Aramex, the Middle East’s biggest courier company, reported an 18 per cent rise in third-quarter income as lower expenses helped to offset a dip in revenue.
Net profit from continuing operations, attributable to the equity holders of the parent company, for the three months to the end of September rose to Dh37 million ($10.05m) from Dh31.35m in the same quarter last year, Aramex said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.
Total revenue in the quarter dropped 2.4 per cent to Dh1.42 billion as the company shipped lower volumes in the Oceania and North Asia regions.
Revenue was also affected by the devaluation of currencies in certain markets, making foreign products relatively more expensive for some consumers, Aramex said.
The US dollar — regarded as a safe haven asset by investors — has gained strength in recent months amid rising volatility in global markets and aggressive interest rate increases by global central banks.
The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, reached a two-decade high of 114.78 in late September.
“The strength and resilience of the GCC economies contributed to the stability of our top line year to date in 2022,” said Othman Aljeda, chief executive of Aramex.
“In line with our strategic objectives, our revenue mix is now more diversified both in terms of contributions from the different business segments and from a more diverse customer base.”
The global logistics industry is reporting a slowdown in e-commerce activity as consumers return to brick-and-mortar shops, with the easing of Covid-19 restrictions.
Higher inflation rates are also squeezing discretionary spending.
Logistics and cargo companies registered a sharp rise in business in 2020 after the onset of the pandemic when safety measures drove more consumers to shop online.
However, the industry has been hit with rising costs due to supply chain bottlenecks, rising inflation rates and higher oil prices that have put pressure on margins.
Aramex said its “disciplined” approach to cost management lowered operating expenses in the third quarter.
The company’s administrative expenses, which include costs related to the payment of wages, fell 2.3 per cent to Dh213m. It reported an other income of Dh9.8m, compared with an expense of Dh4.58m a year ago.
Aramex's courier shipment volumes dropped almost 13 per cent to Dh29.61bn in the three-month period, leading to a 16 per cent fall in gross profit from the business.
Meanwhile, the company’s freight-forwarding and logistics business benefited from strong industrial demand as well as “good” contribution from high-growth sectors such as retail, small and medium-sized enterprises and pharmaceuticals.
In the quarter, the business unit's revenue grew 29 per cent annually to Dh550m. It also grew by 27 per cent to Dh1.59bn in the first nine months of the year.
“The freight-forwarding business continues to be our strong performer, registering double-digit growth in both the three-month and nine-month periods,” said Mr Aljeda.
“We remain cognisant of global macro activity and believe that our dominant position in the GCC … will continue to support our resilient performance.”
The company's nine-month net profit, meanwhile, dropped more than 3 per cent to Dh128m, but revenue rose slightly to Dh4.389bn during the period.
Aramex, which completed the acquisition of e-commerce platform MyUS in October, expects the new unit to add about Dh110.2m in earnings before interest, taxes, depreciation and amortisation in 2023.
“We look forward to unlocking further value over the long term through revenue and cost synergies,” Mr Aljeda said.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
Need to know
Unlike other mobile wallets and payment apps, a unique feature of eWallet is that there is no need to have a bank account, credit or debit card to do digital payments.
Customers only need a valid Emirates ID and a working UAE mobile number to register for eWallet account.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
