A drop in fourth quarter profits has spurred Jeddah-based Savola Group to pursue expansion initiatives locally and internationally.

The group expects to acquire edible oil companies in India, Pakistan and Indonesia, other food products companies in Egypt and packaging companies.
It also plans to play a more active role in the Saudi real estate industry by developing partnerships for property development.
The group posted a 23.9 per cent drop in fourth-quarter profit which Savola officials blamed on rising raw material prices and costs from marketing and expansions. They said they did not want on to pass on the extra costs to consumers.
Net profit for the quarter was SR177 million ($47.2 million) compared with SR233 million in the year-earlier period.
Profit for full-year 2007 rose 7.1 per cent to SR1.23 billion. The figure would have been 54 per cent lower but for the capital gains from the sale of a majority stake in an Egyptian fertiliser during the second quarter. Turnover for 2007 was SR10.4 billion, up 14.4 per cent over 2006.
“We are looking for vertical expansion opportun-ities, going upstream, to have better control over margins,” Baroum told Reuters recently.
“We are heading to some countries with strong potential, namely India, Indonesia and Pakistan for edible oil in particular,” he said.
Savola, which produces 1.4 million tonnes per year of cooking oil which it sells in markets including Morocco, Turkey and Iran, had not yet identified investments, Baroum said.
“The fourth quarter reflected the worst impact on our earnings from the rise in raw material prices, which hit unprecedented levels,” he said.
Savola is constrained in its ability to pass along commodity price rises to consumers and has to shoulder a lot of the increases.
King Abdullah ordered last December subsidies on some food products to ease the impact of inflation on ordinary Saudis after inflation hit 16-year highs of 6 per cent and 6.5 per cent in November and December, respectively.
“Instead of selling low-margin products we focused on high-margin products, through re-branding, which required investment in marketing and sales,” Baroum said.
The company said last June it had earmarked SR18 billion for expansion in North Africa and Central Asia. Sixty per cent of that was meant for expanding existing activities in edible oils, sugar refining and supermarket retailing.
Savola is the second largest sugar refiner and owns the largest retail chain in the Middle East, named Panda.
Its sugar refinery of annual capacity 750,000 tonnes is expected to be commissioned soon while a new $140 million edible oil plant in Algeria will start production by end-May.
The $140 million refinery located on the Red Sea port of Ain Sokhna will begin working at 25 per cent of capacity, steaming to full capacity by October. It will serve growing markets in Egypt and nearby countries.
Kamal Shukri, general manager for international trade and export at United Sugar Company in Jeddah, said the Jeddah plant would expand its capacity from the current 1.2 million tpy to 1.5 million tpy should marketing and logistical conditions be suitable.
The company has raised its stake from 70 to 95 per cent in an Egyptian plastics company. Baroum said the transaction was a prelude to more acquisitions in the packaging industry.
Among recent developments was the approval granted to it by the Saudi Arabian Capital Market Authority to boost its capital by issuing bonus shares. The Savola Group planned to issue one share for every three held to increase its capital to $5 billion.
The Savola Group has divisions for oils and fats, sugar, plastics, retail, real estate, franchising, investments and strategic management.
It is a founder partner in King Abdullah Economic City and has invested SR350 million through its fully owned subsidiary Arabian Adeem Company. The group leads a consortium to develop Knowledge Economic City. It holds 40 per cent of the equity in the name of Madinat Al Sira for Real Estate Development Ltd.