UAE food commodity prices to drop in 6 months if there is no more of external ‘drama’: Agthia CEO

Dubai: Consumers in the UAE can actually start seeing lower food bills within the next 6 months – if there is no more of the ‘extreme drama’ from external events like in the last year.

“There’s been an easing in food commodity prices such as wheat,” said Alan Smith, CEO of Abu Dhabi-based Agthia Group, and one of the systemically important F&B players in the Gulf. “It’s great to see these prices come down after the kind of year the industry had in 2022. There was the crisis in the supply chains, then the crisis in Europe (with the Russia-Ukraine situation).

“Thankfully, that situation is turning, and we should see that reflected in consumer prices in the UAE.”

Food and fuel price spikes were at the heart of the higher inflation consumers and businesses the world over faced in 2022. The effects of that still linger, but if shipping costs come down – and they have already done so significantly since Q4-22 – everyone could soon plan on spending less on their food needs.

"Commodity costs hit elevated levels between 12-18 months ago, and there is still an inflationary environment around," said Smith. "The market would require at least another six months to cool and for prices to settle lower."

Solid on results, dividends

Whatever the situation on expenses, Agthia is coming off a solid year on the financials, and which meant its shareholders would be rewarded with a Dh65.3 million dividend for H2-2022. (That’s from an 8.25 per cent dividend proposal and matches what the company paid for the first-half of last year. Agthia now has a semi-annual dividend payout program.)

Agthia has the numbers to feed those dividends. “Our 2022 numbers were driven by organic growth and revenues topped Dh4 billion from Dh2 billion two years ago,” the CEO said. “And our profits have evolved faster than that.

What’s been helping us is the diversity we brought into our portfolio and become a more branded consumer-focussed business from the commodity- and agri-focussed entity we had been. (The target is to get the consumer business make up 75 per cent of revenues by 2025.)

- Alan Smith of Agthia Group

Gross profit for 2022 is higher by 21 per cent year-on-year to Dh1.2 billion. There was, however, a 273 basis points decline in gross margins through incorporating an additional Dh270 million of commodity price inflation compared with 2021.

“We managed with caution what was in our control,” said Smith. “We always had a risk management strategy – and even though it meant higher costs, we took on more stocks. Because we had to have that to keep supplying the markets. A strong in-house procurement team helped, and so did our agility to react and manage changes that happened to food commodity prices globally.”

Keep pushing into overseas markets

Another area where Agthia was able to make progress was in international sales. Within the region, it has become stronger, boosted by a series of acquisitions and stake buys it made within the Gulf, Egypt and Jordan. That also meant a wider product portfolio on the snacks side.

“But we wanted to diversify the customer base even further, and revenues from international markets have grown to over 10 per cent,” said Smith. “From being a regional player, we are starting to do a lot of exports to Asia, and directly feeding into retail in the US.”

And forecasts for 2023? More of the same growth patterns is how Smith sees it. Of course, without any of the ‘extreme drama’.