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Savola Group, Saudi Arabia’s largest food production company, saw its net profit plunge more than half in the third quarter of the year due to lower margins in its retail business.
Total net profit reached 122.4 million riyals ($32.6 million) in the three months ending September 30, 2021, down 56 percent from the 283.7 million recorded in the same period last year, the company said in a filing to the Saudi Stock Exchange (Tadawul).
The drop in profits was attributed to lower margins in Savola Group’s retail business, higher operating expenses, as well as higher tax costs. The company said the shift in consumers’ shopping behaviour during the pandemic, coupled with lower income levels, has impacted Savola Group’s revenues.
During the quarter in review, Savola’s sales/ revenue stood at 6 billion riyals, compared to 4.5 billion a year earlier. However, gross profit fell 3.8 percent to 1.023 billion riyals, while total comprehensive income plunged 99 percent to 1.9 million riyals.
“The decrease in the net profit for the third quarter of 2021 compared with the same quarter last year is attributed mainly to the … decrease in the gross profit that is mainly due to lower margins in retail sector [among other factors],” the statement said.
First nine months of the year
For the first nine months of the year, total net profit stood at 476.2 million riyals, a decrease of 45 percent compared to a year earlier.
Revenues in the retail and frozen food segments fell by 10.9 percent and 17.3 percent respectively. Overall, the retail segment recorded a net loss of 146.9 million riyals, compared to a net profit of 172.6 million riyals a year earlier.
The net profit from frozen foods, investments and food processing segments also fell by 38.2 percent, 22 percent and 5.5 percent, respectively.
“The decrease in the revenues of the retail and frozen food sectors in the current period compared to the same period last year was due to the impact of consumer buying behavior that occurred during the lockdown and curfew,” Savola said.
“In addition, during the current period, a negative impact of a weaker consumer base and lower buying power resulted in the decline.”
(Writing by Cleofe Maceda; editing by Daniel Luiz)
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