Savola annual profit down 13%, as new CEO takes over

By Eliot Beer

- Last updated on GMT

Savola said of its full-year results: “[The decline] is attributed mainly due to the lower share of profit from one of the associates and disposal of Plastic Sector during Q1 of 2015."
Savola said of its full-year results: “[The decline] is attributed mainly due to the lower share of profit from one of the associates and disposal of Plastic Sector during Q1 of 2015."

Related tags: Generally accepted accounting principles, Savola

Savola’s full-year profits were down 13.5% on 2014 at US$478m thanks to a subsidiary sale, as Q4 profits beat analyst predictions, and the firm announced a new CEO appointment.

The Saudi group’s gross profit for the year was up 5.3% at US$1.37bn, but operational profit fell almost 20% from 2014, to US$529m. The group’s net income before capital gains and exceptional items was 23% down on the year before, at US$397m, below the firm’s own target of US$435m – which it blamed on its aggressive retail expansion.

Savola misses subsidiary income

In an announcement to the Saudi Tadawul, Savola said of its full-year results: “[The decline] is attributed mainly due to the lower share of profit from one of the associates and disposal of Plastic Sector during Q1 of 2015. This is despite recording the insurance claim settlement for the fire in raw sugar warehouse in 2013, gain on sale of land, no impairment in non-core investment, lower net financial charges, zakat and income tax and minority share in income.

Gross profit is higher mainly due to increased revenue from retail sector partly off-set by lower gross profit in food sector. Operating income is lower mainly due to increased operating expenses, which were higher primarily as a result of opening of new stores in retail sector compared to same period last year​,” the statement added.

Savola has been selling off a number of its subsidiaries for the last few years​,​ as it aims to tighten its focus on its core food businesses.

It recorded a net profit for its fourth quarter of US$137.4m, ahead of the US$127.6m analysts polled by Reuters had predicted. Savola attributed its Q4 performance to the insurance payout for the fire at its sugar facility in 2013, along with the sale of land. Gross profit and operational profit were both down year-on-year – by more than 12% in the case of the latter – for the quarter.

Utility costs to rise

Just over a week before Savola announced its annual results, it released information on the increase in costs it expected to see this year due to the Saudi government’s move to increase electricity, water and fuel prices. The group said it expected costs to rise by almost US$28m for 2016 – well below the US$53.3m Almarai has forecast​.

Also before its results announcement, the firm said it had appointed Rayan Mohammed Fayez as its next chief executive. Fayez was formerly CEO of bank JP Morgan’s Saudi branch, and will take over from current CEO Abdullah Mohammed Nour Rahemi on 1 March.

Rahemi, aged 65, will stay on as managing director of Savola until 30 June, coinciding with the end of the board of governors’ current term. When he steps down as CEO, he will have been in the role just over a year – Rahemi took over from previous CEO Abdulraouf Manna on 1 January 2015.

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