Agthia, the Abu Dhabi food and beverage company 51 per cent owned by state-owned conglomerate Senaat, posted a 15 per cent drop in third-quarter net profit because of the UAE’s subsidy reform for flour and animal feed.
Net profit attributable to equity owners in the three months ending September 30 reached Dh46.5 million compared with Dh54.8m a year earlier, Agthia said in a statement on the Abu Dhabi bourse, coming in below a forecast of Dh58.4m from EFG-Hermes.
Revenue grew 4.4 per cent to Dh498.9m from Dh477.8m.
The company, which has lost Dh112m in the first nine months in subsidy receipts compared to last year owing to the reforms taking place, is undertaking a programme of “growth generation and cost- cutting” to weather the changes in subsidies.
Net revenues of the agriculture segment in the first nine months of this year declined 12 per cent to Dh739m as the subsidies reform and cheap flour imports dented sales.
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[ Agthia second quarterprofit hit by subsidy reform to flour, animal feed ]
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Flour net revenue in the first nine months declined 8 per cent to Dh299m.
"New wave of subsidy removals [on flour] – half of the subsidy in the bakery channel was taken out as of July 1 this year – exerted the expected and planned-for pressure on volume and profitability, as an additional and larger segment of the market is now open for free competition," the company said.
“An unexpected complication, which is slowly but rather persistently emerging not only for us but he UAE milling industry, is the cheap imported flour from different parts of the world where there is surplus capacity.”
Agthia said that foreign-branded flour is being sold at 15 to 20 per cent below market prices and even lower than Abu Dhabi’s subsidised prices.
The animal feed net revenue plunged 15 per cent to Dh441m.
“With about 70 per cent of the business non-subsidised for more than a year now, we demonstrated our capability and capacity to weather even unprecedented changes in this business by incurring subsidy-induced volume losses less than we initially anticipated,” said Agthia.
The company’s consumer segment, which makes up 53 per cent of net revenues, continued to grow, however.
Net revenue of water and beverages, which includes Al Ain water and Capri-Sun, rose 27 per cent to Dh695 in the first nine months of this year.
The food segment, which includes Yoplait dairy products, grew 2 per cent to Dh133m in the first nine months.
