Aramex, a global leader in logistics and transportation solutions, has seen its third-quarter (Q3) net profit plunge to AED9.6 million from AED39.6 million recorded in Q3 2022. 

 

More than half of the decline in net income can be attributed to the interest expenses related to the acquisition of MyUS due to the steep increase in interest rates since the transaction. Therefore, normalised net income – excluding the FX impact and the increase in finance loan expenses – was AED30.4 million in Q3 2023, a decline of 23% YoY.

 

However, Aramex sustained its performance with group revenues amounting to AED1.35 billion. This represents a moderate 5% YoY decline, attributed to currency fluctuations, macroeconomic challenges, and subdued global retail activity in certain markets. 

 

Steady operating margins

Othman Aljeda, Chief Executive Officer, Aramex, said: "In the face of an ongoing global growth slowdown, Aramex remains steadfast in its commitment to a strategic framework centered on operational efficiency, high-quality sales and stringent cost management. Our focus on cost optimisation has been pivotal in maintaining steady operating margins, even amidst the challenges posed by currency fluctuations and the interest rate environment.”

 

‘’The slight softening in revenue can be attributed to global headwinds, FX translations and reduced retail activities. However, with the resilience of consumer spending in the GCC, the region continues to be a key driver of growth, reporting a 21% YoY growth in Gross Profit in Q3 2023.”

 

‘’As we continue to execute Q4, historically a stronger quarter marked by increased retail activity during festivals, our primary focus will be to deliver outstanding services to our customers. We will continue enhancing trade lanes, enriching the customer experience and fortifying our operational capabilities across all business lines. Our goal is to expand our quality business lines, focusing on B2B, direct brands, SMEs, and premium offerings such as same and next-day deliveries.” 

 

Enduring resilience

The quarter bore testament to the company's enduring resilience, as evidenced by a noteworthy 4% YoY increase in gross profit and a resilient EBITDA of AED134 million for the third quarter of 2023. This progress was underpinned by the company's proactive measures to boost operational efficiencies and optimise General and Administrative expenses (G&A) for the organic business (excluding MyUS).  Our prudent cost management resulted in strong margins in Q3, with a Gross Profit Margin of 25% and an EBITDA margin of 10%.

 

Despite the increase in selling expenses, which aligned with our focus on sales specialism and enhancing competencies, Aramex remained steadfast in its commitment to cost-efficiency. 

 

The third quarter of 2023 showcased the company’s ability in this regard, as evidenced by a noteworthy 9% YoY reduction in organic (excluding MyUS) G&A expenses. This achievement signifies Aramex’s agility and effectiveness in managing costs, effectively bringing organic G&A back to pre-pandemic levels. 

 

Aramex's strategically diversified geographical presence remains a key advantage, with the GCC region consistently leading the way by contributing a remarkable 40% of the group's total revenues.

 

Aramex maintained a strong balance sheet position with Net Debt-to-EBITDA ratio of 2.6x and a healthy cash balance of AED604 million as of September 30, 2023.

 

Business performance

International Express Q3 Revenue grew by 4% YoY, reaching AED512 million, despite the softening of shipment volumes due to the slowdown in retail activity. Premium products (same day and next day –intra GCC) and dangerous goods continue to perform well.

 

Reported Gross Profit for Q3 2023 reached AED183 million, marking a 20% YoY increase and a solid Gross Profit Margin of 36%. It is worth noting that the Express product costs had a positive impact during Q3 2023 which we do not expect to recur in future quarters. 

 

Several factors, including improvements in linehaul costs and other cost optimisation measures, as well as the consolidation with MyUS, continue to support the performance of the international express product. Notably, the organic business (excl MyUS) also reported significant improvement - cost per shipment was well managed, resulting in a 12% YoY increase in Gross Profit per shipment. 

 

Domestic Express

Domestic Express reported stable Revenue of AED353 million in Q3 2023, representing a modest decline of 5% YoY, due to marked currency fluctuations. Excluding the FX impact, revenue grew 4%. Volumes were stable for the domestic express product. 

 

It is important to note, excluding Oceania, where a turnaround plan is currently in progress, the domestic volume growth was 2% in Q3 2023 compared to the same period last year, driven by volume growth in GCC and MENAT. 

 

The lower Gross Profit margin is primarily attributed to the softness in Oceania, as well as a different allocation of resources within the Group. Aramex’s automation and operational efficiency efforts have pushed up courier productivity by 6%; Aramex’s Pick-Up and Drop-Off (PUDO) network increased by 65% this quarter compared to the same period last year. 

 

Freight-Forwarding

Aramex's Freight-Forwarding business continues to deliver quality business, with solid growth in volumes and good profitability. Although a 4% YoY softening in Gross Profit was observed in Q3 2023, this was predominantly influenced by the reduction in global shipping rates during that period which impacted revenues.

 

The business has shown resilience through the economic cycles, as evidenced by the notable improvement in the Gross Profit margin, which increased to 16%. 

 

Logistics and Supply Chain Solutions

Logistics and Supply Chain Solutions Revenue witnessed a 5% decline YoY to AED105 million in Q3 2023, primarily due to FX translations. However, when FX is factored out, Revenue grew 1% in Q3 2023. 

 

The rebalancing of the logistics business continues, with increase in sales from strategic sectors such as retail and energy. Sequentially, Q3 2023 saw a decline in sales and margins compared to Q2 2023 due to loss of business, following the acquisition of our customer by a company already having Logistics infrastructure. New business wins secured in Q3 2023 will be reflected in the financials in 2024.--TradeArabia News Service