Drop in consumer spending hurts Agthia profit in Q2

Abu Dhabi food and beverage company Agthia reported a 5 per cent year-on-year drop in the second quarter net profit, dragged down by a drop in consumer spending and losses on foreign exchange rates.

Net profit attributable to the owners of the company for the three-month period to the end of June fell to Dh62 million, Agthia said in a bourse filing yesterday. Revenue for the period also fell 5 per cent yearon-year to Dh516.8m, it said. “Wide-ranging economic measures that have been taken in the past few years in response to relatively lower oil prices have created a ‘new normal’ for our markets,” Agthia said in a statement to Abu Dhabi stock exchange, where its shares are listed.

“As our consumers respond by spending less, shifting pack sizes, switching brands or searching for promotions much more intensively than before, we as producers and marketers are adjusting to this new reality.”

The company, which is majority owned by Abu Dhabi Government-controlled conglomerate Senaat, said total assets stood at Dh3bn as of June 30, up slightly from Dh2.9bn the previous year.

Agthia has struggled to maintain profit growth after subsidy reforms in flour and animal feed sectors – two of the major revenue sources for the company. The introduction of VAT earlier this year has also added to pressure on its consumer business lines, which the company is trying to offset with a tighter control on costs.

The firm, which produces the Al Ain bottled water brand in the GCC, among other products, reported a Dh337m loss on cost of sales, and a Dh7.2m loss on currency exchanges on foreign operations.

Agthia’s first-half net income also declined, by 8 per cent year-on-year to Dh109m, according to its financial statement.

Revenue from Agthia’s food business rose 15 per cent yearon-year in the first half of 2018 to reach Dh105m, while the water segment stayed flat from a year ago, at Dh405m on the back of “weak demand” for its products in Saudi Arabia.

Agthia last year acquired Delta Water Company, which produces Al Ain in Saudi Arabia.

It plans to raise as much as Dh2bn to fund acquisitions in the region, particularly in the kingdom, as part of the company’s 2020 business strategy, its chief executive Tariq Al Wahedi told The National in May.

“All in all, we are still maintaining our market leadership positions, and a solid financial stability, against all odds,” the company said in its statement to the bourse yesterday.