Agthia considers acquisitions and reviews strategy amid pandemic, CEO says

The Abu Dhabi food and beverage company intends to finish its strategic review before year-end

Agthia is conducting a strategic review of its business as it navigates the pandemic-driven slowdown. Delores Johnson / The National

Agthia is looking at mergers and acquisitions and re-evaluating its strategy as it adjusts to the coronavirus pandemic that has tipped the world economy into a recession.

The Abu Dhabi food and beverage company intends to complete its review before the end of the year, which will help it come up with a strategic plan centred around new products and new markets, group chief executive Alan Smith told The National on Wednesday.

Agthia plans to continue to expand organically in domestic and international markets despite the Covid-19 headwinds.

“What we are currently working on is a complete strategic review of the business in terms of where we go next, how we look at growth in the future and what the right operating model is for us,” Mr Smith said.

“M&A are obviously part of the plan [and] we are looking at what the right targets are.”

Mr Smith said any potential acquisition must complement what Agthia does while also enhancing its business.

Part of Abu Dhabi’s ADQ, Agthia is one of the region’s largest holding companies and has a strong balance sheet that gives it the financial power to buy other companies that fit into its strategy. The company is open to expanding into new markets beyond the GCC, Egypt and Turkey, where it already has a presence.

“We have a very strong footprint in the UAE, and even within the [country], we are looking at what more we can do. There are opportunities across the GCC,” Mr Smith said.

“Further afield, we have an open mind at the moment.”

Most of the company’s international businesses registered strong growth this year, with Kuwait growing 50 per cent despite the global health crisis.

Business and profitability also improved in other markets such as Oman, Bahrain, Egypt and Turkey, and Mr Smith expects the trend to continue.

The one “big headwind” has been Saudi Arabia but the company said it had built a strong platform to return to growth in the kingdom.

Mr Smith, a former executive with US confectionery multinational Mondelez International, took charge of Agthia this month. He remains cautiously optimistic about the prospects of growth in the second half amid uncertainty concerning the world economy.

The company is expected to benefit from measures to cut costs during the first half and a sharp increase in economic activity, including the reopening of restaurants.

“Given the fact that the channels that have been the worst [affected] are starting to open up, we expect the hotels and restaurant businesses to start to improve and we are already seeing that today,” he said.

The UAE, which has fared far better than other countries in handling the outbreak, has reopened its economy gradually amid a declining infection rate.

Government offices and malls in Dubai are operating normally.

Government offices and malls in Dubai are operating normally while restaurants are accepting guests and observing strict social-distancing guidelines. Abu Dhabi on Wednesday gave the green light to cafes and restaurants to begin operating at 80 per cent of capacity..

“We would expect [an] improving profit trend moving forward,” Mr Smith said.

Agthia said on Tuesday that its first-half profit had fallen by about half due to higher expenses while revenue grew by 2.5 per cent to Dh1.09 billion.

“Overall, if you look at the headwinds we have faced, we have been able to grow our revenue [in the] year to date, which is impressive considering the market environment,” Mr Smith said.