Some of Agthia's products. The company saw its profits decline by almost half in the first six months of the year down to Dh42 million. Image Credit: Agthia/ Instagram

Abu Dhabi: Agthia Group, which produces brands such as Al Ain Water, saw its profits decline by almost half in the first six months of the year down to Dh42 million.

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Group revenue was at Dh1.09 billion, representing a 2.6 per cent increase compared to last year, with Dh506 million of that coming from its argi-business segment – up 9 per cent - and the other Dh584 million from its consumer business division – down 2 per cent.

“In the first half of 2020, Agthia Group demonstrated resilience and agility in dealing with the uncertainty imposed by the COVID-19 pandemic and its influence on the operational environment across our markets,” said Khalifa Sultan Al Suwaidi, chairman at Agthia Group.

Alan Smith, CEO, Agthia Group

“Enforcement of lockdowns and movement restrictions caused business disruptions, logistics transformation and changed customer demand patterns,” he added.

Al Suwaidi said Agthia like many other businesses, improved its e-commerce division along with home deliveries.

“We increased stocks of essential F&B (food and beverage) products, accelerated our e-commerce presence and doubled the number of delivery trucks for home delivery service to cater for the consumer needs.”

Despite the profit drop, the group maintained a healthy balance and liquidity position, with assets at Dh3.2 billion – up 3.4 per cent – and group shareholder equity totaling Dh1.9 billion.

Product demand and costs

Commenting on the pandemic’s impact on the business, Alan Smith, CEO at Agthia Group said the company’s higher costs were mainly driven by increasing its home delivery services along with ensuring its products were well stocked for availability during this period.

“We saw lower volumes of water in the UAE and Saudi Arabia, so that was related to the shift in demand habits; obviously for the food service, eateries and convenience stores the demand dropped, which was picked up in largely home delivery.

“In terms of the cost side of things obviously when you need to start delivering rather than to retail or eateries, the cost of delivering to homes is higher than delivering to those channels,” he added.

“So without a doubt we took on an incremental warehousing cost and logistics costs, but they’re very much short term impacts.”

And in terms of any price increase for consumers, Smith said Agthia was not planning to raise its prices, with raw material prices remaining the same so far.

“Key raw material prices haven’t changed at all, so from that point of view we do not expect to see any impact on retail pricing.

“In fact if you look across our portfolio this year there’s only one product that’s seen a price increase and that was our juice beverages because of the sweetened tax that was imposed at the start of the year. That was purely driven by the taxation and had nothing to do with COVID,” he added.

“We don’t expect an increase in prices, but at the moment it’s very difficult to predict where COVID is going to take us. What we’re seeing in terms of the market is the retail side of the business has been fairly resilient, and by that I mean the bigger retailers and that’s starting to grow,” he said.