance Compliance

The Board of the Company, by its decision, will form a committee to be called the "Risk Management Committee". The Company will establish programs to develop and encourage the participation and performance of the Company's employees.

FINANCIAL STATEMENTS

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization of Chartered and Professional Accountants ("SOCPA"). (collectively referred to "IFRS approved in KAS").

Preparation of the consolidated financial statements

Functional and presentation currency

Standards, interpretations and amendments that became effective during the year

Standards, interpretations and amendments issued but not yet effective

SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Consolidation of a subsidiary begins when the group obtains control of the subsidiary and ends when the group loses control of the subsidiary. For each business combination, the group chooses whether the acquired company's minority interests are to be measured at fair value or at the proportionate share of the acquired company's identifiable net assets.

SIGNIFICANT ACCOUNTING POLICIES (continued) 1 Basis of consolidation (continued)

Investment in equity accounted investees (associate)

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy. For purposes of fair value disclosure, the Group has defined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.

SIGNIFICANT ACCOUNTING POLICIES (continued) 3 Fair value measurement

SIGNIFICANT ACCOUNTING POLICIES (continued) 4 Segment reporting

Foreign currencies translation Transaction and balances
Revenue recognition

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Revenue is recognized in the Consolidated Statement of Profit or Loss when a performance obligation is satisfied, at the price assigned to that performance obligation.

SIGNIFICANT ACCOUNTING POLICIES (continued) 5 Foreign currencies translation (continued)

SIGNIFICANT ACCOUNTING POLICIES (continued) 6 Revenue recognition (continued)

Selling, distribution, general and administrative expenses
Property, plant and equipment i) Recognition and measurement

Similarly, when a major maintenance operation is carried out, its cost as a replacement is included in the carrying amount of the plant and equipment if the recognition criteria are met. Subsequent expenditure is only capitalized if it increases the future economic benefits inherent in the tangible fixed asset.

SIGNIFICANT ACCOUNTING POLICIES (continued) 8 Dividends distribution

Intangible assets Goodwill
Zakat and income taxes on foreign entities

Current income tax is calculated based on the tax laws enacted or substantially enacted at the end of the reporting period in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Income tax related to subsidiaries is recorded in the consolidated statement of profit or loss.

SIGNIFICANT ACCOUNTING POLICIES (continued) 10 Intangible assets (continued)

SIGNIFICANT ACCOUNTING POLICIES (continued) 12 Leases

Financial assets with cash flows that are not SPPI are classified and measured at fair value via the income statement, regardless of business model. Financial assets at fair value through OCI with reuse of accumulated gains and losses (debt instruments).

SIGNIFICANT ACCOUNTING POLICIES (continued) 13 Financial instruments

SIGNIFICANT ACCOUNTING POLICIES (continued) 13 Financial instruments (continued)

Impairment of non-financial assets

Financial liabilities are recognized for the first time when the group becomes a party to the instrument's contractual provisions. The group has not classified any financial liability at fair value via the income statement.

SIGNIFICANT ACCOUNTING POLICIES (continued) 15 Cash and cash equivalents

Trade receivables
Inventories
Trade and other payables
Provisions
Employee benefit obligations
Share capital
Treasury shares

The difference in the respective book values is recognized in the consolidated profit and loss account. iii) Compensation of financial instruments. Any subsequent changes in liability are included in the consolidated income statement.

SIGNIFICANT ACCOUNTING POLICIES (continued) 20 Non-controlling interest put options

SIGNIFICANT ACCOUNTING POLICIES (continued) 24 Other reserve

Earnings per share

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) (ii) Non-controlling interest put options

Further details are explained in note 18 of the consolidated financial statements. iii) Measurement of defined benefits after employment. The cost of post-employment defined benefits is the present value of the related liability, as determined using actuarial valuations.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) (iv) Right-of-use assets and lease liabilities (continued)

These include determining the discount rate, future salary increases, withdrawal before normal retirement age and mortality rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions.

REVENUE

Diluted earnings per share are the same as basic earnings per share, as the Group has no dilutive instruments in issue. SAUDIA DAIRY AND FOODSTUFF COMPANY (SADAFCO) (a Saudi public limited company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended March 31, 2023 (all amounts in thousands of Saudi Riyals unless otherwise stated) 36 13. MATERIALS, FACILITIES AND EQUIPMENT The movement of the tangible fixed assets during the year are as follows: Land and buildingsMachinery and equipmentVehicles and trailers.

PROPERTY, PLANT AND EQUIPMENT (continued)

LEASES

The discount rate was an estimate of the weighted average cost of capital per March 31, 2023 based on market rates adjusted to reflect management's assessment of the specific risks related to the segment and operations in Poland. The discount rate was an estimate of the weighted average cost of capital per March 31, 2023 based on market rates adjusted to reflect management's assessment of the specific risks related to the segment and operations in Poland.

EQUITY ACCOUNTED INVESTEE

All other assumptions remaining the same, reducing this rate by 13% (March across all expected cash flows would yield a value in use equal to the current book value. All other assumptions remaining the same, reducing this growth rate by 181% (March would give a value in use corresponding to the current accounting value.

LONG TERM INVESTMENT

NON-CONTROLLING INTEREST PUT OPTION

A put option on a non-controlling interest is a binding, irrevocable option to acquire the remaining share of the owners of the non-controlling interest on the option's expiry date, i.e. a put option available to holders of a non-controlling interest can be exercised within 15 business days of the option's expiration date.

TRADE RECEIVABLES

The Group has recognized minority interests in the Mlekoma group at the proportionate share of the net identifiable assets acquired. The redemption value is recognized as the higher of the purchase price under the SPA or is determined by applying the profit multiplier to the audited EBITDA of the 2022 financial year of the Mlekoma group, less the net debt in accordance with the SPA.

PREPAYMENTS AND OTHER RECEIVABLES

The group does not obtain collateral for receivables, so the vast majority of receivables are unsecured. See Note 33 on the credit risk of trade receivables, which explains how the Group manages and measures the credit quality of trade receivables.

CASH AND CASH EQUIVALENTS

Murabahah short-term deposit rates range from 4.8% to 5.6% per annum for the year. CASH AND CASH EQUIVALENTS (continued) . b) As of March 31, the carrying amount of bank balances (included above) and short-term murabaha deposits represent its maximum exposure to credit risk without taking into account any collateral and other credit enhancements, and none of the balances have been impaired at the date of reporting.

CAPITAL AND RESERVES 1 Share capital

Statutory reserve
Treasury shares
Other reserve
Foreign currency translation reserves
Charge for the year
Status of assessments

Zakat assessments for the years up to the year ended 31 March 2020 have been finalized with the Zakat, Tax and Customs Authority (ZATCA). The company has filed the zakat return for the year ended 31 March 2022 and received the zakat certificate valid until 31 July 2023.

TRADE AND OTHER PAYABLES

ACCRUED EXPENSES AND OTHER LIABILITIES

Other payables mainly include customer advances in the amount of Saudi Riyals 8.4 million (March 31, 2022: Saudi Riyals 5.6 million).

RELATED PARTY TRANSACTIONS AND BALANCES

Operating segment

The Group's Board of Directors and Chief Executive Officer monitor the results of the Group's operations with the aim of making decisions on resource allocation and performance assessment. The following table shows a reconciliation of the opening balance to the closing balance for the employees' end-of-service benefits.

EMPLOYEES BENEFIT OBLIGATIONS (continued) iii) Sensitivity analysis

The Group operates an Approved Unfunded Pension Scheme (EOSB) for its employees as required by Saudi Arabia's Labor Law. An independent actuarial exercise has been carried out by the Group on 31 March 2023 and 31 March 2022 to ensure the adequacy of the benefit for employee benefits upon termination in accordance with the rules specified under the Saudi Labor Law by using the expected unit credit method as required in according to International Accounting Standards 19: Employee Benefits.

FINANCIAL INSTRUMENTS 1 Financial assets

Financial liabilities
Financial instruments carried at fair value
Financial instruments carried at fair value (continued) c) Valuation process
Financial instruments carried at fair value (continued) d) Derivative financial instruments

The Group has an established control framework related to the measurement of fair values. The Group's main financial assets include trade and other receivables, as well as cash and cash equivalents.

FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVE AND POLICIES (continued)

Customer credit risk is managed by each business unit, subject to established Group policies, procedures and controls relating to customer credit risk management. Credit risk from deposits with banks and investments is managed in accordance with Group policy.

FAIR VALUE OF ASSETS AND LIABILITIES

If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety at the same level of the fair value hierarchy as the lower input. significant for the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred.

Level 2 Level 3 Total March 31, 2023

FAIR VALUE OF ASSETS AND LIABILITIES (continued)
CONTINGENCIES, COMMITMENTS AND OTHER INFORMATION 1 Contingencies

Commitments and other information

SUBSEQUENT EVENTS
RECLASSIFICATION OF COMPARATIVE FIGURES
AUTHORIZATION OF FINANCIAL INFORMATION

During the year ended 31 March 2023, the fair value hierarchy of the Non-controlling interest put option changed from level 3 to level 2 as the redemption amount is estimated in accordance with the transaction agreements and is based on the actual FY22 consolidated results of Mlekoma. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, it does not include fair value information for financial assets and financial liabilities that are not measured at fair value, if the carrying amount is a reasonable approximation of fair value.