RIYADH (Reuters) – Saudi food company Savola Group said rising international prices for raw materials hurt profit in the third-quarter as the kingdom, which pegs its currency to the dollar, battles inflation at a seven-year high.
Saudi Arabia’s largest food company by market value and the Gulf’s second-largest sugar refiner said on Wednesday it will probably have to increase prices this quarter to compensate for the expected higher price of goods such as edible oil.
Saudi King Abdullah last week summoned the interior minister and provincial governors to explain rising costs in the world’s largest oil exporter, whose riyal currency has fallen in line with the dollar’s decline to record lows against the euro and a basket of major currencies.
Annual August inflation in Saudi Arabia, home to about 24 million people, rose to 4.4 percent, driven mainly by a record 12.1 percent jump in rents and a 6.6 percent rise in prices of food products, according to data released earlier this month.
“Prices of palm and corn oil, for instance, rose 70 to 100 percent this year, but we have so far raised the price of our edible oil by 10 to 15 percent,” Muhammad Amin Kashgari, Savola’s president of retail and real estate, told Reuters.
“There will be a small increase in prices in the fourth quarter,” Kashgari said, without being more specific.
Savola said earlier on Wednesday third-quarter profit plunged 72 percent after a capital gain last year, and warned higher international commodity prices would hurt earnings.
Net income in the three months to Sept. 30 at Savola was 151.4 million riyals ($40.37 million) and the capital gain in the year-earlier period 371 million riyals, the firm said in a statement on the Saudi bourse Web site.
Savola earned 533.78 million riyals in the year-earlier period, according to Reuters data, implying a 7 percent decline in third-quarter profit after discounting the capital gain.
Higher international commodity prices, such as for edible oil, had a “small” impact on third-quarter profit and will hurt earnings in the three months to Dec. 31, Savola said, without being more specific.
Earnings per share in the nine months to Sept. 30 rose to 2.81 riyals from 2.45 riyals in the year-earlier period, it said.
Bakheet Investment Group forecast a 67.8 percent drop in third-quarter profit, according to a Reuters survey last month.
Shares of Savola have fallen 20 percent this year, compared with a 1.55 percent decline in the main stock index.