Agthia Group reports Q3 2011 Financial Results

Agthia Group, one of UAE’s leading food and beverage groups, today announced the Company’s financial results for the third quarter 2011 ended 30 September 2011. Agthia has continued its strong growth momentum in all categories in the first nine months of 2011, registering a 14% sales increase year on year reaching AED 841 million, while net profits are at AED 60 million. 

Among the highlights, the Water & Beverages segment achieved sales growth of 22% to record AED 236 million driven by 18% water volume growth and 27% Capri Sun juice volume growth; while the Flour and Animal Feed segment grew 12% year on year to achieve AED 563 million, driven by pricing and 4% volume increase; and the processed Fruits and Vegetables business grew by 4% year on year. The Company also entered processed fresh fruits and vegetables category, targeting the UAE’s hospitality and catering industry through a selective fresh fruit juices range under the “Al Ain Fresh” brand, with further product launches under the same brand expected in 2012. The Company also confirmed upcoming launches of fresh dairy products under the “Yoplait” brand and long shelf-life juices under the “Chiquita” brand in quarter four this year.

Commenting on the results, His Excellency Rashed Mubarak Al Hajeri Chairman of Agthia Group said, “Despite the challenging environment of increasing input costs, our business fundamentals remain strong with sales and volume growth across all categories. This performance is consistent with our long term growth model.”

Ilias Assimakopoulos, Chief Executive Officer of Agthia, added, “The launch of “Al Ain Fresh” fresh fruit juices is the first in a series of new initiatives, announced last year, in relation to Agthia’s diversification strategy. These also include entry into fresh dairy products under the “Yoplait” brand as well as entry into long shelf-life 100% juice segment under the “Chiquita” brand, which are progressing well and are on track for a planned launch in Q4 of 2011. We are successfully addressing rising costs by pursuing cost savings initiatives, pricing opportunities, and accelerating our entry into new categories. Our strong sales performance is an indication of the Company’s strategies delivering results.”

Sales

Net sales for the Company have increased by 14% year on year, reaching AED 841 million. This growth in sales was driven by consistent strong performance in the Company’s Water & Beverages business which delivered strong 22% sales growth year on year; and a significant 12% year on year growth in Company’s Flour & Animal Feed business.

Net Profit

Net profit for the Company at AED 60 million reflects a drop of 24% versus the same period last year due to four percentage points’ contraction in gross profit margin. As stated in last quarter’s directors’ report, this drop is basically 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, the 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 12% year on year to AED 563 million, driven by pricing and 4% volume increase.

Net profit for the segment has declined by 21% year on year. This is mainly attributed to the gross margin contraction of four percentage points due to significant increase in grain prices 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 and the mill is running at installed capacity. The feed mill expansion is expected to reach the installed capacity by Q1, 2012. We expect the profitability of Flour & Feed business to improve starting Q4 2011, provided no major escalation in grain prices.

Water and Beverages

The Company’s Water & Beverages business has delivered strong consistent sales growth of 22% year on year, reaching AED 236 million. Overall net sales growth is attributed to strong volume growth, where water volume grew by 18% and Capri Sun juice volume grew by 27%.

Net profit in this segment dropped by 15%versus same period last year, attributed to the rising cost of PET. A price increase of approximately 10% has been implemented on bottled water and Capri Sun juice in September 2011. This will partially offset the increased PET cost and will improve the margin going forward.

Processed Fruits and Vegetables

Sales in the Processed Fruits & Vegetables business grew by 4% year on year. Branded business sales were up by 22%, in line with the Company’s strategy to move away from the low margin private label export business.

Net loss of this segment at AED 4.5 million has significantly dropped versus last year’s loss of AED 11 million. The Company remains focused on further improving profitability and expects the business to return to profitability in the short term.

The Company’s Egypt operation during the nine months of the year delivered improved results versus same period last year, although our exports business was impacted by the regional unrest. We have also entered the domestic retail market by launching “Pure Natural” branded tomato and chili paste in glass jars and the initial market response has been encouraging.

Fiscal 2011 Outlook

It is quite clear that food & beverage manufacturers will have to contend with higher and more volatile input cost while the repercussions of the recent regional unrest remain a concern. Despite a truly challenging environment, we expect strong sales performance which is an indication of Company’s strategies delivering results. However, the higher input cost will have an impact on our profit delivery in 2011.