Savola recovers after dismal fourth quarter

PROFIT SURGE: Savola posted a 82.2% rise in net income in Q1. (Getty Images)

Savola Group, Saudi Arabia's largest food products company by market value, returned to profit growth in the first quarter, posting an 82.2% surge in net profit as expansion abroad boosted its revenues.

The firm made 250.5 million riyals ($66.8 million), or 0.50 riyals per share, in the three months ended March 31, its biggest quarterly profit since the second quarter of 2007.

That compared with 137.5 million riyals, or an adjusted 0.27 riyals per share, in the same period a year earlier, it said in a statement on the bourse website.

Savola's profit had fallen in the third and fourth quarters compared with the year-earlier periods, partly driven by lower margins in its home market.

First-quarter profit growth was driven by a 33.3% jump in revenues to 3 billion riyals, Savola said, attributing the profit growth to its operations outside of the largest Arab economy.

Chief Executive Sami Baroum was not more specific in the statement.

The food company said in January it would seek acquisitions of cooking oil firms in Asia and push into real estate at home after its fourth-quarter profit fell 24% as high commodity prices slashed margins.

In the first quarter, operating profit jumped 54.3% to 316.22 million riyals, Savola said, adding it would pay out 125 million riyals to investors for the quarter, compared with 93.75 million riyals a year earlier.

Savola is constrained in its ability to pass along commodity price rises to consumers and has to shoulder a lot of the increases resulting from tighter subsidies in the country of 25 million people.

The government has ordered price controls in response to rising inflation, which hit a 27-year peak of 8.7% in February.

Savola, the world's largest producer of branded cooking oil, wanted to take stake in cooking oil firms in India, Indonesia and Pakistan, Baroum said in January.

Savola raised to 95% from 70% its stake in an Egyptian plastics company that month. The Saudi conglomerate plans to start a 750,000 tonnes per year sugar refinery in Egypt in May, as well as begin a $140 million edible oil plant, Baroum had said.

KSB Capital Group had expected Savola's first-quarter profit to rise 19.3%. (Reuters)

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