Aramex, a leading global provider of logistics and transportation, has seen its first-quarter (Q1) net profit slump 49% YoY to AED24 million ($6.54 million) due to a mix of factors, including currency devaluation in certain markets.
Other factors that cut into profits were interest expenses associated with the MyUS acquisition and in line with Aramex’s strategy to leverage the balance sheet, as well as the softening at topline flowing through to the bottom line.
Amid softening of global shipment volumes, Aramex continued to deliver a resilient performance in the first quarter of 2023, while making further progress in executing its strategy. Revenue totalled AED1.43 billion, down marginally by 1% YoY, outperforming global peers.
Gross profit improves 4pc
Gross profit improved 4% YoY to AED358 million in Q1 2023, driven by consolidated growth in the International Express business – with the MyUS acquisition providing a further boost. This reflects Aramex’s consistent investment in efficiency maximising initiatives and cost optimisation through the economic cycle. EBITDA for Q1 2023 decreased 9% to AED153 million.
Aramex’s Q1 2023 Revenues declined marginally by 1% YoY to AED1.43 billion, reflecting the robustness of its revamped operating model, amid global headwinds. Revenues were driven by stable performance in International Express and the resilience of the Freight-Forwarding, and Logistics and Supply Chain Solutions Businesses.
Revenue continued to be impacted by currency fluctuations, inflationary pressures, and normalisation of worldwide shipping flows. However, despite softening revenues, the Company demonstrated resilience in volumes and improvements in margins.
The Selling, General and Administrative Expenses (SG&A) costs for the organic business, which excludes MyUS, declined 3% YoY, reflecting the Company’s disciplined cost optimisation drive, while consolidated Group SG&A costs increased by 6% mainly due to the addition of MyUS. The Group’s SG&A organic structure as a percentage of revenue has remained stable.
FX and devaluation impact
Due to some negative FX and devaluation impact in some markets, Aramex moved swiftly to hedge exposures and move into more US Dollar-denominated contracts.
Aramex maintained a strong balance sheet position with Net Debt-to-EBITDA ratio of 2.3x and a healthy cash balance of AED722 million as of 31 March 2023.
Othman Aljeda, Chief Executive Officer, Aramex, said: “In a quarter when our industry globally continued to face headwinds from cost inflation, base rate rises, softening shipment volumes and FX fluctuations, we are proud to present a stable and resilient financial and business performance for the first three months of 2023. We continued to both drive revenue quality and benefit from our sustained investment in efficiency, and our performance vs industry means we are confident in unlocking the potential of our rebalanced business model.
“Three of our four business lines increased gross profit year-on-year, and we maintained a stable profit margin in our Domestic Express business, due to our relentless focus on cost control and improvements in productivity. We maintain our commitment to invest in optimisation measures across the economic cycle, including automation of shipments sorting process which enables us to boost operational productivity; and the newly launched Enterprise Automation & Robotic Process Automation Centre of Excellence that is focused on digitalising the overall enterprise for higher efficiency levels within the support functions as well as across our operations.”
Signs of optimism
The continued growth in the GCC economies, and the expectation that inflationary pressures around the world may peak and then decline significantly show some signs of optimism towards the end of the year. Aramex believes the key differentiator in the months ahead will be its ability to invest in technology, along with its geographic and business line diversification which offers competitive advantage.
“We will continue to improve the efficiency of our services, enhancing customer experience, strengthening road networks, improving resourcing and making other targeted operational improvements across our four products – putting us in a strong position to capture market share and deliver long-term value for our shareholders.”
Business performance
International Express reported stable consolidated Revenue of AED567 million in Q1 2023, reflecting the additional volume from MyUS and attractive margins in Aramex’s Parcel Forwarding Business, which includes MyUS and Shop & Ship. Organic revenue (excluding MyUS) witnessed a softness Year-on-Year due to a change in customer mix.
Reported gross profit for Q1 2023 was AED184 million, a YoY increase of 3%. The corresponding gross profit margin was maintained at 32% due to a number of factors, including improvements in linehaul costs and other cost optimisation measures.
Domestic Express
Domestic Express Q1 2023 revenue declined by 4% to AED362 million due to FX impacts in Egypt, Lebanon, South Africa and certain Menat countries, as well as a revenue decline in Oceania, where a restructuring plan is in progress. This was partially offset by an increase in domestic revenues from the GCC and prudent cost management. Gross profit for the period was AED87.6 million, a slight decrease of 6%.
However, the corresponding gross profit margin remained stable at 24% compared to the same period last year, reflecting the company’s success in operational efficiencies especially at the “last mile" as a result of the company’s automation efforts- which further enhanced courier productivity; and a doubling of Aramex’s Pick-Up and Drop-Off (PUDO) network in Q1 2023.
Freight-forwarding
Aramex's Freight-Forwarding business delivered a robust performance in the first quarter with Revenue maintained at AED385 million and a 17% increase in Gross Profit at AED61 million. This was driven by the positive impact of operational efficiencies, including increased focus on realising quality revenue and consolidation of trucking resources between freight and logistics products. Revenue growth in Africa and America, stable revenues in the GCC and Menat, and newly opened freight services in Oceania contributed to the revenue growth in the Freight-Forwarding business.
Logistics and supply chain solutions
Logistics and Supply Chain Solutions Revenue decreased marginally by 5% to AED107 million in Q1 2023, while Gross Profit increased by 23% to AED16.2 million, with a corresponding Gross Profit Margin of 15.1% - up from 11.7% in Q1 2022. Solid performance in the GCC, Europe and South Africa, driven by sectors such as Retail, e-Commerce, Pharma and Oil &Gas, contributed to this growth.-- TradeArabia News Service
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