Lower Oil Prices, E-commerce To Aid Growth In 2015, Says Aramex

Growth in the Middle East’s e-commerce sector and lower oil prices could underpin regional courier major Aramex’s growth in 2015, its top management revealed today.

Speaking to reporters at a roundtable in Dubai today, Aramex CEO Hussein Hachem said that lower oil prices could translate into a five to 10 per cent drop in its operating costs in 2015.

“We have been watching the oil prices intently,” he said. “Our business depends on airlines and we have a massive fleet of delivery vehicles. Our airline costs are dropping…freight costs are cheaper.”

Lower oil prices have seen governments in the region assuage their respective populations by increasing their public spending. This, according to Hachem, could result in an increase in regional trade, which in turn would push up Aramex’s business.

“Being a global firm, lower freight costs obviously benefit us globally. Of course it remains to be seen how much do airlines cut costs. It is already happening though and we are passing on the benefit to our customers,” he stated.

Looking at 2-3 acquisitions

Hachem and Aramex’s senior management were speaking not long after the Dubai-based revealed a 17 per cent rise in fourth-quarter net profit as revenues from its domestic and international operations grew.

The company made a net profit of Dhs89.4 million ($24.3 million) in the three months to Dec. 31, up from Dhs76.4 million in the prior-year period, it said in an emailed statement.

For 2015, Hachem said that the firm’s forecast is conservative and he was predicting a profit growth of about 10 per cent.

“We have to wait and see. We would like to see what is happening on the Euro. We would like to see what’s happening with oil prices.”

To aid Aramex’s future expansion plans, CFO Bashar Obeid revealed that the firm was raising $150 million in debt from a consortium of local banks in 2015.

“We have a very low debt-equity ratio of 8 per cent and banks have shown their willingness to lend to Aramex. We should be signing documents to this effect in the coming 10 to 15 days,” he said.

This extra capital would be used to fund Aramex’s inorganic growth strategy, according to Hachem, who revealed that the firm was looking at 2-3 acquisitions in 2015, though he declined to go into it further.

E-commerce outpacing consumer business

Iyad Kamal, COO at Aramex, said that the firm’s e-commerce business has been growing at fast clip in the last four to five years and is becoming a significant driver of its revenues.

“Our B2C business is growing faster than our B2B business,” said Kamal. “As of now, e-commerce is growing 30 per cent year-on-year within Aramex and we expect that growth rate is maintained.”

That part of Aramex’s business could grow faster, Hachem opined, if the GCC Customs Law could be adapted to e-commerce. As of now, the union’s customs regulations do not address e-commerce.

The region’s current current regulations only allow small shipments – small parcels – to be cleared by customs if these are transported by air, which is expensive.

“As a leader in the logistics space, what I am calling for an upgrade of the infrastructure on GCC borders, at ports, at customs to facilitate easier online trade,” he stated.

Hachem lamented that the logistics industry was not lobbying for this change as a consortium. “We are going to continue lobbying…keep knocking on doors…but we need to do this as a group.”