News Column

Agthia gains from lower commodity prices

January 26, 2014

John Everington

Declining commodity prices and strong sales helped to boost profits at Agthia Group , the Abu Dhabi -listed food company. The group reported a 28 per cent rise in profits for 2013, on the back of robust sales and higher margins. Net income rose to Dh160.1 million last year, up from Dh124.7m in 2012, Agthia's preliminary annual results showed. Revenues increased 14 per cent year-on-year to Dh1.51 billion in 2013 fromDh1.33bn a year earlier, driven by higher volumes. The company's agribusiness division, consisting of Grand Mills for flour and animal feed, recorded a 13 per cent increase in revenues during 2013. The division, which contributes roughly 60 per cent of the company's revenue, was boosted by lower international wheat prices, which fell 22 per cent during the year. Agthia's consumer business division, which produces and distributes products including Al Ain Mineral Water, Yoplait fresh dairy products and Capri-Sun juices, achieved a 16 per cent growth in sales over 2013. The group signed an agreement in August with California's Monster Beverage to distribute its range of energy drinks in the UAE . Growth in profit margins across both divisions outstripped revenue growth during the year, "resulting from an improved sales mix, competitive procurement, in-house production of previously outsourced feed volume, cost saving initiatives and higher flour pricing in the Northern Emirates," the company said. Agthia is due to publish more detailed annual results in a month's time. The company's headline figures were broadly in line with analyst forecasts, said Asjad Yahya , the vice president of research at Shuaa Capital . "There weren't any surprises in the fourth quarter. The outlook's a positive one, as wheat prices are continuing to fall, and capacities across their flour and bottled water businesses are set to increase. "How quickly they're able to put that new capacity to good use will determine what growth we see in 2014," he said. NBK Capital forecasts a 14 per cent growth in revenues for 2014, but cautioned that margins in Agthia's agribusiness division might come under some pressure in the coming year, as lower wheat prices lead the Abu Dhabi Government to reduce subsidies on flour in the Northern Emirates. Senior executives at Agthia were not available for comment. Agthia's shares closed up 1 per cent at Dh4.50.

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Source: National, The (United Arab Emirates)

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