Agthia second quarterprofit hit by subsidy reform to flour, animal feed

Net profit plunges 15.5 per cent on higher operating costs

Agthia, the Abu Dhabifood and beverage company, posted a 15.5 per cent drop in second quarter net profit as subsidy reform on flour and animal feed continued to dent earnings.
Net profit attributable to equity holders in the three months ended June 30 reached Dh65.7 million compared with Dh77.8m in the year earlier period, the company said. Revenue fell 2.1 per cent to Dh546.8m compared with Dh558.7m in the same previous year quarter.
"In the UAE softer consumer markets, in which the players are going to great lengths in order to sustain their competitiveness, required us to exercise formidable effort to continue to grow our businesses," said Dhafer Al Ahbabi, the company's chairman. 
"On the other hand, higher operating costs on account of rationalised government subsidies and additional fiscal measures to counter the impact of low oil prices made it a very arduous task to protect our profits."
The increase in electricity prices in Abu Dhabi this year also dented profitability, he added.
Since the subsidy reforms were introduced last year, profit has taken a direct hit at Agthia, which has sought to grow its water business to offset losses in other segments. 
While its Agricultural business, which includes flour and animal feed, in the first half posted a 13.5 per cent year-on-year drop in revenue to Dh510.1m from Dh589.6m, its consumer business, which includes water, beverages and food, recorded a 22.5 per cent year-on-year revenue increase to Dh557.3m from Dh455m.
Water and beverages revenue grew 28 per cent to Dh465.2m in the first half from Dh363.6m in a year-earlier period.
"Since subsidy rationalisation of last year, flour has been subject to aggressively competitive market conditions including increased market activity of low-priced imported flour," said 
Mr Al Ahbabi.
The company has introduced low-cost value-range products among other initiatives to shore up its flour business, where first half revenue fell 5.5 per cent
First-half revenue at the animal feed business plunged 18.7 per cent owning to subsidy reforms.
The animal feed business has shown signs of stabilisation in the second quarter, Mr Al Ahbabi said.
"We are optimistic about further stability in this category in the second half of the year on the back of our relentless efforts to be innovative in providing goods and services to the farms of our nation and to a range of initiatives that are already in the pipeline for execution as soon as July-August," he added.