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Abu Dhabi, UAEMonday 20 August 2018

Exclusive: Agthia mulls acquisition opportunities in North Africa and Asia by 2021

Company expects flat full-year profit and revenues on a reported basis in 2018; sees earnings growth on like-for-like basis 

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

Abu Dhabi-listed food and drinks firm Agthia Group is mulling acquisition opportunities in North Africa and Asia by 2021 as part of a plan to expand its footprint beyond the Middle East, its chief executive said on Tuesday.

The company is also studying acquisition targets in Saudi Arabia with a ticket size of 500 million riyals (Dh489.6m) to1.5 billion riyals and expects to close a deal by year-end or the first quarter of 2019, Tariq Al Wahedi told The National. The purchases will help grow its market share to become the No 2 food company in the kingdom, up from its current ranking of sixth biggest player.

"There are big markets around us like Pakistan, India and Thailand with huge populations and we're looking into them," Mr Al Wahedi, said. "In North Africa, we're assessing macro-economic factors and political stability."

The company is looking to expand its footprint to new global markets beyond the Middle East, where consumer spending declined after governments took measures such as introducing VAT to narrow their budget deficits. A three-year drop in oil prices has taken its toll on regional economies and weakened growth. Agthia currently has assets in the UAE, Oman, Kuwait, Saudi Arabia, Egypt and Turkey. A potential acquisition in Asia will be the company's first entry for assets on the continent.

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Exclusive: Agthia eyes Dh2bn in acquisition finance to fund growth plans

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

Agthia plans Dh500m of Saudi acquisitions by 2020

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The company plans to raise as much as Dh2 billion to fund multiple acquisitions as part of its business strategy, Mr Al Wahedi said in May. It is open to contributing equity from its own balance sheet to secure assets if required and also sees "big appetite" from banks.

The company is bullish on growth in Saudi Arabia and expects an acquisition of a manufacturing plant to boost its marketshare.

"We are very deep in analysing targets available for acquisition but it won't happen overnight," he said. "By the end of the year or first quarter of next year, you should hear some good news."

Agthia, which reported a 5 per cent year-on-year decline in second-quarter net income, expects full-year profit and revenue to remain flat on a reported basis in 2018 because of "softening" market conditions," Mr Al Wahedi said. However, on a like-for-like basis, full-year profit is set to grow up to 9 per cent and revenues to rise up to 8 per cent year-on-year.

In 2017, Agthia reported full-year net income of Dh206m, a 19 per cent drop on the year earlier, on lower contributions from the animal feed and flour business.

This year, the company expects growth in its food and animal feed businesses, Mr Al Wahedi said. 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.

It is also planning new products that will be "coming soon," he said, declining to reveal the type of items or specify when they will be introduced to the market.

Agthia, which is majority owned by Abu Dhabi government-controlled conglomerate Senaat, is exploring several opportunities in Serbia for food security projects but those are still "too early" to divulge, Mr Al Wahedi said.

On Monday, Agthia said second-quarter net profit attributable to the owners of the company fell to Dh62m from Dh65.8m year-on year as consumer spending and losses on foreign exchange rates weighed on earnings. Revenue for the period also fell 5 per cent year-on-year to Dh516.8m.

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