Agthia doubles first-half profits

Emirates Foodstuff and Mineral Water doubles its profit in the first half of the year compared with the same period last year.

Agthia has seen its profits double so far this year.

Emirates Foodstuff and Mineral Water (Agthia) doubled its profit in the first half of the year compared with the same period last year. Profit increased to Dh75.9 million (US$20.6m) compared with Dh37.9m for the first half last year. The company said the result was mainly due to new products and continued success in its flour and feed and water divisions. Revenues for the company reached Dh456m in the first half, up by almost 18 per cent since the first half of last year. In the first quarter of this year, Agthia posted revenues of Dh222m.

Agthia's water and beverages subsidiary recorded the biggest jump in sales volumes of 42 per cent, while its flour and feed division reported a 7.6 per cent increase. Mina Zayed Port reported recently that container traffic rose by 27 per cent, in part because of increased imports of food into Abu Dhabi. The growth in consumer goods imports may be partly attributed to population growth in the Abu Dhabi metropolitan area, which is expected to increase to 1.3 million by 2013 from 930,000 in 2007, according to the Urban Planning Council.

Food companies became regulated by the Government last year as commodity prices rose to record levels, fuelled by high oil prices. This trickled down to grocery bills in the UAE, which imports about 80 per cent of its food. Inflation also hit a record high of 12.2 per cent in March last year. In response, the Ministry of Economy signed agreements with major supermarket chains to cap the prices of basic goods such as cooking oil and rice. But by the end of last year, the price of oil dropped and market forces began to ease.

The IMF predicted last spring that UAE inflation would fall slightly to 10.8 per cent this year. Shonil Chande, a food and drink analyst at the market research company Business Monitor International, said Agthia's performance was a reflection of the food and drink sector's resilience during the global economic crisis. Agthia also attributed the increase in sales to its new lines of tomato paste, frozen vegetable products and Capri Sun beverages.

The tomato paste business produced revenues of Dh20m, which make up about 4 per cent of the company's total revenues. Mr Chande said the tomato paste division, which is relatively new and still a small part of overall sales, would probably be a solid step towards Agthia's plans to diversify its product range and expand its customer base. He added that Capri Sun was doing good business for Agthia.

Despite its first-half success, Agthia said it did not expect profit growth to be so robust in the second half of the year. The company said it expected flour and feed prices to decline with grain prices, and it would reduce the price it charged customers accordingly. [e-mail]