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CHAIRMAN’S REPORT
Dear Shareholders,
I have great pleasure sharing with you the highlights of another year of great achievements for
DRC.
First of all let me congratulate you on the successful completion of 50 years of DRC. It was a long journey and we are headed towards more promising future built on a strong business foundation.
Financial Summary
The start of the Year 2009 was very difficult as the global economic downturn had also impacted the UAE economy. The outlook for the year was not positive in terms of sales and profitability. Sales forecast was lower than the year 2008 while cost of raw and packaging materials increased substantially. Forecasted profit for 2009 was also negative.
Facing such a bleak outlook, DRC management embarked on a restructuring programme that focused on cost cutting and revenue enhancement. This programme was successful in turning around the profit picture of DRC and putting the company on the right path going forward.
Sales Revenue Growth
Sales revenue grew in 2009 by 11% against a volume growth of 5%. This was ahead of plan by 6%. The increase in export sales coupled with the improvement in revenue per case and reduction in discounts were the main drivers behind this increase.
Profitability
DRC achieved operating profit of AED 30.47 million Vs AED 8.35 million in 2008, a 241% improvement. Total net profit reached 32.1 million Vs. AED 14.4 million in 2008, a 123% improvement. This is the highest ever operating and net profit achieved by the company in 50 years of its history.
Market Share
Dubai Refreshments PSC (‘DRC’) products gained more than four full share points in 2009 and we ended the year with 76.0% Vs 72 % in the Year 2008. This is a significant achievement given the tough competition that exists in soft drink category.
Although year 2009 was not showing a very promising outlook, DRC was able to achieve substantial improvements in overall revenues, profit, market share and cash flow. Some of the major accomplishments include:
Sale of Aquafina plant:
DRC sold Aquafina manufacturing plant at Dibba to our sister concern Jeema Mineral Water Company and entered into a long term co packing agreement with them. This sale has helped both the companies to improve profitability by leveraging economies of scale.
Outsourcing of Fleet:
DRC Outsourced its whole fleet of trucks, cars, vans, trailers. forklifts and buses to specialized fleet operators including Al Wathba, Oman Transportm Budget Rent-a-car and Kanrent. The benefits of outsourced included substantial improvements in custpmer service and productivity with corresponding increase in delivered cases and market share.
Exports:
With local sales under pressure DRC management focused on export business development as a way to improve revenue and profit. In 2009 DRC managed to more than double its export sales from 3.3 million cases in the year 2008 to 7 million cases in 2009. This is a record achievement for DRC, which provided a great impetus in growing revenues by 11% in 2009.
Capital Projects
In order to sustain DRC’s growth into the future, DRC will have to move to a much bigger manufacturing facility soon. In 2009, DRC board and management have taken the initial steps to move to a new state of the art manufacturing facility by the year 2012. These steps include:
• Securing a long term lease for land at Techno Park having an area of 1 million sq. ft.;
• Appointing PMG as project manager;
• Issuing tender to several local and lead architects for proposal to design the new plant;
• In addition to the steps taken for new plant, DRC has placed an order in 2009 for a new plastic bottles (PET) production line, which will triple our production capacity for this growing and profitable package. This new line is expected to be in operation by the end of first quarter of 2010. This production line was purchased with the vision of moving to the new plant once completed.
At the end, I would like to express our gratitude and appreciation to His Highness Sheikh Mohammed Bin Rashid Al Maktoum Vice President, Prime Minister of U.A.E and Ruler of Dubai and His Highness Sheikh Hamdan bin Rashid Al Maktoum, UAE Minister of Finance & Industry for providing us with a business environment and an infrastructure where we can grow and contribute to the UAE economy and for providing us with their continuous support whenever it is needed.
In addition, I would like to thank all the people who supported and showed their commitment and dedication to help achieve our objectives. Our employees, shareholders, customers, suppliers and our business partners are all equally important to us in our efforts to seek a better future for all.
Thank you,
Ahmad Bin Eisa Al Serkal
Chairman of the Board
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