Comprehensive Financial Review: Savola Food Company Analysis Report

This report provides a comprehensive financial analysis of Savola Food Company, covering its background, history, operating model, and corporate structure. It delves into Savola's earnings, focusing on the Savola Food Company division and its corporate social responsibility efforts, including ethics. The report reviews the company's financial structure, financial management strategies, tax structure, and budgeting processes. It also includes a forecasting of sugar prices and insights into the corporate work program, including training and limited review reports on various aspects like monthend activities, fixed assets, CAPEX management, and customer balance confirmations. The report concludes with recommendations aimed at enhancing the company's financial performance and operational efficiency.

FINANCE
TABLE OF CONTENT

S
INTRODUCTION......................................................................................................................3
Company Background and history.........................................................................................3
Operating Model.....................................................................................................................4
Corporate structure.................................................................................................................5
Savola earnings.......................................................................................................................6
Savola Food Company...........................................................................................................6
Corporate Responsibility........................................................................................................6
Ethics......................................................................................................................................7
Reviewing Financial Structure...................................................................................................8
Finance...................................................................................................................................8
Financial Management...........................................................................................................8
Financial Management in a business......................................................................................9
Strategies of Financial management.....................................................................................10
Tax structure.........................................................................................................................10
Budget...................................................................................................................................11
Forecasting of Sugar Prices..................................................................................................13
Corporate Work Program.........................................................................................................14
Training................................................................................................................................14
Limited Review Report of Mont End...................................................................................14
Limited Review of Fixed assets and CAPEX Management.................................................14
Flash Review Report for Balance confirmed by customers.................................................15
Conclusion and Recommendations..........................................................................................15
Conclusion............................................................................................................................15
Recommendation..................................................................................................................15
REFERENCES.........................................................................................................................16

INTRODUCTION
Finance play an important role in an entity as it boosts the performance of the
company as it lubricates the productivity of the business within a given span of time. Finance
is considered as a mandatory requirement of the business which helps an entity in surviving
for a longer period of time by achieving all the goals and the objectives of the firm. Current
assignment is related to the monetary and non-monetary structure of an entity reflected in the
given report. This assignment is majorly based on some of the primary pillars which bear the
load of the whole enterprise. Savola Company has been selected for the current assignment
which is segregate into various fields such as savola Food Company and Savola group and
several investments made by an entity within the business tenure for a specific period (Ang,
2018). Various percentages of shares held by an entity in several businesses sector in the
investments made by an enterprise (Cerchiello and Nicola, 2018). This assignment reflects
the company profile and its history to inspire a start-up entity to grow more by applying lots
of efforts in transforming its efforts into the success (Gallagher, 2018). Operating model of
the firm is clearly visible from this assignment as it shows the approach of the business to
earn its daily bread by using the support of all the employees. Finance chapter of this
assignment is related to the planning of finance and its financial resources by predicting the
need of finance in advance. Financial projection method is used by the business concern to
get rid of all their financial problems. Corporate framework used to evaluate the corporate
governance structure of the firm.
Company Background and history
Company Background
Savola Food Company is regarded as the biggest sugar company in Saudi Arabia
which is a food company which deals with a variety of food products. Al- Osra is a mother
brand of Savola Company is a retailer of sugar in the country (Background of Savola, 2017).
This firm is renowned in the world for its purity and quality. Al-osra is considered as the first
entity that launched packaged sugar which inspires other competitors to introduce this system
of offering sugar to its customers (Company brands, 2017). The unique feature of the
products offers by this entity is that it mentions recipes on the food packages to facilitate its
customers to cook foods. It helps all kinds of customers who know cooking or does not know
anything about the cooking can purchase the food products of the Al-osra to know about new
recipes to generate unique ideas of cooking among its users. The sustainable advantage
3

enjoyed by Savola food group is related to the technological innovation which induces the
overall performance of an entity in front of its internal as well as the external users.
History
The business journey of Savola group started in the year 2002 as a sugar retailer with
its sugar brand named as Al- osra captures the attention of its majority of users in the market.
The attractive packaging of the sugar packets steals the attention of the customers towards
this product to purchase it without getting influenced by the price of the products (Company’s
history, 2017). The purity of the sugar is one of the factors which help in inducing the
performance of the company as an entity uses different levels of purity to test the sugar
before launching in the market. This quality of the company attracts its customers as this
reflects the trustworthiness of the firm. This action of the firm acts as a key driver to boost
the company’s performance in front of its external users.
In the year 2006, Al- osra added natural word along with the purity of the sugar to
catch the attention of most of its buyers as this helps in catching the attention of diet
conscious people who are conscious about their weight. This new feature of the firm brings a
high level of competition in the existing market as compared to its existing rivalries.
The success of the company is celebrated in the year 2011 with the help of TV ad
campaign to inform all the domestic as well as internal users. After all the efforts of the
company, in the year 2016, entities explore the emotional benefits of its brand by showing its
creativity by designing the packages of the sugar packets to target its users.
Operating Model
Savola comes into existence in the year 1979 by setting up its headquarters in the
kingdom of Saudi Arabia (Financial structure of Savola, 2017). Initial capital invested by the
company was SAR 40 million along with the support of 200 personnel whose results is clear
to the world (Operating model, 2017). The aim of this company is transforming efforts into
profits by using unique talents of its employees as this entity cares about their employees as
they think as an asset rather than thinking them as just cost to the company. Initially, Savola
was started as a cottage industry which runs on a small scale of importing and refining edible
vegetable oil distributed in the local areas.
Market segmentation of the firm was contracted as they focus only on the local
markets in selling their products just to earn its daily targets rather than fighting against big
4

risks in the environment. The generic strategy of the company was cautious as they want to
ensure its survival in the market for a longer time period to mark their presence.
Determination of Savola led them towards the path of the success of the continuous growth.
The firm has selected the path of diversification to get rid of all the market complexities.
Corporate structure
For the progress of an entity, the corporate structure is mandatory as it boosts the
performance of the company in dealing with various market complexities (Corporate
structure, 2017). A strong corporate structure helps in catering needs and objectives of the
company and along with customers. An entity segregates its company into various divisions
which acts as a strategic business unit (Gelman, 2018). These strategic business unit’s
customers, competitors, target users, aims and objectives, marketing strategies are totally
different as they act as separate business heads. An entity categorizes its business into various
divisions to manage the overall divisions by delegating the responsibilities among different
company rather than holding centralized power with the Savola group. It is essential to
segregate different heads to accomplish all the goals and the objectives within a given span of
time (Benatar, Upshur and Gill, 2018). A corporate structure of the Savola Company is
categorized into two primary units named as Savola Foods and Savola Retail and further
categories of these two heads are there to control the overall Savola group within a given
span of time.
Savola investment is another group which includes all the investments made by an
entity in various businesses to strengthen its current business (Vongsaroj, 2018). It includes
various investments such as Almarai Company, Herfy food services Company, Knowledge
economic city company, Kinan International Real Estate Development
Company, Emar Economic City Company, Taameer Jordan holding company, Swicorp
company private equity and Intaj capital company private equity (Bjola and Kornprobst,
2018).
Three staple items of Savola foods are Oil, sugar, and pasta which further categorized
into various heads. Various brand companies which provide oil includes Afla International
Corporation KSA and Egypt, Savola co. United Sugar Company offering sugar and El
farasha for food industries co.
5

Savola earnings
This phase discusses the overall earnings earned by Savola group who have earned
this income by converting their efforts into the entire success. According to the quarterly
report of the Savola group for the year 2017, an entity suffered from a net loss of SAR 37.5
million due to the cost burden imposed on an entity (Wellmer, 2018). Savola group is located
in Saudi Arabia, deals in offering food products by including all the staple items such as oil,
sugar, and pasta as three primary strategic business units. An entity segments its overall
business into these three business heads to lessen its entire work load. In the fourth quarter,
an entity has suffered from a net loss of 37.5 million is the stable position for the firm as the
business has overcome the difficult position imposed on an entity from the previous year
(Iggers, 2018). The previous year loss was 915.7 million as this loss has reduced to just 37.5
million that means an entity has reduced 95.90% loss. The increasing amount of loss is due to
the increasing expenses of an entity. An entity needs to decrease its overall operating
expenses to enhance its overall margins (Murphy, 2018).
Savola Food Company
Savola Food Company is one of the business head of the overall Savola group as the
whole entity is categorized into two streams such as Savola Food Company and Savola
retailer deals in all the FMCG products (Bailey, 2018). The business of the Savola Food
Company is expanded to both the domestic as well as international market. Savola Food
Company existing its business in Saudi Arabia and catering the needs of all its users in
various countries such as Egypt, Iran, Turkey, Algeria, Morocco, and Sudan. These seven
countries are neighbouring countries to the Saudi Arabia which are gulf countries in which an
entity offers its variety of services (Thompson, 2018). The aim of the firm is to mark its
presence in front of all their users by showing its true image to make loyal customers who
purchase all the products offers by an entity (Wachs, 2018). The firm follows Business to
customer format of an e-commerce system in which they sell its products only to the end
users to enjoy the higher margins as they did not sell their products to wholesalers. Business
to the Business platform of selling the business services is not considered by an entity in
selling branded products. Household staples products sold by this entity includes edible
vegetable oil, sugar, pasta and ghee by selling these products under various brand names.
Corporate Responsibility
Corporate social responsibility is an iron law of responsibility of an individual which
needs to be fulfilling by an entity to avail all the benefits from the society and its
6

environment. Savola groups deals in food products which utilizes the agricultural products
which requires the permission of the society and the environmental regulations to enjoy the
benefits of all the environmental resources existing in the country in which an entity is
operating its business (Weigend, 2018). Corporate social responsibility is a concept which
helps an enterprise in showing its responsibility towards the society. Savola group held
responsible for meeting all the needs and the objectives of all the society members by giving
employment opportunities to all the society members. By offering employment opportunities
to its society members, an entity will appreciate the efforts of all the members of the society
for giving the overall support. Aim of the firm is to satisfy all its stakeholders who actively or
passively participate in the business proceedings just to accomplish its aims and the
objectives within a given span of time. Vision of the Savola Company is to emphasize on one
statement such as “Value Built on Values” this is the vision of the company in which an
entity focuses on all the values of all the stakeholders such as the shareholders, owner,
employees, government and investors who invests its precious amount in the company
(Mayer and et. al., 2018).
Ethics
Honesty and integrity are two features acts as a basic pillar of the business which
helps an entity in accomplishing its desired returns within a given span of time (Ladkin,
2018). Trust and business transparency are mandatory for the business in attracting both its
internal as well as the external users (Vongsaroj, 2018). Trust is that feature of a business
which attracts all the investors to invest in a business on the basis of trust factor and honest
relationships created between an entity and the investors (Feng and Hu, 2018). This
relationship of integrity and trust leads an entity towards the achievement of all its goals and
the objectives in a given span of time. Entities need to follow the professional code of
conduct and code of ethics by complies with the statutory requirements of the business entity
(Yon, Cai, Wang, Wang and Shen, 2018). There are various codes of ethics to be followed by
an entity to form a relationship of integrity and trust among all its stakeholders are mention as
below:
 Business policy develops by an entity by enclosing all the ethics in the favour of the
company and its employees to regulate the actions of all its personnel as a business
held responsible for the action of its employee (Gomez, Khelf, Bourdon, André and
Rémond, 2018).
7

 Training is given to all the newly hired employees in an entity to adapt to the
corporate changes takes places in the business.
 Fair wages is given to all its employees according to its calibre as their motive is to
equalize all its employees working in the business by applying their efforts. By giving
deserving salary to all the employees working on a different business position an
entity will justify their action.
REVIEWING FINANCIAL STRUCTURE
Finance
A basic requirement of every business is finance which lubricates the vehicle of a
business to reach its desired destination in less period of time. The motive of the business is
to achieve all its aims and the objectives within a given span of time. It is regarded as the
study of investments, in which an entity tests its calibre in the form of finance available to
them, too, boosts its overall performance (Almeida, 2018). Various kinds of sources finance
than an entity can choose according to the nature and the type of a business. Short term,
medium term, and long-term finance are available for an individual to achieve all its dreams
within a stipulated time (Hadi, Handajani and Putra, 2018). Various forms of finance include
bank loan, venture capital, issuing equity shares, crowd funding, trade credit, debentures, a
loan from friends and relatives. Two primary head of the finance includes personal finance
and the corporate finance as these two heads of the finance is segregated according to the
needs and aim of an individual. In the current world, everyone requires fiancé to meet its
needs which are further categorized into different criteria’s such as the purpose of an
individual, time period for which finance is required, and interest rate paid on the principal
amount taken by an individual.
Financial Management
It is a systematic process of managing all the financial resources used in an entity to
accomplish all the financial aims and the objectives within a stipulated time period. It is a
process of planning, organizing, directing and control the financial tasks stakes places in a
business to get the desired return on time (Langley, 2018). Financial management aims to
target both the quality and quantity of the financial resources from different sources to get the
desired return on time (Barr, 2018). It is important to follow the financial management
principle to evaluate the financial structure of an entity to take investment decisions. Capital
budgeting tools are used by an entity to evaluate the overall performance of the business. An
entity uses different elements such as fixed assets to invest in a particular project to get the
8

desired return in the future. Capital and economical appraisal technique help an entity in
providing the glimpse of the future profitability and the overall returns in advance to
strengthen its capability. It also includes financial decisions taken by an entity by considering
all the costs of the financial resources such as the cost of using equity and cost of using the
debenture as a financial source of finance. Cost of the equity involves the dividend payable to
the shareholders who invest in an entity by taking the shares of the company. Cost of other
financial sources is the cost of using the debenture, in which an entity will pay the amount
interest on the total value of the debenture given to the lenders who supports an entity by
giving a specific share of the amount in the form of finance. Financial management is a
building based on three pillars in the form of three decisions such as investment decisions,
financial decisions, and the dividend decisions (Kuo and Cheng, 2018). These three decisions
guide a business to invest in suitable source finance its business appropriately and lastly give
dividends to satisfy all its shareholders who are the true owners of their business (Langley,
2018).
Financial Management in a business
Savola Company emphasizes on safeguarding its initial capital applied in a business
as their motive is to plan about the financial resources used by an entity within a given span
of time. It aims to plan about the financial resources used in an entity and also to direct all the
financial resources used in a business to generate the cash. Every entity aim to achieve profit
by operating its business as cash is utilized in paying of the liabilities of all the lenders who
supports the firm in each and every point of time Initial capital applied by a firm comes from
different sources of finance (Dutt, Vankudothu, Hegde and Tyagi, 2018). The financial
structure of an entity is evaluated in advance by considering the entire accounting and non-
accounting aspects of the firm to know all the pros and cons of the financial resources used in
an entity. With the help of three business decisions as an integral part of the financial
management such as investment, financial and dividend decisions to guide the actions of the
business (Kerzner, 2018). Investment decisions guides an entity that where to invest in a
business to generate the desired outcome. Financial decisions helps an entity to select
financial resources by using different sources of finance such as bank loan or other modes of
finance to boosts the overall firm’s performance (Husted, Henriques and Crane, 2018).
Strategies of Financial management
Strategies crafted by every entity to achieve its desired aims and the objectives within
a given span of time. Every entity prepares a strategy to accomplish all the goals and the
9

objectives within a stipulated time period. Various financial strategies crafted by an entity to
get rid of all the difficulties faced by an entity in business duration. A business owner is
required to take risks before stepping head into a business as their aim is to satisfy all the
users of the business.
Cash is one of the liquid components used effectively and efficiently in a business
which needs to be managed in an enterprise (Hugos, 2018). The aim of the business is to
identify various kinds of liquid sources of finance to overcome the situation of a liquidity
trap.
Accounts receivable and Accounts Payable
The liquidity trap is a situation of the economics, in which there is a shortage of cash
in a firm as a business runs on credit which requires some amount of cash to meet its short-
term liabilities. An entity like Savola foods plans about the overall finance used in operating
its business by ascertaining the amount of the total working capital which is a difference of
current assets and the current liabilities. Finance planning is done in the form of three states
such as short term up to 1 ear, medium term for 3 years and lastly discusses the long term
finance for up to 5 years.
Oracle system and objective system used by an entity to keep track of all their
financial elements of the company such as keeping track on the accounts receivables and
accounts payable amount. Cash inflow and outflow is traced by using the current system of
Oracle which helps in enhancing the overall performance of an entity. Another tool used by
an enterprise includes objective system used by an entity to maximize its overall output by
eliminating all the unnecessary resources used in a business.
Planning of controlling the budgets
In this stage, officials of an entity will check the budgetary requirements of an entity
by comparing this with the actual conditions to take corrective actions. Budget can be
controlled by Savola group by putting initials of the officials for all the transactions takes
places in an entity up to a certain limit decided by a firm to regulate the expenditures.
Budgets can be controlled by using benchmark approach which helps in comparing
the standards prepared for a budget with the actual results to take a corrective action. Cost
schedule prepared by a budget supervisor to eliminate all the business costs.
10

In the planning department, responsibilities are given to the middle-level management
of Savola Food Company to reduce the overall costs incurred in an entity as their aim is to
minimize all the unnecessary costs incurred in a particular business process.
Liabilities incurred by an entity for a short period of time includes trade payable
which needs to be payable by an individual to reduce its debt burden. Cash management is a
concept in which an entity makes cash strategy to generate cash from different sources in
advance to avoid the problem of a liquidity trap (Barr, 2018). It can be managed by
preparing accounts receivable account to collect the cash from all its creditors and also to pay
off the debtors of the business to get rid of all the problems incurred in a business.
Financial planning is another important part of the strategic financial management
system in which an entity plans for its future by securing enough amount of finance to meet
its future uncertainties on time (Policy and et. al., 2018). It is a process of predicting the
likelihood of the occurrence of the future uncertainties which will be minimize with the help
of existing financial resources available with an enterprise to meet the business problems and
the complexities.
Tax structure
The government of Saudi Arabia created special rules and the regulations for
communicating its users to pay the tax according to the set limits of the government act.
General Authority of Zakat and tax set a limit of SAR 40 million worth of goods and services
of an entity to file Value added tax returns for the first quarter of 2018 by the end of the April
month. An entity whose goods and supplies fall in the range of SAR 375000 and SAR 1
million are obligatory to file its tax return for a period of three months. Monthly vat tax
payable by an entity whose goods and supplies surpass the limit of SAR 40 million are liable
to pay VAT tax return otherwise an entity is required to pay fine of 5% to 25%.
Budget
Parti
cular
s
Ja
n
Fe
b
Ma
rch
Apri
l May June July Aug Sept Oct Nov Dec
Initia
l cash
60
00
0
Bank
loan
50
00
00
11

Inco
me
from
onlin
e
sales
60
00
0
66
00
0
726
00
7986
0
8784
6
9663
0.6
1062
93.6
6
1169
23.0
26
1286
15.3
29
1414
76.8
61
1556
24.5
48
1711
87.0
02
Inco
me
from
retail
store
s
25
00
0
26
25
0
275
62.
5
2894
0.62
5
3038
7.65
63
3190
7.03
91
3350
2.39
1
3517
7.51
06
3693
6.38
61
3878
3.20
54
4072
2.36
57
4275
8.48
4
Sales
inco
me
from
sugar
80
00
0
10
00
00
125
000
1562
50
1953
12.5
2441
40.6
25
3051
75.7
81
3814
69.7
27
4768
37.1
58
5960
46.4
48
7450
58.0
6
9313
22.5
75
Sales
inco
me
from
oil
12
00
0
12
00
0
120
00
1200
0
1200
0
1200
0
1200
0
1200
0
1200
0
1200
0
1200
0
1200
0
Recei
pts
from
sale
of
retail
store
4000
00
Total
intere
st
recei
vable
s
5000
00
6000
00
Total
cash
inco
me
73
70
00
20
42
50
237
162
.5
2770
50.6
25
3255
46.1
56
1284
678.
26
4569
71.8
32
5455
70.2
63
6543
88.8
73
7883
06.5
15
9534
04.9
73
1757
268.
06
Cash
outfl
ow
lease
rental
25
00
00
Purc
hase
of
offic
12
00
00
12