Friday, April 09, 2021
Gulf News - Abu Dhabi's F&B giant Agthia is working up an appetite for canny acquisitions
Vijay Valecha, Special to Gulf News April 9, 2021
The DFM gained 0.99 per cent and ADX 1.98 per cent for the week ended April 8.
The top gainers were International Holding Co. (35 per cent), Gulf Cement Co (14.35 per cent), Arkan Building Materials (13.23 per cent), Zee Stores (9 per cent) and Abu Dhabi National Takaful (6.56 per cent). With a spectacular rise of 105 per cent, International Holding is the top performer so far this year.
The company's shares are supported by a string of acquisition deals that help it grow at a terrific pace. The second best was Dubai Insurance Co. with 78 per cent.
Agthia Group, an Abu Dhabi based F&B company with a market cap of Dh4.80 billion and a dividend yield of 2.51 per cent too, delivered a magnificent return of 56 per cent for shareholders. The company has a world-class portfolio of integrated businesses and brands, which include Al Ain Water, Grand Mills Flour and Yoplait Yogurt.
A taste for buys
Agthia is again in the news after its board approved the acquisition of a majority stake in Ismailia Investments, an Egyptian producer of frozen chicken and beef products. The enterprise value of the company for acquisition purposes is estimated at Dh752 million.
Ismailia Investments, whose portfolio includes four brands; Atyab, Meatland, Shiketita and Furat, had an EBITDA of Dh79 million giving it a margin of around 19 per cent. The Egyptian company reported revenues of Dh424 million, and its employees more than 2,500 people across its factories and 11 distribution centres.
Agthia is on an acquisition spree and is trying to become a vertically integrated company to maximize margins. In Q1-2021, it announced plans to acquire a majority stake in Jordan's Nabil Foods. Last year, it acquired Al Foah Co., the world's largest date processing and packaging company, giving its cost and revenue synergies by integrating its retail products with a cross-market distribution network.
Sweet deal in Kuwait
Another acquisition, Al Faysal Bakery & Sweets in Kuwait, enabled it to upscale operations there and optimize costs through back-end Integration.
Group sales stood at Dh2.06 billion in 2020, up 1.1 per cent versus last year, notwithstanding headwinds, while one time write-offs due to a strategic review brought down net profit to Dh34.5 million. Unfavourable sales mix was also a factor behind the decline in profit margins.
Expenditure was on the higher side on account of maintaining business continuity amidst the pandemic. If the aggregate Dh82 million one-offs are excluded, normalized net profit would be Dh117 million. The company enjoys a strong liquidity position.
The water and beverage segment posted sales of Dh799 million, and food had Dh327 million. Bottled water sales were hit by the loss of the food service channel after the pandemic hit. Saudi Arabia's movement restrictions also hit the business.
The scenario is unlikely to repeat, and 2021 can be a much better year. It has also undertaken a lot of cost savings initiatives which should improve profits substantially. Gven its acquisition spree, Agthia seems to be adopting a business model similar to International Holding Co.