Saudi Savola posts Q4 loss, predicts further woe

UPDATE 1: Saudi conglomerate sees 36% drop in company's profit in Q1 of 2009.
Saudi Savola posts Q4 loss, predicts further woe
By Souhail Karam
Sun 18 Jan 2009 12:04 PM

Saudi Arabia's Savola Group posted a fourth-quarter loss on Sunday after booking 676 million riyals ($180.3 million) of provisions on iinvestments, sending its shares tumbling 10 percent.Savola, a conglomerate that produces branded cooking oil and refined sugar, said it would return to profit in the first quarter as global commodity prices stabilise, but warned net earnings in the three months would fall about 36.1 percent.

The company's net loss in the three months to Dec. 31 amounted to 464 million riyals compared with a profit of 177 million riyals a year earlier, it said in a statement on the bourse website.

"The decline in fourth-quarter earnings is due to the constitution of precautionary provisions worth 676 million riyals to confront the decline in the market value of the group's investment portfolio," Savola said, without elaborating.

It also attributed the loss to the impact of a rapid slide in global prices of soft commodities on the value of its products.

A global financial crisis sent oil prices spiralling more than $100 off a July peak above $147 a barrel.

Commodity prices were stabilising and would help Savola post net profits of about 160 million riyals in the first quarter and 800 million riyals for all of 2009, it said. Savola made 250.5 million riyals in the first quarter of 2008.

"These projections are based on an expected stabilisation in prices of raw materials once they return to their historically normal prices," the firm said.

Chief Executive Sami Baroum told Reuters in October that the Savola had built up inventories while commodity prices were high.

Savola is also active in retail business lines and holds stakes in some listed firms, including dairy firm Almarai and property developer Emaar Economic City.

Saudi Arabia's stock market fell more than 56 percent last yearin a global market rout.

In 2008, Savola's sales grew 32.5 percent to 10.4 billion riyals, while operating profit slid 8.2 percent to 673 million riyals, Savola said.

Its 2007 earnings had been bolstered by capital gains from the sale of a stake in Egyptian Fertilizers Co, it added. (Reuters)

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