Middle East has a thirst for Agthia

Armina Ligaya Bottled water and juice usually fly off shop shelves, recession or not, but more so in the hot and arid climate of the Middle East. So it is no surprise that Agthia Group, which produces Al Ain Water, Capri-Sun juices, and flour and poultry feed, saw double-digit profit growth last year in spite of tough economic conditions for retailers the world over. Profits rose 44 per cent to Dh107 million (US$28.3m) compared with 2008, while revenues grew by 8 per cent to Dh921m, Agthia announced yesterday.

The performance was driven by the growing volume of water and juices the company sells. Agthia started producing Capri-Sun blends in the second quarter of last year. But the performance was also due to big profit margins in the first half of the year, created by steep falls in the prices of flour and feed on world markets. These factors combined with Agthia's stable selling price in the local market, said Laurent-Patrick Gally, a retail analyst with Shuaa Capital in Dubai. This trend began to reverse in the fourth quarter of last year, and net operating income dropped by about 60 per cent compared with the same period in 2008, from Dh19m to Dh7.5m, Mr Gally said.

But this pressure should abate by the first half of this year, he said. "I believe that as the first quarter passes in 2010, Q4 2009 results will just be a bad souvenir, and the Agthia share price will reflect improved business fundamentals," Mr Gally said. "In 2010, I would expect the same type of earnings [as] in 2009." Agthia shares closed yesterday at Dh1.79, down 0.55 per cent. The share price is up 71 per cent from a year ago. David Edwards, the managing director of IMES Consulting Group, a market research and consulting firm based in Dubai, said Agthia is in growth mode and is likely to be a safe investment.

"Any organisation that is grounded in stable foodstuffs has to be a fairly solid investment," Mr Edwards said. "There are certain things people are always going to need and food is one of them. Fundamentally, you're not going to lose your shirt." @Email:[e-mail]