Americana, the largest quick-service restaurant operator in the Mena region, reported a double-digit drop in its first-quarter net profit and revenue, driven by ongoing geopolitical tensions and a seasonal sales slump linked to the Ramadan period.
The company's net income attributable to the shareholders of the parent company dropped 51.8 per cent annually to $28 million.
Higher depreciation charges and rent expenses due to new store openings during the January to March period also negatively impacted the profits, the company said in a statement.
Its revenue stood at $493.5 million, down 16.3 per cent year on year, in the last quarter.
“Decline in revenues were primarily driven by lower like-for-like sales due to ongoing geopolitical tensions in the region, as well as the seasonal effect of Ramadan period,” Americana said, without giving details.
However, Americana said it is committed to navigate the “current economic adversities while continuing its expansion strategy”. It expects to open 200 to 225 new stores this year and focus on markets that are less impacted by the current regional macro-environment.
Americana said it aims to boost revenue recovery through initiatives such as smart pricing, targeting, promotion and marketing, focusing on driving transactions through “value, crave and familiarity”.
In the current quarter, it “anticipates a lesser impact of Ramadan on sales” compared to the second quarter of last year.
Americana, a franchisee of a number of international food and beverages brands in the Middle East, operates in 12 countries across the region, North Africa and Kazakhstan.
The company’s portfolio includes KFC, Pizza Hut, Hardee’s, Krispy Kreme, Peet’s Coffee, Wimpy, TGI Fridays, Costa Coffee and Baskin Robbins.
Americana raised $1.8 billion from its initial public offering in November 2022.
It was the first company to be dually listed on Saudi Arabia's Tadawul stock exchange and the UAE's Abu Dhabi Securities Exchange, the Arab world's two largest stock markets.
Americana's IPO was the largest in Saudi Arabia in 2022.
During the first three months of the year, Americana reported a lower cost of inventory compared to the prior year period, because of “optimised use of raw materials and strategic procurement”.
Americana opened 37 stores in the March quarter. Its portfolio stood at 2,456 restaurants, with 37 under construction, as of March 31.
Last month, the company approved distribution of total dividends of $179.4 million, split between ordinary dividend of $129.7 million and an additional one-time special dividend of $49.7 million to its shareholders.
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Who has been sanctioned?
Daniella Weiss and Nachala
Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.
Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
Zohar Sabah
Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.
Coco’s Farm and Neria’s Farm
These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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