Saudi’s Savola Forecasts Lower Q2 Profit After Q1 Lifted By Unit Sale

Saudi Arabia’s largest food products firm, Savola Group, posted an 11.2 per cent jump in first-quarter earnings on Sunday, but said profits in the second-quarter would be down by comparison with a year ago.

Among the few Saudi companies to issue forward earnings estimates, and traditionally of a conservative nature, Savola said it expected a profit of SAR429 million ($114.4 million) in the second quarter, according to a bourse statement.

The company, which produces cooking oil, sugar and other foodstuffs, made SAR513.3 million in the same period last year.

The bearish earnings guidance came after the firm in March revised down its profit expectations for the first quarter by half to SAR178 million, citing lower than expected retail sales and currency devaluations in some foreign markets.

In the end, Savola largely exceeded its revised forecast, posting a first-quarter net profit of SAR470.5 million compared with SAR423.3 million in the same period in 2013.

However, the earnings were boosted by a SAR265.2 million capital gain from selling its packaging unit and its subsidiaries to Takween Advanced Industries.

This helped to offset increased costs from opening new stores, currency losses and increased tax in overseas subsidiaries, according to the bourse filing.

EFG Hermes and NCB Capital forecast Savola would make a quarterly net profit of SAR180.7 million and SAR476.0 million respectively.

Its board proposed a cash dividend of SAR0.5 per share for the first quarter, matching the dividend of the same period last year, according to Thomson Reuters data.