Aramex, a leading global provider of logistics and transportation solutions has seen its fourth-quarter (Q4) 2023 net profit more than doubled to AED77 million ($21 million) compared to Q4 2022, driven by a growth in EBITDA.
The substantial EBITDA growth of 33% YoY in Q4 2023 was driven by an increased focus on quality revenue, enhanced operational efficiencies and a one-time logistics business boost from settlement claims in the quarter. The EBITDA margin grew to 13% in Q4 2023, and reached 11% for the entire fiscal year.
Aramex maintained a strong balance sheet position with Net Debt-to-EBITDA ratio of 2.4x and a healthy cash balance of AED575 million as of 31 December 2023.
Net income declines for FY
But, for the full year, net income witnessed a 22% decline to AED129 million, attributed mainly to the increase in finance expenses associated with the MyUS acquisition loan taken in Q4 2022, and to a lesser extent, to the currency translation impact. Net income for the organic business increased 7% YoY in 2023 compared to 2022, demonstrating the underlying strength of the firm’s operations.
Aramex reported a marginal 1% YoY decline in Q4 2023 revenue to AED1.52 billion, despite challenging market conditions and currency fluctuations. Full year revenue was healthy at AED5.69 billion, a decline of 4% YoY. When excluding the impact of currency translation, full year revenue decline was 1% compared to reported decline of 4%.
Revenue growth in International Express was offset by the decline in revenues from other products. Freight Forwarding was impacted by the decline in global rates in the Freight- Forwarding industry, while the Domestic Express and Logistics businesses reported marginal decline in revenues, impacted by currency translation. Excluding the impact of currency translation, both products reported growth of 2% in revenue for the full year 2023.
With the management’s resolute focus on quality revenue, operational efficiency, and cost optimisation, Aramex delivered a notable 2% YoY growth in Gross Profit for Q4 2023, reaching AED389 million and remained stable for the full year. Gross Profit Margins witnessed a one percentage point improvement both in Q4 2023 and FY 2023, reaching 26% and 25%, respectively.
The company’s fiscal discipline was further showcased through its improvement in Group Selling, General, and Administrative (SG&A) Expenses, returning to pre-pandemic levels for the cost structure. The organic business (excluding MyUS) delivered a 10% decline in general, and administrative expenses for the full year 2023.
A 7% increase in selling expenses for the organic business for the full year 2023 reflects the company’s strategy to increase sales competencies in key verticals across key markets to ensure sustainable and quality revenue growth in the future.
Othman Aljeda, Chief Executive Officer, Aramex, said: “I am pleased to report a strong fourth quarter and a resilient financial year performance for Aramex in 2023, despite persistent challenges in the operating environment globally. Q4 2023 has proven to be exceptional, marked by record quarterly International Express volumes and improved profitability for the Group. This is driven by client wins, operational excellence, and the strength of our home markets in the GCC and wider MENAT region.
“We are delivering on our strategy to optimise costs, improve operational efficiencies, and prioritise revenue quality in the face of cyclical pressures. Our EBITDA increased 33%, while our net profit more than doubled in Q4 2023 compared to the same period last year. Our organic net income for the full year also improved, registering a 7% growth compared to 2022.”
Regionally, the GCC and Menat continued to account for half of the total group revenue and gross profit in Q4 2023. Despite mixed economic indicators across these markets, Aramex achieved growth in gross profit of 6% in the GCC and 32% in Menat. Its global operations are expanding, and it sees opportunities across its key international markets.
International express benefitted from new client wins, with significant growth in volumes and healthy improvement in profitability. Domestic Express maintained stable volumes despite a challenging operating environment. The Logistics product enhanced efficiencies, and is supported by a robust pipeline of client wins for 2024.
While Freight Forwarding continues to pose challenges globally, Aramex turns its attention to the situation at the Red Sea, where it is closely monitoring the current shipping disruption. With a large trucking fleet in the region, it is supporting its clients with alternative solutions. Aramex is deploying its trucks via Dubai, UAE and via Dammam, Saudi Arabia for the onwards journey of shipments arriving from Asia and via Port Said, Egypt for the onwards journey of shipments arriving from Europe.
Operationally, during Q4 2023 Aramex successfully completed its most extensive automation project to date at its Sydney facility, which will improve productivity and efficiency in Australia. Additionally, other automation projects were successfully concluded in other markets, further fortifying its network capabilities.
“We are seeing a good start to 2024, a year during which our strategic focus remains on securing quality revenue across our four products, further enhancing efficiencies through technology and operational investments, to continue improving overall group profitability,” he said.
International Express achieved a remarkable 31% increase in shipment volumes in Q4 2023 YoY reaching 7.6 million shipments, setting a record for the highest quarterly volumes in the history of Aramex. For the full year 2023, volumes were up 5% YoY. This growth is driven by new customers. International express will continue to diversify across verticals and markets, while also expanding its premium product and dangerous goods offering.
Revenue increased to AED656 million in Q4 2023, reflecting 8% growth YoY while full year growth was at 2% compared to FY 2022. The gross profit for Q4 2023 was AED226 million, a YoY increase of 16% while the corresponding gross profit margin grew to 34% mirroring the FY 2023 gross profit margin performance. Aramex’s investments in driving efficiencies have resulted in a strong and agile infrastructure, able to accommodate the growing business in a sustainable and profitable manner. This is reflected in the gross profit growing at a faster rate than the revenue.
Domestic Express delivered a resilient performance in the face of softened retail activity worldwide. Volumes were stable for both the Q4 2023 and FY 2023 periods. The Q4 2023 Revenue declined by 4% YoY to AED362 million and Revenue for the full year 2023 declined by 5% YoY to AED1.43 billion mainly due to due to FX impacts. Excluding the currency impact, Revenue decline was 1% for the Q4 2023 period, and for the full year period Revenue grew 2%.
The gross profit margin decreased double digits in Q4 2023 and FY 2023, primarily due to the softness in Oceania, certain adjustments in group reporting as well as currency fluctuations. Upon removing FX effects, the gross profit declined 8% for the full year 2023.
Going into 2024, the focus for Domestic Express is to improve efficiency and profitability, while growing the business in key sectors. Oceania continues to account for approximately 40% of our volumes in domestic express, and the turnaround strategy is ongoing.
Freight-Forwarding Shipment Volumes
Aramex’s Freight-Forwarding business was resilient in a challenging market characterised by the decline in global freight rates, leading to a downward impact on pricing as seen across the freight forwarding industry worldwide. Aramex was also impacted, with Q4 2023 registering a 9% YoY decline in Revenue, mirroring a consistent trend for the full year with a 11% drop in Revenue. Notably, Q4 2023 revenue improved compared to Q3 2023 revenue.
Costs were effectively managed, aligning with Revenue, resulting in a stable Gross Profit Margin of 15% for the full year 2023.
Land freight delivered robust growth in volumes, with Aramex boasting a large trucking fleet in the GCC and wider region. During the year, the decline in sea freight rates has led to a shift in volumes from air freight to sea freight which is also reflected in the volume performance of Aramex.
Currently, the shipping industry is impacted by the situation at the Red Sea which is causing an increase in rates and disruption in transportation routes. Aramex is able to support clients with alternative transportation routes thanks to its strong network and infrastructure in the region.
Logistics and Supply Chain Solutions
In Q4 2023, the Logistics and Supply Chain Solutions reported Revenues of AED111 million, a decline of 4% YoY and in line with the full year performance, which saw a 5% decline in revenue compared to FY2022. Foreign exchange translations had a significant role to play throughout the year. When excluding the impact of currency translation, revenue grew 2% for the full year 2023, compared to the year 2022.
Aramex continued to focus on enhancing operational efficiencies and maintained a disciplined approach to cost management. For the full year 2023, gross profit declined in line with revenue and the margin was maintained at a healthy 15%.
Q4 2023 gross profit increased 13% YoY to AED21 million and the margin improved to 19%. It is worth noting that logistics benefitted from a one-off settlement which added a further boost to the profitability of this product during Q4 2023.