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Savola Group announces the interim financial results for the period ending on 31-12-2016 (Twelve Months)

Element Current quarter Similar quarter for previous year % Change current Previous quarter % Change previous
Net profit (loss) -964.3 515.3 - 173.4 -
Gross profit (loss) 755.1 1,274.1 -40.73 1,157.4 -34.76
Operational profit (loss) -176.1 378.1 - 311.3 -
All figures are in (Millions) Saudi Arabia, Riyals
Element Current period Similar period for previous year % Change
Net profit (loss) -451.3 1,791.7 -
Gross profit (loss) 4,425.1 5,025.4 -11.95
Operational profit (loss) 834.9 1,785.4 -53.24
Earning or loss per share, Riyals -0.85 3.36 -
All figures are in (Millions) Saudi Arabia, Riyals
Element EXPLAINATION
Reasons of increase (decrease) for quarter compared with same quarter last year The Group recorded net loss for the 4th Quarter 2016 compared to the profit achieved in the same quarter last year is mainly attributed to the following:

- non-recurring items booked in current quarter comprised of impairment of assets and goodwill related to Egypt operations in Savola Foods Company of gross SAR 302mn (net impact to the Group of SAR 245mn), inventory reduction costs in Panda Retail Company of gross SAR 377mn (net impact to the Group of SAR 343mn) and impairment in the Group of non-core investments of SAR 272mn.


- lower gross profit, mainly due to lower margins in Retail sector and one time cost to reduce inventory,
- lower share of income from an associate,

- higher financial charges, due to higher currency exchange losses,

- higher losses in United Sugar Company - Egypt USCE (classified as discontinued operations) which are mainly due to higher currency exchange losses despite higher margins,


- the Group also recorded gain on sale of land of SAR 38.8mn and gross insurance proceeds of SAR 126.5mn in Q4 2015.

This recorded loss came despite:

- non-recurring net positive impact for the Group of SAR 26mn for reinstatement of the classification of edible oil subsidiary of Savola Foods Company in Morocco from held for sale,

- slightly lower operating expenses, mainly due to reduction in selling and distribution expenses in Food and Retail sector,
- lower zakat & taxes, and
- increase share of minority in the losses.
Reasons of increase (decrease) for period compared with same period last year The Group recorded net loss for the period ended 31 December 2016 compared to the profit achieved in the same period last year is attributed to:

- non-recurring items booked in 2016 comprised of impairment of assets and goodwill related to Egypt operations in Savola Foods Company of gross SAR 302mn (net impact to the Group of SAR 245mn), inventory reduction costs in Panda Retail Company of gross SAR 377mn (net impact to the Group of SAR 343mn) and impairment in the Group of non-core investments of SAR 272mn.


- lower share of net income from an associate,
- capital gain recorded from disposal of Savola Packaging Systems Co. in 2015 (SAR 265mn),

- gain on sale of land of SAR 38.8mn and gross insurance proceeds of SAR 126.5mn recorded in 2015,

- lower gross profit, mainly due to lower margins in Retail sector and one time charge to reduce inventory,
- increased financial charges mainly due to currency exchange losses,

- higher zakat and income tax,
- higher losses from USCE due to higher currency exchange and lower margins, and
- increase in operating expenses which is mainly driven by growth in Retail operations.

This recorded loss came despite positive impact of reduced minority interests and non-recurring net positive impact for the Group of SAR 26mn for reinstatement of the classification of edible oil subsidiary of Savola Foods Company in Morocco from held for sale,
Reasons of increase (decrease) for quarter compared with previous quarter The Group recorded net loss for the quarter ended 31 December 2016 compared to the profit achieved for the previous quarter ended 30 September 2016 is due to:

- non-recurring items booked in current quarter comprised of impairment of assets and goodwill related to Egypt operations in Savola Foods Company of gross SAR 302mn (net impact to the Group of SAR 245mn), inventory reduction costs in Panda Retail Company of gross SAR 377mn (net impact to the Group of SAR 343mn) and impairment in the Group of non-core investments of SAR 272mn.



- lower gross profit, mainly due to lower margins in Retail sector and one time charge to reduce inventory,
- increased financial charges mainly due to currency exchange losses,
- higher losses from USCE due to higher currency exchange despite increase margins.

This is despite a reduction in operating expenses, lower zakat & income tax, a positive impact of reduced minority interests and non-recurring net positive impact for the Group of SAR 26mn for reinstatement of the classification of edible oil subsidiary of Savola Foods Company in Morocco from held for sale
Reclassifications in quarterly financial results Certain comparative figures have been reclassified to conform to this quarter presentation.
Other notes The net revenue for Q4 2016 reached SAR 6.25 Billion compared to SAR 6.26 Billion for the same quarter of last year a decline of 0.2% whereas the net revenue for the twelve month period of 2016 reached SAR 25 Billion compared to SAR 25.1 Billion for the same period of last year representing a decrease of 0.4%.The equity attributable to shareholders of the parent company (without minority interest) for the period reached SAR 8.5 Billion compared to SAR 10.6 Billion for the same period of last year representing a decrease of 19.8%During December 2016, as per information provided by IMF combined with other indicators Sudan ceased to be a hyperinflationary economy as of December 31, 2016. Accordingly, the Group has ceased to apply hyper-inflation accounting for Sudan operation as per generally accepted accounting standards in Saudi Arabia. As announced on Tadawul on 29th March 2016, Savola Group (Savola) and other shareholders' of USCE (an indirect subsidiary of Savola) have entered into a Shareholders Agreement with European Bank for Reconstruction and Development (EBRD). Therefore, subsequent to the issuance of new shares and completion of the related legal formalities and government approvals, Savola will account for its investment in USCE on equity basis of accounting.Till such time, in accordance with the generally accepted accounting standards in Saudi Arabia, the assets and liabilities of USCE as of December 31, 2016 have been classified as (held for sale) in the interim consolidated balance sheet and results of operations of USCE for the twelve-months period ended December 31, 2016 has been disclosed as (loss from discontinued operation) in the interim consolidated income statement. Also the amounts relating to USCE for the twelve-months period ended December 31, 2015, have been reclassified as (loss from discontinued operations) in the interim consolidated income statement.The issuance of new shares and completion of all legal formalities are expected to be completed during Quarter 1 2017 and Group will account for its investment in USCE on equity basis of accounting during Q1 2017.During the last quarter of 2016, the investment in the Group's non-core investment, Intaj Capital Limited (Intaj), has been classified as held for sale, in accordance with generally accepted accounting standards in Saudi Arabia, pursuant to the Groups decision to sell off its interest in Intaj within one year time. The Group Board resolved to cease the disposal plans for edible oil business in Morocco and reinstated the classification of amounts in the balance sheet for the current and comparative period. The Group would also like to announce that it will not pay quarterly dividends during the year 2017. We would like to inform the investors that the interim consolidated financial statements of the Group for the period ended December 31, 2016 will be uploaded on Savola website after submitting it to the concerned authorities, and can be accessed through the following link:http://www.savola.com/SavolaE/Financial_Reports.php

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