Currency crisis: Snacking category leads Agthia Q1FY2023 growth despite challenges in Egypt and protein sector
Agthia recently announced its Q1FY2023 financial results, reporting a 12.3% growth-year-on-year in net revenue to hit AED1.18bn (US$321.3mn) and a 6.5% growth in net profit to AED 96.7mn (US$26.3mn).
Although Agthia is primarily based in the United Arab Emirates, it has significant business dealings in Egypt, which is currently in the throes of a currency crisis after the Egyptian pound (EGP) lost over half its value in 2022, and local inflation has grown 31.9% year-on-year, primarily led by high food prices.
The Egyptian pound is currently ranked as the sixth worst performing currency this year, placing it behind only such troubled currencies as the Lebanese pound, the Venezualan bolivar, the Zimbabwean dollar and the Iranian rial, according to CNBC numbers.
On the back of this, Agthia’s revenue also took a hit in the first quarter of the year, having to absorb a significant EGP devaluation impact of AED112mn (US$30.5mn) in total.
“Agthia saw strong revenue and healthy net profit growth in the first quarter of this year amidst a challenging backdrop which included commodity inflation which means additional commodity costs of AED55mn (US$15mn), the EGP devaluation which led to an AED112mn (US$30.5mn) impact, as well as rising interest rates which led to a net interest cost of an additional AED20mn (US$5.4mn) this quarter,” Agthia Group CEO Alan Smith told the floor during the year’s first results conference call.
“The snacking segment in particular saw total revenue growth of 50% - 16% from pricing adjustment and 34% volume growth with strong contribution from the Auf dates brand.
“This reflected a strong performance from our dates business, with a premiumisation shift in international markets and international retail volumes up about 30% year-on-year, [including] growth in India, Indonesia, Malaysia and Brazil.
“Gifting has emerged as a strong driver, with new gifting ranges and product and packaging innovations such as chocolate dates, snack packs and date pouches underpinning further market share gains.”
The firm’s protein business suffered the largest impacts as a result of the EGP devaluation, showing a 14.5% decline in revenue attributed solely to this factor.
“Notwithstanding the challenging macroeconomic environment, in Egypt the protein sector actually saw strong local currency revenue growth of 46% year-on-year,” the firm stated.
“While currency headwinds continue to overshadow the strong underlying performance in Protein, we [have] identified a number of incremental efficiency drivers across production, formula optimisation and waste management to help manage this [foreign exchange] volatility.
“Egypt [continues to be] a strategically important market for Agthia, not only in the favourable, long-term socio-demographics and structural demand for Protein, Snacking and Coffee products, but increasingly as a manufacturing hub for key regional and international export markets, leveraging low-cost capacity.”
Agthia is also placing increasing focus on the digitalisation of the business, having established a five-year digital roadmap to guide its transformation.
“Our 5-year digital roadmap is intended to transform Agthia from a product-led to data-led, consumer centric organisation,” Smith added.
“In addition to [investments in manpower and software to] harmonise business processes, data and adoption of industry best practices, we have also established a new Partnership with Microsoft to bring a state-of-the-art CRM and Contact Centre.”