Exclusive: Agthia eyes Dh2bn in acquisition finance to fund growth plans
The company saved Dh20m in the first quarter through cost controls
Agthia Group plans to raise as much as Dh2 billion to fund acquisitions in the region, particularly in Saudi Arabia, as part of the food and beverage company's 2020 business strategy, its chief executive has said.
“In terms of [acquisition] finances, we are ready to secure up to Dh2bn,” Tariq Al Wahedi told The National in a phone interview. “But that won’t happen on a single deal. It will be on multiple deals and that would be spread out for us to meet our 2020 business plan.”
Agthia, which reported a 10 per cent like-for-like growth in the first quarter net income this week, is willing to contribute equity from its own balance sheet to secure an asset if required. The company is “flexible” in terms of equity contributions, but “I can happily say that banks have a very big appetite to come and support us in those [potential] deals,” he noted.
Agthia is looking at deals with a ticket size of Dh200m to Dh700m and the company is reviewing a couple of potential acquisition targets in Saudi Arabia, the region's largest economy, he said, without giving further details. The company's priority is to acquire the best asset in terms of facilities and distribution networks, Mr Al Wahedi said.
“We want to make the right choice. This is an ongoing thing and hopefully, we will see it happen in 2018 – at least one deal [in Saudi Arabia].”
In February Mr Wahedi told The National the firm plans to invest more than Dh500m by 2020 in Saudi Arabia, to expand its regional footprint and add new revenue lines. Agthia has already invested north of Dh200m in the market and aims to more than double its revenues in the kingdom within the next three years from a current Dh140m. Last year the company acquired Saudi-based Delta Water Company, which produces Agthia’s Al Ain water brand in the kingdom.
Like other UAE-based companies, Agthia is targeting Saudi Arabia as part of its expansion plans in line with the kingdom's economic diversification drive. While the focus remains fixed on the kingdom as its “next big market”, the company is not ruling out acquisitions in its home market.
“We are open and if an opportunity comes up we will be looking at it,” he noted.
Earlier this week Agthia, which is 51 per cent owned by industrial conglomerate Senaat, said cost optimisation across several business lines has helped improve profitability in the first three months of 2018. The company saved Dh20m in the period through a tighter cost control, a figure it plans to increase to Dh80m this year, according to Mr Wahedi.
Agthia has made a major turnaround in several of its business lines this year after struggling to maintain profitability in recent quarters on lower contributions from its flour and animal feed business after the UAE reformed subsidies for both sectors.
The Animal feed, like-for-like, quarterly profit rose by 250 per cent and volumes climbed by 8 per cent roughly and the company completed two joint ventures with major global firms to drive the business forward. It will soon form major partnerships in flour business as well, Mr Wahedi said.
“We are focusing on innovation like we did in animal feed [business],” he said. “The subsidy issue is gone It is way beyond us. It didn’t really drag us down. It was just a cloud that has passed.”
Updated: May 3, 2018 03:02 PM