No respite in near-term for Savola: Al Rajhi Cap

The challenging operating conditions for Savola Group are expected to continue impacting the company’s standalone business, Al Rajhi Capital said in its earnings review on Tuesday.

Further, the impact of currency devaluation, especially in Iran, Sudan and Turkey, on the working capital is likely to further pressurize the company’s short-term liquidity needs, which is likely to further increase the finance costs, the brokerage firm added.

Savola recorded net loss of SAR 51 million in Q3 2018 (vs. net income of SAR 829 million in Q3 2017).

Structural headwinds such as lower customer count, currency devaluation, end product price controls in the overseas markets and unfavorable regulatory changes pushed top-line down by 6.9 percent year-on-year (YoY).

“The company’s strategy to position itself in the value markets seems unclear, which is likely to weigh on the turnaround efforts in the near-term, in our view,” the report said, revising its target price to SAR 26 per share (earlier: SAR 33 per share).