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Dispute with US army haunts supplier Agility

Kuwait's top executive has said the company will take a "long time" to return to the profitability level it used to achieve when it had contracts with the US army

Agility was one of the top gainers on the Kuwaiti index yesterday, but it still cannot seem to shake off the impact of a long-running legal battle with the US army.

Agility shares rose 3.08 per cent to 335 fils, but the stock is down as much as 72 per cent since the end of 2009.

The company's managing director said the GCC's largest warehousing and logistics operator by market capitalisation would need a "long time" to return to the profitability it once achieved as a major supplier to the US military.

But Agility will try to offset the losses caused by the termination of its contracts with the US army, Tarek Sultan, the company's chairman and managing director, was quoted as saying in the Kuwaiti newspaper Al Rai.

It has shed more than half of its value since being indicted in US federal court in November 2009 on charges of conspiracy and fraud for allegedly overcharging the US defence department on about US$8.5 billion worth of contracts to supply food to troops in Kuwait, Iraq and Jordan.

At the end of last year, the company lost the US army as a prime client, which historically contributed as much as 35 per cent to annual revenue. Agility has also been barred from bidding for any future US army contracts.

If found guilty, the company would potentially have to pay a cash penalty of as much as $750 million, according to a recent note from Al Mal Securities.

Analysts have looked negatively at the company during its ordeal, as its financial results have continued to be unimpressive.

The company posted a net profit of 8 million Kuwaiti dinars for the first quarter of this year, a 131.5 per cent drop from the same period last year. This was due to lower revenue from its traditionally high-margin defence and government business unit, which held the contract with the US army.

Agility has operations in 120 countries and secures most of its revenue from operations in Kuwait.Contracts in Asia and Europe provided 21 and 22 per cent of its revenue, respectively, in 2009.

 

fhalime@thenational.ae

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