Equity Analysis /
Saudi Arabia

Savola: Q2 22 earnings call summary

  • Revenues came in at SAR6.89bn, up 16.7% yoy (-8.0% qoq)

  • Reported net income was SAR214mn in Q2 22, up 6.9% yoy (-21.1% qoq)

  • The number of Panda stores declined by 3 and reached 192 stores at the end of Q2 22

Savola: Q2 22 earnings call summary
SNB Capital
31 August 2022
Published bySNB Capital

Business Performance

  • Revenues came in at SAR6.89bn, up 16.7% yoy (-8.0% qoq).

  • Food processing revenues increased by 53.8% yoy to SAR4.1bn, while revenues of Panda declined by 14.5% yoy to SAR2.5bn. Food services revenue declined by 9.4% yoy and frozen foods grew by 4.4% yoy.

  • By geography, Saudi constituted 64% of total sales in H1 22 followed by Egypt, Central Asia, and others at 16%, 6% and 14%, respectively. Saudi as a % of total sales declined from 69% in H1 21 to 64% in H1 22.

  • Gross profit increased by 11.6% yoy (-2.9% qoq) to SAR1.25bn and gross margins stood at 18.1% in Q2 22 vs 18.9% in Q2 21 vs 17.2% in Q1 22.

  • EBITDA increased by 12% yoy to SAR759mn in Q2 22 vs SAR677mn in Q2 21 and SAR781mn in Q1 22. EBITDA margin stood at 11.0% in Q2 22 vs 11.5% in Q2 21 and 10.4% in Q1 22.

  •   Reported net income was SAR214mn in Q2 22, up 6.9% yoy (-21.1% qoq).

  • Net debt stood at SAR7.36bn at the end of Q2 22 (vs SAR6.48bn at the end of Q2 21). Total loans increased to SAR9.24bn vs SAR7.87bn at the end of H1 21. The management attributed the increase in loans to financing of the Bayara acquisition, Bakery acquisition in Egypt and higher working capital requirements.

  • Capex for H1 22 increased to SAR424mn vs SAR177mn in H1 21. Of the total capex, 48% was for the food processing segment, 41% for the retail segment, while 10% was for the food services segment. The remaining 1% was allocated to the frozen food segment. The growth in capex was due to the Bakery acquisition in Egypt and higher spending in the retail segment.


  • Revenues stood at SAR2.43bn, down 15% yoy.

  •   The decline in revenues were driven by 1) store closures with total store count decreasing from 205 in Q2 21 to 192 in Q2 22, 2) renovations related to Panda’s CXR Program disrupted the shopping experience and 3) pre-Ramadan rollover into Q1 22.

  • Gross profit decreased to SAR567mn, down 10% yoy, while margins improved to 23.3% in Q2 22 from 22.1% in Q2 21 and 21.1% in Q1 22. The improvement in margins were attributed to favorable sales mix

  • EBITDA declined 36% yoy to SAR113mn in Q2 22 (4.7% margin) vs SAR177mn in Q2 21 (6.2% margin).

  • The segment reported a net loss of SAR72mn in Q2 22 vs a loss of SAR27mn in Q2 21 and loss of SAR35mn in Q1 22.

  • The number of Panda stores declined by 3 and reached 192 stores at the end of Q2 22. (Closures in Q2 22 included 2 supermarkets and 1 hyper store). Total selling area declined to 585,800 sqm in Q2 22 from 594,357 in Q1 22.

  • For remodeling stores based on the CXR program, the management anticipates a capex of SAR6-9mn per store in the Super store format and SAR9-12mn per store in Hyper store format.

  • Regarding Panda’s profitability, the management is not just focusing on the top-line growth but is also working hard to optimize the cost structure.

  •   The management will provide a detailed update on the CXR program and capex needed in H2 22.

  • The management clarified that the CXR program is targeting the average Saudi citizen and families looking for everyday value. The company is not targeting the affluent class nor focusing on lowest prices.

  • Savola completed 14 store renovation in July, hence it would be still early to state the net benefit of the CXR program. However, the management highlighted that the stores under CXR have showed a 11% decline in sales in Q2 22 during the renovation phase.

  • As per the management, the overall 2022 P&L of Panda should look similar to 2021.

  • The management believes that Panda will reach 2014 levels of profitability over the next 5 years.

Food Processing

  •  Revenues increased by 54% yoy to SAR4.06bn in Q2 22 and 51% yoy to SAR8.40bn in H1 22 due to the increase in both prices and volumes.

  •   In H1 22, oil revenues increased 55% yoy to SAR5.83bn, driven by Saudi (+68% yoy), Egypt (+56% yoy), Central Asia (+56% yoy), Turkey (+58% yoy), Algeria (+72% yoy), Sudan (+20% yoy) and Morocco (+19% yoy).

  • In H1 22, oil volumes increased by 8% yoy to 952 KMT, driven by Saudi (+5% yoy), Egypt (+26% yoy), Turkey (+12% yoy), Algeria (+76% yoy), but was partially offset by a decline in Sudan (-30% yoy), Central Asia (-11% yoy) and Morocco (-5% yoy).

  •   In H1 22, sugar revenues increased 29% yoy to SAR1.71bn, driven by Saudi (+50% yoy) but was partially offset by Egypt (-24% yoy).

  •   Sugar volumes were slightly up by 2% yoy to 743 KMT, with an increase in Saudi (+16% yoy), which offset a decline Egypt (-38% yoy). The decline in sugar volumes in Egypt was due to the higher level of carried-over stock in Q2 21 thus making the volumes not comparable.

  • Pasta volumes declined by 19% yoy in H1 22 due to lower B2C and exports. The decline in pasta sales was due to an embargo of the Egypt government on the export of pasta. Additionally, higher prices of wheat, currency devaluation and inflation led to lower volumes of pasta. Savola is a major exporter of pasta to Africa.

  • Gross profit increased 60% yoy to SAR561mn with margins up to 13.8% in Q2 22 from 13.3% in Q2 21 and 12.7% in Q1 22. Gross margins improved both yoy and qoq during Q2 22.

  • EBITDA increased 58% yoy to SAR377mn, with a margin of 9.3% in Q2 22, vs 9.0% in Q2 21.

  • Net income increased 56% yoy to SAR128mn in Q2 22 vs SAR82mn in Q2 21.

  • Sunflower oil – The management clarified that the Russia-Ukraine conflict has not led to a shortage of oil, however the real challenge is with the logistic and supply chain and bunker ship capacities to get the oil to the markets that Savola operates in.

  • Bayara: The decline in profits of Bayara was due to the significant expense in relaunching the brand under the Afia brand in Saudi. The management clarified that Bayara generated AED60mn in profits when acquired and will still generate the same level of profits in the absence of the relaunching expenses.

  • Egypt: Savola will not launch Bayara in Egypt this year. Savola acquired Egypt Bakery as an asset purchase and is looking to launch it in 2023f, and it is expected to contribute meaningfully in 2024f.

  • In general, the management clarified that there is one or two quarters of lag effect of price increase or decrease on Savola’s sales. The price varies contract to contract.

Frozen Foods

  • Revenue increased by 4.0% yoy to SAR165mn with growth due to recovery in B2B/HORECA channels. The momentum in UAE was supported by the Expo 2020.

  •   Gross profit decreased 8.0% yoy to SAR52mn, with margins contracting to 31.7% in Q2 22 from 36.0% in Q2 21 due to high input costs.

  • EBITDA declined 21.0% yoy to SAR22mn, with margins reaching 13.2% in Q2 22 vs 17.3% in Q2 21, driven by a decline in gross margin and increase in marketing and advertising expenses.

  • Net income decreased 23.0% yoy to SAR15mn with margins contracting to 9.2% vs 12.4% in Q2 21.AR15mn with margins contracting to 9.2% vs 12.4% in Q2 21.