Adnoc Distribution open to expansion in new markets, CEO says

Adnoc Distribution, the UAE’s largest fuel and convenience retailer, is open to boosting its presence in new markets depending on commercial viability and regulations, the company’s chief executive has said.

Entry into a new country will depend on factors such as demographics, the regulatory framework and potential financial returns, Bader Al Lamki told The National in an interview on Tuesday.

As part of its five-year growth strategy, Adnoc Distribution plans to run a total of 1,000 stations in the UAE, Saudi Arabia and Egypt by 2028, up from 840 in 2023.

“Jumping to 1,000 would be within our current core market but [we are] also open to exploring new markets, as long as the opportunity makes commercial sense and [it is] demonstrated that the market is ready,” Mr Al Lamki said.

Within the UAE, Adnoc Distribution has the “lion’s share” of service stations but the company will continue to focus on Dubai and the Northern Emirates, he added.

"We do have a good spread of stations across all seven emirates and we will continue to expand ... the Dubai market is very important [and] Northern Emirates is equally important as well," Mr Al Lamki said.

The company’s new growth strategy, announced this week, includes building at least 500 electric-vehicle charging stations across the UAE by 2028, as well as a new dividend policy.

Under the proposed policy, shareholders will receive dividends totalling $700 million each year, or 75 per cent of net profit, whichever is greater. The plan will be presented for shareholder approval at the company’s annual general meeting in March.

“The guidance that we have given to the market at the beginning of the [company’s] IPO journey has been fulfilled with the historic achievement last year of achieving $1 billion in Ebitda [earnings before interest, taxes, depreciation and amortisation],” Mr Al Lamki said.

Reaching that target called for a “strategy rethink” but he is “bullish” about the path ahead, he added.

“We want to establish ourselves as a leading Middle East fuel and retail service provider.”

The UAE’s fuel station market is expected to reach 2.25 million barrels per day by 2029, from this year’s estimate of 2.01 million bpd, recording an annual growth of 2.2 per cent, according to Mordor Intelligence.

The growing demand for fuel stations, increasing adoption of the compact fuel station concept and expansion of existing infrastructure are expected to drive the market during the forecast period, the research firm said.

For 2023, Adnoc Distribution's net profit dropped by 5.4 per cent year-on-year to Dh2.6 billion ($710 million). However, revenue during the same period increased by about 8 per cent to Dh34.63 billion.

The company aims to reduce operating expenses by up to $50 million in the next five years, while earmarking between $250 million and $300 million each year for capital expenditure.

Last year, Adnoc Distribution completed the acquisition of a 50 per cent stake in TotalEnergies Egypt, marking its entry into the country.

The company said nine service stations were rebranded to Adnoc in Cairo last year, with more targeted for the year ahead.

Adnoc Distribution, which operates 50 EV charging points in the UAE, teamed up with Abu Dhabi National Energy Company, better known as Taqa, last January in a joint venture to build and operate electric vehicle infrastructure in Abu Dhabi.

The company, E2GO, aims to become the main provider of EV charging points and associated infrastructure in the UAE capital.

"The intent is to build charging points that car owners are able to access and plan their journey with ease. We have the advantage of being on highways and also in communities," Mr Al Lamki said.

The UAE, Arab world's second-largest economy, aims for EVs to make up 50 per cent of traffic on the roads by 2050.

EV sales are rapidly increasing in the Emirates, now representing more than 1 per cent of the overall car market.