Agthia, the food and beverage group that manufactures Al Ain mineral water, has forecast an improved full-year performance as it expects sales to rise.
“We expect the water and beverage business to pick up in the second half of the year because now we have the capacity to meet the demand for Al Ain water brand and we will focus on regaining the distribution that we may have lost,” said Iqbal Hamzah, the acting chief executive and chief financial officer of Agthia. “We also want to expand to Saudi Arabia, which is a a major market, in the second half of 2015.”
In the second quarter the company expanded its bottled water capacity by 70 per cent to 57 million cases as a new plant in Al Ain started production in June.
Half-yearly net profits rose 21 per cent to Dh104.5 million on better sales from its animal feed division. Net sales increased 8 per cent to Dh822.6m.
However, Agthia’s second quarter profits of Dh56m and sales of Dh432m missed some expectations.
Asjad Yahya, the senior vice president of research at Shuaa Capital in Dubai, had expected a net income of Dh58.9m.
But “agricultural product prices remain depressed, suggesting that margin guidance for the full year could be revised upwards”, he said in a research note.
During the current quarter, the company aims to diversify into frozen baked products such as croissants, muffins and bread rolls. The products will first be rolled out in the UAE. The company’s Abu Dhabi plant will start production in August and has an annual capacity of 8,000 tonnes.
The agribusiness division, which makes and distributes Grand Mills flour and Agrivita animal feed products, reported an 8 per cent increase in net sales to Dh532.4m, while net profit rose 21 per cent to Dh113.4m in the first six months.
Net sales in the consumer business division, which includes Al Ain water, Yoplait fresh dairy products and Capri-Sun juices, rose 7 per cent to Dh290.2m.
After a slump in profits in the consumer unit in the first quarter, the second quarter showed a 19 per cent year-on-year rise in profit to Dh14.6m. Net sales in the period touched Dh159.8m, a rise of 11 per cent year-on-year.
The division’s first-quarter profit decreased because of weak demand for Capri-Sun beverages over concerns about the drink’s high sugar content. Agthia will introduce new variants of the product in the current quarter, Mr Hamzah said.
Agthia expects to break even at its Egypt plant this year, four years after operations started. The plant produces tomato and chilli paste under the Pure Natural brand name.
“Last year’s losses were because of issues with getting raw materials and operational issues, but we have harmonised our product offerings and improved production efficiency,” Mr Hamzah said.
The Turkey plant, which started production of the bottled water Alpin last year, registered sales growth of more than 80 per cent in the first half over last year.
Mr Hamzah also expects to expand the distribution coverage in the UAE and rest of Arabian Gulf region.
Shares of Agthia closed 3.45 per cent up yesterday at Dh6 each.
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