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Thu 7 May 2020 05:27 PM

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Aramex reports 38% drop in Q1 profit on Covid-19 issues

Domestic operations saw 'significant increases in activity levels' according to CEO Bashar Obeid

Aramex reports 38% drop in Q1 profit on Covid-19 issues

The first quarter saw Aramex's total domestic express volumes rise by between 21 percent and 34 percent in its core markets.

Dubai-based logistics major Aramex witnessed a 38 percent drop in Q1 profit, to AED 67.4 million, as the outbreak of Covid-19  resulted in increased costs in shipment routes.

The company said its revenues fell three percent to AED 1,196m, with Covid-19 having a disproportionate impact on service lines, particularly international business.  

Bashar Obeid, chief executive officer of Aramex, said: “From a business perspective, it is too soon to say with certainty how severe and lasting the impact of the pandemic will be on our business. However, in Q1 our revenue mix has shifted on the back of considerable changes in consumer shopping behaviour and e-commerce trends, and we saw an increase in the cost of doing business.”

Obeid said the company’s international express and freight forwarding businesses, in particular, were negatively impacted due to "a general softening in demand for goods, and more complicated and costly shipment routes", caused by air travel disruptions and changes in land border regulatory requirements, which he said “impacted our volumes and profit margins in those service lines”.

Domestic increase

In its domestic operations, however, the first quarter saw its total domestic express volumes rise by between 21 percent and 34 percent in its core markets.

“In stark comparison, domestic express and logistics and supply chain management have witnessed significant increases in activity levels,” Obeid said.

“This is mainly because almost entire populations in countries where we have significant on the ground operations were encouraged to turn to online channels to purchase and deliver necessities, such as food and other household goods.

“This has prompted major traditional retailers in our core countries to turn to Aramex to partly handle the influx of orders and deliveries and relieve pressure on their limited last mile capacities. At the same time, major e-commerce players have also increased their demand on our services to support their last mile delivery requirements.”

New business

Obeid revealed that Aramex is targeting companies in the pharmaceutical, life sciences and healthcare sectors for new business, which is expected to yield positive results in the year ahead.

“We are confidently servicing new clients and we expect to continue to see an increase in activity from those critical industries and sectors over the coming periods,” he said.

Outlook

Looking to the remainder of the year, Obeid said there is still a lot of uncertainty around how long lockdown measures and other movement restrictions will remain in place in countries where Aramex has significant operations.

“There is also ambiguity around shifts in consumer demand trends in a post-Covid-19 world," he said.

“This is why, over the coming period, we are focused on remaining flexible when addressing clients’ needs, while adapting to fast changing operating environment and remaining financially robust to weather a global economic downturn.”

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