|In This Report|
|2021 Annual Report|||||Sustainability and this Report|||||Our People|||||Sustainability|||||Financials|
In my over 20 years of working in the industry, I have never seen a single event disrupt the global supply chain industry while simultaneously skyrocketing demand for last mile delivery with heightened expectation for seamless customer experience. As a company that sits across the global transportation and logistics industry’s value chain, servicing customers of all types and sizes from first mile to last mile, Aramex acted swiftly and innovatively to navigate the supply-side constraints and the demand-side spikes while enhancing its level of service at competitive prices.
In 2021, Aramex continued to demonstrate our market leading position and capitalized on strong demand growth with revenues growing 10% year on year to AED 6.1 billion, an all-time high for the Company and our third consecutive year of top line growth. Margins remain constrained due to Covid-19 induced costs, particularly line haul costs as a result of capacity constraints, as well as increased competition in certain markets. Excluding extraordinary items, normalized operating margin was down to 5% in 2021 vs. 9.3% in 2020 and normalized net profit was down by 51% to AED 183 million. Throughout the year, we continued to provide our customers with best services levels and this customer-first approach meant we have absorbed a higher cost of doing business to ensure we continue to respond to customer needs and defend and grow our market share in a period of dislocation and supply chain disruptions.
We maintained a strong balance sheet and healthy levels of liquidity thanks to our prudent financial management practices. With a low debt position, our under geared balance sheet is a source of value. We are well positioned to pursue our organic and inorganic growth ambitions.
Turning to our accomplishments, 2021 was a transformational year for Aramex, proving that we are a Focused, Fast, and Forward-looking company.
We launched a redesigned, more effective, and powerful operating model. This reconfigured operating model essentially decoupled our two core services into standalone and decentralized strategic operating units, each headed by their respective Chief Operating Officers – and veterans of Aramex who know the business and industry inside out.
Express, our courier business which includes International and Domestic delivery solutions, will serve the B2C and B2B customers. Meanwhile, Logistics, which includes Freight-Forwarding and Integrated Logistics and Supply Chain solutions, will serve B2B customers. To support our global growth ambitions and to cater to unique customer needs and respond effectively to country-specific challenges, we created a new regional structure composed of eight key regions. Each region is being managed by a Regional Vice President with dedicated teams focused on growing Aramex’s local footprint and expertise while driving commercial opportunities and customer-centric innovations. The operating regions will also serve to build a growing number and busier trade lanes with the GCC and broader MENA region.
The operating model has made us more agile and better prepared to capture the right opportunities to grow and diversify our customer base, develop the right product mix and dedicated service, invest in, and employ value-adding technologies, and operate at more efficient and sustainable levels. We are also growing our global network and deepening and expanding our local presence, getting closer to our customers, and enabling our customers to get closer to theirs.
In less than six months since its deployment, the redesigned operating model is already producing good results. While we saw growth across all our product lines year on year, the most tangible result is in our Logistics and Freight-Forwarding business. Despite the incredibly disruptive and evidently persistent impacts that Covid-19 is having on global supply chains – especially in sea-freight – we successfully grew our logistics and freight-forwarding business by 21% in 2021 year on year, surpassing pre-Covid-19 levels.
We are also focused on driving cost-efficiencies across the board. While we continue to witness margins coming under pressure, owed in large part to persistently higher line haul costs driven by capacity constraints – due to Covid-19 disruptions - and other higher operating costs, we are focused on driving both cost-driven and value-driven cost optimization initiatives. Cost–focused initiatives include cutting back on non-essential activities and centralizing our global procurement process to realize cost synergies. Value-focused initiatives include optimizing our workforce and CAPEX needs to align with business growth objectives while embedding sustainability practices across the board. With the new operating model, we will have even greater visibility and ability to smartly forecast and manage our cost base, ultimately leading to improved margins in the mid-to-long term.
We have been dedicated to decarbonization for over 10 years. By being an early mover, we have the experience and foresight to commit to realistic, actionable targets. In 2021, we doubled down on our commitments by committing to the Science Based Targets initiative (SBTi) – one of the few companies in the MENA region to sign up to the globally recognized and UN-backed initiative. By setting science-based carbon emission targets, we are accelerating our climate action goals to help keep a rise in global temperature to well below 2°C. We have committed ourselves to reach carbon neutrality by 2030, and to become net-zero by 2050, and we have a clear roadmap that will enable us to get there.
Our efforts are paying off. We are incredibly proud to be recognized as global industry leaders in sustainability by Sustainalytics. In October 2021, Aramex received an ESG Risk Rating of 11.7 on Sustainalytics' ESG risk assessment scale, indicating a low level of risk of experiencing material financial impacts from ESG factors. Our rating places us number one in the global ranking of 363 transportation companies and 413 out of 15,124 companies rated by Sustainalytics worldwide. We also received the Dubai Chamber CSR label for 2021 which is one of the most established and prestigious framework and development tool that helps companies evaluate their CSR strategies.
We also never lost focus on keeping our 16,000+ employees across our network safe and well looked after. We understand that the pandemic added more stress – both physical and mental – and this is why we rolled out several initiatives to help ensure we are doing our part in helping them cope with the workload. Their hard work and dedication to the business is enabling us to play a pivotal role in moving shipments around the world and delivering packages to homes, and I am very grateful to be working alongside the hardest and most talented individuals in the business.
Over the past 12 months, the evolving Covid-19 virus continued to test economies, industries and companies’ resilience, speed of adaptability and innovation in different ways. For the e-commerce industry, the name of the game was speed. Consumers’ expectations have become even more discerning; they expect lightning speed and frictionless deliveries, returns and exchanges for any products they buy online – from everyday essentials from the store in the neighborhood to holiday gifts from an e-tailer from the other side of the world. As a key player in ensuring the sustainable growth of the $4 trillion – and fast-growing - global e-commerce market, the onus is on us to make sure our products, services, operations, and workforce are working seamlessly, optimally and with precision. I am delighted to report that Express business handled a record volume of packages, with exceptional growth in the Domestic Express segment.
In 2021, we invested in growing and automating our global, strategically located, and largescale international and domestic courier business operations to further improve our speed and efficiency. We also heavily invested in countries where we continue to see significant growth opportunities driven by government-led initiatives as well as a strong post-Covid recovery in the private sector, including Saudi Arabia and Australia. In Riyadh, we opened a fully automated state-of-the-art facility, serving as a prime gateway to a population of over 34 million people with a growing purchasing power of hyper-connected youth.
While every mile along the journey matters, it is the last mile that matters the most for consumers. This is where Aramex continues to establish market leadership in key markets and this where our scale, experience and expertise affords us the competitive edge versus relative new market entrants. We continuously come up with innovative and smarter solutions to ensure we remain competitive, reliable while consistently providing excellent service.
Our recent investments in technology, AI and data analytics adds greater visibility and predictability to our Express business, leading to greater efficiency and enhanced customer service. Of note, we teamed up with Salesforce to integrate a customized CRM system that provides us with greater access to gain a holistic view of customers across all our platforms to offer optimized solutions.
In 2022 our ambitions are clear: we want to go the extra mile at every mile to create greater value for all our stakeholders.
What that means practically is that for our customers, we want to further improve our service excellence and upgrade our products to cater to their changing needs. For our shareholders, we want to continue protecting and growing the company’s value by executing on a bolder, more aggressive strategy for each of our new clusters.
For Express business, we want to stay resolute in our commitment to customer excellence and further cement our market leading position in core markets. We want to continue building our scale and expertise for both international and domestic express and leverage predictive analytics and data-driven intelligence to deliver packages focusing on efficiency and reliability. We want to significantly increase the flow from major hubs in the US, UK, Amsterdam, China and Hong Kong to service our markets in the GCC, wider MENA region and Australia. We also want to drive new trade lanes across the globe for e-commerce, such as the UK into Europe, Asia and Europe into Oceana and South East Asia, Europe into Americas, Asia and MENAT, and Americas into Europe. We see high potential for acquisition in emerging markets, such as North Africa, Turkey and Southeast Asia, and remain on the lookout for acquisition opportunities in the GCC markets.
We are confident on Freight’s potential for growth, and we have outlined an ambitious strategy to accelerate our momentum. Geographically, we want to expand our global footprint by growing our freight presence in existing and new locations. Operationally, we want to be more integrated and specialized. We will be investing in specialized warehouses to cater for high potential industry verticals such as cold chain, pharmaceuticals, oil & gas, and FMCG. Beyond expanding our operations, we believe we can capture growth opportunities through acquisitions, and we are ready to act quickly when we identify the right opportunity. We believe our strong presence in the MENA region – a busy trade route with government-led pro logistics and sector growth initiatives – also positions us favorably to form strategic alliances. Our bold ambitions for this cluster will be matched by growing our team of industry experts through hiring top talent.
For the planet, we are doubling down on our decarbonization actions. For our society, we want to do more to help lift the standard of living and to support small businesses to grow and thrive. For our employees, we want to listen and cater to their needs while also empowering them through training and upskilling. Finally, we want to take deliberate action to ensure we continue to retain and recruit diverse and inclusive talent.
We remain steadfast and resolute in maintaining our sights focused on executing on our strategy and putting the customer’s needs first. Furthermore, I have confidence that our new operating model, the leadership and guidance of our strong management team, and the ingenuity and commitment of our employees position us favorably to navigate this dynamic and complex environment. This will be bolstered by our new strategic shareholder, GeoPost and reaffirmed vote of confidence from our wider shareholders, including Abu Dhabi Ports. The synergistic opportunities that we can unlock with one of Europe’s leading courier delivery companies is significant – from market know-how and intelligence to product offerings and services to pure knowledge sharing, and of course, opening new trade lanes. Similarly, Abu Dhabi Ports will help further cement our market leading position in the region and enable us to grow the Freight-Forwarding business.
Thank you, dear stakeholders, for your ongoing support and confidence, together we will be taking Aramex towards the next chapter of sustainable growth.
Chief Executive Officer