DEAR SHAREHOLDERS,

I have the great pleasure sharing with you the highlights of another year of great achievements for DRC.

FINANCIAL SUMMARY

2008 was a year of great positive changes for DRC. At the start of the year, all our major indicators showed negative outlook. Sales forecast was not very promising. Our profit forecast for year 2008 was AED 5 million and we started the year with total bank borrowings of AED 80 million in our books. The continuously increasing cost of raw materials, combined with limited warehousing and production capacity for cans and plastic bottles negatively impacted our profitability. In May – June 2008 the new board and management took several decisions to reverse the declining trend. This included management restructuring, re-evaluation of customer contracts, improvement in debtors and creditors’ period, cost rationalization and selling some portfolio investments. Due to these actions, DRC managed to repay all borrowings and achieved a positive cash balance by year end 2008. At the end of the year company had over 7 million positive balance in banks and no overdraft, which is a first since 2004.

Sales Revenue Growth

Sales revenue grew in 2008 by 19% against a volume growth of 14%. This was ahead of plan by 4%. Our sales success has been achieved by enlarge behind strong marketing & promotional campaigns and expansion of the new 500 ml single serve plastic bottle.

Profitability

In terms of profitability, we have achieved AED 14.4 million net profit, which is significantly better than our original plan of AED 5.28 million. Operating profits were AED 8.92 million, which is slightly less than the plan of AED 9.6 million, while gains on sale of investments were AED 5.04 million. Operating profit were impacted by capacity constraints, where significant volume was imported at higher cost than planned. In addition significant increases in fuel, electricity and water cost also impacted profitability.

Market Share

As far as market share is concerned, Dubai Refreshments PSC (‘DRC’) products gained approximately one full share point in 2008 and we ended the year with an average of 71.7 % share of market. This is a significant achievement given the tough competition that exits in soft drink category.

Capital Projects

A new state of the art high capacity CAN line was successfully commissioned in July 2008. As a result of this addition DRC will be able to meet rapidly rising local CAN demand and still be able to take advantage of many export opportunities. Both the new & old CAN lines are being fully utilized since the commissioning of the new line, which indicates it was a timely investment.

2009 OUTLOOK

In 2009 we are looking at optimizing production and adding new capacity for the plastic bottles to support expected high growth rates particularly for the new 500 ml bottle. In addition, we are looking at submitting a proposal by the end of 2009 to move our production facility to a more suitable location in the new industrial area. For this purpose DRC has already secured a 1 million sq feet plot in Techno Park. In order to finance this much needed additional capacity, the DRC board has approved the sale of the Aquafina plant in Dibba to our sister company Jeema. Concurrent with the sale, a separate long term agreement has been signed with Jeema to produce DRC’s needs of Aquafina. This transaction will help DRC build cash reserves and will help both Jeema and DRC reduce the cost of producing water by leveraging the combined economies of scale. Aside from the capital restructuring described above, DRC has also taken two strategic decisions to improve productivity and profitability.
First, DRC has already started distributing a range of non-carbonated beverages which includes world famous brands such as Gatorade, Tropicana Juice, AMP energy drink, Bario non alcoholic beer in addition to the existing Lipton ice tea. A long term exclusive distribution agreement is currently under discussion with Pepsico. The management expects good growth for these products going forward with significant contribution to DRC profitability within 3 years.
Second, DRC management has recommended and received board approval to outsource the fleet department. This action will help improve operations while reducing the capital needed to renew our fleet, which needs significant additions and upgrades. DRC will divert many resources dedicated to fleet to focus on our core business of producing and selling beverages.
The success of DRC is built on dedication and commitment of highly skilled employees. In 2008 we spent more time and effort listening to our employees and we have invested in improving working conditions and ompensation. As a result we are proud of the fact that turnover has been reduced dramatically and we were able to retain our best people to guide us through another successful year.