Volumes grow faster than profits at Aramex in Q1


Double digit volume growth in nearly all segments bar logistics belied far smaller revenue growth across the board at Middle Eastern logistics player Aramex in the first quarter of 2024. International express and all freight forwarding volumes all saw high double digit growth in volumes, even while overall revenues grew just 8% y-o-y to USD $419.5m, and EBITDA grew 18% y-o-y to $49.3m.

International operations hit by overcapacity

A quick snapshot of volumes and revenues shows lower margins in key segments of the company:

  • International Express volumes grew 44% y-o-y to 7.76m, though revenues grew just 14%
  • Freight Forwarding revenues grew 3% while for example, sea freight less than container load (LCL) volumes grew 100% y-o-y

This is reflective of the global overcapacity in air and sea freight. Othman Aljeda, CEO of Aramex said of the express delivery volumes, “Both [domestic and international volumes were] driven by new customer wins as well as seasonality during Ramadan.”

All freight forwarding volumes saw double digit growth where the division saw a 29% y-o-y drop in EBITDA to $5.3m. As well as the huge leap in sea freight LCL volumes, air freight volumes were up 35% to 12.4m kg and land freight LTL volumes were also up 35% to 48m kg in the period. This led to an EBITDA margin drop of two basis points to 5%.

Even more volume growth is expected in the coming months. Aljeda added, “We [expect] Q2 and Q3 2024 to continue to deliver volume growth… albeit at a softer rate compared to the levels during the peak seasons in Q1 2024 and in Q4, 2023”.

As can be seen, volume growth doesn’t immediately translate into profitability, and Aramex must seek greater efficiencies if it is to improve profitability across the board. Many of the issues behind the smaller margins include a surfeit of global aircraft belly space and containership capacity, so even the most efficient operation will not see the margins of the post-pandemic boom.    

The softness in freight forwarding wasn’t offset at all by the 3PL and 4PL logistics business. Many e-commerce companies are moving away from 4PL offerings and this might well be behind the 13% y-o-y fall in EBITDA to $5.89m in the quarter on 0.0% revenue growth at $29.0m. 

Offsetting the volume/income imbalance in the international markets, domestic express saw 7% volume growth and revenues up 5%. Aljeda concluded, “Our focus on technologies such as last mile route optimisation is… significantly enhancing operational efficiency.” Though the overall revenue and EBIT figures are reasonable, the underlying softness in international logistics markets suggest that there is room to manoeuvre in improving profitability in the medium term.

Author: Richard Shrubb

Source: Aramex