Aramex's second-quarter profit slides on softening courier volumes

Company's unit hit by slowdown in e-commerce activity as higher inflation squeezes discretionary spending

Aramex expects to fully complete its acquisition of e-commerce platform MyUS during the third quarter of 2022. Silvia Razgova / The National

Aramex, the Middle East’s biggest courier company, reported a 32 per cent annual decline in second-quarter net income as revenue fell due to lower courier volumes.

Net profit for the three-month period to the end of June stood at Dh44.6 million ($12.1m), compared with Dh65.5m in the second quarter of 2021, Aramex said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.

Revenue for the period decreased by about 3 per cent annually to Dh1.5 billion as the courier business softened, although this was partially offset by a sixfold growth in the freight-forwarding and logistics business.

For the first half of 2022, the company's net profit declined 18 per cent a year to Dh91.8m. This was mainly due to a 1 per cent annual drop in revenue to Dh2.96bn and the impact of exchange rate movements on the Lebanese pound and the Egyptian pound, the company said.

“One of the greatest changes we have seen in our business in the first half of 2022 is the change in our revenue mix. Our freight-forwarding and logistics business was the star performer, helping offset the softness we have seen in the courier business,” chief executive Othman Aljeda said.

The global logistics industry is reporting a slowdown in e-commerce activity as consumers return to brick-and-mortar shops, with the easing of Covid-19 restrictions, he said.

Higher inflation rates are also squeezing discretionary spending.

Logistics and cargo companies registered a sharp growth in business in 2020 after the onset of the pandemic when safety measures drove more consumers to shop online.

However, the industry has been hit with rising costs due to supply chain bottlenecks, rising inflation rates and higher oil prices that have put pressure on margins.

Aramex's courier shipment volumes dropped 9 per cent in the second quarter, leading to a 15 per cent decline in revenue to Dh936m and a 62 per cent decrease in operating profit to Dh40m.

The cross-border international express business unit led the decline in volumes and earnings.

“The Covid years of 2020 and 2021 drove hyperactivity in the express and last-mile sector. However this phenomenon is starting to fade,” said Alaa Saoudi, chief operating officer of Aramex Express.

“This year, we started to see a normalisation in e-commerce activities, as well as macroeconomic headwinds. This has, undoubtedly, impacted our performance during this period on a top-line level. However, we remain focused on driving greater efficiencies to maintain stable gross profit margins.”

Increased activity in the industrial, retail and pharmaceutical sectors, as well as small and medium businesses, has contributed to the growth in Aramex's freight-forwarding and logistics business, the company said.

In the second quarter, the business unit's revenue grew 24 per cent annually to Dh544m while operating profit jumped sixfold to Dh22m.

“The logistics and freight-forwarding business sustained a remarkable growth momentum as we focused on capitalising on verticals where Aramex has a dominant position while adopting a solutions-orientated customer approach to attract new customers,” said Mohammad Alkhas, chief operating officer of the unit.

Aramex, which previously announced plans to acquire e-commerce platform MyUS to bolster its cross-border business and expand its footprint in the US, said the transaction was expected to be fully completed during the third quarter of this year.

“Going forward, our focus is on quality earnings and better efficiencies, by optimising resources, and strengthening our end-to-end product and service offering across [the] courier, freight, logistics, warehousing and supply chain,” Mr Aljeda said.