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Abu Dhabi–based Agthia acquired two companies in the past five months and is now in the midst of completing another purchase. With a war chest of 700 million dirhams, the food-and-beverage company is not done with its acquisition drive. Zawya spoke to CEO Alan Smith on the company’s strategy, financial results, and outlook for the current year.
Agthia, which is 51 percent owned by Abu Dhabi’s investment holding company Senaat, went through significant changes in 2020, including the election of a new board, a leadership reshuffle, and a new direction, based on a strategic review, to shift the portfolio mix more towards consumer goods and to increase its regional footprint.
The acquisitions are a part of that overall plan, Alan Smith, CEO of Agthia, told Zawya. “The recent transactions that we’ve announced, whether it’s Al Foah, Al Faysal Bakery or Nabil—all of these acquisitions help to move Agthia in that direction.”
Al Foah is a dates and confectionary business in the UAE. Al Faysal Bakery and Sweets Company deals in baked goods and snacks in Kuwait. Nabil Foods, whose transaction is yet to receive all the regulatory approvals, is a Jordan-based frozen protein products brand.
SCALING UP REGIONALLY
While the historically UAE-centric company has a presence in Oman, Kuwait, Saudi Arabia, Egypt, and Turkey, it is now ready to expand further. “Our footprints have been fairly subscale, and what we’re looking to do is to scale up and increase our reach in those geographies.”
The Al Faysal transaction, he said, was one such opportunity to scale up in a geography. “We have a growing water business in Kuwait [worth] around 30 million dirhams [$8 million]; it basically increased its size by 50 percent last year. Faysal is a strong brand with very strong distribution reach, and it is located adjacent to our existing facility. This gives us the opportunity to scale up that market to deliver both cost and revenue synergies and to give us a footprint to bring other products into Kuwait. So it gives us nice scale business worth 120 million dirhams in Kuwait, and we think we can grow from there.”
OPEN TO FINDING NEW TARGETS
Asked if Agathia had any imminent acquisition in mind, he said the company was open to finding the right targets that made financial sense, were accretive, and were a complimentary fit within the company’s current strategy.
Referring to Agthia’s potential war chest, he said, “If you look at our balance sheet, we have around 700 million dirhams in cash even after the recent acquisitions. Al Foah was a pure cash transaction. Nabil is 60 percent share and 20 percent cash. So we do have an idea of how much we have to play with and how much we can leverage our plan.”
Senaat, which is itself owned by state holding company ADQ, agreed to transfer Al Foah to it in exchange for 120 million new shares through the issuance of a convertible instrument.
The deal gave Agthia a firmer hold on the global market for dates, which it considers a superfood and, according to some analyses, has a market potential of $50 billion. “This category has a lot of room to be developed. We currently have a good footprint in the GCC and Asia, and we need to develop the category in the premium gifting space […] and also work with other companies on a B2B basis with dates as an ingredient.”
SNACKS SEGMENT
Agthia’s intent is to build its food-and-beverage footprint, and the recent moves are part of that plan. Snacking is a fast-growing segment globally, and dates and confectionary fit right in that space.
Smith himself comes from the same industry background as he was with Mondelez International, a US confectionary company, before he joined Agthia.
“On the other side, we’ve moved into the frozen and chilled processed protein space, which is an important food group for the region,” he added, referring to Agthia latest acquisition.
Al Nabil, which is a top brand in Jordan, is already present in a number of GCC markets. Agthia will try to expand that market share, synergizing with their existing frozen vegetable space, Smith said.
“Presently, meat protein is obviously the core of the business, and that’s where we will look to grow,” Smith said, adding that other, emerging sources of protein, like plant protein, are “potentially interesting” as well if the market shows an interest.
Agthia owns the Al Ain Water, Al Bayan and Alpin brands of bottled water. The water, beverage and food business contributed 55 percent of the Agthia group’s top line for fiscal 2020. Water and beverage brought in 799 million dirhams in revenue while food brought in 327 million dirhams. In addition, the agri-business brought in 935 million dirhams revenue, which is a 4.9 percent y-o-y growth.
However, the group saw its net profit fall by over 74 percent to 35.5 million dirhams from 137 million dirhams in 2019. Agthia said that its normalised net profit of 117 million dirhams excluded the aggregate 82 million one-offs recorded in Q3 after its strategic review exercise.
VOLATILE MARKET
Smith said that Agthia has been able to grow revenue in what was a very volatile market last year, especially as the water business came under pressure both in the KSA and the UAE because the impact of lockdowns and reduced tourism.
“I think when we look from the profit perspective,” he said. “Obviously, we made some strategic decisions and increased our cost base to be able to respond to the market during COVID to make sure products were available. Our home delivery business grew as consumers consumed more at home. And I think overall we drove around 50 million dirhams of cost savings.”
Smith is cautiously optimistic about 2021: “I think obviously Q1 versus Q1 last year will be slightly deflated because we still have a COVID impact. Last year, we had zero COVID impact in Q1, plus we had some panic buying towards the end of the quarter as lockdown started to become imminent.”
“We hope to see some normalization,” he added, “but it’s going to be gradual.”
(Reporting by Brinda Darasha; editing by Seban Scaria)
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