RIYADH, 11 October 2007 — Saudi food company Savola Group said rising international prices for raw materials hurt profit in the third-quarter as inflation hit a seven-year high in the Kingdom last August.
Savola’s third-quarter profit plunged 72 percent after a capital gain last year, and warned higher international commodity prices would hurt earnings.
Net income in the three months to Sept. 30 at Savola was SR151.4 million ($40.37 million) and the capital gain in the year-earlier period SR371 million, the firm said in a statement on the Saudi bourse website.
Savola earned SR533.78 million in the year-earlier period, according to Reuters data, implying a 7 percent decline in third-quarter profit after discounting the capital gain.
Higher international commodity prices, such as for edible oil, had a “small” impact on third-quarter profit and will hurt earnings in the three months to Dec. 31, Savola said, without being more specific.
Earnings per share in the nine months to Sept. 30 rose to SR2.81 from SR2.45 in the year-earlier period, it said.
Saudi Arabia’s largest food company by market value and the Gulf’s second-largest sugar refiner said yesterday it will probably have to increase prices this quarter to compensate for the expected higher price of goods such as edible oil.
Annual August inflation in Saudi Arabia rose to 4.4 percent, driven mainly by a record 12.1 percent jump in rents and a 6.6 percent rise in prices of food products, according to data released earlier this month.
“Prices of palm and corn oil, for instance, rose 70 to 100 percent this year, but we have so far raised the price of our edible oil by 10 to 15 percent,” Muhammad Amin Kashgari, Savola’s president of retail and real estate, told Reuters.
“There will be a small increase in prices in the fourth quarter,” Kashgari said, without being more specific.
The Savola Group is one of the leading industrial companies in Saudi Arabia, with a wide portfolio of businesses including edible oils, sugar, noodles/pasta, and packaging, in addition to real estate and franchising. Savola has a strong presence in the Middle East and North Africa (MENA) region and Central Asian countries. The Savola Group’s operating businesses are divided into two core sectors, these are “Savola Foods Sector”, including edible oils, foods and sugar and “Savola Retail Sector”, including Panda.