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Aramex Achieves Robust Operating Margins Through Diversified Portfolio and Home Market Resilience Amid Global Uncertainties

  • Through persistent global challenges, inflationary environment and currency fluctuations, Aramex delivered a robust Revenue of AED 1.35 billion in Q3 2023, a decline of 5% Year-on-Year (YoY) and a resilient Gross Profit of AED 335 million, a growth of 4% YoY. Excluding the foreign exchange translation impact, Revenue decline was 2% and Gross Profit growth was 8%.
  • Aramex's strategically balanced geographical presence continues to be an advantage; the GCC remains the highest contributor to Group revenues with a share of 40% of total revenues, with the region also reporting 21% growth YoY in its Gross Profit in Q3 2023.
  • The Company reported robust margin performance with Gross Profit margin increasing to 25% and a stable EBITDA margin of 10%.
  • EBITDA reached AED 134 million, a decline of 5% YoY in line with Revenue softness indicating the continued focus on quality business, disciplined cost management and investment in operational efficiencies.
  • The Company's prioritization of cost management is also evidenced by the notable 9% decline in the Group’s organic (excl MyUS) General, and Administrative Expenses (G&A) in Q3 2023. Notably, selling expenses for the organic business increased during the quarter, in line with the Company’s strategy to increase sales competencies in key verticals across key markets.
  • Reported Net Income declined to AED 9.6 million for the Q3 2023 reporting period, largely led by the steep increase in interest rates since the MyUS acquisition.  Net income normalized for the FX impact and the increase in finance expense loans following the acquisition of MyUS transaction stood at AED 30.4 million in Q3 2023, a decline of 23% YoY.
  • Aramex's International Express segment achieved steady growth, posting a 4% YoY increase in revenue, despite the softness in volumes. The Domestic Express business was resilient both on a YoY and sequential basis. Despite industry headwinds, our focus on Freight-Forwarding delivered strong margins and for our logistics business, we continue to reposition it with increase in quality revenue from strategic sectors.

Dubai, UAE – 8 November 2023:
Aramex (DFM: ARMX), a global leader in comprehensive logistics and transportation solutions, today released its financial results for the third quarter of the year ending September 30, 2023.

 

In Thousands of UAE Dirhams

Q3

2023

Q3

2022

% Change (YoY)

 

% Change (YoY; excl FX)

Revenues

1,349,678

1,426,250

(5%)

(2%)

Gross Profit

334,657

320,827

4%

8%

Gross Profit Margin

25%

22%

 

 

EBIT

44,709

50,907

(12%)

 

EBIT Margin

3%

4%

 

 

EBITDA

133,866

141,357

(5%)

 

EBITDA Margin

10%

10%

 

 

Net Profit

9,642

39,643

(76%)

 

Net Profit Margin

1%

3%

 

 

Normalized Net Profit*

30,420

39,643

(23%)

 

* Net income was normalized for the FX impact and the increase in finance expense loans in Q3 2023 compared to Q3 2022, noting that the MyUS acquisition was closed in Q4 2022.

 

Financial Performance Commentary

In the third quarter of 2023, Aramex sustained its performance with Group revenues amounting to AED 1.35 billion. This represents a moderate 5% YoY decline, attributed to currency fluctuations, macroeconomic challenges, and subdued global retail activity in certain markets. Notably, when excluding the impact of foreign exchange (FX) translation, the decline in revenue was 2%.

The quarter bore testament to the Company's enduring resilience, as evidenced by a noteworthy 4% YoY increase in Gross Profit and a resilient EBITDA of AED 134 million for the third quarter of 2023. This progress was underpinned by the company's proactive measures to boost operational efficiencies and optimize General and Administrative expenses (G&A) for the organic business (excluding MyUS).  Our prudent cost management resulted in strong margins in Q3, with a Gross Profit Margin of 25% and an EBITDA margin of 10%.

Despite the increase in selling expenses, which aligned with our focus on sales specialism and enhancing competencies, Aramex remained steadfast in its commitment to cost-efficiency. Notably, the third quarter of 2023 showcased the Company’s ability in this regard, as evidenced by a noteworthy 9% YoY reduction in organic (excluding MyUS) G&A expenses. This achievement signifies Aramex’s agility and effectiveness in managing costs, effectively bringing organic G&A back to pre-pandemic levels.

The Company reported a Net Profit of AED 9.6 million in Q3 2023, a notable decline from AED 39.6 million recorded in Q3 2022. 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. Therefore, normalized net income – excluding the FX impact and the increase in finance loan expenses – was AED 30.4 million in Q3 2023, a decline of 23% YoY.

Aramex's strategically diversified geographical presence remains a key advantage, with the GCC region consistently leading the way by contributing a remarkable 40% of the Group's total revenues.

Aramex maintained a strong balance sheet position with Net Debt-to-EBITDA ratio of 2.6x and a healthy cash balance of AED 604 million as of September 30, 2023.

Othman Aljeda, Chief Executive Officer, Aramex, said: "In the face of an ongoing global growth slowdown, Aramex remains steadfast in its commitment to a strategic framework centered on operational efficiency, high-quality sales, and stringent cost management. Our focus on cost optimization has been pivotal in maintaining steady operating margins, even amidst the challenges posed by currency fluctuations and the interest rate environment.

‘’The slight softening in revenue can be attributed to global headwinds, FX translations and reduced retail activities. However with the resilience of consumer spending in the GCC, the region continues to be a key driver of growth, reporting a 21% YoY growth in Gross Profit in Q3 2023.

‘’As we continue to execute Q4, historically a stronger quarter marked by increased retail activity during festivals, 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. 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.”

 

Business Performance

International Express (Including Shop & Ship and MyUS)

In Thousands of UAE Dirhams

Q3

2023

Q3

2022

% Change (YoY)

Revenues

511,951

493,927

4%

Gross Profit

182,510

151,839

20%

Gross Profit Margin

36%

31%

 

 

International Express Shipment Volumes

In millions of shipments

Q3

2023

Q3

2022

% Change (YoY)

Total Number of Shipments

4.9

5.1

(5%)

 

International Express Q3 Revenue grew by 4% YoY, reaching AED 512 million, despite the softening of shipment volumes due to the slowdown in retail activity. Premium products (same day and next day –intra GCC) and dangerous goods continue to perform well.

Reported Gross Profit for Q3 2023 reached AED 183 million, marking a 20% YoY increase and a solid Gross Profit Margin of 36%. It is worth noting that the Express product costs had a positive impact during Q3 2023 which we do not expect to recur in future quarters.

Several factors, including improvements in linehaul costs and other cost optimization measures, as well as the consolidation with MyUS, continue to support the performance of the international express product. Notably, the organic business (excl MyUS) also reported significant improvement - cost per shipment was well managed, resulting in a 12% YoY increase in Gross Profit per shipment.

 

Domestic Express

In Thousands of UAE Dirhams

Q3

2023

Q3

2022

% Change (YoY)

Revenues

352,597

369,820

(5%)

Gross Profit

72,164

88,902

(19%)

Gross Profit Margin

20%

24%

 

 

Domestic Express Shipment Volumes

In millions of shipments

Q3

2023

Q3

2022

% Change (YoY)

Total Number of Shipments

24.5

24.4

0%

 

Domestic Express reported stable Revenue of AED 353 million in Q3 2023, representing a modest decline of 5% YoY, due to marked currency fluctuations. Excluding the FX impact, revenue grew 4%. Volumes were stable for the domestic express product. It is important to note, excluding Oceania, where a turnaround plan is currently in progress, the domestic volume growth was 2% in Q3 2023 compared to the same period last year, driven by volume growth in GCC and MENAT.

The lower Gross Profit margin is primarily attributed to the softness in Oceania, as well as a different allocation of resources within the Group. Aramex’s automation and operational efficiency efforts have pushed up courier productivity by 6%; Aramex’s Pick-Up and Drop-Off (PUDO) network increased by 65% this quarter compared to the same period last year.

 

Freight-Forwarding

In Thousands of UAE Dirhams

Q3

2023

Q3

2022

% Change (YoY)

Revenues

367,911

439,530

(16%)

Gross Profit

58,314

60,782

(4%)

Gross Profit Margin

16%

14%

 

 

Freight-Forwarding Shipment Volumes

 

Q3

2023

Q3

2022

% Change (YoY)

Air Freight (KGs)

10,901,706

11,773,193

(7%)

Sea Freight (FCL TEU)

8,051

7,766

4%

Sea Freight (LCL CBM)

5,439

4,759

14%

Land Freight (FTL)

7,718

7,355

5%

Land Freight (LTL KGs)

53,409,441

38,523,420

39%

 

Aramex's Freight-Forwarding business continues to deliver quality business, with solid growth in volumes and good profitability. Although a 4% YoY softening in Gross Profit was observed in Q3 2023, this was predominantly influenced by the reduction in global shipping rates during that period which impacted revenues.

The business has shown resilience through the economic cycles, as evidenced by the notable improvement in the Gross Profit margin, which increased to 16%.

 

Logistics and Supply Chain Solutions

In Thousands of UAE Dirhams

Q3

2023

Q3

2022

% Change (YoY)

Revenues

104,813

110,475

(5%)

Gross Profit

11,651

8,707

34%

Gross Profit Margin

11%

8%

 

 

Logistics and Supply Chain Solutions Revenue witnessed a 5% decline YoY to AED 105 million in Q3 2023, primarily due to FX translations. However, when FX is factored out, Revenue grew 1% in Q3 2023.

The rebalancing of the logistics business continues, with increase in sales from strategic sectors such as retail and energy. Sequentially, Q3 2023 saw a decline in sales and margins compared to Q2 2023 due to loss of business, following the acquisition of our customer by a company already having Logistics infrastructure. New business wins secured in Q3 2023 will be reflected in the financials in 2024.