Saudi Arabia’s second-largest industrial conglomerate, after Saudi Basic Industries Corporation (Sabic), is one of the kingdom’s widest held stocks, and is steadily building up its regional presence with acquisitions from Morocco to Kazakhstan. It is also extending its footprint into new sectors, such as petrochemicals and telecommunications
Company snapshot: The Savola Group
Date established: 1979
Main business sectors: Food, retail, packaging, real estate
Main business regions: Saudi Arabia, Egypt, Jordan, Kazakhstan
Market capitalisation: SR6.88bn (total equity at end of 2006)
Managing director: Sami Baroum
The Savola Group structure
The Savola Group became one of Saudi Arabia’s first listed companies on its inception in 1979, and now has 162,000 shareholders. Among these are some significant Gulf investors, including Prince Alwaleed bin Talal al-Saud, who now owns at least 13 per cent of the company’s stock, having increased his holding in January 2007.
The group has four main operating divisions: food (including edible oils and sugar), retail, plastics and real estate. It is pursuing a diversification drive that it hopes will turn it into a holding company, allowing its affiliates to pursue their objectives independently.
This arm’s length approach is designed to provide each business unit with the freedom to aim aggressively for strategic targets, but collaborate where these goals coincide. For example, its Panda hypermarket brand will rent anchor stores in some of the developments backed by Savola’s real estate unit.
Savola runs its business in the core oils and foods sector through a subsidiary, Afia International Company, which is 90.6 per cent owned by Savola. “As Saudi Arabia is not an agricultural base, we import raw materials [corn oil, palm oil and raw sugar] from global sources and do the refining and processing locally,” says Muhammad Ikhwan, senior vice-president of Savola. “Savola is now the largest edible-oil company in the world in refined consumer oils, with 1.4 million tonnes processed a year.”
Through seven business units, Afia dominates the Saudi edible-oil market and operates in more than 30 markets in the Middle East, North Africa and Central Asia region.
Savola also has a sugar division, comprising Jeddah-based United Sugar Company, operated in partnership with the UK’s Tate & Lyle, and the United Sugar Company of Egypt. Egypt is also home to one of the company’s six plastics companies, which make up the Savola plastics division. The other five plants are in Saudi Arabia. In the retail sector, the company’s business is run through another wholly owned subsidiary, Al-Azizia Panda United Company.
The Savola Group operations
Core activities are those most closely linked to customer demand: edible oils, sugar, packaging and bottled juices. Aside from being the Gulf’s second-largest sugar refiner, Savola’s oil and foods division has a share of the domestic market of more than 70 per cent, and growing fast.
Savola’s sugar division is planning an expansion in its Saudi refinery capacity from 1.2 million tonnes a year (t/y) to 1.5 million t/y. A new 750,000-t/y sugar refinery came on stream recently in Egypt, supplying the local market, Jordan and Lebanon.
Savola’s retail footprint is also growing. In 2006, it launched a massive 175,000 square foot hypermarket - HyperPanda - located at Dubai Festival City (DFC).
Real estate is also emerging as a key business. The company has taken a 30 per cent holding in Kinan International Real Estate Development, which is planning a SR2bn ($530m) landmark real estate scheme in central Jeddah. Savola is also a small shareholder in the King Abdullah Economic City in the Western Province, and the largest single shareholder in Knowledge Economic City in Medina.
The Savola board’s growth projects unit is developing a strategy that will deploy the group’s investment capacity of SR9bn, matched by a further SR9bn that will be sourced from strategic partners and co-investors.
Savola’s investment strategy involves the acquisition of stakes in businesses, directly or indirectly, with strategic partners across a variety of sectors. This necessitates an active investment portfolio, taking it further away from its core food and oils activities. There are plans for new petrochemicals, real estate and IT ventures.
Real estate is emerging as a pivotal sector. The Kinan project in Jeddah is planned as an integrated mixed-use development, including offices of up to 123,000 square metres. The group’s plans for growing its main operating division will complement development of the investment division, providing room to explore opportunities in petrochemicals and telecoms.