* Dairy company plans U.S. dollar sukuk in next 12 months
* Proceeds to be used for growth, farms
* Almarai could issue hybrid sukuk - CFO
(Adds more CFO quotes, details)
RIYADH, May 8 Saudi Arabian dairy producer
Almarai Co plans to raise at least $500 million from
the sale of a debut international Islamic bond to help to
finance ambitious growth plans, a senior executive said on
The company, which is the Gulf's largest dairy firm, has
previously sold two Islamic bonds, or sukuk, in local currency,
open only to Saudi institutional investors.
"We're looking at how to get financing internationally.
We're targeting at least $500 million and this should be out in
the next 12 months," Paul Louis Gay, Almarai's chief financial
officer, told reporters.
The company aims to invest 3 billion riyals ($800
million)annually in the next 5 years, Gay said.
"Proceeds will be used to finance our growth, mainly
factories, distribution capabilities and farms."
Gay said the structure of any eventual issue was still under
consideration, but the company could opt for a hybrid sukuk.
Hybrid structures are rare in the region, although two banks
in the United Arab Emirates have tested markets with hybrid
sukuk since last year. Hybrids are usually accounted for as
subordinated debt on a company's balance sheet, and contain some
Traditionally, Saudi companies and other entities have
relied on bank loans and retained earnings to finance their
expansion. But many are now diversifying their financing
requirements into bond markets.
Despite a burst of riyal-denominated debt issuance,
globally-marketed bonds or sukuk remain rare, and therefore are
likely to attract strong investor appetite.
U.S. dollar sukuk issues from Saudi Electricity Co
in 2012 and earlier this year were multiple times
oversubscribed, although borrowers do have to be prepared to pay
a higher profit rate to issue international bonds as well as
comply with more stringent disclosure requirements.
Almarai reported a first quarter net profit of 255 million
riyals, up 5.4 percent over the prior-year period, due to
increased revenues, particularly in poultry sales.
Shares in Almarai are up about 3 percent so far in 2013.
($1 = 3.7502 Saudi riyals)
(Reporting by Mirna Sleiman and Marwa Rashad; Writing by Rachna
Uppal; Editing by Dinesh Nair and xx)