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Abu Dhabi, UAETuesday 11 December 2018

Agthia's 2017 profit drop 19%, affected by subsidy reform for flour and animal feed

Revenues for the Abu Dhabi firm, which is majority owned by Senaat, grew despite difficult market conditions

Its UAE home base will continue to be the "prime" market, the Saudi business will grow albeit from a low base and Egypt is "doing extremely well" as the company gains market share. Delores Johnson / The National
Its UAE home base will continue to be the "prime" market, the Saudi business will grow albeit from a low base and Egypt is "doing extremely well" as the company gains market share. Delores Johnson / The National

Agthia Group, an Abu Dhabi-based food and beverage firm, reported a 19 per cent drop in its full-year 2017 net profit, missing analysts' forecast, as lower contributions from flour and animal feed business affected profitability.

The company, which is 51 per cent owned by Abu Dhabi government-controlled conglomerate Senaat, said net profit in 2017 slumped to Dh206 million, down from Dh254.3m a year earlier. It missed the Dh212.8m mean estimate of analysts polled by Bloomberg.

Group revenues advanced to Dh2.05 billion in 2017 from Dh2.01bn, but came slightly under the analysts’ estimates of Dh2.07bn.

Agthia, which had posted a 15 per cent year-on-year drop in its third-quarter net profit, has struggled to maintain profit growth in recent quarters after the UAE reformed subsidies for flour and animal feed sectors.

Despite the external economic challenges, the company said it has managed to grow revenue and “mitigate the impact on profit of significantly reduced subsides and increased operating costs”. Lower income from animal feed and flour business was offset by cost savings and increased contributions from the consumer business.

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Revenue from water and beverages, which includes Al Ain water and Capri-Sun brands, rose 25 per cent from 2016, with Delta Water in Saudi Arabia contributing about Dh143m alone last year. The flour and agriculture business revenues declined by 13 per cent in 2017 as both segments are adjusting to new market norms, it said.

“Proliferation of imported flour at very cheap prices was an impactful aftereffect of subsidy regime changes whereas the animal feed business was additionally undermined by the cancellation of the concentrated pellet tender this year,” the company noted.

Agthia's assets climbed to Dh2.4bn at the end of 2017, a 15 per cent increase from a year earlier. New ventures in Saudi Arabia and Kuwait drove the asset growth, it said.