Aramex, the Middle East’s biggest courier company, reported a 42 per cent increase in normalised net profit in the fourth quarter of 2022 amid growth in its freight-forwarding business and tighter cost management.
Normalised net profit, which excludes the impact of non-recurring items, rose to Dh45.3 million ($12.3 million) for the three-month period to the end of December, up from Dh31.9 million in the same quarter of 2021, Aramex said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.
The normalised results exclude the performance of its recently-acquired e-commerce platform MyUS and transaction costs related to the acquisition, the company said.
Revenue during the fourth quarter fell nearly 5 per cent to Dh1.53 billion due to currency devaluation in some countries where Aramex operates — primarily in Lebanon and Egypt, it said.
However, Aramex’s freight forwarding division posted an 8 per cent rise in revenue during the quarter.
Net profit for the quarter fell 27 per cent year-on-year to Dh33.9 million.
Overall, the company ended the year as a “stronger and more agile” business, with a clear growth strategy for the next five years, Othman Aljeda, chief executive of Aramex, said.
The group also stabilised its selling, general and administrative costs in an inflationary environment, meaning “we have a leaner organisation which is more cost efficient, more agile and ready to sustain future growth”, he said.
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.
For the full-year period, Aramex reported a 9 per cent annual rise in normalised net profit to Dh173 million while net profit declined nearly 27 per cent on an annual basis to Dh165.4 million.
Revenue in the 12-month period slipped 2 per cent year on year to Dh5.9 billion.
Aramex ended the year with a cash balance of Dh768 million, which remained stable compared to last year. Its debt-to-Ebitda ratio of 2.2 times provides the company with “considerable opportunity” to deliver on its growth agenda, it said.
The company's freight-forwarding business recorded a 27 per cent year-on-year increase in revenue in 2022 to Dh1.68 billion as volumes grew.
During the year, Aramex expanded its air and sea charters and increased its focus on core markets, including UAE and Saudi Arabia, it said.
“The strong performance of our freight-forwarding product contributed significantly to our top and bottom line in 2022,” Mr Aljeda said.
Aramex's international express business posted a 16 per cent decline in revenue on an annual basis in 2022 to Dh2.25 billion, driven by softening volumes amid Covid-induced lockdowns in China. This was partially offset by growth of its Shop and Ship business, which benefitted from positive contributions from the MyUS acquisition.
Its domestic express unit's revenue declined 7 per cent year-on year to Dh1.5 billion in 2022, due to the impact of foreign exchange volatility and lower volumes, particularly in Australia.
This was partially offset by an increase in volumes in its home markets, particularly in the GCC and Mena region, it said.
“Solid growth in our home markets in the GCC and other Menat countries … also contributed to a good performance in our main outbound markets including the US and UK. We now have a more diversified customer base than ever before, with no single customer making up more than 7 per cent of our revenue, thus reducing our concentration risk,” Mr Aljeda said.
Aramex's logistics and supply chain solutions business recorded a 2 per cent annual increase in revenue to Dh445.3 million in 2022.
Looking ahead, the company is confident about the economic prospects of its home markets in the GCC and the Menat region, benefiting from good gross domestic product projections, young populations and “fantastic growth opportunities”, Mr Aljeda said.
He said that “53 per cent of our global revenue originates from these two regions”.
“Accordingly, we are strengthening our sales teams with new hires in 2023.”
Aramex has earmarked Dh2.4 billion in capital expenditure over the next five years for its organic growth plans, the company said.
“We also have several M&A [mergers and acquisition] opportunities in the pipeline, as inorganic growth is a key component of our growth strategy. Our strong cash position will help us fund some of these acquisitions,” Mr Aljeda said.