Savola 2014 profit up 21%, but Q4 misses targets

By Eliot Beer

- Last updated on GMT

Higher profits were mainly due to increased market share of the retail sector and improved performance of the foods sector, the company said.
Higher profits were mainly due to increased market share of the retail sector and improved performance of the foods sector, the company said.

Related tags: Savola, Profit, Marketing

Saudi food giant Savola Group announced a 21.5% growth in full-year profit of US$551m, but saw Q4 profits fall, missing analyst predictions.

The group made US$115.5m in the last quarter of 2014, down 23% year-on-year and down 38% from Q3. The result also fell well short of the US$150m predicted by a Reuters poll of analysts.

News of the profit fall sent Savola’s shares down 2.3% last Monday. This was despite the firm’s explanation of the decline as a result of both the one-off sale of land to Knowledge Economic City in Q4 2013, which netted US$61.5m in profit at the time, and a one-off US$18m investment in Q4 2014.

This decline is despite the continued growth in revenues and increased market share of Retail Sector and positive impact of reduced financial charges increased zakat and income tax and minority interests​,” said Savola’s statement to the Saudi Tadawul stock exchange.

Bullish predictions

Overall the firm painted a positive picture for its full-year results, thanks to growth in its core businesses, and a reclassification of results from its Iranian and Sudanese operations. It also said it expected to make at least US$483m in 2015, excluding any capital gains.

Gross profit and operating profit have increased mainly due to continued growth in revenues and increased market share of retail sector and improved performance of foods sector, and the impact of accounting treatment on the group operations in Iran and Sudan which are considered as hyper inflationary economies for the year ended December 31, 2013, whereby adjustments were made in all the line items of balance sheets and income statements of those operations and full year impact were recognized in Q4 2013 financials of the group​,” said Savola’s Tadawul statement.

Packaging sale finalised

One gain which is highly likely to be recorded in Savola’s 2015 results is the sale of its packaging operations to Takween, which was agreed on 30 December at a price of US$242m. The sale has been under negotiation since July​, and the firm expects to complete the deal by the end of March this year.

Savola is planning to utilise the proceeds generated from this transaction to support its core businesses (foods and retail) and adjacent activities. The key financial impact of this transaction is that Savola will record capital gain of [US$70m], which is expected to be reflected in the results of 2015, and the net assets of Savola will be reduced by approximately 5% after completion​,” said the firm in a statement to the Tadawul.

While Savola Packaging has remained profitable, the division has seen profits fall from US$26.6m in 2012 to US$18m in 2013. In the summer Savola said it was in the process of selling off non-core businesses such as its packaging operation in order to concentrate on its core business units.

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