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Aramex, the world’s leading logistics and transport provider, saw its first-quarter (Q1) net profit fall 49% year-on-year to AED 24 million (US$ 6.54 million), citing currency depreciation in some markets.
Other profit-cutting factors include interest expense related to the MyUS acquisition, which is in line with Aramex’s strategy with a leveraged balance sheet, and weaker earnings that would hit revenue.
Aramex continues to perform strongly in the first quarter of 2023 amid weak global shipments, while making further progress in executing its strategy. Revenue totaled AED 1.43 billion, down slightly by 1% year-on-year, outperforming its global peers.
Gross profit increased by 4pc
Gross profit rose 4% year-on-year to AED 358 million in Q1 2023, driven by combined growth in the international express business – further fueled by the MyUS acquisition. This reflects Aramex’s continued investment in efficiency maximization programs and cost optimization throughout the economic cycle. EBITDA in the first quarter of 2023 fell by 9% to AED 153 million.
Aramex’s revenue in the first quarter of 2023 fell slightly by 1% year-on-year to AED 1.43 billion, reflecting the robustness of its revamped operating model amidst global headwinds. The stable performance of international express delivery and the resilience of the freight forwarding, logistics and supply chain solutions business drove revenue growth.
Revenue continues to be impacted by currency fluctuations, inflationary pressures and the normalization of global shipping. However, despite weaker revenues, the company has shown resilience in volume and margins.
Organic selling, general and administrative expenses (SG&A) costs excluding MyUS decreased 3% year-over-year, reflecting the company’s rigorous cost optimization drive, while consolidated group SG&A costs increased 6%, primarily due to the addition of MyUS. The Group’s SG&A organic structure as a percentage of revenue has remained stable.
Foreign exchange and depreciation effects
Due to some negative foreign exchange and depreciation impacts in certain markets, Aramex moved quickly to hedge its exposure and moved to more USD-denominated contracts.
Aramex maintains a strong balance sheet position with a net debt to EBITDA ratio of 2.3 times and a healthy cash balance of AED 722 million as at 31 March 2023.
Othman Aljeda, Chief Executive Officer of Aramex, said: “In a quarter in which our industry continued to face headwinds globally from cost inflation, rising benchmark interest rates, weak shipments and foreign exchange volatility, we are proud to present a Stable and resilient financial and business results for the first three months of 2023. We continue to drive revenue quality and benefit from our continued investment in efficiencies, and our performance compared to the industry means we are confident in unlocking our rebalanced The potential of the business model.
“Gross profit in three of our four business lines increased year-on-year and our domestic express business maintained stable margins as a result of our relentless focus on cost control and productivity improvement. We remain committed to investing in optimization measures throughout the economic cycle, Including the automation of the goods sorting process, which enables us to increase operational efficiency; and the newly launched Enterprise Automation and Robotic Process Automation Center of Excellence, which is focused on digitizing the entire enterprise to achieve greater efficiencies in support functions as well as our operations level.”
signs of optimism
Continued growth in GCC economies and expectations that global inflationary pressures may peak and then fall sharply point to some signs of optimism for the end of the year. Aramex believes key differentiators in the coming months will be its technology investment capabilities, as well as geographic and business line diversification that provide a competitive advantage.
“We will continue to improve the efficiency of our services, enhance the customer experience, strengthen our road network, improve resource allocation, and make other targeted operational improvements across our four products – enabling us to capture market share and create Well positioned for long-term value. Our shareholders.”
Operating results
International Express reported solid consolidated revenue of AED 567 million in Q1 2023, reflecting additional traffic from MyUS and attractive margins in Aramex’s parcel forwarding business, which includes MyUS and Shop & Ship. Organic revenue (excluding MyUS) was weak year-over-year due to changes in customer mix.
Reported gross profit for Q1 2023 was AED 184 million, up 3% year-on-year. The corresponding gross margin was maintained at 32% due to several factors including improved long-distance transportation costs and other cost optimization measures.
Domestic express delivery
Domestic express revenue fell 4% to AED 362 million in Q1 2023 due to foreign exchange impacts in Egypt, Lebanon, South Africa and certain Menat countries, as well as lower revenue in Oceania, which is undergoing a restructuring plan. This was partially offset by higher GCC domestic revenue and prudent cost management. Gross profit for the period was AED 87.6 million, a slight decrease of 6%.
However, the corresponding gross margin remained stable at 24% year-over-year, reflecting the company’s success in operating efficiencies, especially in the “last mile,” as a result of the company’s efforts in automation – which further improved increase courier productivity; and double Aramex’s Pickup and Delivery (PUDO) network in the first quarter of 2023.
shipping agent
Aramex’s freight forwarding business performed strongly in the first quarter, with revenue remaining at AED 385 million and gross profit up 17% to AED 61 million. This was driven by the positive impact of operational efficiencies, including an increased focus on achieving premium revenue and consolidating trucking resources between freight and logistics products. Revenue growth in Africa and the Americas, stable revenue from GCC and Menat, and new cargo business in Oceania drove revenue growth in freight forwarding.
Logistics and Supply Chain Solutions
Logistics and supply chain solutions revenue declined slightly by 5% to AED 107 million in Q1 2023, while gross profit increased by 23% to AED 16.2 million, corresponding to a gross margin of 15.1%, higher than Q1 2022 11.7% in the first quarter. Performance in the GCC, Europe and South Africa contributed to the growth, driven by sectors such as retail, e-commerce, pharmaceuticals and oil and gas. — trade arab news agency
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