Agthia Group Snacking revenue increased by +17.7%, Protein, and frozen revenues increased by +16%, Agri-business +10.5% (excl. one-off) water and food by +3.5%. when it comes to our snacking segment revenue growth was driven by coffee and dates’ notable performance during the quarter. As for the Water and food segment, UAE water revenue rose by 5.9% year-on-year, while international business revenue increased by 8.3% year-on-year, with a notable performance from Kuwait (+21.0%) and Oman (+14.2%). Regarding our Protein and Frozen segment, it reported the first revenue growth since Q3 2022 of 15.9% in dirham. In Egypt, robust pricing and a favorable mix across domestic channels supported the segment, while we have achieved double-digit growth in revenue from domestic and export frozen vegetables. And finally, Our Agribusiness revenue excluding the one-off trading sales of AED120M, increased by 10.5% year-on-year, mainly due to increased volume.

"Our margin expansion was mainly driven by many factors besides commodity costs. One factor was increased efficiencies, and another was the enhanced category mix and increased Innovation as drivers for margin expansion.  But what is more important is that, we are in a great position to weather the current market disruptions and noting that we have a central procurement team that is monitoring the market very well.because of our diversified portfolio and agile business model Agthia Group’s profit margins are sustainable." 

Said Alan Smith, CEO of Agthia Group.

Looking at agriculture commodities, there are a lot of factors that are driving prices to historical highs. Some have to do with climate change and poor weather, others have to do with the structural dynamics of supply and demand. We believe that there is some speculative action taking place and so there will be a kind of price adjustment most likely in Q3 as the data for new crops becomes available.

All our segments are profit-generating.

However, Our snacking segment is the most profitable to Agthia Group with an achieved EBITDA margin of 24.5% in Q1 2024, with an annual increase of +430 bps. This mainly reflects strong pricing, favorable mix effects in both domestic and international date markets, as well as strong profitability expansion in Abu Auf. In general, our overall expansion in EBITDA Margin for Agthia group in Q1 2024 is 10 bps and this was mainly driven by increased efficiencies and innovation.

We continue to focus on market share across all our verticals and our Strong financial position helps us even in challenging markets. Also focusing on balancing market leadership and implementing initiatives to shore up margins (brand tiering, channel mix, price pack architecture, operational cost-effectiveness, product formulation, automation, integration, etc.) 

We are always mindful of the challenges consumers in certain markets are going through and we are doing our utmost to limit these challenges where possible, by utilizing the variety of initiatives at our disposable rather than focusing solely on pricing. That why our pricing strategy depends not only on input costs but works in tandem with the fluidity of current market dynamics and changing consumer spending patterns and relies as well on our high ability to optimize our cost structure.

Agthia benefits from relatively low leverage vs market peers. Our current Net Deb/EBITDA ratio is currently at 1.3x, leaving considerable debt headroom for our future M&A plans (capacity up to 4x, although we typically remain at or below 1.5x in a normal operating cycle) During Q1 2024, our gross debt has declined by 5% comparing to 2023 rate. We also have AED 483 million cash on the balance sheet, which we can utilize to fund M&A. Also our interest cover has increased to 8.2x from 7.6x EO Q1 2023, which is one of the highest in the sector; we continue to achieve favorable borrowing terms from our supportive network of lending banks and a strong yield on cash, which supports our low net borrowing cost. We continue to assess our capital structure and make adjustments when appropriate – for example paying down debt ahead of schedule (2023 we have repaid c. AED 840 mn,). Our strong cash generation gives us the flexibility to continue doing this above and beyond investing in growth. Furthermore, if it happened and we faced a scenario where we would require external financing during the year, we will look at all financing options and choose the most appropriate considering cost vs. return analysis, with a strong liquidity position thanks to cash balances of AED 483 million, and net debt / EBITDA of 1.3x

The current situation in the region is undoubtedly a distressing one. Our heartfelt sympathies go out to the affected individuals and families during this challenging time. When it comes to the current geopolitical situation, Agthia Group has not been impacted. This was the result of our operations in a large number of geographically diverse markets and its portfolio is highly diversified, which ensures our ability to navigate with any situation. However, as a precaution, we have increased our stock coverage ratio to ensure the availability of all our supplies and currently, we have 6 months of physical wheat coverage.

Our revenue growth in Q1 2024 was driven by a 17.5% growth in sales volume and only a 5.1% growth from pricing. The increase in sales volume reflects our ability to balance market leadership (Agthia is consistently focusing on market share) while implementing initiatives to shore up margins. so, it’s not all about pricing. Since the economic environment in some of our key markets is challenging, we are mindful of the challenges consumers are going through and we are doing our utmost to limit these challenges where possible, by utilizing the variety of initiatives at our disposal rather than focusing solely on pricing. That is because our pricing strategy depends not only on input costs but works in tandem with the fluidity of current market dynamics and changing consumer spending patterns. considering the elasticity of demand, we are still seeing lower elasticity of demand in comparison to pre-Covid levels.

Agthia’s underlying growth in local currency across our Egyptian assets remains strong despite the recent currency devaluation. Also, Egypt remains a strategically important market for us, not only considering the favorable long-term socio-demographics and structural demand for Protein, Coffee, and snacking products, but increasingly as a cost-efficient manufacturing hub for key regional and international export markets.

We also believe that creating an export hub in Egypt is a key hedging mechanism for the volatility of currency.  In addition to export capabilities, we see a strong opportunity to scale up into new markets (e.g. across the GCC, and North Africa) - several of which have supportive trade agreements.

We have a fully dedicated M&A team that is always on the hunt for growth opportunities across the region. Our priority has been and will always be shareholder value creation while serving the communities we operate in. That is why many factors are being considered when it comes to our M&A rationale. But typically, we focus on markets with large population bases and growing consumption trends. For us, Saudi is an interesting market, accounting for approximately half of the population and GDP of the GCC. It’s a market that we already service across three of our verticals (Snacking, Protein, and Water).

We continue to make progress across our sustainability agenda. Notably, during the reported quarter, we have reduced our Group CO2 emissions by 7% year-on-year. In addition, approximately 96% of Group packaging is now fully recyclable or reusable. In Q1 2024, our board approved our new ESG policy, defining four strategic pillars: Environmental Integrity, Scaling Health and Wellness, Fostering Positive Potential, and Shared Accountability which comes as a part our unwavering commitment to always do the better.