The food and beverage company Agthia expanded its footprint to Saudi Arabia looking to the privatisation of the flour mill industry in the kingdom.
The Abu Dhabi-listed company signed a deal with General Trading Company, a unit of the Olayan Group conglomerate, to distribute its retail flour product in the country. The first shipment is expected at the end of this month.
Agthia’s stock gained 2.14 per cent to Dh7.15 yesterday. That is up from Dh6.44 a year ago.
Flour consumption is expected to grow to 2.6 million tonnes a year in 2019 from 2.3 million tonnes this year, according to the research company Euromonitor International.
“Saudi Arabia clearly provides us with a large population and a ready market,” said Manolis Trigkonis, the executive vice president of agri-business at Agthia.
The flour will be manufactured at Agthia’s Grand Mills, which opened in Abu Dhabi in 1978.
The group’s grain silos under construction in Abu Dhabi would add 50,000 tonnes to its storage capacity. The silos, expected to be ready next year, are costing Dh55 million to build. Its current silo capacity is 150,000 tonnes.
To tackle a growing water scarcity, the Saudi government in 2008 announced it would phase out domestic wheat production. By the end of this year, all of its domestic wheat demand will be met through imports.
To meet the changes, the Saudi Grain Silos and Flour Mills Organisation, now known as the Saudi Grains Organisation, which operates all flour mills and silos in the country, is encouraging the privatisation of all wheat mills and some storage facilities.
The organisation has 27 mills and 26 silos, with a total storage capacity of 2.9 million tonnes, according to its website.
In November, the Saudi government said it would put up for bidding nine flour mills that have a combined daily milling capacity of 12,630 tonnes of wheat, and annually about 3.3 million tonnes of wheat, according to the US department of agriculture. Dubai’s Essa Al Ghurair Investment is among the bidders for the mills, Bloomberg reported.
Agthia, which turned a net profit of Dh231 million last year on the back of sales of flour, water and beverages and dairy products, reported Dh571m in surplus cash at the end of last year. Its profits rose by 20 per cent over 2014. It is seeking to expand into new markets such as Saudi Arabia with flour distribution, said Iqbal Hamzah, the chief executive of Agthia, in an interview last month.
Agthia’s flour sales grew by 15 per cent last year on the previous year to Dh427m following an expansion of distribution and customer network in Abu Dhabi and the Northern Emirates, besides expansion of exports and wheat trading.
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