Agthia plans Dh500m of Saudi acquisitions by 2020

Agthia Group plans to invest more than Dh500 million by 2020 in acquiring assets in Saudi Arabia, the region’s biggest economy and the most populous Arabian Gulf country, as the company looks to expand its regional footprint and add new revenue lines, its chief executive said.

The Abu Dhabi-based food and beverages company is evaluating “many” acquisition targets and aims to increase its revenue from Saudi operations “manyfold” in coming years, Tariq Al Wahedi told The National on Sunday.

“So far we have invested north of Dh200m and we expect that we will invest above Dh500 by year 2020 [in Saudi Arabia],” he said. “We want to double our business in terms of revenues in the kingdom within the next three years. Today in Saudi, we are making Dh140m [in revenues] and the target is to push that [severalfold] and this can only be done through acquisitions.”

Agthia last March completed the acquisition of 100 per cent of Saudi-based Delta Water Company, which produces Agthia’s Al Ain water brand in the kingdom.

Like many other UAE-based companies, Agthia is targeting Saudi Arabia for expansion as the kingdom embarks on an economic diversification drive. Riyadh plans to off load several state-controlled assets - including food and agricultural companies - to the private sector.

While Agthia is mainly focused on acquiring consumer businesses, particularly in water and beverages, the company will evaluate other opportunities that arise out of the kingdom’s privatisation programme, said Mr Al Wahedi.

The company, which currently ranks as the kingdom’s seventh largest food and beverages provider, aims to increase its ranking to second or third place, he said, without giving a timeframe, adding that the kingdom is going to be Agthia’s “next biggest market” which will offer synergies and room for expansion.

Abu Dhabi-listed Agthia, which typically eyes food and beverage assets with values ranging between Dh50-300m, has already lined up financing for expansion and potential acquisitions, said Mr Al Wahedi.

“All the banks are lined up for that. We have huge support from the banking industry, across GCC to be frank,” Mr Al Wahedi said. “We are not heavy on debt ….. that’s something we want to leverage more and that’s something we want to increase.”

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

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He declined to say how much funding it has at its disposal for acquisitions.

In its home market of the UAE, where it is the biggest food and beverages company with a 30 per cent market share, Agthia aims to further strengthen its grip, increasing that share by 3-4 per cent annually, in spite of tough market conditions.

“We are driving our market share very hard [even though] the market is very competitive,” he noted. “The only way to enhance our market share is to focus on distribution and niche products to increase revenues,” he said of the organic expansion plans in the UAE.

Agthia, which is 51 per cent owned by Abu Dhabi government-controlled conglomerate Senaat, earlier this month reported a 19 per cent drop in its net profit for 2017, as lower income from its agriculture business – encompassing flour and animal feed - impacted profitability, in the wake of lower subsidies for such lines from the UAE’s federal government.

Net profit in 2017 slumped to Dh206m and missed the Dh212.8m mean estimate of analysts polled by Bloomberg. Revenues advanced to Dh2.05 billion, but also came slightly under the analysts’ estimates of Dh2.07bn.

Mr Al Wahedi, however, said the performance of agriculture business was above the global average last year, and that the company has managed to offset the declines by boosting profits from the consumer business.

“Globally, this type of businesses make 1 per cent or 2 per cent profit on average. Fundamentals are there and we are 100 per cent sure our net profit average [from agriculture business] will be much better than the global average [in 2018 as well].