Capri-Sun and Egypt plant to give leg-up to Agthia in the region - Emirates24|7

Capri-Sun and Egypt plant to give leg-up to Agthia in the region

Ilias Assimakopoulos CEO, Agthia (MOHAMMED HAKEEM)

The Emirates Foodstuff and Water Company (Agthia) sees itself as the UAE's leading developer of consumer product brands despite stiff competition. The Al Ain-based company is listed on the Abu Dhabi Securities Exchange, with 51 per cent owned by the local government's General Holding Corporation and the remaining stake shared by the public and institutional investors. The company, which produces Al Ain mineral water and will soon start manufacturing and distribution of children's fruit juice Capri-Sun, has a strategic plan to become the regional leader in consumer products, following the example of the likes of Lever Brothers. In this interview with Emirates Business, CEO Ilias Assimakopoulos sets out in detail how he believes this will be achieved.


The company's 2008 third-quarter results reveal that the growth has been good. How were you able to deliver such results during in the global crisis?

We had top-line growth of 46 per cent over the same period last year, while our bottom line increased by 90 per cent. This growth came from all our businesses – flour, foodstuff, beverages and feed. Clearly we believe we should insulate and protect our business from the crisis.

Our business is purely linked to the consumption of food and water – essential commodities. We are not into luxury goods, real estate or finance. That is why we are not affected by the crisis, and we are quite positive about the outlook. Our growth plans are linked to acquisitions. If and when acquisition opportunities come along we will have to secure the necessary capital, which will come from a combination of all our resources and borrowing. This will be a concern because at this particular time, as you know, financing is quite tight.

Can you tell us about the company's current initiatives and projects?

We have embarked on two strategic initiatives. One is related to the acquisition of the manufacturing and distribution rights for Capri-Sun [the German-based Wild Group's fruit juice drink] in the GCC, apart from Saudi Arabia. This will commence in February. The other initiative is the new manufacturing and processing plant for tomato paste in Egypt, which is very much on target.

What is the current capital of Agthia?

The current capital of the company is Dh600 million.

Do you plan to increase this figure and if so where would the extra investment come from?

There is no plan to increase the capital at present. If eventually we need finance for acquiring projects then clearly it will be a combination of both our cash reserves and borrowing from banks. Right now there is nothing specific to announce, so we have to wait and see. The focus clearly remains on the UAE. This is where we are and where our businesses are. Obviously, if an acquisition comes along the synergies will be important. But this does not mean our market is only the UAE; the wider GCC is of great interest to us. Exports are part of our business though not a very big part. This is something we would like to build further.

What are the markets for your exports?

We have to be specific about the different businesses because exports are a small percentage as far as the flour business is concerned. In a number of key markets in the region, pricing is subsidised by respective governments so there is no room for us to compete. When it comes to flour and feed demand we are targeting the local market. Exports account for about 10 per cent of our water business. We export to Oman, Bahrain and will soon start exporting to Qatar. We envisage our exports building up in the GCC in the months to come and are looking at Kuwait and possibly Saudi Arabia. There is a third leg to our business that is the Al Ain Vegetable Processing and Canning Factory (AAV), the reports for which are not consolidated into our financial results. It makes a substantial contribution to exports, close to 50 per cent. We see ourselves as a local company but we will do whatever is necessary to have a wider presence beyond the UAE.

The company has the tomato paste plant in Egypt that will start operating soon. Do you have other plans to further grow the company's global portfolio?

No. Not right now, we will take it step by step. We want to do the right things at the right time. We want to make sure that the Egypt venture is up and running efficiently and is properly integrated into our business.

What about investment in agriculture outside the UAE?

At this stage we don't intend to invest in agriculture because we don't have the expertise and capabilities. It is not our core competency, so obviously it is not something that features in our strategic business plans for the next three years.

Any plans to enter the dairy business?

Dairy is of interest to us. It is something that we have looked at in the past and are still looking at, but there is nothing specific at this particular point of time that we can announce.

What challenges did you face in 2008 and how did you deal with them?

One of the challenges was the increasing cost of materials. Another was pricing pressure because it is not so easy to transfer costs to the consumer any more. And one of the challenges when you are in an environment of accelerating growth is securing the right talent to lead and manage growth. Human capital, finding the right people, is clearly a key challenge in the domestic market.

How do you finance growth, and are you happy with the current results or do you think you could have done better?

Our debt-to-equity ratio stands at 24 per cent, which shows we have room to borrow money. In the current situation it is difficult because the liquidity is not there. There is always room for improvement. We are looking at various projects to sustain growth and deliver sustained returns to our shareholders. Ordinary growth is not enough. We need something on top of that – new products, joint ventures and acquisitions. Our growth is volume driven. All our factories are running at 100 per cent capacity. If we look back, in 2006 we were running at 50 per cent and 60 per cent capacities respectively in our flour and feed businesses. Similarly, in water we were running at 60 per cent of capacity and now it is 100 per cent. Now we are set for expansion.

How would you describe the outlook for 2009?

The outlook remains positive. We look at 2009 as a growth year compared to 2008. We have a number of new initiatives such as Capri-Sun and the move into Egypt as well as new products across the business.

Has the recent inflationary pressure forced Agthia to increase the prices of its products?

This affects all of us, it affects the cost of production because it raises the prices of raw materials. In general the cost of doing business is rising, we are exposed to it like everybody else. Pricing opportunities are rather limited. We have kept our prices for flour and feed, the bulk of our business, at the same level since 2007 under government instructions. We have launched a number of initiatives within the company to minimise the impact of the external inflationary pressure.

When we talk about this industry, are there enough players in the UAE?

The market is very competitive because there are local players in the food and beverage industry and regional players that compete here in the local market, and eventually we will see international players. So, competition is already quite high. I believe there is scope for consolidation in the industry because in certain categories, for example flour and feed, the margins are on the low side.


PROFILE: Ilias Assimakopoulos CEO, Agthia

Assimakopoulos, who joined Agthia as CEO last year, was previously Regional General Manager for the Middle East and North Africa at Reckitt Benckiserm, maker of leading consumer brands such as Dettol. He also worked for Gillette as General Manager in the Czech and Slovak Republics. He joined Agthia with a new team and new ideas for acquisitions, joint ventures and the expansion of existing units. Developments under his leadership include the acquisition of Al Ain Vegetable Processing and Canning Factory, setting up a tomato paste manufacturing plant in Egypt and securing the manufacturing and distribution rights for Capri-Sun in the region.

 

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