RIYADH (Reuters) – Saudi food company Savola Group said on Saturday it would pursue acquisitions of cooking oil firms in India, Indonesia and Pakistan to help it cope with a rise in world commodity prices that slashed margins.
“We are looking for vertical expansion opportunities, going upstream, to have better control over margins,” Chief Executive Sami Baroum said.
“We are heading to some countries with strong potential, namely India, Indonesia and Pakistan for edible oil in particular,” he told Reuters in a telephone interview. Savola had not yet identified investments, he said.
Savola, also the second-largest sugar refiner and owner of the largest retail chain in the Middle East, reported a 24 percent drop in fourth-quarter profit on Saturday as high global commodity prices cut margins and it spent more on marketing.
The firm, constrained in its ability to pass along commodity price rises to consumers, has to shoulder a lot of the increases.
King Abdullah ordered last month subsidies on some food products to ease the impact of inflation on ordinary Saudis after inflation hit 16-year highs of 6 percent and 6.5 percent in November and December, respectively.
“The fourth quarter reflected the worst impact on our earnings from the rise in raw material prices, which hit unprecedented levels,” Baroum said.
The company plans to push into real estate business in the kingdom and wants to make more acquisitions of packaging and plastics companies, he said.
“The packaging industry promises to be profitable,” he said, without being more specific.
Savola announced earlier this month that it has raised to 95 from 70 percent its stake in an Egyptian plastics company.
In Egypt, where the Saudi conglomerate plans to start a 750,000 tonnes a year sugar refinery in May, Savola is planning acquisitions of food companies, Baroum said.
He denied that Savola was eyeing acquisitions of Egyptian edible oil firms as an Egyptian newspaper reported earlier this month, citing a Savola executive.
“We are not targeting edible oil firms in Egypt. He (the executive) meant to say other food products,” Baroum said.