Saudi food producer Savola Group , the country's largest food products company, slashed its dividend after reporting a 80.3 percent fall in first-quarter net profits, missing analysts' forecasts. It is the latest Saudi retailer to report poor earnings for the period as the local economy has been hit by lower oil revenues. Savola's net profit in the three months to March 31 was 92.9 million riyals ($24.8 million), compared with 470.5 million riyals in the same period a year earlier, Savola said in a bourse statement.
That was below an average forecast of three analysts polled by Reuters of 268.1 million riyals. While the profit drop was mainly due to an exceptional gain made in the same period last year, the company's shares still slumped as much as 9.2 percent after the company said it was halving the dividend for the quarter to 0.25 riyals a share.
Saudi retailers have felt the fallout from a prolonged lull in oil prices that is weighing on government and consumer spending. Almarai, the Gulf's largest dairy company, warned of challenging market conditions after reporting a marginal rise in first-quarter net profit. Jarir Marketing, one of the kingdom's largest retailers by market value, posted a 29.5 percent drop in net profit over the same period on falling sales, particularly for smartphones and other electronics.
However, Jarir noted results a year ago were also boosted by Saudi King Salman's payment of two months' extra salary and pensions to government employees and retirees. Savola attributed the fall in profit mainly to the fact its earnings were boosted in the same period last year by a 265.2 million riyal capital gain from the sale of its packaging unit to Takween Advanced Industries. It said lower consumer spending, along with higher operating expenses from its expansion in retail and the devaluation of the Egyptian pound, also hurt its results.
The company has an indirect subsidiary in Egypt, United Sugar Company of Egypt (USCE). Increased financial charges due to currency exchange losses in USCE dented Savola's profit, despite lower taxes in overseas subsidiaries, it said. A chronic shortage of foreign currency is hampering Egyptian businesses, leading the central bank to ration dollars through auctions with commercial banks, giving priority to imports of strategic goods.