Aramex profits slide 15% amid high operating costs

Global logistics provider Aramex opened new fulfillment centers and branches in Egypt, Iraq, Morocco and Saudi Arabia this year following a 22% year-over-year jump in revenue in 2021 in its freight-forwarding business. Dubai, United Arab Emirates-based Aramex posted a net profit of AED 226 million (U.S. $61.5 million) in 2021, a 15% YoY decrease, while revenue climbed 10% to a record-high $1.6 billion, about the same growth rate as 2020. The company — with its strategic location in the Middle East that serves as a logistics connection between East and West — saw the third consecutive year of continuous growth across all its product lines last year.

Aramex claims to have dozens of alliances with leading international express and logistics providers as part of the Global Distribution Alliance (GDA), reaching more than 230 countries and territories worldwide. The Middle East operator has proven that its unique, asset-light business model allows the company to adapt quickly to changing market conditions, implement last-mile delivery solutions, develop new services, and respond to evolving customer preferences.

The company, which operates in more than 600 cities across more than 65 countries and employs over 16,000, divides its product offering into four main categories: International Express Services, Domestic Express Services, Integrated Logistics and Freight Forwarding. Other services include Healthcare, Information Management Solutions, and Shop & Ship, which accounted for 3% of Aramex revenue distribution by segment as shown in Figure 1.

Aramex International Express Services continues to be the company’s core product, with a revenue share of 44% in 2021. This segment grew in 2021 by 3% to $722 million, fueled by higher volumes from Australia, the U.S., Europe and Asia into the Gulf Cooperative Council (GCC) markets.

Domestic Express revenue increased by 35% to $405 million in 2021, up from $302 million in 2020, due to an increase in domestic e-commerce across the GCC and Australia. E-commerce volumes in core markets increased by 65% as more consumers turned to online shopping. Figure 1 - Aramex Revenues by Business Segment 2009-2021

Shifting focus

Figure 1 illustrates how Aramex’s various business segments have changed their revenue share over time. The company in 2007 was focused on its Freight Forwarding operations, but its dependency on this division has been offset by growth in the Domestic and International Express sectors over the last five years.

Meanwhile, Aramex has targeted other market opportunities in the pharmaceutical, oil and gas, aerospace and fashion industries. By investing in warehouse spaces and temperature-controlled vehicles, the company offers additional logistics and freight-forwarding solutions in different regions. GeoPost/DPDgroup, a subsidiary of the French state-owned postal group La Poste — which in October 2021 acquired a 21.6% stake in Aramex — and Abu Dhabi are the most recent strategic large shareholders that are well-positioned to add synergies to Aramex’s Express and Logistics divisions.

The logistics provider continues to grow its customer base by servicing online retailers in its core markets: the Gulf, Levant, Asia and Africa, as well as in new markets. While the company posted an increase in revenue across all business units, its Freight Forwarding division recorded revenue of $361 million in 2021, up 22% YoY. The “Other” division also grew in 2021 by 16% YoY to $45 million. The growth in freight forwarding is due to the oil and gas and retail sectors, and the company is now shifting its focus to a combined e-commerce and freight-forwarding product for its customers.

Figure 2 shows Aramex’s revenue share by region, with its core market accounting for 53% of total revenue in 2021. The Asian region experienced the highest growth over the last decade while revenue from Europe declined to 13% in 2021 from 18% in 2009.

Increasing costs

Aramex recorded double-digit growth in logistics coming from Saudi Arabia, Morocco and the UAE, three markets that present a wide range of opportunities in e-commerce. The company saw continuous pressure from the increase in line-haul costs due to supply chain constraints, lockdown restrictions and lack of international belly capacity.

Oceania remains a key market for Aramex, where the company is the second-largest logistics operator and where it sees opportunities for cross-border growth by expanding trade lanes from the continent to North America and Europe especially. Figure 2 - Aramex Revenues by Region 2009-2021

Aramex delivered a total of 132 million shipments in 2021, a 12% YoY increase. Figure 3 shows the revenue-per-shipment development from 2007 to 2021, while figure 4 logs shipment volumes over time. The company has noted a considerable increase in the cost-per-kilo for shipments due to limited airfreight capacity and higher overall line haul costs. As a result, Aramex is considering options to restructure its own long-haul network, including chartering its own flights to some routes. The company continues to diversify its business units with a healthy mix of B2B and B2C services, moving to a B2B2C model with an end-to-end service offering. Figure 3 - Aramex Revenue per Shipment and Volume Development 2007-2021

Figure 3 - Aramex Corporate Revenue and EBIT Margin 2007-2021

In October, Aramex completed its acquisition of Florida-based Access USA Shipping (MyUS), a global technology platform that enables cross-border e-commerce, for around $265 million — marking the company’s largest purchase to date. In 2021, MyUS generated more than $100 million in revenue and delivered over 1 million packages to customers from retailers based in the U.S., U.K. and China.

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