Savola Group to divest Iranian operations for US$187.6M in strategic shift

IRAN – Savola Group, a leading Saudi-based food conglomerate, has announced the sale of its Iranian operations to an undisclosed foreign investor for SAR 705 million ($187.6 million).

This strategic move is part of Savola’s ongoing efforts to streamline its portfolio by exiting non-core markets and focusing on high-potential regions.

The divestment includes Savola Foods Company’s entire business activities in Iran, encompassing the manufacturing and distribution of edible oils, seafood, bakery, and confectionery products.

The unaudited net book value of these Iranian assets was approximately SAR 656.5 million (US$175M) as of November 30, 2024. The transaction is expected to yield a modest gain of around SAR 2.8 million (US$746,000) after accounting for transaction costs.

However, due to reclassifications required under International Financial Reporting Standards (IFRS), the company anticipates a net loss of approximately SAR 1.6 billion. This includes the reclassification of SAR 1.3 billion (US$346M) in foreign currency translation reserve and SAR 251 million (US$67M) in non-controlling interests from equity to profit or loss.

Savola Group stated that the proceeds from the sale will be utilized to strengthen its financial position.

This divestment aligns with the company’s strategy to exit non-core markets and reallocate resources toward high-growth investments within its food platform. In recent years, Savola has withdrawn from operations in Morocco and Iraq, reflecting its commitment to focusing on more lucrative markets.

Financially, for the nine-month period ending September 30, 2024, Savola reported a slight year-on-year decline of 1.04% in net profit attributable to the company’s owners, totaling SAR 665.12 million (US$177.2M).

Despite this, the third quarter of 2024 saw an improvement, with net income rising by 22.8% to SAR 181 million (US$48.2M) compared to SAR 147.36 million (US$39.3M) in the same period the previous year. This uptick was driven by improved performance across most segments, notably the retail sector.

Earlier in the year, Savola announced plans to distribute its stake in Saudi food group Almarai to some of its shareholders, following the launch of a SAR 6 billion (US$1.6 billion) rights issue.

The completion of the Iranian divestment is subject to certain legal formalities and regulatory approvals.

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