Saudi Arabias largest food producerSavola says it will maintain business in Iran, brushing off speculation that itsstakemight be sold in the wake of a diplomatic spat between the two countries.
Savola's shares plunged after Saudi Foreign Minister Adel al-Jubeir was quoted as saying that Riyadh was severing "all commercial relations" with Iran along with diplomatic ties and halting flights to the Persian country.
However, a senior Savola executive quoted by Reuters, said the company plans to maintain its investments there (in Iran) despite a diplomatic standoff between the regional powers.
"We knew the risks of doing business in Iran from the start," said the executive, who declined to be named due to Saudi disclosure rules.
Business outlook
The Saudi holding has a controlling 90% stake in Savola Behshahr Industrial Company which accounts for 40% of Irans edible oil market. The firms Iranian edible oils and sugar businesses account for some 13% of total revenues.
It also holds 100% ownership in the Savola Behshahr Sugar Company, distribution firm Tolue Pakhshe Aftab and confectionery maker Modern Behtaam Royan Kaveh, according to the groups annual report.
Iran provided 11% of Savolas total revenue in the third quarter of 2015 and the company's revenues for Iran totaled 2 billion Saudi riyals ($534 million) in the first nine months of 2015.
The company has come under scrutiny, with several Iranian MPs questioning Savolas perceived monopoly over edible oils business in the country and local producers accusing it of dumping.
The Saudi government is reportedly the second-largest single shareholder in Savola through a 10% stake held by a social-insurance board.
Local producers in Iran have accused the company of flooding the market with its products in anticipation of expanding the company's clout.
Savola says it islooking to an imminent lifting of sanctions to further boost Iran business.
"For the long term, Savola will have a competitive advantage once sanctions have been lifted," the companys executive told Reuters.
Saudi businesses in Iran
The fallout from recent deterioration of diplomatic ties looms large over commercial ties between Tehran and Riyadh but trade volumes are paltry.
The few Saudi companies operating in Iran are mainly involved in food and consumer goods businesses.
Since 2005, Rani Refreshments has been making its popular fruit juice products in Iran under license from Saudi Arabia's Aujan Group Holding, itself operating under British firm Nichols and Coca-Cola through a $1 billion joint venture.
Kaveh Aluminum Can Company in Iran supplies cans to the Aujan Industries Iranian Company as well as Coca-Cola, Pepsi and other brands for sale in Iran, according to Reuters.
Who will lose the most?
Meanwhile, it is not clear yet how the recent diplomatic row will affect proceeds from more than 1 million Iranians traveling to Saudi Arabia a year for the Hajj pilgrimage.
While Saudi Foreign Minister Jubeir has stated that Iranian pilgrims would still be welcome to visit Mecca and Medina, an Iranian official said the decision to continue or suspend the Hajj is up to Leader of the Islamic RevolutionAyatollah Seyyed Ali Khamenei to make.
On Wednesday, the Fars news agency said Saudi Arabia makes a minimum of $1 billion a year from Iranian Hajj travels, which could enormously damage the kingdoms economy if Iran decides to halt them.
Regardless of diplomatic and political aspects, it is Saudi Arabia which will definitely lose economically, from its decision to cut relations with Iran, the news agency said.
Existing figures and reviews show we are not buying any special commodity from Saudi Arabia because Saudi Arabia basically is not a producer for its goods to be used in the Iranian market, Fars added.
Meanwhile, head of the Jewelry Producers' Union Ebadollah Mohammad-Vali said Iranian gold producers who sell to Saudi customers can easily find a newmarket, the ISNA news agency reported.
By Press TV
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