Aramex, the Middle East’s biggest courier company, reported a 23 per cent drop in the second quarter net profit due to a rise in "unforeseen" costs related to the Covid-19 pandemic.
Net income for the three months to June 30 fell to Dh94.4 million, Aramex said in a regulatory filing to the Dubai Financial Market on Wednesday. Second quarter revenue, however, grew 4 per cent year-on-year to Dh1.33 billion.
"As a business, we are now operating in a higher cost environment which is adding pressure to our profitability margins, Bashar Obeid, chief executive of Aramex, said. "Having said that, we have a robust balance sheet and comfortable free cash flow position, enabling us to manage higher costs while continuing to protect shareholder value."
Global trade has been hit hard by the restrictions put in place to stop the spread of Covid-19. In May, the World Trade Organisation said global trade would fall between 13 and 32 per cent in 2020, with all regions facing double-digit declines.
Aramex said coronavirus-related costs such as challenges in cross-border operations due to global shutdowns and an increase in line-haul charges, affected profitability of its international express and freight units.
The company said its international express business decreased 1 per cent to Dh582m, as shipment volumes dropped 4 per cent in the second quarter.
Its freight-forwarding division saw business decrease 3 per cent to Dh268m, mainly because of declining demand from the oil and gas sector and traditional retailers. However, a surge in demand for healthcare-related shipments offset some of that pressure, it said.
Its logistics and supply chain business remained flat year-on-year.
However, the company's domestic business grew 31 per cent as customers, confined to homes, increased the use of e-commerce sites to buy goods, particularly those in Saudi Arabia, UAE, and Kuwait. Online shopping also increased ahead of the rise in VAT and custom duties in Saudi Arabia, it added.
"While we are starting to see a modest recovery in some of our [business] verticals, it is too soon to say with certainty that we have returned to pre-Covid-19 levels," Mr Obeid said.
Aramex said it will continue to invest in expanding last-mile operations and upgrading its infrastructure, including warehouses and transportation fleet.
“We are not out of the woods yet; the shape of the global economic recovery is still uncertain, and it is too early to determine a clear trend or change in consumer behaviour," Mr Obeid said.
"However, we are optimistic that growth in e-commerce will continue to drive healthy shipment volumes and expect to continue to see solid growth in the healthcare vertical, albeit at a likely slower pace of growth," he said.
