UPDATE 2-Kuwait’s Agility replaced as U.S. military supplier

* Co replaced as U.S. military supplier in Kuwait, Iraq

* To continue as supplier for six more months

* Analyst believes company will withstand blow

* Stock closes 5 percent lower

(Adds analyst comment, background, updates share price)

By Diana Elias

KUWAIT, April 15 (BestGrowthStock) – Kuwait-based logistics firm
Agility (AGLT.KW: ) has been replaced as the main supplier to the
U.S. military in Kuwait and Iraq, following U.S. authorities
indictments for overcharging. [ID:nN12191003]

The Gulf’s biggest logistics firm said in a bourse statement
on Thursday the U.S. Defense Logistics Agency has appointed a
new company as the main supplier in the area, but that Agility
will continue to supply the U.S. military for six months “to
guarantee continuity of supplies”.

Agility declined immediate comment when contacted by
Reuters, and it was not clear who has been named as the new

The firm, formerly Public Warehousing Co. K.S.C. (PWC), is
in talks with the U.S. government to settle indictments accusing
it of overcharging the U.S. Army on supply contracts in Iraq,
Kuwait and Jordan.

“This will affect them in the short-term with the contracts
they lost, but they had three to four years ago diversified
activities,” independent economic analyst Mustafa Behbehani,
told Reuters.

He said Agility’s deferred profits and operational revenues
will help it overcome difficult times. However, Behbehani said
the firm would now have to cut expenses.

On Sunday, Agility said its profits for 2009 rose 11 percent
and declared a surprise cash dividend.

Agility’s first indictment was in November. On Monday, U.S.
authorities extended the charges to include two company
affiliates: U.S.-based Agility DGS Holdings Inc and Agility DGS
Logistics Services K.S.C., which is based in Kuwait.

If convicted under the False Claims Act, prosecutors say the
company faces probation and a fine of up to twice the gain it
realized or twice the loss to the U.S.

The company says the original indictment was invalid because
it was served against the U.S. subsidiary rather than the parent
company it named.

The bourse statement did not mention Agility’s contracts in
Jordan. Naser al-Nafisi, general manager of Al Joman Center for
Economic Consultancy said matters were still “suspended”.

“I don’t see their ties have been 100 percent severed,” he
said. He said the U.S. hasn’t clearly announced it was not doing
any business with Agility and there was still room for positive

Shares of the logistics firm, which were temporarily halted
earlier in the day, closed 5 percent down on the Kuwait exchange
on Thursday. [ID:nLDE63E0UC]

Stock Market Advice

(Reporting by Diana Elias; Editing by Dinesh Nair and Sharon

UPDATE 2-Kuwait’s Agility replaced as U.S. military supplier