Aramex reports stable revenues with Gross Profit increase of 4% YoY in Q1 2023 amid global headwinds

Aramex (DFM: ARMX) a leading global provider of comprehensive logistics and transportation solutions, today announced its financial results for the First Quarter (“Q1”) ending 31st March 2023.

Financial Performance Commentary

Aramex’s Q1 2023 Revenues declined marginally by 1% YoY to AED 1.43 billion, reflecting the robustness of its revamped operating model, amid global headwinds. Revenues were driven by stable performance in International Express and the resilience of the Freight-Forwarding, and Logistics and Supply Chain Solutions Businesses. Revenue continued to be impacted by currency fluctuations, inflationary pressures, and normalization of worldwide shipping flows. However, despite softening revenues, the Company demonstrated resilience in volumes and improvements in margins.

For the Q1 2023 period, Gross Profit was up 4% to AED 358 million compared to AED 344 million in Q1 2022, while the corresponding Gross Profit Margin for Q1 2023 was reported at 25%. The Selling, General and Administrative Expenses (SG&A) costs for the organic business, which excludes MyUS, declined 3% YoY, reflecting the Company’s disciplined cost optimisation drive, while consolidated Group SG&A costs increased by 6% mainly due to the addition of MyUS. The Group’s SG&A organic structure as a percentage of revenue has remained stable.

Net Profit for Q1 2023 declined by 49% YoY to AED 24 million due to a mix of factors, including currency devaluation in certain markets, interest expenses associated with the MyUS acquisition and in line with Aramex’s strategy to leverage the balance sheet, as well as the softening at topline flowing through to the bottom line.

Due to some negative FX and devaluation impact in some markets, Aramex moved swiftly to hedge exposures and move into more US Dollar-denominated contracts.

Aramex maintained a strong balance sheet position with Net Debt-to-EBITDA ratio of 2.3x and a healthy cash balance of AED 722 million as of 31 March 2023.

Othman Aljeda, Chief Executive Officer, Aramex, said: “In a quarter when our industry globally continued to face headwinds from cost inflation, base rate rises, softening shipment volumes and FX fluctuations, we are proud to present a stable and resilient financial and business performance for the first three months of 2023. We continued to both drive revenue quality and benefit from our sustained investment in efficiency, and our performance vs industry means we are confident in unlocking the potential of our rebalanced business model.

Three of our four business lines increased Gross Profit Year-on-Year, and we maintained a stable Profit Margin in our Domestic Express business, due to our relentless focus on cost control and improvements in productivity. We maintain our commitment to invest in optimization measures across the economic cycle, including automation of shipments sorting process which enables us to boost operational productivity; and the newly launched Enterprise Automation & Robotic Process Automation Centre of Excellence that is focused on digitalizing the overall enterprise for higher efficiency levels within the support functions as well as across our operations.

The continued growth in the GCC economies, and the expectation that inflationary pressures around the world may peak and then decline significantly show some signs of optimism towards the end of the year. We believe the key differentiator in the months ahead will be our ability to invest in technology, along with our geographic and business line diversification which offers competitive advantage.

We will continue to improve the efficiency of our services, enhancing customer experience, strengthening road networks, improving resourcing and making other targeted operational improvements across our four products – putting us in a strong position to capture market share and deliver long-term value for our shareholders.”

Business Performance

International Express (Including Shop & Ship and MyUS)

International Express Shipment Volumes

International Express reported stable consolidated Revenue of AED 567 million in Q1 2023, reflecting the additional volume from MyUS and attractive margins in Aramex’s Parcel Forwarding Business, which includes MyUS and Shop & Ship. Organic Revenue (excluding MyUS) witnessed a softness Year-on-Year due to a change in customer mix.

Reported Gross Profit for Q1 2023 was AED 184 million, a YoY increase of 3%. The corresponding Gross Profit Margin was maintained at 32% due to a number of factors, including improvements in linehaul costs and other cost optimization measures.

Domestic Express

Domestic Express Shipment Volumes

Domestic Express Q1 2023 Revenue declined by 4% to AED 362 million due to FX impacts in Egypt, Lebanon, South Africa and certain MENAT countries, as well as a revenue decline in Oceania, where a restructuring plan is in progress. This was partially offset by an increase in domestic revenues from the GCC and prudent cost management. Gross Profit for the period was AED 87.6 million, a slight decrease of 6%. However, the corresponding Gross Profit Margin remained stable at 24% compared to the same period last year, reflecting the Company’s success in operational efficiencies especially at the “last mile" as a result of the Company’s automation efforts- which further enhanced courier productivity; and a doubling of Aramex’s Pick-Up and Drop-Off (PUDO) network in Q1 2023.

Freight-Forwarding

Freight-Forwarding Shipment Volumes

Aramex's Freight-Forwarding business delivered a robust performance in the first quarter with Revenue maintained at AED 385 million and a 17% increase in Gross Profit at AED 61 m