Aramex third quarter profit climbs 1% as revenues rise

Net profit for the three months to the end of September climbed to Dh113.8m

Aramex, the Middle East's biggest courier company, reported a 1 per cent increase in its third-quarter profit. Pawan Singh / The National

Aramex, the Middle East's biggest courier company, reported a 1 per cent increase in its third-quarter profit, missing analyst estimates, due to tighter yields and pricing pressure from the cross-border international express business.

Net profit attributable to shareholders for the three months to the end of  September climbed to Dh113.8 million, the company said on Thursday in a filing to the Dubai Financial Market, where its shares trade. Third-quarter revenues rose 2 per cent to Dh1.27 billion from the prior-year period.

“We are pleased to see strong growth in Aramex’s e-commerce volumes despite pricing pressure witnessed across the e-commerce industry,” said Bashar Obeid, chief executive of Aramex.

“As we expect the low-margin environment to continue over the next quarter, we will remain focused on improving service levels on the ground to prioritise quality across the delivery journey and optimizing costs throughout the business to build further resilience.”

Net profit for the quarter was also impacted by implementation of measures related to accounting for leases, the company said. Excluding that accounting impact, net profit would have grown 7 per cent over the quarter.

Third-quarter revenues would have grown 5 per cent excluding the impact from currency fluctuations as well as the company’s strategic restructuring of its operations in India, according to Aramex.

During the third quarter, revenues from Aramex's cross-border international express business grew 3 per cent to Dh556m and express volumes grew 13 per cent on the back of strong demand from the US, China and other Asian markets. Pressure on pricing impacted revenue growth and margins, the company said.

The domestic express business also registered a growth of 6 per cent, reaching Dh271m in the third quarter. Domestic express volumes rose 29 per cent during the period due to strong demand in core GCC markets, including Saudi Arabia and the UAE, as well as a shift in e-commerce fulfillment business models from international to domestic, which has increased the demand for Aramex’s domestic last mile delivery services.

Freight forwarding, on the other hand dropped 4 per cent to Dh281m during the quarter due to continued regional economic uncertainty.

The company’s integrated logistics and supply chain solutions business grew 16 per cent to Dh88m from the year earlier period, due to increased demand from oil and gas customers, as well as a rise in the number of traditional retailers tapping into the multi-sales channel model.

Aramex expects continued growth in international and domestic e-commerce volumes for the rest of the year. However, pressure on pricing is likely to impact revenue growth and profitability for the remainder of 2019.

“Our efforts remain firmly focused on further enhancing last-mile delivery solutions and service improvement to ensure Aramex maintains and grows its market share in the Express business,” said Mr Obeid.

“We will continue to expand segments across our B2B business, in order to maintain a secure and sustainable balance in revenues. We will also explore opportunities for inorganic growth, to bolster our service reach and operational capabilities.”

Net profit for the nine-month period ending September 30 increased 2 per cent to Dh344.9m.