Agthia Group, one of UAE’s leading food and beverage groups, today announced the Company’s financial results for the first six months ended 30 June 2011. Agthia has maintained its growth momentum in all categories in the first six months of 2011, registering a 17% increase in year on year net sales, reaching AED 559 million.
Among the highlights of first half of 2011, Agthia’s Water & Beverages segment achieved sales growth of 26% to record AED 155 million, while the Flour and Animal Feed segment grew 14% year on year to achieve AED 376 million. The Company also announced the recent completion of its flour mill expansion project, anticipating a similar expansion in its Animal Feed mill to be completed by Q4 2011. These expansions are expected to improve profitability in Flour and Animal Feed segment. The company also stated that launch plans related to its entry into new categories including fresh dairy products, long shelf life juices, and processed fresh fruits and vegetables are expected to take place in fourth quarter of this year.
Commenting on the results, His Excellency Rashed Mubarak Al Hajeri, Chairman of Agthia Group said, “We are pleased with Agthia’s sales and volume growth momentum during the first half of the year. The rising input cost is a challenge; however, the Company is progressing well in line with its long term strategy to deliver business growth along with expansions into new categories."
Ilias Assimakopoulos, Chief Executive Officer of Agthia, added, “The new strategic initiatives announced in 2010, in relation to Agthia’s entry into fresh dairy products under the Yoplait brand, its entry into processed fresh fruits and vegetables, as well as Agthia’s recent announcement in relation to its entry into long shelf life juice segment under the Chiquita brand are all progressing well and are on track for a planned launch in Q4 of 2011. We remain focused on investing in growth opportunities, while we continue to address the challenge of higher input costs. We are addressing this by pursuing cost savings, pricing opportunities, capacity expansions and by accelerating entry into new categories. We continue delivering growth despite challenging circumstances and we expect 2011 to be another year of good business growth for Agthia Group. ”
Net sales for the first six months have increased by 17% year on year, reaching AED 559 million. This growth in sales was driven by consistent strong performance in the Company’s Water & Beverages business which delivered 26% sales growth year on year; and a significant 14% year on year growth in Company’s Flour & Animal Feed business.
Net profit for the first six months at AED 40 million reflects a drop of 25% versus the same period last year. This drop is mainly attributed to two factors (a) the continued increase in input cost of raw materials (grains and PET) and (b) during the same period last year Company’s Flour business benefited from a decline in wheat prices which outpaced the drop in the market selling price of flour resulting in higher one off profit margin.
Flour and Animal Feed
The Company’s Flour & Animal Feed business recorded a net sales growth of 14% year on year to AED 376 million, driven by pricing and 6% volume increase.
Net Profit for the segment has declined by 30% year on year. This is mainly attributed to the gross margin contraction of 600 basis points due to the increase in grain prices and as well as for the fact that the flour segment during the same period last year benefited from a decline in grain prices which outpaced the adjustment in market selling price resulting in higher one off profit margin.
Actions are under execution to improve the profitability of this segment which among others include the production capacity expansion of existing flour & animal feed mills. This incremental capacity will replace the currently higher cost of outsourced volume. The flour mill expansion has been completed in mid July while the feed mill expansion has now been delayed until Q4, 2011 due to some technical reasons.
Water and Beverages
The Company’s Water & Beverages business has delivered strong consistent sales growth of 26% year on year, reaching AED 155 million. Overall net sales growth is attributed to strong volume growth, where water volume grew by 22% and Capri Sun juice volume grew by 32%.
Net profit in this business remained flat versus same period last year, affected by the rising cost of PET. Management is carefully monitoring the cost trends of PET, and while current PET prices are unlikely to drop in the short term, a price increase in both bottled water and Capri Sun juice in Q3 2011 should lead to improved profitability in the second half of the year.
Processed Fruits and Vegetables
Sales in the Processed Fruits & Vegetables business grew by 9% year on year. Branded business sales were up by 30%, in line with the Company’s strategy to move away from the low margin private label export business.
Positive results have been achieved in the Company’s Egypt business through the expanded product portfolio of tomato and chili paste, fruit puree, frozen vegetables and private label tomato and chili paste in glass jars. However, the current geopolitical unrest in the region has had an impact on expected export volumes and will remain an area of focus for management over the next quarter, as the Company considers the launch of branded tomato and chili paste jars for the local Egyptian market in second half of the year.
Overall results for this business during the first six months of the year improved versus the same period last year. The Company remains focused on further improving profitability and expects the business to return to profitability in the short term.
Fiscal 2011 Outlook
The challenges of rising soft commodity and PET prices persist, hence pressuring our profit margins, while the repercussions of the recent regional unrest remain a concern. Nevertheless, the Company remains focused and committed to growing its existing businesses; effectively executing commencement of new category launches in fresh dairy products, long shelf life natural juices and processed fresh fruits and vegetables; and expects to deliver another year of good business growth.