Aramex's second-quarter profit falls as revenue declines on lower volumes

Logistics company to remain focused on reducing costs and improving efficiency, chief executive says

An Aramex drone in Dubai. The company's domestic express shipments increased slightly in the last quarter. Photo: Aramex

Aramex, the Middle East’s biggest courier company, said its second-quarter profit dropped as revenue for the period declined in line with an industry-wide trend of softening shipment volumes.

Net income in the three month period to the end of June fell an annual 57 per cent to about Dh19 million ($5.17 million) due to weak market conditions and foreign exchange headwinds, Aramex said on Wednesday in a filing to the Dubai Financial Market, where its shares are traded.

Revenue dropped 8 per cent annually to Dh1.4 billion during the same period, but excluding the impact of currency exchanges, revenue was down 5 per cent.

“Q2 [second quarter of] 2023 had fewer working days, mainly due to the shift of Islamic public holidays observed in certain markets during the quarter, compared to the same period of last year where these public holidays fell during Q3 2022,” the filing said.

First-half net profit was down 53 per cent annually to about Dh43 million due to increased financial expenses, a drop in its international express unit's top line and currency devaluation in certain markets.

First-half revenue declined 5 per cent on an annual basis to about Dh3 billion.

“We performed robustly, despite continued challenges in an environment characterised by cost inflation, lower freight rates, softening shipment volumes and FX [foreign currency] fluctuations,” chief executive Othman Aljeda said.

“Our strategically balanced geographical presence remains a pillar of strength, with solid performance in key markets, including the GCC region, accounting for 39 per cent of total revenues, while continuously reinforcing revenue performance in Europe and North American outbound markets.”

Companies in the global logistics sector have grappled with a decline in shipments over the past few quarters, having been hit by lower demand for their services as consumers returned to in-store shopping after Covid-19 was brought under control.

Higher expenses have also pushed logistics operators to undertake cost-control measures to protect profits and remain competitive.

Aramex's international express business posted a 5 per cent decline in revenue, year on year, to Dh561 million for the second quarter, reflecting a 7 per cent drop in shipments in line with the global industry amid challenging market conditions, the company said.

The revenue of the domestic express business dropped 6 per cent during the period to Dh351 million, due to the impact of foreign currency exchanges.

Aramex’s domestic express shipments increased slightly by 1 per cent to 24.2 million during the last quarter, mainly driven by robust volume performance in the GCC, Mena region, Turkey and Asia.

Freight forwarding revenue slipped 17 per cent to Dh358 million.

“Global sea freight rates declined further this year, driving a shift in volumes from air freight back to sea freight,” the company said.

“Aramex reported double-digit growth in sea freight volumes, and a double-digit decline in air freight volumes during Q2 2023, also driven by less aircraft chartering in Q2 2023, compared to the same period last year.

“Road freight volumes were relatively stable during the same quarter, showcasing the strength of the Aramex trucking fleet in the GCC and wider Mena region.”

The logistics and supply chain unit's revenue fell 5 per cent to Dh106 million.

However, excluding the currency exchange impact, revenue grew 2 per cent during the quarter.

Overall, the company's performance during the three-month period was supported by its industrials unit, which won a significant contract in Houston.

The company also opened new centres in Saudi Arabia and India.

Looking ahead, Aramex said it would continue to focus on reining in its expenses.

“Our focus in the second half of the year will remain firmly on cost reduction and further efficiencies on operating expenses and SG&A [selling, general and administrative expenses], so that we can continue to be a very well-positioned, disciplined and agile business, with a strong balance sheet and key competitive strengths for the long-term,” Mr Aljeda said.