Agthia, the Abu Dhabi food and beverage company that produces Al Ain water, expects to expand into new markets amid forecast of a flat profit next year, as competition heats up in the Arabian Gulf and changes in population demographics impact purchasing power, its chief executive said.
The company plans to deal with the status quo by cutting costs, introducing new products, increasing market share in countries it already operates in and expanding into new geographies, siad Tariq Al Wahedi on Sunday.
“The market has become competitive,” he said. “There are lots of changes that are happening right now in terms of demographics of the population that we are witnessing, not only here but also in Saudi Arabia and other GCC countries, which is affecting us. But we are adapting to this with innovation and value-added products and this is how we maintain our profitability and that is how we grow.”
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[ Abu Dhabi's Agthia posts 6.5% third quarter profit growth on lower costs ]
[ Exclusive: Agthia eyes Dh2bn in acquisition finance to fund growth plans ]
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Countries in the six-member GCC are growing but not at the same pace of the pre-oil price crash that began in mid-2014, when prices were around $115 per barrel. Governments in the region are undertaking reforms to stimulate the economy and help attract foreign direct investment, measures that are expected to trickle down to the population and boost purchasing power.
Agthia, which is majority owned by Abu Dhabi conglomerate Senaat, reported on Sunday a 6.5 per cent increase in third-quarter profit attributable to equity holders to Dh49.5 million thanks to lower cost of sales, which fell 8.6 per cent to Dh309.6m. Revenue dropped 4.4 per cent to Dh476.9m.
Mr Al Wahedi, who expects to achieve cost savings exceeding Dh60m this year, forecast a similar result for next year.
“Managing the cost of sales has definitely helped us in terms of our profitability and we will continue to do this with all opportunities that are available but at the same time we are focusing on top line as well as expanding our market share,” he said.
The company is the biggest player in the UAE with a market share of 30 per cent and it plans to work on moving up the list in Saudi Arabia, where it is eighth with a 2 per cent market share.
Agthia continues to scout for acquisitions in the kingdom, but there are no final deals in the pipeline, he added.
Agthia began production of its Al Ain water in Iraq this month and plans to expand in this market where there is a population exceeding 38 million. Agthia is also looking for further expansion into North Africa and the Levant.
“Al Ain has moved from being a UAE-centric brand, and now we see ourselves as a pan-Arab brand,” said Mr Al Wahedi.
The company can spend as much as Dh2 billion on acquisitions and can fund them through a mixture of equity and debt by raising money through banks. There are no plans for bond issuances.
Agthia is still studying entering markets in Asia but has yet to make a final decision on that. It is also still exploring investment in food security outside the UAE, including Serbia, Romania and Poland.
“We are searching there [in Serbia] to build on food security ... be it from grains or frozen vegetables,” Mr Al Wahedi said.
In Turkey, Agthia has a water brand that it is being exported to other regions, including Europe, and the financial crisis gripping the country has helped the Abu Dhabi company's business since the plunge in the Turkish lira makes exports cheaper for importing countries.
