Agthia changes profit outlook amid potential government subsidy changes

It expects to have an impact anywhere between Dh15 million and Dh20m on its net profit.

Iqbal Hamzah, Agthia’s chief executive, said the company was taking 'several mitigating steps to minimise the scale through new products and regional expansion'. Silvia Razgova / The National

Food and beverage company Agthia has altered its net profit outlook for the year due to potential changes in the Abu Dhabi government subsidy regime.

It expects any changes in the government’s flour and animal feed subsidies to have an impact of anywhere between Dh15 million and Dh20m. The government is yet to announce specific changes, and talks are ongoing, according to Agthia on Monday.

The guidance came as Agthia shares fell on Wednesday. They closed at Dh6.50 Wednesday, down 4.41 per cent from previous day’s close. That was down from Dh7.67 a year ago.

“There won’t be a 100 per cent withdrawal of subsidies but there will be a rationalisation of the subsidies, but things are not yet clear,” Iqbal Hamzah, Agthia’s chief executive, told The National on Monday.

Agthia reiterated its position in a statement on the Abu Dhabi Securities Exchange.

If Agthia loses out on the volume, it will impact the bottom line, but the company was taking “several mitigating steps to minimise the scale through new products and regional expansion”, Mr Hamzah had said.

That would include entering Bahrain and Oman with its flour products this quarter. Agthia started marketing its flour in Saudi Arabia in the first quarter. Its six-month revenue for the flour division rose 3 per cent year-on-year to Dh230m. Agthia’s Grand Mills opened in Abu Dhabi in 1978.

In November, Saudi Arabia had announced a plan to privatise its flour mills and silos as it prepares to phase out domestic wheat production. Agthia would bid for them if it makes strategic sense, Mr Hamzah told The National on Monday.

The company’s animal feed division’s first half revenue rose 7 per cent year-on-year to Dh360m.

Agthia receives subsidies for its flour and animal feed businesses in Abu Dhabi and the Northern Emirates.

State-owned conglomerate Senaat has a 51 per cent stake in Agthia.

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