Fuel distributor to renovate three stations and open at least 13 new facilities this year
Adnoc Distribution to expand into Dubai and Saudi Arabia in 2018
Adnoc Distribution, the UAE's biggest fuel distributor and convenience store operator, will open its first service stations in Dubai and Saudi Arabia this year, an expansion boosted by the removal of subsidies on fuel.
The company, which listed on the Abu Dhabi stock exchange in December, will rollout at least 13 new service stations this year, and extend three of its existing facilities, the company said on Wednesday.
Expansion into Dubai, the only emirate where the company has no physical presence, is now feasible for the company following changes to how fuel is priced were introduced across the UAE in August 2015, said Saeed Al Rashidi, Adnoc's acting chief executive officer.
"Fuel products were subsidized until August 2015, so prior to that no one actually wanted to invest because it was a loss-making business," Mr Al Rashidi told The National.
"Since August 2015, we have wanted to expand and enter the market in Dubai. We are definitely well positioned from a logistics and supply chain point of view as we have the infrastructure."
As part of its focus on profitability, Adnoc Distribution has reduced capital expenditure on a per site basis; projected capex costs for some future service stations have been reduced by as much as 40 per cent, without cutting corners on health and safety considerations, according to Mr Al Rashidi.
Adnoc Distribution currently operates 360 service stations and 235 Oasis convenience stores across the UAE, with the exception of Dubai, holding a monopoly in Sharjah and Abu Dhabi. Enoc and Emarat are the only operators in Dubai.
Through a franchise model, Adnoc Distribution will open a service station in Saudi Arabia this year, the company said, giving no details regarding its partner there.
The franchise venture will be the first of its kind for the company, which had previously explored such a model with Saudi Arabia's Al Olaibi Group for service stations in Riyadh, Makkah and Madinah.
Adnoc Distribution sold 10 per cent of the company in December in an initial public offering on the Abu Dhabi stock exchange. The listing, which valued the company at Dh31.1 billion, was the first to be held on the bourse in over six years.
Priced at Dh2.5 per share, the retail portion of the listing was 22 times oversubscribed. The company's shares have risen 7.6 per cent since their listing to Dh2.69, compared with a 5.6 per cent rise for the Abu Dhabi's headline index over the same period.
Goldman Sachs, EFG Hermes, HSBC and AlphaMena all initiated coverage of the stock this week with "buy" recommendations, with target prices ranging between Dh2.79-3.40. Morgan Stanley, which also began coverage this week, gave the stock an "equal weight / attractive" rating, with a target price of Dh2.95.
"For shareholders, we are on track with commitments we made about station openings and capital expenditure in the lead up to Adnoc Distribution's successful IPO last month," said John Carey, Adnoc Distribution's deputy chief executive, in a statement on Wednesday.
"In the first quarter alone, four new stations and three major extensions will open in Abu Dhabi and Ajman including prime sites on strategically positioned highways like the Sheikh Mohammed bin Rashid Al Maktoum Road, which links Dubai with Abu Dhabi city."
As well as the two stations on the Sheikh Mohammed bin Zayed road, there will be a new station in Al Raqayeb, New Baniyas Club, Al Surrah, Madinat Al Mafraq, Tamouh, Al Falah South, and Al Hulaifat. The Adnoc Distribution stations in Officer's City, Shahama and Khalifa City A will see major extensions.
Mr Carey said he expected further expansion in 2019 that would match the rate of growth of this year.