Aramex: H1 profits decline sharply

Middle East based global logistics company Aramex has published its First Half (H1) results for 2020.

Revenues increased by 1% to £527.1 million compared to the same period in 2019. Net profit however fell by 30% to £33.78 million thanks to increased costs associated with the pandemic offsetting the surge in demand for its services. To tackle this sharp fall, Aramex has introduced cost-containment measures that are set to stay in place until confidence returns in the idea that there will not be a second or third wave of the pandemic.

Bashar Obeid, Chief Executive Officer of Aramex, said: “Given a very challenging period, I am pleased with Q2 results, the heroic performance of our employees and the strong growth in overall express shipment volumes.

“Within our business lines, Domestic Express was the standout performer driven by exceptional growth from e-commerce related deliveries as government mandated stay at home measures and lockdowns forced people to turn to online channels to shop for necessities and other goods. We also benefitted from a surge in demand for healthcare related shipments which is positively reflected in our Freight and Domestic Express service lines. However, some industries which we service are still witnessing a slow recovery; the oil and gas sector which has been impacted by low oil prices and the economic slowdown has negatively impacted the performance of Freight, as has the sluggish demand for traditional retail. While we are starting to see a modest recovery in some of our verticals, it is too soon to say with certainty that we have returned to pre-COVID-19 levels.

“As a business, we are now operating in a higher cost environment which is adding pressure to our profitability margins. While some factors pushing costs higher may dissipate or normalise over time, such as sanitisation costs, others may adjust higher for an extended period, such as line haul costs. Having said that, we have a robust balance sheet and comfortable free cash flow position, enabling us to manage higher costs while continuing to protect shareholder value. Also, we expect that as we continue to execute on our business and digital transformation strategy, we will carry on improving operational efficiency and quality of customer service which, over the long term, will continue to drive down overall costs and relieve some of the pressure on margins.”

Othman Aljeda, acting Chief Operating Officer and Regional CEO for Aramex in Europe, North America and Asia, added: “Over the period, we remained focused on efficient and innovative problem solving to resolve several operational challenges while managing a 26% growth in overall Express (International and Domestic) shipment volumes.

“We have started ramping up on the ground operations and investing in expanding last mile capacity in our core markets to meet the surge in volumes led by robust demand from the e-commerce segment. We are hiring more couriers, increasing our fleet, and investing in expanding our warehousing facilities and related infrastructure. We are also capitalising on our crowd sourcing solution, Aramex Fleet, and our other digital-enabled cost-efficient solutions to help handle the spike in volumes. During the quarter we introduced Aramex SMART, a full stack payment option which fits perfectly in the contactless environment and expect it to be a powerful payment and delivery solution for e-tailers.

“For our International Express and Freight business, we are leveraging on our longstanding relationships with our airline partners to ensure we deliver shipments with minimum delays. We have been experiencing a particularly difficult operating environment in the US, due to social unrest and a resurgence in COVID-19 cases. However, we continue to manage our operations with heightened levels of health and safety measures.

“While we are starting to see a return to pre-COVID operating environment in some markets, we remain vigilant in our approach and will remain focused on efficiently overcoming those operational challenges to ensure we maintain the level of service our customers are used to seeing from us.”