Agthia on course for double-digit growth

Above, the Al Ain water factory, which produces not only water but the Capri Sun brand juice as well. Delores Johnson / The National

Agthia expects to record strong double-digit growth this year despite the low oil price after posting a 20 per cent rise in profits last year.

Its net profit increased to Dh231 million last year as net sales grew by 13 per cent to touch Dh1.87 billion on the back of flour, water and beverages and dairy products sales.

“I don’t expect any slowdown in our products because we are into basic, not value-added, products. We are still looking for growth but it depends on the global economy,” said Iqbal Hamzah, the chief executive of Agthia.

“If the situation remains as it is and there are no major changes [in oil prices and the regional situation], we would look for a strong, double-digit growth in profit and sales this year.”

He said the weaker oil price could reduce liquidity and therefore affect funding required for expansion.

“There is already an issue with liquidity, the interest cost is going up and if oil prices remain at the same level [for three to five years], the liquidity will further dry up, borrowing costs will go up and then we will slow down because acquisitions require funding,” Mr Hamza said.

Agthia stock fell by 2.7 per cent on Tuesday, closing at Dh7.05.

The company said that it spent between Dh160m and Dh180m to acquire Dubai’s Al Bayan Water in October. The deal helped it to expand its bottled water business beyond the Al Ain and Alpin brands.

The Abu Dhabi-listed com­pany would focus its investments on water, juice, dairy, flour and feed as part of its new strategy.

“Our aim is to become a US$1 billion company in terms of revenues by 2020,” Mr Hamza said. Last year’s revenues were Dh1.86bn, up from Dh1.65bn.

It has identified Dh250m for expenditures this year, up from Dh200m last year, that would go towards launching new products, capacity increases in its operations, and acquisitions.

With Dh500m in surplus cash, it is eyeing acquisitions and entry into new geographic areas such as Saudi Arabia.

The grain silos that it has under construction are expected to be ready next year and to add 50,000 tonnes to its storage capacity, it is spending Dh55m.

Its current silo can hold 150,000 tonnes and stores wheat, barley and corn.

Agthia expects to appoint distributors this quarter for flour in Saudi Arabia as it prepares to enter the country and launch products in the bakery and yog­urt divisions in the UAE.

The agribusiness, which makes and distributes Grand Mills flour and Agrivita animal feed, reported net sales of Dh1.1bn, a 7 per cent increase on 2014. Net profit rose by 13 per cent to Dh226m thanks to higher sales and “a significant improvement in gross margin resulting from improved sales mix, operational efficiencies and favourable commodity prices”, according to the company.

Net sales for its consumer business, which produces and distributes Yoplait dairy products and Capri Sun juices, touched Dh760m last year, up by 23 per cent on the previous year on the back of water and beverages products. Net profits touched Dh86m, an increase of 51 per cent on 2014.

EFG Hermes has a “buy” rating on Agthia.

“We expect sustained earnings growth into 2016, as the company ramps up existing capacities and accommodates further capacity increases in the high-margin water and beverages division,” said a note from EFG Hermes.

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