A surge in the prices of input materials sliced Abu Dhabi food and drink producer Agthia Group's first half net profits by a quarter to Dh40 million down from Dh50 million recorded the same period last year.
"This drop is mainly attributed to the continued increase in the input cost of raw materials. Also during the same period last year, the company's flour business benefited from a decline in wheat prices which outpaced the drop in the market price of flour — this resulted in higher one-off profit margin," Elias Assimakopoulos, Agthia's CEO, said.
"The prices of raw materials for flour and animal feed increased, leading to the decline in profit margins," said Marwan Shurrab, vice-president and chief trader at Gulf Mena Investments, adding that in 2010 the prices of wheat were lower compared to levels for this year.
However, despite the drop in profits, the company's revenue grew 17 per cent to Dh559 million, due to increased consumption.
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Agthia's shares closed at Dh1.96 per shares yesterday following the announcement.
"The turnover of Agthia shares stood at 52,000 with a free float stock of 300 million in the market," Shurrab said. He noted that most shareholders prefer to keep the shares to collect dividends.
Rashid Mubarak Al Hajeri, Agthia chairman, was upbeat about the results. "The company has been progressing well in line with its long-term strategy to deliver business growth along with expansions into new categories," he said.
Assimakopoulos also pointed to expansion in a number of areas. "The group entered into processed fresh fruit and vegetable products, shelf life juice segment and fresh dairy products," he said.
He added that the company managed to achieve the result through cost savings, pricing opportunities, capacity expansions and by accelerating entry into categories.
"We continue delivering growth despite challenging circumstances and we expect 2011 to be another year of good business growth for the Group," he said.
Assimakopoulos said the company is expanding in the region. "The main markets for Agthia Group are the UAE, GCC and North Africa," he said.
According to a statement by the company, the growth in sales was driven by consistent strong performance in the company's water and beverages business which delivered 26 per cent sales growth year on year and a 14 per cent year on year growth in the company's flour and animal feed business.