Savola Group, which recently announced it raised its stake in foods firm Almarai Company to 36.5 per cent, reported a strong performance in the first three quarters of this year and its managing director expects to achieve a net income before capital gain of SR1.32 billion ($351 million) for 2012, 10 per cent over the original forecast.

Abdulraouf Mannaa also said the encouraging showing in the January-September period, where net profit surged 40.5 per cent to SR988.9 million compared with the same period in 2011, was due to growth in its foods sector, continued sales growth and increased market share in its retail sector.

These sectors helped the group to generate revenues of SR20.4 billion for the January-September period compared with SR18.8 billion in the corresponding period of 2011. It also recorded capital gains of SR46 million due to the sale of Emaar Economic City shares as part of the group’s strategy to divest non-core investments.

The purchase into Almarai, which increased Savola’s holding in the company from 29.95 per cent, was “in line with the group’s strategy of further growing its exposure in its core sectors, of which the foods sector is one of them,” said Mannaa. Savola financed the deal with its own cash reserves and Islamic loan financing provided by local banks.

Samba Capital, the investment banking arm of Samba Financial Group, acted as financial consultant on the transaction.

Savola’s third-quarter net profit was SR405.2 million compared with SR307.9 million in the same quarter of 2011 and SR341 million in the previous quarter. 

Mannaa highlighted that the Q3 net income before capital gain and exceptional items reached SR358.4 million, which is 5.4 per cent higher than the forecast of SR340 million.

Savola’s board approved the distribution of SR150 million (amounting to SR0.30 per share) as dividends for that quarter, which represents 3 per cent of the company share nominal value.

The dividend payments process will start on November 17.

The Savola Group operates in three core sectors – food, which includes edible oils, sugar and pasta; retail, through Al Aziziya Panda supermarkets and hypermarkets; and plastics, which manufactures both rigid and flexible plastic products.

In addition, the group has a diversified portfolio of strategic investments in which it owns 36.5 per cent of Almarai, 49 per cent of Herfy foods and restaurant chain, and 29.9 per cent of Kinan International real estate.

The group is also one of the founders of Knowledge Economic City in Madinah.