Adnoc plans outlets in Saudi Arabia and Dubai

▶ Search begins for suitable partner as kingdom opens the door for foreign operators with fuel subsidies on offer

Adnoc Distribution, the UAE’s biggest fuel retailer whose second-quarter net profit rose 24.3 per cent, expects to open new stations in Saudi Arabia and Dubai by the fourth quarter of this year.

“In Dubai, we’ve said we would look to open three sites this year,” deputy chief executive John Carey told The National. “We’ve broken ground and have begun construction on all three sites at the moment with the expectation that we’d be opening them to the public and offering our services there in the fourth quarter.”

Adnoc Distribution, which secured a trade licence to operate in Saudi Arabia in March, is in discussions to choose “the right partner” to open service stations in the kingdom, where a liberal fuel subsidy environment has opened doors for foreign players. The Abu Dhabi company is also targeting the fourth quarter for a Saudi launch and will look to open more than one station per year, said Mr Carey, who declined to comment on planned investments in the kingdom.

The fuel and convenience retailer, which debuted on the Abu Dhabi Securities Exchange at the end of last year, made a net profit of Dh581.8 million for the second quarter, it said yesterday. Gross profit for the period rose 33 per cent, while gross profit margin rose to 25 per cent, up 22 per cent from a year earlier.

Egyptian investment bank EFG Hermes said in a note that Adnoc Distribution’s 66 per cent climb in revenues for the second quarter was largely due to higher oil prices, offset mildly by a 3 per cent dip in volumes. The bank maintained a cautious outlook for the company, observing that inventory gains from higher prices could ease once the oil market cools off during the latter half of the year.

Adnoc Distribution operates three key segments: fuel distribution convenience store retailing and a lubricants arm. It aims to grow all three, particularly its non-fuel sector, this year.

“We have a very strong lubricants business that has a very strong presence across India and across other parts of Asia,” Mr Carey said. “We would look to grow that in terms of retail business.”

Adnoc Distribution, which also operates a small franchise distribution network for lubricants in Egypt, is also eyeing opportunities in the North African state to grow this segment. However, it would pursue its growth plans “at the right pace”.

There were no immediate plans to issue debt to fund expansion, given the company’s strong balance sheet during the first half, Mr Carey said.

Adnoc Distribution’s second-quarter profit was driven by lower capital expenditure, which fell 23.6 per cent to Dh179m year-on-year. The results showed the company “on track” to hit its declared target of achieving about Dh190m in cost savings for the fiscal year, said acting chief executive Saeed Al Rashdi.

“As a newly public company, [we] are continuing to exercise a heightened level of discipline in capital investments, resulting in a reduction in our capital expenditure budget compared to 2017,” he said. Mr Al Rashdi noted the company had been able to achieve cost savings across its business, while continuing to grow its service stations network.

Abu Dhabi National Oil Company floated a 10 per cent stake in the fuel retailer in December, the first IPO on the bourse in six years.

Following the listing, the company posted a 12 per cent increase in its first-quarter profit and announced plans to expand into new locations, notably Saudi Arabia.

Net profit for Adnoc Distribution, which holds a virtual monopoly in Sharjah and Abu Dhabi, has increased over the first six months of the year by 18 per cent to Dh1.12 billion on a year earlier.

We are exercising a heightened level of discipline in investments, with a reduction in our capital expenditure budget SAEED AL RASHDI Adnoc Distribution acting CEO