Aramex points to $200m Asian acquisition

(SATISH KUMAR)   

Aramex International is planning new acquisitions to consolidate its presence in South East Asia and to open new markets in the American west and heartland.

Fadi Ghandour, founder and CEO of Aramex, says the company has had a $200 million acquisition plan under investigation for the past two years, and he expected the acquisition of a major stake in an Asian company was very close this year.

In the below interview with Emirates Business, Ghandour also expected Aramex would achieve growth in its net profits in 2008 ranging between 20 and 25 per cent, compared to its highest growth recorded in net profits last year of 28 per cent.

EB: Do you have plans for expansions?

Ghandour: Aramex plans for acquisitions of companies in key strategic international markets in Asia and the United States after its integrated acquisitions in Europe.

These acquisitions aim to consolidate and leverage Aramex’s global network, which consists of key hubs in Dubai, Hong Kong, New York, London, Amman, Liege, and Singapore.

So we have a strong presence in Asian countries and the acquisition of a company operating in Asia will expand our operations in these countries and open markets in other Asian countries. Commercial activities are increasing in the region and we want to benefit from these activities.

Any recession in the US economy will have a negative impact on the global economy and markets. But we already have $200 million (Dh734.5m) allocated for acquisitions and we plan to invest them in new markets for our business.

We have a long-term strategy, there are cycles in the international economy and we want to enter new markets during the downturn stage to have better negotiating abilities and get acquisitions with the minimum cost.

We will wait until the cycle goes up again and at that time we will have a strong presence in these markets. We are committed to increasing shareholder value through an expansion strategy aimed at propelling the company into the front ranks of the global transportation solutions sector.

Aramex is keen to become the fifth largest global logistics and express transportation service provider by the year 2010.

International transportation companies are expanding their presence in the local and regional markets.
 
What is the impact of increasing competition on your business?

We are not afraid of the competition as Aramex was born in an open market and since the beginning, all international companies were operating in the local and regional market.

Competition is healthy for the transportation business as it creates challenges to improve our services and solutions. For 25 years we have been operating among fierce international competition but we could achieve continuous progress due to our strong infrastructure in the region. We are part of the core export and re-export services in Dubai and Jebel Ali.

Aramex and its worldwide alliance form an extensive transportation network worldwide. We offer customers around the world a wide range of transportation solutions including international and domestic express delivery, freight forwarding, logistics, warehousing and specialised shopping services.

Also Aramex-led Global Distribution Alliance (GDA) brings together 40 independent express companies covering the world with unified standards and business procedures.

An integrated information and communication technology infrastructure connects Aramex’s worldwide operations, enabling flow of information between Aramex and its alliance members and customers.

We also have a strong commitment to our clients through addressing their different needs and requirements. We dedicate everything in Aramex to serve customers with efficiency and care through installing better ways to communicate with customers and faster ways to track their shipments.

Innovation is an integral part of our development and it derives from listening to customers and addressing their needs.

What is your outlook for the transportation market in the UAE and the GCC region?

The region is enjoying a period of rapid and sustainable economic growth, and transportation services are part of all these developments.

With the expected increasing rates of expansions and investments by local and international institutions and investors, the growth in demand for all types of transportation services will increase.

Movements of people, capital and goods all over the region are on the rise and this creates more opportunities to achieve increasing growth rates in Aramex’ revenues and net profits.

I expect Aramex to continue a growth rate ranging between 20 and 25 per cent in both revenues and net profits. In 2007 we recorded what is considered the company’s best year yet.

Aramex revenues increased to Dh1.8 billion compared to around Dh1.4bn, a 31 per cent surge in revenues. Also, net profits rose by 28 per cent last year – from Dh95 million to around Dh121m.
 
We grew in size, reach, capability, and reputation, and will be able to continue expanding our strengths as we move into 2008. Aramex has been able to win major logistics contracts in 2007 in the region by diversifying its products and services.

Strong infrastructure investments in the Middle East also enabled the company to grow its profitable logistics business. After moving to a mega facility in Jebel Ali Free Zone, Aramex will increase its revenue growth.

Inflation increases the operating cost of our services, especially increases in fuel prices and the cost of human resources as it is becoming more competitive to attract and retain the best talent.

But our operations have increased and accordingly our revenues increased so we could cover the surge in the cost. We also have applied cost efficiency systems to minimise the cost of our operations.

We are primarily a non-asset based company operating in a traditionally asset-intensive business and we deliver our services using minimal owned assets.

So the acquisition process is very important to expand our stake in the market. We aim to engage our customer base in all regions where we operate and gather their feedback to use it in our strategy.
 
Engaging the customers is an ongoing process, as our teams consistently communicate with customers and gather their feedback through one-on-one meetings, our online system, contact centres and surveys.

We also aim to be employer of choice for top talent in our markets because our success will be sustained by the quality of our people.

Aramex also recognises shareholders as key stakeholders and aims to secure profits.

Profitability can be improved with sustainable practices and we believe we will be rewarded financially for continuing excellence in service quality, customer care and innovation. We have targeted growth in our net profits ranging between 18 and 20 per cent until 2009, and we could record even more profits.

This sustainable strategy will enable Aramex to be the global fifth largest logistics and express transportation company in the near future.

Fadi Ghandour, Aramex CEO

Aramex, one of the leading logistics and transportation companies in the Middle East and South Asia, was the first company from the Arab world to go public on the Nasdaq stock exchange.

After five years of successful trading, Aramex returned to private ownership and, in June 2005, went public again on the DFM.

Ghandour is a founding partner in Maktoob.com, the world’s largest Arab on-line community, and a member of the board of Abraaj Capital.

Between 2003 and 2005, he was the Middle East and North Africa Area Chairman of the Young Presidents Organisation (YPO). Ghandour is actively involved with community and NGO work.

He is vice-chairman of the board of trustees of the Jordan River Foundation, chairman of National Microfinance Bank in Jordan, and a founder of the newly formed Entrepreneurs for Development (EFD), a region-wide corporate social responsibility initiative.