Aramex, the Middle East's largest courier company, said its third-quarter profit dropped as revenue for the period declined amid continued global macroeconomic challenges, high interest rates and foreign currency fluctuations.
Net profit attributable to equity holders of the company for the three months to the end of September declined by nearly 76 per cent year-on-year to Dh9.64 million ($2.6 million), Dubai-based Aramex said on Wednesday.
“More than half of the decline in net income can be attributed to the interest expenses related to the acquisition of MyUS due to the steep increase in interest rates since the transaction,” the company said in a filing to the Dubai Financial Market, where its shares are traded.
Normalised net income – excluding the foreign exchange impact and the increase in finance loan expenses – was Dh30.4 million in the quarter, an annual decline of 23 per cent.
Revenue dropped to Dh1.35 billion ($367.6 million), from Dh1.43 billion a year earlier, while operating profit decreased by about 12 per cent to Dh44.7 million.
The company attributed the drop in third-quarter revenue to “currency fluctuations, macroeconomic challenges, and subdued global retail activity in certain markets”.
Excluding the impact of foreign exchange translation, the decline in revenue was 2 per cent during the quarter.
“In the face of an ongoing global growth slowdown, Aramex remains steadfast in its commitment to a strategic framework centred on operational efficiency, high-quality sales and stringent cost management,” chief executive Othman Aljeda said in the statement.
For the first nine months of 2023, revenue dropped 5 per cent to Dh4.17 billion, while net profit slipped 60 per cent to Dh52.5 million.
“Our focus on cost optimisation has been pivotal in maintaining steady operating margins, even amidst the challenges posed by currency fluctuations and the interest rate environment,” Mr Aljeda said.
Companies in the global logistics sector have been grappling 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, however, expects a rebound in the “historically stronger” fourth quarter, as it gears up for the gifting season, which includes Christmas and New Year, with plans to boost operations across all its verticals, Mr Aljeda said.
“Our primary focus will be to deliver outstanding services to our customers. We will continue enhancing trade lanes, enriching the customer experience and fortifying our operational capabilities across all business lines,” he said.
“Our goal is to expand our quality business lines, focusing on B2B, direct brands, SMEs and premium offerings such as same- and next-day deliveries.”
Aramex's international express business posted a 4 per cent annual rise in revenue to Dh512 million, despite a 5 per cent decline in shipment volumes due to the slowdown in retail activity.
Its premium services, which include same- and next-day deliveries within the GCC, and dangerous goods “continue to perform well”, it said.
Gross profit for the unit hit Dh183 million, a 20 per cent annual increase.
The company said that several factors, including improvements in line haul costs and other cost optimisation measures, as well as the consolidation with its MyUS unit, continued to support its international express business.
MyUS – formally Access USA Shipping – was acquired by Aramex for $265 million in October 2022.
Revenue for the company's domestic express unit reported a 5 per cent year-on-year decline in the third-quarter to Dh353 million, attributed to “marked currency fluctuations”. Excluding the currency fluctuations, revenue grew 4 per cent, it said.
Freight forwarding, meanwhile, posted a 16 per cent revenue drop to around Dh368 million in the three-month period, although the unit still managed to record “solid growth in volumes and good profitability”, the company said.
Revenue in Aramex's logistics and supply chain solutions decreased 5 per cent annually to around Dh105 million, primarily due to forex translations.