UPDATE 2-Kuwait’s Agility Q1 net drops 52 pct, shares fall

* Sees declining profitability for next four quarters

* Says 2010 is final option year for U.S. govt contracts

* Shares close down 3.4 percent

(Adds details, analyst comment, updates stock performance)

By Eman Goma

KUWAIT, May 16 (BestGrowthStock) – Net profit at Agility (AGLT.KW: )
more than halved in the first quarter and the Gulf’s biggest
logistics provider said future earnings would suffer from legal
costs and lost contracts following fraud charges.

The firm, formerly Public Warehousing Co. K.S.C. (PWC), has
been accused of overcharging the U.S. Army over 41 months under
contracts to supply $8.5 billion of food to troops in Iraq,
Kuwait and Jordan.

If convicted, prosecutors say the company faces a fine of
twice the gains it realised or twice the loss to the United
States.

Agility says it is in talks with the U.S. government to
settle the fraud charges, but there is no guarantee an agreement
can reached. The firm was suspended from bidding on new
contracts last November last year.

Last month, Agility said it had been replaced as the main
supplier to the U.S. military in Kuwait and Iraq.

DECLINING PROFITABILITY

“Agility is likely to face declining profitability over the
course of the next four quarters, as a result of major U.S.
government contracts winding down in Iraq, recovery from the
global recession, and the financial impact of the legal dispute
with the U.S. government,” the firm said on Sunday.

Agility added that 2010 will be the final option year for
U.S. government contracts, which have contributed up to 35
percent to the firm’s annual revenues.

“A big part of the group’s business comes from its contracts
with the U.S. government and a long suspension could have a
critical effect on the group’s business with the government,”
Agility’s auditors said in the bourse statement.

The firm’s total assets came in at 846 million dinars at the
end of the first quarter, with shareholders equity at 971.4
million dinars.

Net profit in the three months to March 31 was 17.59 million
dinars ($60.72 million), compared with 37 million in the same
period a year earlier, Agility said.

“The results were not shocking but we did not expect the
decline in profit to be this steep,” said Naser al-Nafisi,
general manager of Al Joman Center for Economic Consultancy in
Kuwait.

Nafisi said the firm’s decision not to book provisions
against any potential settlement with the U.S. government could
lead the firm to post losses in the coming quarters.

The firm did not book provisions in the first quarter, the
auditors said.

Stock Today

(Reporting by Eman Goma; Editing by Dinesh Nair and David
Cowell)

UPDATE 2-Kuwait’s Agility Q1 net drops 52 pct, shares fall