Saudi food producer Savola Group announces second quarter profits of US$137m, up 32%, as it seeks to sell its packaging unit and its CEO reveals he is to step down.
The bumper profits were 18% higher than the US$116m Reuters’ survey of six analysts had predicted. In a statement to the Saudi stock exchange, Savola sad the growth came mainly from strong retail sales, pushing quarterly revenue to US$3.76bn.
“The increase in the Group net income for the period ended June 2014 compared to the same period last year is attributed mainly to the continued growth in revenues … in addition to the outstanding performance of retail sector, increased share of net income and dividend income from some associates, dividend income, and positive impact of reduced financial charges, zakat and income tax and minority interests,” said the statement.
Shedding dead weight
A few days after releasing its Q2 figures, Savola revealed it was in talks to sell its packaging division to Takween Advanced Industries, a Saudi packaging and bottling company. Savola said both companies were in the process of doing due diligence and finalising negotiations, with a deadline of 16 November 2014 on the process.
According to the company, the sale is in line with Savola’s plan to focus on its core food and retail businesses. As part of this strategy it is selling off its more peripheral or non-performing divisions.
In May Savola announced it had sold its edible oils subsidiary in Kazakhstan for US$28.5m. The company said this sale generated a capital return of US$4.5m, despite the division’s poor performance, which saw it post a loss of US$1.2m for 2013.
“[Savola CEO Abdulraouf Manna] stated that, this step comes to further strengthening the Group's strategy, which aims to place more focus on its core business that achieve better returns to its shareholders and divest the least return business to take the advantage of its proceeds to support its existing core business,” said a statement from Savola on the sale.
This month Savola also announced Manna would step down as CEO, for unspecified personal reasons. He will continue in the role until the end of the year, when Savola board member Abdullah Mohammed Noor Rehaimi will take up the position on 1 January 2015.
Manna became CEO in 2010, after serving as CEO of Emaar Economic City. Before that he had worked at Savola as head of its food division, as well as president of its investments and IT departments and MD of Savola Sime Egypt.