The food and beverage maker Agthia, based in Abu Dhabi, forecasts a slowdown in profit growth for this year as it grapples with the fallout of subsidy removal.
The company, which sells Al Ain water and Grand Mills flour among other brands, expects full-year growth in revenue of about 8 per cent, and 9 per cent for profit compared to a year earlier.
Profit rose 20 per cent to Dh231 million in 2015 from a year earlier.
“There has been a decline in market share in flour and animal feed business in Abu Dhabi, but we are trying to recover that through expansion in Northern Emirates and exports,” said Iqbal Hamzah, Agthia’s chief executive. “Next year would be a growth year through acquisitions in the beverage segment, exports and new products.”
Agthia expects to start exports in animal feed and flour to Oman and Qatar in December.
It wants to make an acquisition in the water segment in the Arabian Gulf region outside the UAE in the range of Dh200m to Dh300m before the end of the year. The acquisition would be funded through bridge financing to be converted into a long-term loan, Mr Hamzah said.
Agthia stock was unchanged on Wednesday at Dh6.
Subsidy removals led to slower growth across the group during the third quarter and was supported by the sales in the water division.
It reported profits of Dh54.8m for the three months to the end of September, a 1.1 per cent increase on the same period last year. Revenues rose 2.7 per cent to Dh477.86m.
In the flour division, subsidy was removed in full from retail, trading and catering sales channels from September 1.
These will be removed by half for sales to the bakeries – Agthia’s largest customer group – from August 31 next year and in full from August 31, 2018.
The subsidies would continue for its sales to Abu Dhabi Municipality and Khalifa Bin Zayed Al Nahyan Foundation.
Revenues from the flour division rose 2 per cent during the first nine months to Dh324 million compared with a year earlier.
In the animal feed division, subsidies were removed fully for supplies to Abu Dhabi Municipality and distributors from July 1.
The impact on revenues from the division was greater than in the flour section.
The revenues in the segment grew 1 per cent in the nine months compared to a year earlier to Dh520m.
“It is too early to say what the impact will be for next year,” Mr Hamza said.
The company said in August that changes in the subsidy regime would affect its net profit for this year by about Dh20m.
Its market share in retail flour sales is down to 31 per cent, from around 39 per cent before the subsidy removals. In animal feed, where it has increased prices in line with the market, Agthia said volumes have dropped about 20 per cent after the subsidy was removed.
In the first nine months, revenues in the water division grew 27 per cent year-on-year to Dh488m. In the beverages category, where it sells fruit juices, sales fell 2 per cent to Dh59m due to competition and new school regulations.
Sales across its dairy business surged 34 per cent over the same period to Dh24m.
In the emerging business category, which includes frozen vegetables, bakery items and tomato paste, revenues increased 31 per cent year-on-year to Dh108m during the first three quarters.
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