Efficient operations underpinned by a strong digital strategy and robust financial position has enabled Dubai-based logistics company, Aramex, to manage 21 per cent growth in international and domestic express volumes during 2020.
The company has posted its Q4 2020 and FY2020 financial results.
In Q4 2020, revenue increased 13 per cent to 1,598 million AED (approx. €358.8 million) , compared to 1,418 million AED (approx. €318.3 million) reported in Q4 2019.
This marks the company’s highest fourth quarter revenue on record.
Q4, according to Aramex, is typically a busy shopping season and with more and more consumers turning to e-commerce to buy goods and gifts due to travel and other Covid-19 related restrictions, this supported Aramex’s top line growth for the three-month period.
For the year, Aramex’s revenue was 5,510 million AED (approx. €1,237 million), a 9.0 per cent increase versus FY2019 and the highest revenue on record, as Covid-19 accelerated e-commerce activities.
In 2020, the Aramex’s cost base witnessed an unexpected increase as linehaul costs – costs associated with long distance transportation – rose and the cost to scale last mile operations to accommodate the surge in Express volumes from e-commerce also increased.
There was an increase in other costs related to Covid-19, including Personal Protective Equipment (PPE) for company employees and sanitisation of facilities and fleet. Combined, these higher expenditures ultimately weighed on FY 2020 EBITDA margins, which came in at 13.8 per cent, down from 18.2 per cent in FY2019. In addition to the higher cost base in Q4 2020, EBITDA margins were weighed by non-core and one-off provisions of: 18.4 million AED (approx. €4.1 million) was additionally booked in Q4 2020 in relation to warehouse fire incident incurred in Q3 2020; and 21.3 million AED (approx. €4.7 million) in estimated credit loss on the company’s bank deposits in Lebanon, a prudent provision in light of the deteriorating liquidity and banking conditions in that country.
Aramex reported a net profit of 77 million AED (approx. €17.3 million) in Q4 2020, primarily due to the above-mentioned one-off provisions.
“In 2020, Aramex demonstrated its operational resilience and agility to respond swiftly to fast-changing operational conditions thanks to our strong digital infrastructure, robust financial position, experienced management team and the incredibly determined people that were on the ground getting the job done,” said Aramex Chairman, Captain Mohamed Juma Alshamsi.
“Moreover, over the last 12 months, Aramex reinforced its reputation as a trusted brand that can deliver high levels of service in a reliable, safe and timely manner under unprecedented circumstances.
“As the global economy recovers from the pandemic and the global vaccination drive gathers pace, we are optimistic about the future of our industry. Demand-side fundamentals are encouraging as more and more businesses will depend on us to move and deliver shipments globally and domestically. Supply-side, we anticipate a consolidation of market participants, creating stronger, more efficient, and technology-powered logistics service providers that are better able to offer customised solutions.
At Aramex, we will look to further strengthen our leadership position in our core markets while continuing to make inroads into servicing industries that have high volume and growing demand, with the intention of creating greater value for our shareholders and other stakeholder alike.”
Aramex CEO, Bashar Obeid, also commented on the company’s financial results and operations.
“Throughout the year we remained focused on executing on both the digital transformation roadmap, to enhance operational efficiencies and service levels, and on our commercial strategy, to diversify revenue and expand our B2B business,” said Obeid.
“On the digital front, we invested in several technologies with a strategic focus on further improving consumer experience and supporting the growth of the B2B segment. On the commercial front, we were incredibly successful in expanding our services and increasing the number of customers and total volume of shipments handled in the healthcare and FMCG sectors. We are excited about the prospects from both those defensive industries and will continue to build our capacity and capabilities to service and accelerate our growth in those segments.
“Over the past few years, customers have become increasingly price sensitive, which means Aramex’s focus will be on maximising efficiencies to ultimately bolster profitability. While 2020 profitability margins were squeezed by higher costs – due to COVID-19 – and one-off provisions, we believe our investments in technology and other pro-efficiency initiatives will lead to higher synergies, and will reflect positively on our profitability over the coming periods.
“In 2020, we also remained focused on executing on several sustainability initiatives including testing electric vehicles in Saudi Arabia and commissioning the second solar farm in Dubai to power our warehouses. Our efforts over the last several years continues to reap positive results and I am happy to report that we reduced our carbon emissions by 6.0 per cent in 2020, and we managed to increase the number of beneficiaries of our sustainability initiatives to more than 360,000 persons around the world.”
Going into 2021, Aramex, according to Obeid, will have an increased focus on servicing the healthcare and FMCG segment. The company will also increase investment in operations and technologies.
“More broadly, we believe we have entered a new era for e-commerce,” said Obeid.
“As an increasing number of consumers depend on online shopping for essentials as equally as luxury goods, we must continue to enhance and expand our e-commerce operations, especially in the last mile, to defend our market position in core markets.
“From an industry perspective, we are adjusting to lower margins because of more competitive pricing and higher cost environment. Therefore, to continue delivering value to shareholders, one of strategies we are actively pursuing is strategic acquisitions with a focus on core markets. Our strong cash position, low leverage and robust capital structure positions us favourably to capitalise on attractive opportunities in 2021.
“As a business, our strategic priorities will remain to execute on our digital transformation which will help us realise synergies and boost our profitability and to broaden our b2b business to diversify our revenue sources, enabling us to continue to grow through various market cycles. We will remain steadfast in the execution of our sustainability initiatives – which are an integral and integrated part of our Aramex.”