Aramex second-quarter profit up 1%

Net profit would have grown 8% but for implementation of regulation related to accounting for leases, the company says

Aramex said the net profit for the period ending December 31, 2019 climbed to Dh497.4 million. Silvia Razgova / The National

Aramex, the Middle East's biggest courier company, said second-quarter profit inched up 1 per cent, meeting average analyst estimates, due to lower yields on cross-border international express business.

Net profit attributable to shareholders for the three months to the end of June climbed to Dh123.2 million, the company said on Wednesday in a filing to the Dubai Financial Market, where its shares trade. Second-quarter revenues rose 4 per cent to Dh1.28 billion from the prior-year period.

"Strong demand from e-commerce continues to spur growth in volumes we handled over the second quarter," said Bashar Obeid, chief executive of Aramex. "However, lower yields, mainly on the cross-border international express business and changes in fulfillment models, moderated our top line figures and profitability."

Net profit for the quarter was "negatively impacted" by Dh8.4m because of the implementation of IFRS16 related to accounting for leases, the company said. Excluding that accounting impact, net profit would have grown by 8 per cent.

Second-quarter revenues would have grown 7 per cent, excluding the impact from currency fluctuations, mainly in the South African Rand and Australian Dollar, as well as the company's restructuring its operations in India, Aramex said.

Aramex's second-quarter cross-border international express business grew 11 per cent to Dh586m. Express volumes grew 20 per cent during the period as the company got business from new international e-commerce retailers and increased orders from existing ones, although lower yields impacted margins.

The freight-forwarding business decreased 6 per cent to Dh277m as it remains affected by the regional economic uncertainty, Aramex said.

The company's integrated logistics and supply chain solutions business grew 17 per cent to Dh85m, as Aramex serves major regional retailers' appetite to tap online sales. This led to strong demand for warehousing, sorting and last-mile delivery solutions, it said.

In its outlook for the rest of the year, Aramex expects global e-commerce volumes will continue to "positively contribute" to its top line growth, while lower yields will constrain margins and profitability, Mr Obeid said.

"We will carry on boosting our investments in last-mile delivery solutions and enhancing our service levels on the ground to ensure Aramex maintains and grows its market share in the Express business," he said. "The strategic initiatives to transform our business into a technology-driven enterprise and uplift operational efficiencies will also support our growth."