Aramex fourth-quarter net profit slides on rising costs

Aramex, the Middle East’s biggest courier company, reported a 21 per cent slide in fourth-quarter net income despite a rise in revenue as higher operating costs and continued pandemic-driven headwinds dented profitability.

Net profit for the three-month period to the end of December fell to Dh46.08 million ($12.5m) from the same period a year earlier, Aramex said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.

Quarterly revenue climbed one per cent year-on-year to Dh1.61 billion, driven by a strong performance in the company’s logistics and freight-forwarding business.

Operating profit at the end of the three-month period slipped 33 per cent to Dh60m. Aramex attributed the decline to “linehaul costs due to the continued pricing pressure”, higher operating expenses amid scaling up of operations to meet demand and “Covid-19-induced costs and capacity constraints”.

“Our margins remain under pressure,” Othman Aljeda, chief executive of Aramex, said.

“Our customer-first approach means we are absorbing a higher cost of doing business to ensure we continue to respond to customer needs, defend and grow our market share despite the ongoing supply chain disruptions caused by the pandemic.”

While the pressures will probably continue this year, Aramex has defined a strategy to grow the business and improve profit.

“This includes investment in technology and operational optimisation initiatives to strengthen and grow our business across all markets,” Mr Aljeda said.

Limited cargo capacity by airlines amid a pandemic-driven scaling down of operations and shipping bottlenecks have disrupted supply chain globally. It has also pushed the cost of freight higher, but the demand for logistics and courier services has increased with rebounding economic activity and has put courier companies’ margins under pressure.

Aramex's full-year 2021 net profit also fell 15 per cent on an annual basis to Dh225m. However, revenue for the 12-month period jumped 10 per cent to a record Dh6.07bn. Higher costs dragged operating profit 23 per cent lower to Dh307m.

Revenue at Aramex’s courier business, which includes its domestic and international express operations as well as business-to-business and e-commerce offerings, fell 12 per cent to Dh1bn during the fourth quarter of 2021.

However, it grew five per cent year-on-year to Dh4.14bn for the 12-month period, driven by accelerated growth in the global e-commerce market. The volume of business increased 10 per cent on an annual basis last year, Aramex said.

“Over the course of the year, we invested in expanding our operations in key markets, including Riyadh, where we built and are operating a fully automated warehouse,” Alaa Saoudi, chief operating officer at the Express business, said.

“While we are seeing intensified competition from new market entrants, especially in the last mile, our scale and industry expertise will continue to solidify our market leading position.”

The company’s logistics and freight forwarding business saw revenue climb 32 per cent to Dh504m during the fourth quarter, amid strong demand from the oil and gas, retail and fashion and healthcare sectors.

In the 12-month period, the top line grew 21 per cent year-on-year to Dh1.76bn driven by a rebound in global economic activity, it said.

Despite pandemic-driven uncertainties and elevated costs, Aramex is upbeat about business prospects this year.

“We enter 2022 with a clear strategy to deliver our growth ambitions. Our new operating model will enable us to be better prepare to capitalise on the steady global economic recovery and grow our market share within both the logistics and freight forwarding and the courier business,” Mr Aljeda said.

“We expect e-commerce to sustain a good growth momentum in 2022 and beyond.”

Acquisitions will remain a key enabler of the company’s growth. Aramex is “seeking attractive and value accretive investment opportunities in markets that will enable trade flows into Menat, and help us to further grow our global footprint”, Mr Aljeda said.

In September, Aramex said it is in talks to acquire Turkish transportation company MNG Kargo. Discussions are still in the early stages, it said in a regulatory filing at the time.