Aramex Delivers Double-Digit Net Profit Growth in H1 2024 Despite Seasonal Challenges
- Reaffirming stronghold in key markets: Both International Express and Domestic Express achieved significantyear-over-year(YoY)volumegrowthof32%and5%respectively,expandingourcustomer base while maintaining goodservice levelsin the first halfofthe year(H1 2024). Freight Forwarding navigated acomplex environment, marked by increased rates and competition, achieving growth in volumes in H1 2024, as it focuses on consolidating its position on key lanes. Logistics onboarded several new customers during the first months of the year, effectively replacing legacy accounts.
- StrongRevenueGrowth:Aramexachievedarobust8%YoYincreaseinrevenueforbothH1andQ2 2024,drivenbyrevenuegrowthfromallproductslines.Therevenueperformanceinthefirsthalfof the year is attributed to new customer wins and volume growth.
- Effective Cost Management: The Company maintained a tight control over Group Selling, General, and Administrative Expenses (SG&A), with costs growing in line with revenue in H1 2024. Selling expenses increased in line with the company’s strategy to focus on sales specialism, while G&A were wellmanaged,delivering astableSG&A-to-revenueratioof20%,animprovement of0.7ppsoverH1 2023.
- Improved Profitability: The first six months of the year saw a solid 5% YoY increase in Gross Profit,withahealthyGrossProfitMarginof24%amidongoingefficiencymaximizationandcostoptimization efforts. Net profit showed a steady rise of15% YoYin H1 this year, driven by a 20% growth in EBITand an improved EBIT margin, indicating strong operational performance despite Q2 2024 impact.
- 2024FullYearOutlook: Aramex ispoised to sustain itsgrowth momentum acrosskeyproduct linesin the second half of the year and is expected to deliver a good performance for the full year 2024 with an estimated growth of 8% to 9% in Group Revenues and anapproximate Gross Profit Margin of 24% to25%.Thecompanywillcontinueitsstrategicinvestmentsininfrastructureandtalenttobroadenits customer base and prioritize exceptional service, keeping it on course to meet year-end targets.
- BalanceSheet:Aramexcontinuestobewell-positionedwithacashpositionofAED457millionanda Net Debt-to-EBITDA ratio of 0.9x (excl. IFRS16) as of 30 June 2024. Management’s focus on value creation delivers 40 basis points improvement in ROIC, currently standing at 5.2% for H1 2024.
Dubai, UAE – Thursday, 8 August 2024: Aramex (DFM: ARMX) a leading global provider of comprehensive logisticsandtransportationsolutions,announceditsfinancialresultsforthesecondquarter(“Q2”)andfirsthalf (“H1”) ending 30 June 2024.
| InThousandsofUAEDirhams | Q22024 | Q22023 | %Change(YoY) | H12024 | H12023 | %Change(YoY) |
| Revenues | 1,496,254 | 1,388,839 | 8% | 3,036,955 | 2,820,336 | 8% |
| GrossProfit | 345,131 | 345,546 | (0%) | 740,532 | 703,546 | 5% |
| GrossProfitMargin | 23% | 25% | 24% | 25% | ||
| EBIT | 46,962 | 52,762 | (11%) | 139,369 | 115,762 | 20% |
| EBITMargin | 3% | 4% | 5% | 4% | ||
| EBITDA | 134,930 | 143,293 | (6%) | 316,104 | 296,456 | 7% |
| EBITDAMargin | 9% | 10% | 10% | 11% | ||
| NetProfit | 2,893 | 18,960 | (85%) | 49,458 | 42,869 | 15% |
| NetProfit Margin | 0% | 1% | 2% | 2% |
Seasonalityimpact
Q2 2024 was expected to be a softer quarter for the company, impacted by seasonality and loss of productive days. The impact was further amplified due to adverse weather conditions in the UAE causing operational disruptions and slowdowns in business and consumer activity for nearly a week.
- This year, the Ramadan season was observed entirely in Q1, resulting in Q2 not benefiting from the peak festive demand and increased consumer spending seen in Q2 2023 in several markets.
- Additionally, the two public holidays (Eid al-Fitr and Eid al-Adha) in Q2 2024 with extended vacation daysresultedinslowerbusinessactivityoverall,andinfeweroperationalworkingdaysacrossdifferent countries.
- The loss of productive days and the seasonality impact in Q2 2024 is estimated at approximately AED 45 million in lost revenues and AED 8.8 million in lost net income for Q2 2024 for the Group.
Therefore, dueto theimpact and shift inseasonalitybetween thesequarters, it is morerelevant to look at the half year performance in 2024 as an indication of this year’s financial situation and progress compared to last year.
OthmanAljeda,ChiefExecutiveOfficerofAramex,said:“Wearepleasedtoreportagoodperformanceinthe first half of 2024, which underscores our strategic focus on growth. We delivered a healthy revenue growth of 8% YoY and a Net Profit increase of 15% YoY in H1 2024, despite a challenging Q2 2024.
”Weareproud ofthededication andhardworkofourAramexians,spearheadingthisrobust performance.We expanded our customer base and delivered solid volume growth across our product lines, reinforcing our stronghold and leadership position in our key markets. Both International Express and Domestic Express achievedsignificantvolumegrowthwhilemaintainingstrongservicestandards.FreightForwardingnavigateda complex operating environment, delivering good growth in volumes for the first half of the year. Our Logistics businesssuccessfullyonboardednewcustomersinitswarehousesduringH12024andreplacedlegacyaccounts.
“We are monitoring the regional developments and Red Sea complexities closely. Despite the recent global macroeconomic headwinds and the regional disruptions, we are robustly positioned to deliver resilient performance in the second half of the year and achieve our year-end targets.”
”We remain committed to demonstrating the resilience and adaptability of our strategies to market dynamics andcreatinglong-termvalueforourstakeholders.Wewillcontinueourinvestmentsincriticalprojects,ensuring we are well-prepared to capitalize on growth opportunities. Looking ahead, we are confident in our ability to deliver quality service and enhance operational efficiency to meet the evolving needs of all our customers.”
FinancialPerformanceCommentary
Inlinewithexpectations,inthefirsthalf(H1)of2024,Aramexsawstrongrevenuecontributionfromallproducts withrevenuegrowingby8%yearonyear(YoY)inH12024drivenbynewcustomerwinsandanincreasedfocus on sales specialism. The performance was further supported by impressive volume growth of 32% in InternationalExpress,5%inDomesticExpressalongwithstronggrowthinfreightvolumes inH12024.Revenue performanceinQ22024maintainedpositivemomentum,alsorecordingan8%increase,comparedtoQ22023.
The Company posted an increase of 5% YoY in Gross Profit in H1 2024 to AED 741 million, and a stable Gross Profit of AED345 million in Q2 2024. The Gross Profit margin was healthy at 24% in H1 2024 and at 23% in Q2 2024.
Costswerewellmanaged,withtheGroupSelling,General,andAdministrativeExpenses (SG&A)growinginline with revenue delivering a stable SG&A-to-revenue ratio of 20% for both H1 2024 and Q2 2024.
Q2 2024 was expected to be a softer quarter for the company, impacted by seasonality. EBIT declined 11% to AED47million.Furthermore,Q22024netprofitdeclinedtoAED2.9million,impactedby1)approximatelyAED
8.8 million from seasonality and adverse weather effects and 2) negative FX impact of AED 5.1 million coming primarily from the devaluation of the Egyptian pound.
For the half year period, Net profit remained on an upward trajectory, reaching AED 49.5 million in H1 2024, a significant 15% YoY increase, driven by a 20% growth in EBIT and an improved EBIT margin.
AramexhasastrongcashpositionofAED457millionandaNetDebt-to-EBITDAratioof0.9xasof30June2024. Management’sfocusonvaluecreationdelivers40basispointsimprovementinROIC,currentlystandingat5.2% for H1 2024.
ProductPerformance
InternationalExpress(IncludingParcelForwarding)
| InThousandsof UAE Dirhams | Q2 2024 | Q2 2023 | % Change (YoY) | H1 2024 | H1 2023 | % Change (YoY) |
| Revenues | 589,300 | 561,041 | 5% | 1,235,105 | 1,127,622 | 10% |
| GrossProfit | 188,104 | 188,324 | (0%) | 407,246 | 372,120 | 9% |
| GrossProfitMargin | 32% | 34% | 33% | 33% |
InternationalExpressShipmentVolumes
| Inmillionsofshipments | Q2 2024 | Q2 2023 | % Change (YoY) | H1 2024 | H1 2023 | % Change (YoY) |
| Total Number ofShipments | 6.7 | 5.5 | 21% | 14.4 | 10.9 | 32% |
In line with expectations, International Express revenue for the first half of 2024 reached AED 1.2 billion, markinganimpressive10%YoYincrease.Thesegmentalsodemonstratedsolidquarterlyperformance,with Q2 revenue growing by 5% YoY.
Aramexsuccessfullyhandled14.4millionshipmentsinH1,withshipmentvolumesgrowingsignificantlyby 32% YoY for H1 and 21% YoY for Q2.
GrossProfitforH12024was reportedatAED407.2million,reflectinga9%YoYgrowth andahealthymargin of 33%. Gross Profit for Q2 2024 was stable with a healthy margin of 32%.
DomesticExpress
| InThousandsof UAE Dirhams | Q2 2024 | Q2 2023 | % Change (YoY) | H1 2024 | H1 2023 | % Change (YoY) |
| Revenues | 376,074 | 351,385 | 7% | 756,279 | 713,037 | 6% |
| Gross Profit | 81,435 | 74,591 | 9% | 176,240 | 162,228 | 9% |
| GrossProfitMargin | 22% | 21% | 23% | 23% |
DomesticExpressShipmentVolumes
| Inmillionsofshipments | Q22024 | Q22023 | %Change (YoY) | H12024 | H12023 | %Change (YoY) |
| Total Number of Shipments | 25 | 24 | 4% | 51 | 49 | 5% |
TheDomesticExpresssegmentdemonstratedsteadygrowthacrossallindicators.
Domestic shipment volumes remained strong, growing by 5% in the first half of the year to reach 51 million shipments. Q2 2024 volumes also saw solid growth, increasing by 4% compared to the same period last year, mainlyattributedto theturnaroundstrategyinOceania. Revenueswereup7%inQ22024and6%inH12024. Excluding the impact of currency devaluation, revenue grew 9% YoY for both periods.
The Gross Profit Margin increased to 22% in Q2 2024 compared to same period last year, attributed to operationalefficienciesandachangeinthecostprofileofdomesticandinternationalexpress products.Asa reminder, higher volumes in international express lead to a higher allocation of fixed direct cost to the international express product, benefitting the cost profile of the domestic express product. Both domestic express and international express products run on the same infrastructure.
Freight-Forwarding
| InThousandsof UAE Dirhams | Q2 2024 | Q2 2023 | % Change (YoY) | H1 2024 | H1 2023 | % Change (YoY) |
| Revenues | 411,266 | 358,609 | 15% | 809,806 | 744,042 | 9% |
| Gross Profit | 51,920 | 56,601 | (8%) | 108,457 | 117,752 | (8%) |
| GrossProfitMargin | 13% | 16% | 13% | 16% |
Freight-ForwardingShipmentVolumes
| Q2 2024 | Q2 2023 | % Change (YoY) | H1 2024 | H1 2023 | % Change (YoY) | |
| AirFreight(KGs) | 11,009,289 | 10,813,056 | 2% | 23,431,971 | 21,972,042 | 7% |
| SeaFreight (FCL TEU) | 7,518 | 8,039 | (6%) | 15,340 | 15,042 | 2% |
| Sea Freight (LCLCBM) | 6,847 | 5,576 | 23% | 19,002 | 11,647 | 63% |
| LandFreight (FTL) | 6,731 | 6,582 | 2% | 14,624 | 13,411 | 9% |
| LandFreight (LTL KGs) | 50,469,732 | 38,483,702 | 31% | 99,429,900 | 74,840,758 | 33% |
TheFreightForwarding segment reportedasolidYoYrevenuegrowthof9%in H12024 and15%inQ22024, boosted by increased shipment volumes particularly across land and air freight. Sea freight volumes were effectively managed despite disruptions in the Red Sea shipping lanes.
The Freight Forwarding business performance aligns with global industry complexities and fluctuating market conditions in addition to the Q2 seasonal impact seen in the region.
Focusing on expanding volumes on key trade lanes, freight made additional investments in sales specialism during the quarter. The increase in freight rates and a fierce competitive environment pressured the margins during Q2 2024, as the Company focused on scaling up. Gross Profit Margins were recorded at 13% for both periods.
LogisticsandSupplyChainSolutions
| InThousandsof UAE Dirhams | Q22024 | Q22023 | %Change (YoY) | H12024 | H12023 | %Change (YoY) |
| Revenues | 107,671 | 106,217 | 1% | 214,274 | 213,260 | 0% |
| Gross Profit | 12,356 | 16,297 | (24%) | 28,687 | 32,500 | (12%) |
| GrossProfitMargin | 11% | 15% | 13% | 15% |
TheLogisticsandSupplyChainSolutions segmentreportedstablerevenuesinH1 2024,andamarginal1% growth in Q2 2024 compared to the same period last year.
Logistics onboarded several important customers during the first months of the year, effectively replacing legacy accounts that transitioned out over the last 18 months. To support this, additional investments were made in infrastructure and personnel, as the business ramped up operations in its warehouses in Q2 2024. Theseinvestmentsledtoincreasedcosts includingmobilizationcosts andoptimizationofwarehousesforthe new customers.
Subsequently, Gross Profit declined by 12% in H1 and by 24% in Q2 2024. Despite these short-term pressures, we have a positive outlook for Logistics in H2 2024 on the back of the new customer wins, and will focus on unlocking value going forward.
Currency devaluations continue to impact the financial profileof the Logistics product. Excluding the impact of exchange losses, Logistics revenues were up 5% YoY in Q2 2024, and GP was down 17% YoY in Q2 2024 versus the reported 1% and negative 24%, respectively.
