Aramex's third-quarter profit rises 18% on lower costs

Company’s freight-forwarding and logistics business continues to perform strongly on the back of robust industrial demand

Aramex has managed to keep a tight lid on costs in the third quarter of 2022. Silvia Razgova / The National

Aramex, the Middle East’s biggest courier company, reported an 18 per cent rise in third-quarter income as lower expenses helped to offset a dip in revenue.

Net profit from continuing operations, attributable to the equity holders of the parent company, for the three months to the end of September rose to Dh37 million ($10.05m) from Dh31.35m in the same quarter last year, Aramex said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.

Total revenue in the quarter dropped 2.4 per cent to Dh1.42 billion as the company shipped lower volumes in the Oceania and North Asia regions.

Revenue was also affected by the devaluation of currencies in certain markets, making foreign products relatively more expensive for some consumers, Aramex said.

The US dollar — regarded as a safe haven asset by investors — has gained strength in recent months amid rising volatility in global markets and aggressive interest rate increases by global central banks.

The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, reached a two-decade high of 114.78 in late September.

“The strength and resilience of the GCC economies contributed to the stability of our top line year to date in 2022,” said Othman Aljeda, chief executive of Aramex.

“In line with our strategic objectives, our revenue mix is now more diversified both in terms of contributions from the different business segments and from a more diverse customer base.”

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.

Higher inflation rates are also squeezing discretionary spending.

Logistics and cargo companies registered a sharp rise 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 said its “disciplined” approach to cost management lowered operating expenses in the third quarter.

The company’s administrative expenses, which include costs related to the payment of wages, fell 2.3 per cent to Dh213m. It reported an other income of Dh9.8m, compared with an expense of Dh4.58m a year ago.

Aramex's courier shipment volumes dropped almost 13 per cent to Dh29.61bn in the three-month period, leading to a 16 per cent fall in gross profit from the business.

Meanwhile, the company’s freight-forwarding and logistics business benefited from strong industrial demand as well as “good” contribution from high-growth sectors such as retail, small and medium-sized enterprises and pharmaceuticals.

In the quarter, the business unit's revenue grew 29 per cent annually to Dh550m. It also grew by 27 per cent to Dh1.59bn in the first nine months of the year.

“The freight-forwarding business continues to be our strong performer, registering double-digit growth in both the three-month and nine-month periods,” said Mr Aljeda.

“We remain cognisant of global macro activity and believe that our dominant position in the GCC … will continue to support our resilient performance.”

The company's nine-month net profit, meanwhile, dropped more than 3 per cent to Dh128m, but revenue rose slightly to Dh4.389bn during the period.

Aramex, which completed the acquisition of e-commerce platform MyUS in October, expects the new unit to add about Dh110.2m in earnings before interest, taxes, depreciation and amortisation in 2023.

“We look forward to unlocking further value over the long term through revenue and cost synergies,” Mr Aljeda said.