By Andy Sambidge
Food and drinks group says rising costs of raw materials hit bottom line in 2011
Agthia Group, one of UAE's biggest food and beverage groups, has posted a 25 percent decline in net profits in 2011 despite an increase in sales.
Net sales totalled AED1.14bn ($310m) in 2011, up 14 percent on the previous year, but net profits fell 25 percent to AED86m - caused by the higher prices of raw materials, the company said in a statement.
Agthia said that over the past five years it has achieved an annual growth of 21.4 percent in sales revenue and 24.3 percent in net profits.
Its water and beverages business delivered 21 percent sales growth, while the flour and animal feed business grew by 12 percent.
Despite the sharp fall in full-year net profit, Agthia said it was encouraged to see profit recover in Q4 when it was 33 percent up over the average of the preceding three quarters.
"This improvement arose from the price increase in water and beverages, in-house production of previously outsourced flour and feed volumes following the capacity increases, and lower grain input cost," the statement said.
Further expansion in poultry feed capacity is planned for Q4, 2012 including restructuring of the feed mill with the aim of reducing cost and improving efficiency, it added.
On the outlook for 2012, Agthia said: "It is quite clear that food and beverage manufacturers will have to contend with the volatile input cost and may not be able to pass on the full input cost increase to its consumers and customers, while the repercussions of the regional unrest remain a concern.
"Despite a truly challenging environment, we remain optimistic about the prospects for future revenue and profit growth as the company pursues its strategy of introducing new and value-added products, continued geographical expansion, and high operating efficiencies."
Agthia announced the completion of its acquisition of a Turkish spring water company earlier this month.
The Abu Dhabi Securities Exchange (ADX) listed firm said it has acquired 100 percent of Pelit Su.
The acquisition was first announced in December but Agthia has now taken management control of the business, it said in a statement.