Kuwait’s Agility Sees Revenue Rebound On Emerging Markets

Revenue at Kuwait-listed logistics company Agility is expected to resume growing next year as emerging markets business expands and the company develops new sectors, chief executive Tarek Sultan said.

With more than 20,000 employees and over 500 offices in more than 100 countries, Agility is one of Kuwait’s corporate success stories and a play on the Gulf’s rapidly expanding trade links with the rest of the world, especially emerging markets in Asia and Africa.

Its logistics and freight forwarding businesses, which account for most of its revenue, have been hit by instability in the global economy over the last few years. Total revenue sank seven per cent to KD656 million ($2.28 billion) in the first half of this year, after a three per cent drop in 2013.

Agility has been able to keep its profit growing by controlling costs; salaries and employee benefits were essentially flat in the first half as net income climbed 11 per cent to KD24.1 million dinars.

“Globally, revenues have been affected by conditions that have challenged the freight forwarding industry,” Sultan said in an interview for the Reuters Middle East Investment Summit, adding that Agility had therefore been focusing on how it could boost productivity.

But he said revenues were now expected to resume rising in 2015, aided by emerging market business in places including Africa and India.

Meanwhile new activities – developing industrial parks, ground handling and the logistics of handling fuels – were growing rapidly, Sultan said.

“Taking a granular view of our businesses, they are showing improvement across the board.”

The stock market has begun to anticipate a turnaround; Agility’s shares have risen 86 per cent since the end of 2012, compared to a 24 per cent gain for Kuwait’s main stock market index.

STRATEGY

Sultan, who took over leadership of Agility in 1997 when the company was privatised, said a big focus for the company next year would be supporting supply chains for the oil and gas industry in Africa, in countries such as Angola and Ghana.

In the past, the company has spent hundreds of millions of dollars around the world on strategic acquisitions of other firms. A series of purchases in 2005 and 2006 supported its expansion into the United States and Europe.

Sultan declined to discuss in detail whether acquisitions might be on the cards in Africa, beyond saying Agility had always focused on organic growth but “we are continuously assessing any business opportunities that might be accretive in value for our shareholders.”

However, he said the company was prepared to invest heavily in its business of providing industrial warehousing infrastructure; it intends to launch five industrial park projects in Africa next year.

It is hard to put a value on next year’s investment in these projects because Agility rolls them out based on need – it acquires real estate, then develops it and offers facilities in response to growth in demand, Sultan said.

But in coming years, the company may spend “hundreds of millions of dollars” on such projects in Africa, he said.

One major uncertainty for Agility is the outcome of settlement talks with the U.S. government over allegations, which the firm has denied, that it overcharged the U.S. army in supply contracts. In August, Agility said the U.S. Department of Justice was seeking “substantial damages” and that it remained suspended from bidding for new U.S. government contracts.

The dispute has not prevented Agility from winning other military-related business. Earlier this month the company said a wholly owned unit had won an $82.5 million contract from Britain’s Ministry of Defence to manage household moves for ministry and armed forces personnel through April 2016.