News / Aramex profits plunge as it takes on costs and expands forwarding business

© Simon Lehmann

Aramex must be one of the few, if not the only, logistics company to see profits fall significantly last year, as it bore costs in a bid to keep customers happy.

It is also in the market for acquisitive growth, it said.

While revenues rose 10% year-on-year in 2021, to AED6.06bn ($1.65bn), net profit fell 15% to AED225m, as Aramex implemented a “fully redesigned operating model”, according to CEO Othman Aljeda.

He added: “Our customer-first approach means we are absorbing a higher cost of doing business to ensure we continue to respond to customer needs and defend and grow our market share, despite the ongoing supply chain disruptions caused by the pandemic. As a result, our margins remain under pressure.

“While the pressures will likely continue in 2022, we have a defined strategy to grow the business and improve profit margins. This includes investment in technology and operational optimisation initiatives.”

Aramex is known as a Middle Eastern last-mile delivery specialist for e-commerce and saw its courier business turnover rise 5% on shipment growth of 10%, although its ebit fell 42%.

But it is also developing its logistics and freight forwarding arm, which enjoyed revenue growth of 21%, while ebit grew 154%, from a loss in 2020 to AED36.9m in 2021.

Its air freight business saw volumes grow 25%, while land FTL volumes grew 121%. Only sea freight FCLs fell, by 29%. The company said logistics would account for half total revenues, up from one-third, over the “next few years”.

 “We ended the year on a strong footing,” said Mohammad Alkhas, chief operating officer, logistics & freight-forwarding.

“By operating within a more decentralised model, we were able to service a new and growing number of customers, offering more innovative solutions to capture pockets of growth and capitalise on the steady recovery in certain industry verticals including oil & gas and retail & fashion.

“We also strengthened our capabilities with the addition of industry experts and technology investments to capture greater market share.”

Aramex said its new operating model would help it grow market share in 2022, in both parts of the business.

Mr Aljeda said the courier business would “be focused on driving new tradelanes for the global e-commerce market, while positioning ourselves as the premier last-mile solutions provider to businesses of all sizes in our core markets. Aramex has the benefit of scale, and we continue to solidify our position through expansion of our ground operations and fleet in core markets”.

He added that automation would lead to more costs savings and that the firm was in an acquisitive mood.

“Acquisitions remain a key enabler of our growth. To that end, we are seeking attractive and value accretive investment opportunities in markets that will enable trade flows into MENAT, and help us to further grow our global footprint.”

Last year GeoPost/DPD increased its stake in Aramex to 24.9%.