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Abu Dhabi-based food and beverages company Agthia said second-quarter net income increased more than 17.5 per cent as acquisitions boosted revenue, with the company expecting to stay on a positive growth trajectory in the second half of this year.
Net income for the three months to the end of June climbed to Dh18.33 million ($5m) from the same period a year earlier, the company said in a statement on Tuesday to the Abu Dhabi Securities Exchange, where its shares are traded.
Revenue for the quarter rose 26 per cent to Dh652.84m from Dh518.77m a year earlier. Operating profit for the period jumped more than 41 per cent year-on-year to Dh22.71m.
Net profit for the first six months of 2021 surged an annual 61 per cent to Dh67.9m, while the company’s total revenue for the period climbed 21 per cent annually to Dh1.32 billion.
Agthia’s first-half results were "driven by acquisition synergies, acceleration of transformation and additional cost optimisation”, said Alan Smith, chief executive of Agthia Group.
“We anticipate the momentum of this performance to continue over the coming months.”
Agthia – which is part of one of the region’s largest holding companies, ADQ – manufactures, distributes and markets a range of food and beverage products, including popular regional brands such as Al Ain water and Al Foah dates.
In April, the company announced a five-year strategy to become the biggest food and beverage company in the region by 2025. It has been on an acquisition spree in recent quarters, adding Kuwait's Al Faysal Bakery and Sweets, Jordan's Nabil Foods and the world's largest date processing and packaging company, Al Foah, to its consumer business division.
In April, the company also said it was buying a 75.02 per cent stake in Egypt's Ismailia Investments, which produces frozen chicken and beef products, in a deal that valued it at about 3.22bn Egyptian pounds ($205m).
Agthia is close to completing the deal and expects to receive the final approvals "within a few weeks", Mr Smith told The National. The addition of the Egyptian meat processor, known as Atyab, will help boost the Abu Dhabi company's growth, he said.
With consumer confidence returning and economies bouncing back from the pandemic-induced slowdown in its core markets, Agthia expects a positive outlook for the second half of the year.
"From the outlook point of view, we are making good progress," Mr Smith said.
"Hopefully, we will continue to move in the right direction," he said, adding that the business "trajectory should be better than the last year".
Agthia is currently looking at a pipeline of potential acquisition and is interested in acquiring assets in the UAE, the broader region of Mena and Pakistan. Targets beyond these geographies would be interesting if it finds assets that are complementary to its business.
However, finding the right asset is difficult in a very "competitive market".
"For a lot of people food is an attractive category to be in," Mr Smith said. "We are looking for good assets ... not for distressed assets. We want businesses that are accretive to our shareholders."
Agthia's acquisitions this year have boosted the net revenue contribution of the company’s consumer business by 20 per cent year on year to Dh855m. It now accounts for 65 per cent of total revenue, with the agricultural business division contributing the remaining 35 per cent.
The company's water and beverage category also returned to growth in the second quarter, contributing Dh390m to Agthia's first-half revenue. Its bottled water portfolio – Al Ain Water, Al Bayan, Voss and Alpin – retained a volume and value share of 27 per cent and 25 per cent, respectively, of the UAE market, it said.
The net revenue of the food segment increased by 12 per cent on the inclusion of Al Faysal Bakery & Sweets. Al Foah and Nabil Food together contributed Dh272.7m to the company’s revenue in the six months to the end of June.
"One thing we are really happy with is the integration of new business," Mr Smith said.
Agthia’s agribusiness revenue was Dh463.5m but lagged sales for the same period in 2020, which included a one-time boost from a World Food Programme order.
The company's total assets at the end of June climbed to Dh4.6bn, a 46 per cent rise on annual basis, after it consolidated Al Foah, Al Faysal Bakery and Nabil Foods during the first half of the year. Group shareholders’ equity stood at Dh2.7bn for the same period, post issuing additional 191.6 million shares to complete Al Foah and Nabil Foods acquisitions.
So far, Agthia has financed its acquisitions from its "robust" balance sheet and can continue to fund deals for another 18 months from its own resources. It will look at other financing options for the long-term acquisition strategy but has no plans to raise funds in the immediate future, Mr Smith said.
“We look forward to delivering on our growth strategy to become an food and beverages leader in the Menap [the Mena and Pakistan] region, while focusing on retaining our market leadership, financial resilience and delivering sustainable stakeholder value,” group chairman Khalifa Al Suwaidi said.