Aramex is looking to buy up to three companies this year as the Dubai-based courier expands its footprint and e-commerce business.
Aramex is eyeing acquisitions in Asia, Africa and the US and will use debt to finance these purchases, Hussein Hachem, the chief executive, said yesterday.
“What we look for are companies specialised in e-commerce facilitation for the international markets,” said Mr Hachem. “We feel there is a gap in capacity and we are filling that gap through either acquisitions or deploying our new technology and connecting it to other platforms.”
Aramex has been snapping up assets to enhance its fast- growing e-commerce business. Last year, it made its biggest acquisition to date, buying the New Zealand and Australia business of New Zealand-based Fastway Couriers for NZ$125.2 million (Dh303.4m).
Aramex is using various borrowing options to finance growth. "Acquisitions in the future are mostly going to be leveraged through debt," said Bashar Obeid, the chief financial officer. "Now we are acquiring in growth markets where currency is an issue, and we are raising debt locally in every market."
Last year, it signed a US$150m, five-year financing facility with a syndicate of local banks, at 160 basis points plus Libor. Half of the facility was consumed last year and the company plans to tap the remainder. It may also borrow another $150m from the same syndicate of banks, depending on market conditions and interest rates.
“The environment keeps changing and so you can’t really see what will happen towards year-end and whether liquidity will be in the market out there,” said Mr Obeid. “For the next few months – six, nine months – if we come across something reasonably material that requires us to tap into this extra $150m, I think we can get it at something similar to now.”
Banks in the region are suffering from tightening of liquidity as the oil price rout prompts governments to withdraw deposits placed at lenders.
Aramex posted a 36 per cent drop in fourth-quarter net profit to Dh89.4m owing to a provisioning for a company incentive plan to retain staff. The five-year scheme will eat up profit for the next few years, decreasing gradually, Mr Obeid said. Last year, it set aside $12.5m in provisions, this year it will be about $5m and next year $2.5m.
“We believe retaining that talent is crucial for the company to grow,” said Mr Hachem.
If the one-off provision is excluded, fourth-quarter net profit would have risen by 16 per cent from the year-earlier period. Fourth-quarter revenue rose by 5 per cent to Dh1 billion from the year-earlier period, beating a forecast from Kuwait’s NBK Capital. Revenue could have increased by 8.5 per cent had there been no exposure to currency fluctuations.
NBK Capital is forecasting profit will grow by 10 per cent this year compared with a 2 per cent decrease in full-year net profit last year because of the provisions.
“Excluding the one-off item, Aramex results were operationally strong in the fourth quarter,” said Samir Murad, a Dubai-based vice-president of research at NBK Capital.
“We maintain a positive outlook on Aramex as we expect the company to further grow its e-commerce services and capitalise on its recent acquisition in New Zealand.”
Follow The National's Business section on Twitter