Equity Analysis /
Saudi Arabia

Savola: Q1 22 earnings call summary

  • The Saudi FMCG market remained relatively flat with 0.5% yoy growth while modern trade channel declined by 0.9% yoy

  • Savola secured required raw materials in Q2 22, and Q3 22 requirements in some regions. H2 22 seems challenging

  • Savola may not be able to pass the increase in commodity prices fully, thus margins will continue to be under pressure

SNB Capital
24 May 2022
Published bySNB Capital

Business Performance

  • Revenues came in at SAR7.49bn up 25.8% yoy (+11.0% qoq).

  • Food processing revenues increased 48.9% yoy to SAR4.3bn while revenues of Panda grew 3.2% yoy to SAR2.8bn. Food services and frozen foods grew 6% yoy and 5% yoy, respectively.

  • By geography, Saudi constituted 65% of total sales followed by Egypt, Central Asia, and others at 17%, 5% and 13%, respectively. Saudi as a % of total sales declined from 69% in Q1 21 to 65% in Q1 22.

  • Ramadan related seasonality impacted the retail segment more than the food segment.

  • Gross profit increased by 6.1% yoy (+14.2% qoq) to SAR1.28bn, with a margin of 17.2% in Q1 22, contracting from 20.4% in Q1 21 vs 16.7% in Q4 21.

  • EBITDA increased 22% yoy to SAR781mn in Q1 22, vs SAR641mn in Q1 21 and SAR623mn in Q4 21. EBITDA margin stood at 10.4% in Q1 22, vs 10.8% in Q1 21 and 9.2% in Q4 21.

  • Reported net income was SAR271mn in Q1 22 vs a net income of SAR154mn in Q1 21 (excluding one of provisions of SAR23mn, net income stood at SAR177mn) and a net loss of SAR254mn in Q4 21 (excluding one off impairment of SAR422mn net income stood at SAR140mn). The increase is driven by higher net income in the food segment, lower losses in retail segment and higher share of income from associates. (Kinan contributed SAR50mn to income from associates in Q1 22).

  • Net debt stood at SAR6.74bn at the end of Q1 22 (vs SAR6.41bn at the end of Q1 21). Total loans increased to SAR8.65bn vs SAR7.57bn at the end of Q1 21. The management attributed the increase in loans to financing of the Bayara acquisition and higher working capital requirements in the food segment.

  • Capex for Q1 22 increased to SAR139mn vs SAR90mn in Q1 21. Of the total capex, 60% was for the Retail segment, 28% for the Food processing segment, while 11% was for the food services segment.


  • Revenues stood at SAR2.81bn up 3.2% yoy (LFL of +6% yoy).

  • The growth in revenues was driven by Ramadan sales and was partially offset by 1) store closures (-10 fewer stores vs Q1 2021), 2) renovations related to Panda’s CXR Program which reduced the store operating space.

  • Gross profit decreased to SAR591mn, down 2% yoy, while margins came in at 21.1% in Q1 22 lower than 22.3% in Q1 21. The management attributes the decline in margins to continued investment towards defense of its markets share in a highly competitive environment.

  • EBITDA declined 6% yoy to SAR153mn in Q1 22 (5.5% margin. vs SAR163mn in Q1 21 (6.0% margin). The decline is due to lower product margin despite lower operating expense.

  • The segment reported a net loss of SAR35mn in Q1 22 vs a loss of SAR52mn in Q1 21. The yoy decline in losses is mainly due to lower depreciation expense due to a combined effect of a lower number of stores and the impact of IFRS 16.

  • The Saudi FMCG market remained relatively flat with 0.5% yoy growth while modern trade channel declined by 0.9% yoy.

  • Panda’s store count remained flat qoq at 195 stores at the end of Q1 22 while there were 10 store closures vs Q1 21. (Closures in Q4 21 including 8 supermarkets and 2 hyper stores). The total selling area remained flat qoq at 594,357 sqm in Q1 22.

  • Panda began the 1st wave of its Customer Experience Program (CXR) in Q1 22 with a focus on customer experience and achieving its turnaround targets.

  • The CXR program is still in the middle of wave 1 where 30 stores are scheduled to be completed by H1 22. The management will share data on the performance of these stores in H2 22 after the completion of wave 1.

  • The management highlighted that stores under renovation record a double-digit decline in LFL sales.

  • The management will provide updated guidance on Panda’s profitability in H2 2022.

  • Panda has no Saudization concerns. There has been an additional cost of SAR10mn per quarter due to the impact of the minimum wage.

  • The management said that promotional items comprise a high percentage of the total basket size with no plans to go higher than the current proportion.

Food Processing

  • Revenues increased by 49% yoy to SAR4.33bn with overall volume growth of 6% yoy, driven by higher volumes in edible oil and better pricing in oil, sugar, and pasta categories.

  • In Q1 22, oil revenues increased 62% yoy to SAR3.02bn, driven by Saudi (+115% yoy), Egypt (+51% yoy), Central Asia (+66% yoy), Turkey (+36% yoy), Algeria (+46% yoy), Sudan (+18% yoy) and Morocco (+46% yoy).

  • In Q1 22, oil volumes increased by 15% yoy to 553 KMT, driven by Saudi (+40% yoy), Egypt (+21% yoy), Central Asia (+12% yoy), Turkey (+20% yoy), Algeria (+44% yoy), and Morocco (+11% yoy), slightly offset by a decline in Sudan (-15% yoy) due to supply challenges. The company said that the oil volume figures will be updated.

  • In Q1 22, sugar revenues increased 5% yoy to SAR826mn, driven by Saudi (+16% yoy) partially offset by Egypt (-45% yoy).

  • Sugar volumes decreased 10% yoy to 367 KMT, due to a decline in both Saudi (-1% yoy) and Egypt (-55% yoy).

  • Pasta volumes declined by 7% yoy.

  • B2B volumes is growing in major markets due to the removal of COVID-19 restrictions.

  • Gross profit increased 18% yoy to SAR549mn with margins contracting to 12.7% in Q1 22 from 16.0% in Q1 21. The decline is due to higher raw material costs, despite the increase in selling prices for oil. Gross profit per ton for oil and sugar came in at SAR734 and SAR146 respectively in Q1 22 vs SAR708 and SAR215 respectively in Q1 21.

  • EBITDA increased 31% yoy to SAR343mn, with a margin of 7.9% in Q1 22, vs 9.0% in Q1 21.

  • Net income increased 37% yoy to SAR143mn in Q1 22 vs SAR104mn in Q1 21 (adjusted for a one-off provision of SAR23mn).

  • Sunflower oil – The management affirmed that Savola was able to secure required raw material quantities up to Q2 22, and also secure Q3 22 requirement in some regions; however, H2 22 seems challenging due to the supply dynamics post the Russia-Ukraine war. The company is in the process of finding new sources to deal with this challenge.

  • The management said that the sunflower oil raw material constraints came in despite Savola’s contracts as this is an industry-wide situation. C66% of the world supply comes from Russia and Ukraine. Savola is directing inventories towards its premium products.

  • Margins depend on market dynamics and the ability to pass on price increases in commodities is limited due to timing issues.

  • The management highlighted that the sales from Bayara increased yoy in UAE and Saudi.  However, profitability is negatively impacted due to high investments to grow Bayara in Saudi.

Frozen Foods

  • Revenue increased by 5.0% yoy to SAR184mn with growth mainly from Saudi and UAE and across channels with double-digit growth in B2B/HORECA channel due to continued recovery.

  • Gross profit increased 7% yoy to SAR66mn, with margins increasing slightly to 35.5% in Q1 22 from 34.8% in Q1 21.

  • EBITDA increased 11.0% yoy to SAR32mn, with margins reaching 17.3% in Q1 22 vs 16.4% in Q1 21, driven by improvement in gross margin and slightly lower operating expenses.

  • Net Income increased 6.0% yoy to SAR23mn with margins flat at 12.4%.

  • Segment challenges include 1) sourcing of poultry 2) the increase in input costs as a result of global market conditions and geopolitical issues 3) supply chain issues 4) changing regulatory environment.


  • Cost inflation in food commodities will persist during 2022f.

  • Savola may not be able to pass the increase in commodity prices fully to consumers, thus margins will continue to be under pressure in coming quarters.