Adnoc Distribution, the UAE's biggest fuel distributor and convenience store operator, recorded a year-on-year 6.8 per cent increase in fourth-quarter profit, boosted by higher oil prices and an increase in fuel sales.
Profit for the three months ending December 31 rose to Dh492.4 million, or Dh0.039 per share, from the end of same period in 2016, the company said in a regulatory filing to Abu Dhabi Securities Exchange, where its shares are traded.
A 16.2 per cent rise in the price of Brent crude in the fourth quarter of last year helped boost income. Full-year 2017 net income climbed 1.3 per cent to Dh1.80 billion from 2016.
"Adnoc Distribution had a very successful 2017 with an enhanced level of profitability and continued healthy margins. Our twin businesses of fuel and non-fuel retail give us ample scope to expand commercially and geographically," acting chief executive officer Saeed Al Rashdi said. "With plans to grow market share through strategic expansion into Dubai and Saudi Arabia already advanced, our core UAE market is a testing ground for a number of planned new initiatives to grow margins and deliver an enhanced customer experience."
It is the first quarterly results announcement from the Abu Dhabi company since it sold shares to the public in December and announced plans to expand its operations in Dubai and establish presence in Saudi Arabia, the region's biggest economy. Adnoc Distribution's board of directors proposed a dividend of Dh0.058 per share, totalling Dh735m.
The "results and dividend were generally in line with expectations with no major surprises," said Hatem Alaa, head of health care and consumer research at the Egyptian investment bank EFG Hermes.
Mr Alaa said he expected Adnoc Distribution profit to rise to Dh2.05bn in 2018.
Adnoc Distribution, which is valued at Dh31.1bn, sold 10 per cent of the company in the share float, the first listing on the Abu Dhabi bourse in more than six years. In January, the company said it will open its first service stations in Dubai and Saudi Arabia this year.
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The company plans to enter Saudi Arabia through a franchise model, which will be the first of its kind for the fuel distributor. Expansion into Dubai, the only emirate where the company has no physical presence, is now feasible following changes to how fuel is priced were introduced across the UAE in August 2015, Mr Al Rashdi told The National last month.
As part of the expansion plans, Adnoc Distribution which holds a monopoly in Sharjah and Abu Dhabi, will roll-out at least 13 new service stations this year, and extend three of its existing facilities.
The company, which currently operates 360 service stations and 235 Oasis convenience stores in the UAE, said total fuel volumes rose 6.5 per cent in the last three months of 2017 to 2.63bn liters compared to the same quarter of 2016.
The best seller for Adnoc Distribution is 95 unleaded gasoline of which it sold 1.17bn liters in the last quarter of 2017, compared to 1.16bn in the year-earlier period.
Revenue for the 12-month period rose 11.8 per cent to Dh19.76bn from 2016, while total assets at the end of 2017 came in at Dh12.2bn, up from Dh11.44bn in 2016.
UAE currency: the story behind the money in your pockets
Start-up hopes to end Japan's love affair with cash
Across most of Asia, people pay for taxi rides, restaurant meals and merchandise with smartphone-readable barcodes — except in Japan, where cash still rules. Now, as the country’s biggest web companies race to dominate the payments market, one Tokyo-based startup says it has a fighting chance to win with its QR app.
Origami had a head start when it introduced a QR-code payment service in late 2015 and has since signed up fast-food chain KFC, Tokyo’s largest cab company Nihon Kotsu and convenience store operator Lawson. The company raised $66 million in September to expand nationwide and plans to more than double its staff of about 100 employees, says founder Yoshiki Yasui.
Origami is betting that stores, which until now relied on direct mail and email newsletters, will pay for the ability to reach customers on their smartphones. For example, a hair salon using Origami’s payment app would be able to send a message to past customers with a coupon for their next haircut.
Quick Response codes, the dotted squares that can be read by smartphone cameras, were invented in the 1990s by a unit of Toyota Motor to track automotive parts. But when the Japanese pioneered digital payments almost two decades ago with contactless cards for train fares, they chose the so-called near-field communications technology. The high cost of rolling out NFC payments, convenient ATMs and a culture where lost wallets are often returned have all been cited as reasons why cash remains king in the archipelago. In China, however, QR codes dominate.
Cashless payments, which includes credit cards, accounted for just 20 per cent of total consumer spending in Japan during 2016, compared with 60 per cent in China and 89 per cent in South Korea, according to a report by the Bank of Japan.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
