Agthia to deploy $273m in new acquisitions to boost growth, its CEO says

Agthia will continue to look for new targets to acquire within the Mena region and Pakistan, as it seeks to deploy Dh1 billion ($273 million) it has set aside for new deals.

The Abu Dhabi company has completed five deals in the past 12 months in various segments, as it vies to become a leading regional player in the food and beverage industry.

“We continue to look at opportunities in the geographies we’ve identified [as part of its five-year strategy] and in the categories we’ve identified,” Alan Smith, chief executive of Agthia, told The National in an interview.

“We are working on different options to see if there is anything that meets our kind of criteria that we set out in our strategy, good businesses accretive to Agthia, the right geographies, the right categories and also we typically look at whether they've got a good management team and strong brand.”

Mr Smith did not reveal further details on the new opportunities but said: “We do have a pipeline of deals which we are working on. It has to be a right deal for us and it must be a right deal for the seller.”

The Abu Dhabi-listed company, which is owned by Abu Dhabi's state holding company ADQ, has been on a deal-making spree in an effort to become the biggest food and beverage company in the region by 2025.

These have included the purchase of Kuwait's Al Faysal Bakery and Sweets, snacks maker BMB Group, Jordan's Nabil Foods and the world's largest date processing and packaging company, Al Foah.

It also completed the acquisition of a majority stake in Egypt-based meat processor Ismailia Investments – also known as Atyab – in September to expand its portfolio in the Arab world’s most populous country and get a foothold in frozen food product market.

The company already has Dh1bn to deploy and “will look for other funding options if necessary”, to finalise deals, Mr Smith said.

“If there is a pipeline of deals that require incremental funding, then we will definitely consider various options to raise additional capital. [There are] lots of discussions [continuing] with banks and how we do this.”

These acquisitions have helped Agthia's profit to grow tenfold in the first nine months this year to Dh103 million, the company said on Tuesday.

Agthia, which manufactures, distributes and markets a range of food and beverage products, including popular regional brands such as Al Ain and Al Bayan water, expects demand for its products to pick up as economies recover from the coronavirus pandemic.

“What we are seeing since quarter two is the market gradually moving in the right direction,” Mr Smith said.

“From Covid's perspective, we are in a relatively good space with tourism coming back, obviously in the UAE with Expo 2020, it is gradually opening up. We have a positive outlook in terms of demand so we are seeing an upside in demand and we expect that to continue as long as there is no bad news on further Covid waves.”

However, Mr Smith said there are still challenges around escalating costs in different product groups after pandemic-induced supply chain disruptions.

“The biggest challenge is volatility in import costs, whether it be grains for our agribusiness, ingredients and packaging … all of them are seeing an increase in costs and that continues to be unpredictable.

“The demand side, we are very positive but cost side we are expecting more volatility and our big focus is how we manage that.”

Mr Smith expects the healthy snacks portfolio to do better next year amid increased awareness about diet and food quality.

“Protein and snacks will be driving the growth hopefully through 2022 and beyond. BMB [food company] is operating in the healthy snacks space, which is one of the consumer trends that is coming out post-Covid as consumers are much more aware of nutritional benefits and health benefits in terms of immunity.”