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| 19 September, 2018

Agility Abu Dhabi CEO expects flat growth this year, rebound in 2019

Agility Abu Dhabi is part of Kuwait-founded Agility group, one of the biggest logistics firms in the region

Image of warehouse used for illustrative purpose. .

Image of warehouse used for illustrative purpose. .

Getty Images/Katarina Premfors

Logistics firm Agility’s Abu Dhabi operations will not witness the high growth rates achieved three years ago, ato the economic slowdown that followed the sharp fall of oil prices in 2014, the company’s CEO has said.

“In 2017, we (Agility Abu Dhabi) have actual revenue of slightly over 400 million dirhams. In 2018, I cannot give you a figure as of yet. I can tell you, though, that we will not see in 2018 the growth that we have seen before. As a matter of fact, 2018 has been very challenging after three years of less government spending, less projects in the market, less demand,” Bassel El Dabbagh, the CEO of Agility’s Abu Dhabi arm told Zawya in an interview late last week.

“It was a challenging year and we hope to be flat in 2018, frankly speaking. But we are optimistic that 2019 onward, growth will resume.”

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Agility, the parent company of Agility Abu Dhabi, was founded in Kuwait in 1979. It is one of the biggest regional players in the logistics business, with sub-companies and operations in over 100 countries.

In the Middle East, the company is listed on both the Kuwaiti and Dubai stock exchanges.  

Agility reported revenues of 1.4 billion Kuwaiti dinars ($4.6 billion) in 2017, a 14 percent year-on-year increase. Net profit grew by 16 percent to 69 million dinars.  For the first six months of 2018, revenue increased by 14 percent to 756 million dinars, and net profit by 24 percent to 38.9 million dinars.  

Ayub Ansari, senior analyst at Bahrain-based Sico investment bank, told Zawya via email that Agility has been “a notable outperfomer on the Kuwait Stock Exchange since 2016.”

Ansari said the stock’s outperformance was driven by annual double-digit net profit and the settlement of a legal case involving United States government food-supply contracts, which besides ending a long standing dispute, had also allowed the company to bid for future U.S. government contracts.  

Economic slowdown

El Dabbagh said the sharp fall in the oil prices which  took a dramatic drop in December 2014, when prices fell to a five and-a-half-year low, have had a negative impact on the overall economic performance of the six nations of the Gulf Cooperation Council (GCC), which heavily rely on oil as a main source of income.

“Let me start with the oil and gas drops. It was, I think December 2014 when it started dropping severely and we had oil prices very low over the course of 2015, 2016 and 2017. These were challenging years for sure,” El Dabbagh said.

“Most of the governments in the region saw the revenues cut in half and they held the breaks on investments and we saw less and less spending by the government on infrastructure projects and oil and gas projects and general projects that really move the economy,” he added.

El Dabbagh added that “it came as no surprise” that the UAE and other GCC governments had to introduce new fees to boost their revenues, which led to overall cost increases that had an impact on the logistics industry, as well as others.

He said the current stabilisation of oil prices in the $60-$75 a barrel range gives a positive outlook for the region’s economy in the coming years.

“This has given confidence to governments and oil companies to spend again and resume their investments and especially after three years of investments that were much lower than the usual level.”

El Dabbagh praised the government of Abu Dhabi’s decision to introduce a 50 billion UAE dirham ($13.61 billion) economic stimulus package announced by the Abu Dhabi’s crown prince Sheikh Mohamed bin Zayed Al Nahyan in June.  Details of how the stimulus would be allocated were released earlier this week.

Ongoing projects

Agility is a logistics firm that offers storage, shipping and transport services, moving all kinds of cargo from documents, foodstuffs and oil and gas products.

El Dabbagh said Agility Abu Dhabi is currently focusing on three main projects, with a total investment value of 125 million Emirati dirhams ($34 million).  

These include an expansion of the company’s fleet of trucks, as well as new distribution and warehouse centres for fast-moving consumer goods.  

“We do have very big expansion plans particularly in Abu Dhabi. We have started late last year expansion plans that are going through in 2018 and continuing in 2019… We acquired in the last 18 months 85 new trucks. Fifty were delivered and now 35 to be delivered soon,” El Dabbagh said.

“We are investing in a state of the art distribution centre in Musaffah, (an industrial district in Abu Dhabi) … It is already more than half way through the construction and it is expected to be completed by end of this year,” he added.

El Dabbagh said his company has also invested in Kizad, an industrial zone in Abu Dhabi, establishing a new 200,000 square metre warehouse facility next to Abu Dhabi’s Khalifa port.

Blockchain and robots

Like other markets, the logistics sector is grappling with the incorporation of a range of emerging technologies, such as automation.

El Dabbagh said some of those new technologies are useful, while others have a questionable return on investment.

“For sure, what is now called the fourth industrial revolution, it is the technological revolution that really change(s) and disrupt(s) the way business is done, not only in the logistics, or in the GCC or the UAE but globally,” El Dabbagh said.

“The pace of advancement is faster now. So we believe that for sure the way we do business is going to change in the logistics sector, in the UAE and the GCC,” he added. 

He said his company is currently focusing on implementing the blockchain online system that allows for the archiving and securing big sets of data.

“Logistics is not only about moving cargos or the flow of goods but there is also flow of information with multiple stakeholders and having a central ledger that is secure that the multiple stakeholders involved can tap into and transact on it,  a one system… trusted by all stakeholders. This is what blockchain is about and it is a very promising technology,” he said.

 “The return on investment in this case is very straightforward. There is hardware and software that are not that expensive. Change from the previous system will cost, but the investments are not that high and the returns are promising,” he added.

He said that for technologies such as warehouse automation and robotics, there are still some questions about the significance of such investments on the business. “In this case, the investment is high and the returns are questionable, depending on the type of goods, warehouse and solutions. In certain cases, the return could be very high, in other cases, it might not be justified,” El Dabbagh said.

“For warehouses’ automation, for distribution centres that have high turnaround of goods - so a lot of volume is coming in daily and high volume is coming out - the automation will make sense…like retail. But when you are talking about slower-moving items like the oil and gas and other industries, there it does not necessarily make sense,” he added. 

He said Agility has also launched a digital platform that enables users to gain a quote for a cargo shipment, book it and pay and track the movement online. Moreover, the company has invested in Homoola, a Saudi Arabian start-up providing an online platform that matches cargo-owners with transporters.

Although there is a scarcity of data scientists in the Middle East to manipulate large data sets, El Dabbagh said that the company has overcome this challenge by establishing offshore centres of excellence where such talents are more easily available.

“In India we have these types of centres, we have also in Singapore and we rely on that so that we don’t necessarily have to have them locally in every country.”

(Reporting by Yasmine Saleh; Editing by Michael Fahy)

(Yasmine.saleh@thomsonreuters.com)


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