Riyadh, July 18 - Savola Group , Saudi Arabia's largest food products firm by market value, said second-quarter profit fell 17.5 percent on lower income and provisions for an investment in a listed property developer.
Savola, the world's top manufacturer of branded edible oil and the Middle East's top sugar refiner, projected, however, that third-quarter earnings would rise 58.2 percent from a year earlier, backed by growth in revenue from traditional sugar, edible oil and plastic businesses.
The company made a net profit of 212.5 million riyals ($56.7 million) in the three months to June 30, 2009 compared with 257.7 million riyals in the year-earlier period, Savola said in a statement.
Analysts polled by Reuters had expected the firm to post on average a 19 percent drop in second-quarter net profit while the company announced in April a 164 million riyals forecast for the same period.
"We believe many in the market will be nicely surprised by Savola's second-quarter results, especially given the fact that the company bottom line has crossed the 200 million riyals mark once again, the first time since the second quarter of 2008," Shuaa Capital's Laurent-Patrick Gally said.
Savola cited the absence of capital gains, in contrast to last year, as a reason for the fall.
Chief Executive Sami Baroum said the firm booked an unspecified amount of provisions in the second-quarter to revise down the value of its 2.5 percent holding in Emaar Economic City .
"We lowered the value of our investment in Emaar Economic City. This is precautionary measure ... Our stake is marginal, 2.5 percent, we are not even on the company's board," he said.
Savola's second-quarter statements show the value of Savola's investments fell to 4.6 billion riyals by the end of June down from 4.98 billion riyals by the end of March.
The firm's turnover stood at 4.36 billion riyals in the second quarter which is 32 percent above its level a year earlier and 20 percent above the first quarter of this year.
Shuaa's Gally said: "We don't know yet if those preliminary results include any one-off gain/loss or writedown/impairment, which will indicate the full extent of their quality."
Operating profit rose 37.7 percent to 374.9 million riyals in the second-quarter which is also 34.3 percent above the first quarter of this year.
Earnings per share in the second quarter were 0.42 riyal versus 0.52 riyal a year earlier. Savola will offer shareholders a 0.25 riyals per share dividend for the second quarter of 2009, which equals the amount it offered in the first quarter of this year.
The firm said it expected to make 250 million riyals in net profit in the third quarter against 158 million riyals it made a year earlier.
"The third-quarter forecast is higher because it coincides with (Muslim fasting month) Ramadan -- good for sugar and oil businesses -- and with the summer period, which is good for plastics," Baroum told Reuters.
"Plastic sales surge in the summer because of the higher consumption of fluids," he added.
Savola holds a near 28-percent stake in dairy firm Almarai which reported earlier this month a 22.1 percent rise in second-quarter net profit at 287.1 million riyals.