Aramex

Based in Dubai, UAE, Aramex is a global asset-light provider of logistics and transportation solutions. Their strategic location in the Middle East serves as a logistics connection between East and West, operating in more than 600 cities across 70 countries and employing over 18,000 professionals. Aramex continues to be a key player in the Global Distribution Alliance (GDA), a network it co-founded and currently chairs. The GDA is composed of more than 40 independent express operators and is strategically designed to provide extensive global coverage. Aramex, in partnership with Amazon Web Services (AWS) since late 2020, has advanced its digital transformation by migrating its technology infrastructure to AWS, significantly enhancing its agility, innovation speed, and security while improving shipping-date prediction accuracy by 74% and reducing prediction processing time to under 200 milliseconds. The Middle East operator has proven that their unique asset-light business model and commitment allows the company to adapt quickly to changing market conditions, implement last-mile delivery solutions, develop new services, or respond to changing customer preferences. As of November 2023, Aramex opened a new courier facility in Oman and started a collaboration with Mastercard by launching ScaleUp to foster SME growth.

Aramex posted a normalized net profit of AED 173 million ($46.7 million) in 2022, an increase of 9% year-over-year while revenue was down by 2% to AED 5,9 billion ($1.6 billion) with the primary cause being the stagnating revenues from weakness in the markets, which were counterbalanced by growth in GCC and other MENAT countries. Other reasons were the overall economic slowdown, China’s continued lockdowns, and devalued currency in some countries of operation. However, Aramex did witness substantial growth in their freight product by 27% while increasing gross profitability by 51%. Their logistics product was also a winner in 2022 reaching 85% utilization and increasing gross profits by 58%.

Aramex divides its product offerings 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. The latter three segments accounted for 1% of Aramex’s 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 38%. This segment decreased in 2022 by 16% to AED 2,249 million ($607 million) with lockdowns in China due to COVID-19 limiting the amount of desired volume.

In terms of domestic express, revenue decreased by 7% to AED 1,501 million ($405 million) in 2022, down from AED 1,608 million ($434 million) in 2021 due to foreign exchange influence and lower than forecasted volumes, especially in Australia.

Aramex faced significant challenges in 2022 because of a complex global economic situation. The company contended with high inflation, rising interest rates, and currency value declines in some markets. Despite these difficulties, Aramex managed to sustain its performance, largely because of the relatively stable economic conditions in the Middle East, its primary market. This regional stability helped support demand for Aramex’s services in the US and UK. Additionally, the company benefited from an increase in consumer confidence and business activities. Looking ahead, economic forecasts for the Middle East, Aramex’s main market area, are growing increasingly cautious with current geopolitical tensions.

Figure 1 illustrates how the various business segments have changed their revenue share over time. Aramex’s growth has been driven by its international and domestic Express business, which represents about 70% of group revenues, benefiting from e-commerce. Despite a 5% year-on-year revenue decline in H1 2023 and challenges in the market, Aramex maintained a robust 25% gross profit margin, showcasing resilience and strategic adaptability. The company continues to invest in technology and operational optimization, focusing on higher-margin accounts and specialized verticals for long-term value. A shift from air to sea freight due to declining global rates has led to double-digit growth in sea freight volumes for Aramex. Logistics and Supply Chain Solutions revenues decreased slightly in H1 and Q2 2023, but the company expects recovery as new warehouse utilization builds up.

It is worth highlighting the Freight Forwarding division, which recorded a total of AED 1,684 million ($455 million) in 2022 (27% increase vs. 2021). The “Logistics” division also grew by 2% up to AED 445 million ($120 million) in the same period. The freight forwarding revenue growth originates from an added focus on freight capabilities and competencies, as well as focusing on core markets like UAE and KSA. The “Logistics and Supply Chain Solutions” division was the segment of business that saw an increase in revenue YoY, up 2%. Going from AED 435 million ($117 million) in 2021 to AED 445 million ($120 million) in 2022. They Aramex stated credit a “change in focus to quality revenue” for the increase. Higher utilization rate (85% in warehouses), automation, and effective cost management are the main drivers of the better profit margins they saw in this division as well, which were up 5% YoY.

Figure 1 – Aramex Revenues by Business Segment 2010– 2022

Figure 2 shows the company’s revenue share by region, with its core market (Middle East & Africa) accounting for 59% of the total revenue in 2022. The Asian region has experienced the highest growth in the last decade with Europe’s share decreasing from 18% in 2010 to about 13% in 2022. Aramex reported very strong growth in Saudi Arabia and positive performance in the GCC and MENAT regions, which include the UAE, in 2022. These three markets present a wide range of opportunities in the e-commerce sector.

Aramex navigated the impact of global sea freight issues and supply chain disruptions effectively, with the situation being largely manageable. The company benefited from improved land freight movement and increased capacity, despite facing challenges from continued Covid-19 restrictions and a surge in oil prices. They continue to recognize the significance of the Oceania market, actively undergoing restructuring to bolster its operations and expand trade lanes from the continent to North America and Europe, aiming to strengthen cross-border trade and diversify its service offerings.

Figure 2 – Aramex Revenues by Region 2010 – 2022

Aramex delivered a total of 122 million shipments in 2022, a decrease of 9% from the same period in 2021. Figure 3 shows the revenue per shipment development from 2007 to 2022. Additionally, Figure 3 shows Aramex shipment volumes over time. Aramex grappled with increased costs per kilo of shipments due to constrained air freight capacity and elevated line haul expenses, with rates notably higher than pre-pandemic levels. Amid these challenges, Aramex started the process of restructuring its long-haul network, particularly in regions like Oceania, to enhance efficiency and manage revenue declines. To adapt to market shifts, Aramex has realigned its operations into Aramex Express for B2C and Aramex Logistics for B2B services, streamlining its focus on diverse customer segments.

Figure 3 – Aramex Revenue per Shipment and Volume Development 2007 – 2022

In 2023, Aramex reported a resilient performance amid global shipment volume softening. Their revenue in the first quarter was AED 1.43 billion, a slight 1% decrease year-over-year. The MyUS acquisition contributed positively, reflected in a 4% increase in gross profit to AED 358 million. However, Aramex’s net profit for the first quarter decreased by 49% to AED 24 million, partly due to expenses associated with the MyUS acquisition. Additionally, GeoPost/DPDgroup, a subsidiary of the French state-owned postal group La Poste, increased its stake in Aramex from 21.6% in 2021 to 24.9% in 2023.

Figure 4 – Aramex: Corporate Revenue and EBIT Margin 2006 – 2022