Aramex full year profit slides 43% on higher provisions and costs

Aramex reported a 43% drop in 2020 full-year net profit on higher costs and provisions.. Pawan Singh / The National

Aramex, the Middle East’s biggest courier company, reported a 43 per cent drop in full-year net profit due to higher costs and provisions.

Net profit for the period ending December 31, 2020 declined to Dh285 million, the company said in a statement to the Dubai Financial Market, where its shares trade. Aramex booked non-recurring provisions last year to cover damage at facilities in Beirut and Morocco. Costs also rose during the period.

"As the global economy recovers from the pandemic and the global vaccination drive gathers pace, we are optimistic about the future of our industry," Mohamed Juma Alshamsi, chairman of Aramex said.

Global trade volumes, which contracted 9.6 per cent last year, are forecast to grow about 8 per cent in 2021 and then moderate to 6 per cent in 2022, according to International Monetary Fund estimates.

"Demand-side fundamentals are encouraging as more and more businesses will depend on us to move and deliver shipments globally and domestically," Mr Alshamsi said.

Aramex expects "a consolidation of market participants" that will create stronger, more efficient, and technology-driven logistics service providers that are better able to offer customised solutions, he said.

The company's full-year revenue rose 9 per cent year-on-year to Dh5.5 billion. It booked Dh21.3m in estimated credit losses on the company’s bank deposits in Lebanon, which it said is "a prudent provision in light of the deteriorating liquidity and banking conditions in that country."

Aramex's international express business during the period jumped 10 per cent to Dh2.57bn, while the domestic express business surged 23 per cent to Dh1.36bn, driven by strong demand from e-commerce activities across the GCC region and Australia.

However, its freight-forwarding business revenue dropped 5 per cent to Dh1bn, mainly because of the decline in demand from the oil and gas industry and the retail market.

The logistics and supply chain business, on the other hand, rose 6 per cent to Dh375m due to growth in the healthcare and fast moving consumer goods (FMCG) sectors.

The company’s fourth-quarter profit dropped 49 per cent to Dh77m due to higher provisions related to warehouse fire accidents and credit loss on the company’s bank deposits in Lebanon. Without the losses, the company's net profit would have only been down an annual 23 per cent.

At the end of 2020, Aramex’s total cash stood at Dh1.25bn and free cash flow at Dh441m. The agreement to sell its data, technology and analytics firm InfoFort to US-based information management specialist Iron Mountain will strengthen its balance sheet and help the company focus on its core logistics business, it said.

"Going into 2021 Aramex will have an increased focus on servicing the healthcare and FMCG segment and we will double down our investment in operations and relevant technologies to service those defensive segments," chief executive Bashar Obeid, said.

The company is actively pursuing “strategic acquisitions with a focus on core markets", he said. "Our strong cash position, low leverage and robust capital structure position us favourably to capitalise on attractive opportunities in 2021."

ADQ, one of the region’s largest holding companies, acquired 22.25 per cent of Aramex in September through a series of on-market transactions and an off-market special deal.