Grand Mills, a subsidiary of the Abu Dhabi based Agthia, and in business since 1978, produces flour and over 50 types of animal feed products targeting the poultry and ruminant sector in the United Arab Emirates (UAE) and beyond.
Agthia said the agreement between it and the port operator incorporates a 25-year contract for a 85,700 m2 plot of land, which, when fully developed, will include dedicated bulk grain silos, logistics warehousing and onsite bagging facilities.
It said the expansion in capacity at Zayed Port will allow it to increase its current flour and feed milling capacity of 930,000 tons per annum to 1.5m tons when completed.
Iqbal Hamzah, CEO of the Agthia Group, said Grand Mills’ current production capacity utilization rate is at around 90% levels: “When combined with our business growth projections, this necessitates an expansion in both our milling and storage capacity beyond 2017.
“In this regard, Agthia has already started undergoing the construction of an additional 50,000 tons capacity grain silos on Abu Dhabi Ports’ existing plot. This agreement will secure supplementary land essential for future expansion right adjacent to Agthia’s current facilities."
Challenges for feed operations
Hamzah initiated a seven-step strategy in 2015 in what he said was a move to make the group a more than $1bn revenue generating company by 2020.
Last year he told FeedNavigator its development plan for the feed business consisted of further enhancing the quality of its nutritional programs for poultry but also for other livestock, keeping all life stages in mind, to ensure its farmer customers improve productivity and food safety.
But while the flour business is said to be riding out challenging market conditions, it has not been plain sailing for the feed side of Agthia of late.
Its Q1 2016 results showed growth of 2% for its agribusiness, driven by 16% growth in flour but offset by a decline in feed:
“It has been a more demanding quarter for the animal feed business where both accelerating competition and declining commodity prices put downward pressure on market prices. As a consequence, despite volume growth at around 2% in the UAE, revenues declined by 2%.
“A decline in feed trading carried overall feed category shortfall versus a year ago to 6%,” said Fatih Yeldan, chief financial officer, Agthia, in a conference call on the results in May.
Hamzah weighed in on the prospects for the agribusiness division as well during the call:
“On the flour and feed, we expect the flour momentum to continue. There will be growth on a total year basis. Feed is too early to say. In quarter one, yes, we were behind last year. Quarter two so far looks good, volume is picking up. We have taken many actions to get back the volume we have lost, and the indications are positive, the response is positive, the feedback from customers is very positive.”