Kuwait's Agility sees growth in Arab Spring states

Kuwait’s Agility sees growth in Arab Spring states

Kuwaiti logistics firm Agility says it is gearing up for expansion in emerging markets, much of it in countries that experienced Arab Spring political upheavals as new governments there spend more on their oil industries and infrastructure.

September 11, 2012 5:21 by Reuters

The group was the largest supplier to the U.S. Army in the Middle East during the war in Iraq, but is changing tack and putting less emphasis on defence services, Chairman and Managing Director Tarek Sultan told Reuters in an interview.

He said the company was in talks with the new governments in Egypt, Tunisia and Libya on increasing its presence and investments.

“You think of Libya, you think of oil and gas and infrastructure, including roads, ports, warehouses,” Sultan said. “In Egypt there is a consumer market, there are some oil and gas activities, normal freight forwarding, warehousing and there is a lot in real estate.”

Agility’s strategy shift is not just down to confidence in these growth markets. The group is barred from bidding for new U.S. government business, pending the outcome of a legal dispute with the United States, and pleaded not guilty in August last year to charges it defrauded the U.S. government over multi-billion dollar supply contracts.

However, its Kuwait-listed shares have climbed 24 percent since the end of last year, hitting their highest level for 20 months. Global Investment House, a local brokerage, said interest in the stock had been boosted by investors’ hopes that Agility would win a claim filed against the U.S. Defense Logistics Agency (DLA).

Agility filed a $225 million claim against the DLA in April, saying the agency had breached the terms of a contract for food distribution to combat units.

In future, the company is likely to be less vulnerable to large-scale disputes with governments.

“In practice now all of our revenues are basically commercial revenues. So we do have some government work (but) it is limited – in general we are focused on commercial customers,” Sultan said.

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Agility, the largest Gulf Arab logistics company, expects new governments in the region, under pressure to reduce unemployment, to introduce policy changes that produce more private-sector jobs and reduce red tape.

“In the short term, decision-makers will obviously focus on things other than business, but at the same time the signs that we are seeing out of Egypt … are positive and I think the government is saying the right things and starting to do the right things,” Sultan said.

“So hopefully we will be able to have a very positive dialogue with governments once the dust has settled, and they get to turn their attention to the task of creating jobs and opportunity for their constituents.”

Agility, which is present in more than 100 countries, sees opportunities created by the Arab Spring as part of a trend towards emerging market business, beyond more developed economies in the West and the Gulf.

“There is some kind of shift in focus towards emerging markets. Countries including India, China, Brazil, Australia, Pakistan and the Middle East make up almost 60 percent of our revenues. This percentage will increase naturally,” Sultan said.

The group in July won a two-year contract worth $238 million to supply logistics support to the Gorgon natural gas project in Australia. It also obtained a two-year extension of an existing contract with Gorgon worth $262 million.

Agility last month posted a profit of 7.82 million dinars ($27.7 million) for the three months to June 30, against 7.83 million in the year-ago period.

(Additional reporting by Ahmed Hagagy; Editing by Andrew Torchia and David Holmes)