ABU DHABI // Emirates Foodstuff and Mineral Water, now called Agthia Group, almost doubled its combined net profits in the first half of the year despite tough trading conditions. The producer and supplier saw a 94 per cent increase despite a sharp rise in the cost of imports that was driven by global inflation and soaring commodity prices. The half-year net profit of Dh38 million (US$10.3m) was largely attributed to factors including higher volume, production efficiencies, global pricing and efficient procurement of grains, officials at the company said.
"We are confident that growth will continue baring any unforeseen microeconomic challenges, particularly with regard to import materials," said Ilias Assimakopoulos, chief executive of Agthia. "Obviously if there is a worsening in supplies in the global market then things will get more challenging." Revenue growth in each of Agthia's operating companies, which include Al Ain Vegetable & Tomato Paste and Al Ain Water, also grew significantly, with sales in the first six months totalling Dh385m, up from Dh267m during the same period last year, an increase of 44 per cent. Second quarter sales accounted for Dh199m of that amount.
The company's quarterly financial report focuses on its three major business divisions, including water, flour and animal feed, as well as its vegetable processing business acquired earlier this year. According to company executives, Agthia's water business exceeded expectations, recording total sales of Dh64m, a 50 per cent increase over the first half of last year. Sales of animal feed and flour also reached Dh321m, a 43 per cent increase over the same period last year, due mainly to higher sales volume and pricing. Despite soaring grain prices, gross profit margin also improved from 13.7 per cent to 16.6 per cent as compared to the corresponding period last year due to a favourable pricing impact, increased production volume and the procurement initiatives.
Officials with Agthia reported the increase of selling and distribution expenses, due to strong volume growth, as well as the full impact of the new organisation structure. However, while the results were likely to be well-received, Mr Hamzah admitted that the volatility in the global food market weighed heavily on the minds of his staffers, and insisted that the volatile conditions required caution.
"We don't see grain prices in the international markets to ease in the near future," he said. "Grain prices will continue to be at the same level or maybe higher, so we mean wheat, corn, barley and soya, which are the main input for our production." Agthia has been exploring options for securing food reserves in countries such as Sudan, Pakistan and Australia in an effort to shield itself against potential food shortages and skyrocketing commodities prices. The company is working with the Government of Abu Dhabi on this matter.
"There is no concrete plan yet," said Iqbal Hamzah, the chief financial officer. "We are looking at a number of countries closer to the region, mainly because of the freight element, which has increased substantially over the last few months, but also for better availability of proper land, irrigation, investment." vsalama@thenational.ae