UAE mineral water firm ERC's sales nearly halved due to COVID-19

Company faced 'uncomfortable financial position' in 2020, says chairman

Clocks showing the time in different cities of the world are pictured at the stock market, in Dubai, United Arab Emirates, November 5, 2020.

Clocks showing the time in different cities of the world are pictured at the stock market, in Dubai, United Arab Emirates, November 5, 2020.

REUTERS/Abdel Hadi Ramahi

Sales of bottled mineral water at the UAE-based Emirates Refreshments (ERC) had significantly declined in 2020 as COVID-19 impacted the economy and businesses.

The company, which has two bottling plants in UAE, posted a 37 percent fall in net revenue to 24.8 million last year, but narrowed its net loss for the past 12 months by 29 percent to 7.2 million dirhams. Overall sales for the year also fell by nearly half.

“[The] spread of coronavirus pandemic caused disruption of economic and business activities across the geographies. [The] company, too, got affected significantly due to economic slowdown, thereby resulted in decline in sales by 46 percent in the year 2020 versus 2019,” the company said in its detailed analysis of accumulated losses.

In a statement to the Dubai Financial Market (DFM), ERC chairman Nader Al Hammadi admitted that the company “was facing an uncomfortable financial position” last year.

However, he noted that ERC was able to adapt well to the challenges posed by the pandemic and managed to optimise costs and save money across all levels.

“The impact of [the pandemic] also reflected on our company financials due to highest restrictions on travel and Horeca sector (food service industry) and closures of borders resulted in restricted and delayed exports,” said Al Hammadi.

“The company adapted well to challenges of pandemic and adopted continual cost optimisation and saving measures across all levels. This resulted in improved gross profit margin to 41 percent (10.4 million dirham) in year 2020 versus 27 percent (11 million dirhams) in 2019,” he continued.

Share capital increase

The company’s shareholders approved a plan to increase the authorised share capital to 600 million dirhams in December.

It has been posting losses prior to the pandemic. For 2018 and 2019, accumulated losses reached 18 million dirhams, mainly after volumes and net sale prices fell due to competition in the market.

ERC also attributed the past losses to the introduction of toll tax by Sharjah Municipality in 2018 on the transport of goods from the company’s manufacturing sites. The company rolled out cost-saving measures in the last quarter of 2019, which include the shutdown of one manufacturing facility to curb the losses.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

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