Agthia Group, a food and beverage company listed on the Abu Dhabi Securities Exchange, appears confident in the face of rising commodity prices as it beats a path to higher-margin premium products.
Global food prices rose for a second month in February on higher costs for cereals, cooking oils and sugar, according to the United Nations Food and Agriculture Organization.
Agthia is restricted in how much of higher commodity costs it can pass on to consumers by a food price control policy in the UAE that keeps the cost of 400 food products capped and relatively low. But Agthia is showing investors it has plans to overcome these obstacles.
Last week it completed its 100 per cent acquisition of Pelit Su, a spring water business based in Turkey. Ilias Assimakopoulos, the Agthia chief executive, said the Turkish operation would be used to expand Agthia's footprint in higher-margin, premium spring water, targeting not only Turkey but other countries.
Analysts at NBK Capital expect Agthia to focus more on adding premium and value-added products to its portfolio to enhance its pricing power.
As well as the acquisition of Pelit Su, Agthia has launched a Chiquita Tropicals juice range and Yoplait dairy products. The group has also had operations in Egypt since 2009.
Agthia's bottom line for the fourth quarter last year came in broadly as analysts expected. At Dh27 million, profit was down 27 per cent year on year. Revenue rose 12 per cent compared with a year earlier to Dh303m.
The company also reported that income earned directly from its business operations during the quarter was Dh27m, slightly beating profitability expectations by NBK. The company's profit margin was 8.9 per cent.
For all of last year, revenue grew 14 per cent to Dh1.14 billion, while profit fell 25 per cent to Dh86m, largely driven by higher commodity prices. Volatility in international commodity prices remains the key risk for the company's margin progression in future.