Food security – A priority for the GCC

August 2014

V I E W P O I N TConnecting you with the right opportunities

Amid rising population and insufficient domestic food production, GCC countries rely heavily on imports; In 2010, food imports in the GCC region accounted for more than 70% of its total food requirement. This over dependence on imports, together with rising global food prices has aggravated the food security issue in the region. In the past, disruptions in food imports, either due to policy restrictions by exporting countries or natural calamities, have affected the region significantly. Consequently, GCC governments have taken several initiatives to enhance food security in the region and regularise food supply.

Some of the initiatives are listed below:-

Saudi ArabiaDuring 2011-2012, Saudi Arabia invested close to USD 23.1 billion in food security initiatives, which included financial and oil aid to target countries in lieu of agricultural lands. In February 2014, Saudi Arabia formed a joint venture with India to develop rice storage and distribution hub in Dubai at a cost of USD 27 million. Saudi Arabia is planning to expand focus towards Eastern countries to secure its food supplies. It also to phase out domestic wheat production by 2016 as it has become unviable.

UAE UAE has been very active in its efforts to ensure food security. Organisations such as Arab Authority for Agricultural Investment and Development (AAAID) and Al Dahra Agriculture were formed for improving food security in the Emirates. UAE is also promoting the development of aquaculture

projects. Major initiatives include the development of (i) 360,000 square meter fish reserve in the coast of Fujairah, (ii) A 56,000 square meter Siberian caviar farm in Abu Dhabi, (iii) A land-based 500,000 square meter recirculation aquaculture system (RSA) farm in Abu Dhabi to produce 4,000 metric tonnes of fish, annually. UAE is improving food security through purchase of arable lands in East Africa, Southern Europe and South Asia. Al Dahra, a private firm, which seeks to partner with UAE government to ensure food security, acquired 8 agricultural companies in Serbia for USD 400 million in March 2013.

QatarIn June 2014, Qatar formed a supreme committee comprising of 17 representatives to execute Qatar National Food Security Programme that aims to upgrade and develop agricultural products in Qatar. Through this programme, Qatar seeks to meet 40% of its food demand through domestic production by 2023. During 2011-2012, Qatar invested USD 5.1 billion toward its 10-year plan of becoming self-sufficient and promoting food security, which includes leasing 400,000 hectares of land in Kenya against a USD 3.5 billion loan to the Kenyan Government.

BahrainBahrain allocated USD 174.0 million of food subsidies (for red meat, poultry and flour industries) in 2013, up from USD 145.8 million allocated in the previous year. The government has mentioned that the amount of subsidy on these basic staples will continue in 2014. In addition, the

country has invested in overseas projects in Sudan, Pakistan, Turkey, Thailand, Philippines, Ethiopia, India and Turkey by purchasing and privatizing large strips of agricultural land that are registered in Bahrain’s name.

Oman Oman invested USD 361 million over 2010 and 2011 on fisheries, modern irrigation systems, agricultural production and livestock breeding technologies. Moreover, in an attempt to control the severity of price rise of basic food products (such as rice, wheat and sugar) including locally manufactured fodder, the government of Oman introduced a subsidy plan with retrospective effect (for food stuffs - from February 2011 and for fodder - from January 2011). In June 2014, Oman announced plans to develop a Food Cluster at Sohar Port that will include a sugar refinery and Strategic Food Reserves facility. The Food Cluster will serve as the country’s first dedicated agro bulk terminal to handle wheat and grain shipments.

KuwaitLike other GCC countries, the government of Kuwait allocated USD 80 million in 2011 to Public Authority for Agriculture Affairs & Fish Resources. In addition, in October 2012, the Kuwaiti ruler announced plans to launch a USD 7.11 billion Asian Food Security Fund, which besides helping Asian participants secure food supply, would help Kuwait achieve food security. In July 2014, The Public Authority of Agriculture Affairs and Fish Resources announced plans to offer plots of land either for cultivation or raising cattle subject to the approval by Kuwait Municipality.

Alpen Capital India acted as the Financial Advisor to Amrit Banaspati for selling its Edible Oil and Fats Business to Bunge India.

The acquisition includes Amrit Banaspati’s manufacturing facility at Rajpura in the state of Punjab, rights to its brands and trademarks, its sales and distribution business and the transfer of employees pertaining to its edible oils and fats business to Bunge India. Bunge India would also acquire rights to GAGAN, the vanaspati brand held by Amrit Corp which is currently licensed to Amrit Banaspati.

Amrit Banaspati’s transfer/sale of the Edible Oils Business to Bunge is a lump sum Consideration of Rs. 220.72 Crores subject to the Adjustment to Consideration as provided in the Agreement. Besides the Consideration, the secured and unsecured loans of the Company amounting to Rs. 40.60 crores will be taken over by Bunge as part of the slump sale. In addition, Bunge will also purchase the “Gagan” trademark from Amrit Corp under a separate Deed of Assignment for a total consideration of Rs. 104.50 crores.

M & A transaction For Amrit Banaspati, India

Exclusive Financial Advisor

Sale of Edible Oils & Fats Business

Bunge India Private Limited

USD 80,000,000

to

Amrit Group

Alpen Capital transactions

The GCC Food Industry Outlook

Alpen Capital’s report on the GCC Food Industry estimates that the food consumption in the region will expand at a CAGR of 3.1% over 2012-17, reaching 49.1 million metric tonnes by the end of 2017. This increase is attributed to the rapidly growing population in the GCC, increase in foreign tourists as well as the rising income levels of the region. Per capita food consumption for the GCC region is forecasted to reach 971.2 kg by 2015 and 983.0 kg 2017.

From the consumption standpoint, Saudi Arabia will continue to lead the region’s food sector accounting for close to 60% of the total consumption. However, owing to rising population and increase in tourist arrivals, food consumption growth in Qatar is expected to outpace that of other GCC countries. Qatar will be followed by UAE and Oman in food consumption growth.

Riding strong on favorable demographic factors, we believe that there is significant investment potential available in the GCC food sector. High dependence on imports, while posing a challenge for the economy, creates several opportunities for private sector companies to position themselves and take advantage of the growing demand.

The region holds strong potential especially in the food processing segment trade and re-exports. Although food security is an issue with the GCC countries, measures such as renewed focus on agricultural production and increased government support for local food processing companies would help attract higher foreign investments,

strengthen food security in the region, and aid overall market growth. While some of these measures are implicitly factored into the current industry outlook, their effective and timely implementation may positively alter the market’s actual growth trajectory.

During 2012–2017, even though we expect cereals to maintain their dominant position among food categories, due to rising affluence and increasing health awareness, consumption of protein rich and high value products such as a meat & fruits is expected to increase. During 2012-2017, we expect meat consumption to increase at the fastest pace at a CAGR of 3.9%, followed by fruits, vegetables, milk, and cereals at a CAGR of 3.7%, 3.4%, 3.1% and 2.5%, respectively. Others include pulses, sugar, oil, fish, eggs and potatoes, is expected to grow at a CAGR of 4.0% during the period.

Alpen Capital’s report is available for download on its website – www.alpencapital.com under the tab Industry reports – 2014. If you require a copy of the report, please write to alpencapital.events@alpencapital.com

Opportunities in the GCC Food sector

Abu Dhabi eyes food sector growth as investors tap trade zoneAbu Dhabi is attracting growing investment from global food groups who are setting up plants in the Emirate’s new industrial zone as they tap rising consumer demand in neighbouring Gulf countries, a top official involved in the project said.

Abu Dhabi is investing billions of dollars in infrastructure, real estate and tourism to diversify its economy beyond oil. Among the projects under development is a 418 square kilometre industrial zone called Kizad which is targeting investors in industries including steel, glass, engineered metal products as well as food. Kizad already has agreements with Brazil’s BRF SA, the world’s largest chicken exporter, for a USD150 million processing plant, and Abu Dhabi’s National Food Products Company (NFPC) for a AED1.5 billion (USD 408.39 million) facility, Kizad’s chief executive Khaled Salmeen told Reuters.

Almarai invests SAR5bn in poultry lineAlmarai has invested 5 billion riyals in the “Al-Youm” poultry project in Hail, which aims to drastically improve the mass manufacture of poultry in the Kingdom through comprehensive development and modernization of infrastructure, laboratories, factories and production techniques. The project is expected to provide 3,000 jobs for Saudi nationals who will be trained and qualified for the various opportunities in the field. The project will also produce 200 million birds a year in accordance with the highest quality standards.

Almarai Company is among the top companies contributing toward the achievement of food

security in Saudi Arabia through the use of economic and natural resources, as well as through raising awareness for developmental responsibilities. It is also one of the leading companies in supplying the domestic market with fresh dairy products.

Marmum turnover grows 133% in 10 years; targets export marketsMarmum Dairy Farm, a subsidiary of Dubai Investments PJSC [DI] and one of the leading dairy brands in the UAE, has achieved a phenomenal growth of over 133% in the turnover over the last 10 years, reinforcing its leadership in the regional dairy and juice industry. The company’s gross revenue recorded a compounded annual growth rate [CAGR] of 9.8 per cent between 2004 and 2013, while gross volumes achieved a corresponding CAGR of 7.9 per cent in the same period. The company also unveiled plans to double its turnover over the next five years through a three-pronged strategy focused on augmenting its farm capacity, introducing new bottling lines, additional infrastructure and expanding its distribution network, both locally and internationally.

Al-Kabeer plans to build new factory in Saudi Arabia Al-Kabeer, one of the leaders in the Middle East frozen food industry plans to set up a factory with complete production facility in Saudi Arabia. Al-Kabeer since its launch in 1974 as a small chilled meat storage unit in India has grown leaps and bounds. Today the Company has evolved into a multidimensional, multiproduct business with processing units, cold storages and offices spread over in 10 countries. Saudi Arabia is the largest market of Al-Kabeer where it has 5 individual branches in Dammam, Riyadh, Jeddah, Khamis and Madinah to provide an

extensive distribution network to fully support the vast market. The company started in Saudi Arabia in 1981 as a small entity and were limited to the main local market with just a few tons of sales of mutton items.

Dubai Industrial City launches new halal clusterDubai Industrial City, a member of TECOM Investments, announced the launch of a dedicated Halal Cluster as part of plans by Dubai to become the global capital of the Islamic economy. The cluster is a dedicated base for halal manufacturing and logistic companies in food, cosmetics, and personal care industries and is spread across nearly 6.8 million sq ft.

The move has been taken in collaboration with Dubai Islamic Economy Development Centre, Emirates Authority for Standardisation and Metrology (ESMA) and Dubai Municipality, a statement said. Dubai Industrial City is spread across 560 million sq ft of land and was established to serve as a catalyst for the growth and expansion of the industrial sector in the UAE.

Most modern Fish & vegetables market opens in Abu DhabiAbu Dhabi announced the opening of a modern fish and vegetables market in most hygienic and odour free environment. The market was inaugurated by HE Sheikh Nahyan Bin Mubarak Al Nahyan, UAE Minister for Culture, youth & community development at Mushrif Mall in Abu Dhabi. Billed as the benchmark in food safety and hygiene in the region, the market has 3 separate sections for seafood, vegetables and meat with more than 200 shops in the ground floor of the popular mall in Abu Dhabi. The market is simply the biggest and most technologically

Industry update

Alpen Capital, Dubai successfully arranged a project finance facility for National Food Products Company. Established in 1971, National Food Products Company is a leading manufacturer of foods and beverages in the UAE with key brands such as Milco (dairy), Lacnor (juice), Oasis (bottled water), Arla National Food (distributor of Puck, Lurpak, and The Three Cows) and Milco Plastic.

Alpen Capital, Dubai also arranged a USD 25 million working capital facility for Sahar Enterprises LLC. Established in 1979, Sahar Enterprises LLC is a leading frozen and processed foods manufacturer in the region. Their range of products includes meat and poultry products, seafood products, vegetarian products and ready-to-eat meals.

Arranging debt for National Food Products Company and Sahar Enterprises, UAE

Financial Advisor

National Food Products Company

Project Financing Facility

Financial Advisor

Sahar Enterprises LLC

US$ 25,000,000Working Capital Facility

Disclaimer: This document, produced by Alpen Capital*, is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities. This communication is not a Financial Promotion. Alpen Capital undertakes all reasonable measures to ensure the reliability of the information included in this publication. Information and opinions contained herein have been compiled or arrived at by Alpen Capital from sources believed to be reliable but no representation or warranty, express or implied, is made as to and no reliance should be placed on the accuracy, completeness or correctness of the information and opinions contained in this document. Alpen Capital accepts no liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. The information and opinions contained herein constitute neither an invitation nor an offer or recommendation to use a service, to buy/sell investment instruments, nor to perform any other transaction, but serve purely for marketing and information purposes. In addition, the information is not intended for distribution to or for use by individuals or legal entities that are citizens of a country, or have their domicile or registered offices in a country where the distribution, publication, provision or use of this information would violate applicable laws or regulations, or in a country in which Alpen Capital would have to comply with registration or approval requirements. It should also be noted that all investments carry a certain amount of risk and should not therefore be entered into without first obtaining professional advice (contactus@alpencapital.com).

Distribution in UAE: This information has been distributed by Alpen Capital (ME) Limited, Dubai, UAE. Alpen Capital (ME) Limited is regulated by Dubai Financial Services Authority (DFSA). Distribution in Qatar: This information has been distributed by Alpen Capital Investment Bank (Qatar) LLC which is authorised by Qatar Financial Centre Regulatory Authority (QFCRA). Distribution in Oman: This information has been distributed by Alpen Capital LLC which is duly authorised and regulated by the Capital Market Authority (CMA). Distribution in Bahrain: The information has been distributed by Alpen Capital (Bahrain) B.S.C (C) which is regulated by the Central Bank of Bahrain (CBB) as Investment Business Firm Category 3.

Distribution in The Kingdom of Saudi Arabia: The distribution of all information contained herein is by Alpen Capital Saudi Arabia Company Ltd. Alpen Capital Saudi Arabia Company Ltd is registered with Commercial Registration in Riyadh, Saudi Arabia and is licensed by the Capital Market Authority in Saudi Arabia.

Distribution in India: The material produced hereunder has been collated and generated by Alpen Capital (ME) Limited (Alpen) and has been shared with Alpen Capital India Private Limited (ACIPL) for the information of its present and prospective clients. No representation is made that the transactions or dealings undertaken based on the information and recommendations contained herein will be profitable or they will not result in losses. Neither ACIPL nor its Directors or Employees assume any responsibility or liability, financial or otherwise, for losses or damages sustained due to any transaction or action undertaken based on the information contained herein. Recipients of this document are advised to consult experts before taking any decisions based on information provided in the document. Foreign currency denominated securities, wherever mentioned, are subject to exchange rate fluctuations which could have an adverse effect on their value or price, or the income derived from them. Indian Investors may note that any investment in foreign entities and foreign securities is subject to the rules and regulations as may be prescribed by the Government of India, Reserve Bank of India and SEBI from time to time. This Disclaimer is in addition to and not in lieu of the Disclaimer issued by Alpen Capital and should be read in conjunction with each other.

© Alpen Capital 2014 (www.alpencapital.com)*Alpen Capital collectively refers to Alpen Capital (ME) Limited, Dubai, Alpen Capital Investment Bank (Qatar) LLC, Alpen Capital LLC, Alpen Capital (Bahrain), BSC, Alpen Capital Saudi Arabia LLC and Alpen Capital India Private Limited.

Printed on 100% recycled & FSC certified paper.

advanced fresh food market not only in Abu Dhabi but also in the entire Gulf region. The facilities span over 200,000 square feet and will daily market over 150,000 kilograms of fresh produce. Divided into 3 distinct fresh food offers, i.e., Farmers’ fresh Produce (fruit & vegetables), Meat & Poultry and Seafood, the market will have more than 200 shops selling freshest high quality products with the widest choice for the residents of Abu Dhabi.

Greenhouses key to water and food security in UAE, expert saysA United Nations agency is working with water-scarce UAE, which is heavily dependent on imported food, to develop greenhouses to save water and boost food security, an expert said.

Greenhouses use only 10 per cent of the water needed to produce the same yields from open farming, said Pasquale Steduto, deputy regional representative for the Near East and North Africa at the UN Food and Agricultural Organisation (FAO). They work by recycling water - normally lost in plant transpiration and evaporation in the open - in contained spaces where farming and climate conditions are controlled.

NADEC recognised and awarded Superbrands Status for 2013NADEC, one of the leading food, dairy and beverage companies in the Middle East and North Africa (MENA), has been recognized for its commitment to brand excellence and quality as per the international standers by the KSA arm of the independent authority and arbiter of branding excellence - Superbrands.The NADEC brand takes its place alongside the top brands from across a number of

sectors, including FMCG, aviation and telecommunications. After being shortlisted by the Superbrands Council’s stringent research selection process involving industry professionals from the world of branding, NADEC was awarded the official ‘Superbrand’ status.

Popular South African chain KAUAI brings its fresh delicacies to DubaiKAUAI, an authentic South African healthy food chain, has opened doors in Dubai, bringing its fresh mouth-watering recipes to the city’s calorie-conscious food-lovers. A food concept inspired by fresh and delicious fruits from the picturesque island of Kauai, the trendy food brand indulges the taste-buds without compromising on quality or diet.

Staying true to its ‘tasty food, healthy life’ philosophy, KAUAI offers an extensive menu of healthy food and beverage offerings for all preferences - Tasty, Healthy, No Trans Fat, Vegan options, Wraps and Smoothies. The menu includes healthy sandwiches, wraps and delicious salads to the finest freshly squeezed juices and a wide variety of refreshing smoothies.

Singapore F&B companies look to expand in the GCCWith strong demand for halal food and beverage products in the Gulf Cooperation Council (GCC) countries, Singapore-based companies that manufacture halal products are looking to set up operations in the region. Reflecting their interest in doing business in the region, Singapore-based companies participated at Gulfood 2014, a major food and beverage exhibition at Dubai World Trade Centre (DWC). This year, the number of exhibitors increased to 48 from 44 companies

in 2013. Companies generated USD 20.1 million in sales at last year’s exhibition.

Singapore’s food and beverage exports to the UAE touched USD 127.3 million in 2013. Exports to the Gulf Cooperation Council (GCC) countries reached USD 238 million last year, with a growth of between 5 and 6 per cent year-on-year. The UAE accounts for 46.5 per cent of Singapore’s exports to the GCC.

Australia wants to be solution provider for UAE food security programmeAustralia wants to be an international solution provider for most of the countries which has food security issues, according to Andrew Robb, Australia Trade and Investment Minister.

“Australia is internationally recognised for producing food with high levels of safety and has an enabling role can play to support the UAE in its food security programme,” he said at “Australia Unlimited Mena 2014”, an event which was held in Dubai on Sunday.

The Gulf region faces food security challenges and needs certainty of supply and diversification from individual suppliers and Australia will be able to provide sustainable food supply, he added.

The UAE currently imports approximately 90 per cent of what it consumes. However, the county has a growing population and the entire region is severely challenged by an extreme climate and a scarcity of water.

Industry update