Agthia Group reports first quarter financial results

Agthia Group, one of UAE’s leading food and beverage groups, today released the Company’s financial results for first quarter ended 31 March 2011. Agthia has achieved growth in all categories in the first three months of 2011, maintaining the growth momentum and registering a 20% increase in year on year net sales, reaching AED 278 million. 

Among the highlights of an active first quarter of 2011, Agthia’s Water & Beverages segment achieved sales growth of 31% while the Flour and Animal Feed segment grew by 19%. Agthia signed a distribution agreement for the exclusive rights to market and distribute “Isklar” Norwegian premium glacial mineral water in the UAE, Qatar, Bahrain, and Kuwait, with distribution set to commence in the second quarter of 2011. Furthermore, the Company also entered into partnership with global brand Chiquita USA for exclusive rights to manufacture and distribute natural fruit juice products under the “Chiquita” brand in the UAE, GCC, Levant and Egypt. Chiquita’s global brand presence and extensive expertise will further strengthen the Company’s growing product portfolio and regional profile. Manufacturing and distribution of “Chiquita” branded juices in the UAE is expected to commence in quarter four 2011. The company also launched “WOW”, the region’s first vitamin water product.

The initiatives announced in 2010 relating to entry in to fresh dairy products (Yoplait) and processed fresh fruits and vegetables are on track for the planned launch in 2011.

Commenting on the results, His Excellency Rashed Mubarak Al Hajeri, Chairman of Agthia Group said, "We are pleased with Agthia's overall performance across all divisions in the first quarter of 2011. The spreading regional civil unrest and heightened commodity market volatility are challenging, yet Agthia is progressing in line with its long term strategy. The key expansion and diversification initiatives taken this quarter reinforce Agthia's commitment to increase shareholder value and will propel us on the path to becoming the UAE’s leading food and beverage company."

Ilias Assimakopoulos, Chief Executive Officer of Agthia, added, “We continue to invest for the future while addressing the challenge of higher input costs by accelerating entry into new categories as well as ensuring the appropriate balance between cost savings and pricing. We are very pleased with the partnerships we are forging with a number of global brands, and that will form an important part of our business in the near future. We continue delivering growth despite challenging circumstances and we expect 2011 to be another year of good business growth for Agthia Group.”

Sales

In the first three months of 2011, net sales increased by 20% year on year reaching       AED 278 million. This solid performance was led by strong 31% sales growth delivered by the Water & Beverages segment and 19% growth achieved by the Flour & Animal Feed segment.

Net Profit

Net profit for the first three months of 2011 declined by 19% year on year to AED 22 million. The gross margin contraction of 450 basis points is primarily attributed to the flour segment, which during the same period last year benefited from decline in grain prices while the market selling price didn’t change at the same pace. This resulted in higher profit margin in quarter one last year.

Flour and Animal Feed

The segment recorded net sales growth of 19% year on year to AED 194 million driven by 12% volume increase.

Net profits for the segment declined by 27% year on year, to AED 26 million. The gross margin contraction of 710 basis points, as mentioned earlier, is attributed to the flour segment, which during the same period last year benefited from a decline in grain prices while the market selling price didn’t change at the same pace. This resulted in higher profit margin in quarter one last year.

Actions are under execution to improve the profitability of this segment which among others includes the production capacity expansion of existing flour & animal feed mills. This incremental capacity will replace the currently higher cost of outsourced volume. These expansions will be completed in early part of quarter three 2011.

Water and Beverages

This segment maintained its growth momentum, delivering solid net sales growth of 31% year on year, reaching AED 71.4 million. Water volume grew by 26% while Capri Sun juice recorded a growth of 32%.

Net profit at AED 9.4 million grew ahead of the sales growth at strong 38% year on year. The drop in gross profit margin of 180 basis points is attributed to significant increase in PET input cost.

As part of the Company’s pursuit towards new product development, the Company recently launched the first vitamin water in the UAE under the brand “WOW” with three distinct flavors.

Processed Fruits and Vegetables

The segment’s sales dropped by 8% year on year while branded business sales were up 14%. The drop in sales is the reflection of Company’s strategy to move away from low margin private label export business and build the branded business. Also the regional unrest has impacted the export business out of Egypt.

Profitability for the first three months of 2011 has improved compared to the same period 2010 as a result of the actions initiated in the second half of last year. The Company remains focused on turning this segment to profit.

Fiscal 2011 Outlook

The spreading regional civil unrest and heightened commodity market volatility are certainly challenging, yet our businesses are progressing in line with our long term strategy. We anticipate the regional civil unrest to have some impact on our export business and the rising commodity and PET prices pressuring our profit margins, nevertheless, we expect to target another year of good business growth in 2011.