Logistics industry survey finds executives worried despite new trade deal

DAVOS, Switzerland – Jan. 22, 2020 – Just days after the United States and China signed a deal that de-escalates months of back-and-forth trade retaliation, a survey of logistics executives shows that the supply chain industry continues to see a U.S.-China trade war as the top threat to global growth.

In a poll conducted this month by Agility and Transport Intelligence, logistics professionals were surveyed for their thoughts on the global economy and the leading threats to growth in 2020*. The results are part of the annual Agility Emerging Markets Logistics Index, a look at industry sentiment and a ranking of the world’s 50 leading emerging markets.

Twenty-eight percent of respondents see a US-China trade war as the biggest threat to global growth in 2020. US-Iranian tensions were next (19%), followed by a slowdown in the Chinese economy (17%).

 

What is the biggest threat to global economic growth in 2020?

Three of the leading threats involve China, which highlights its growing importance to the global economy and its ability to affect the fortunes of other countries.

The findings come just a week after Washington and Beijing signed a “phase one” trade deal in which they agreed to halt imposition of new tariffs and restore the flow of many goods and commodities that had been cut off by months of friction.

Only 8% of those surveyed see Brexit as the largest threat in 2020.

*The survey of 330 logistics and supply chain professionals was conducted by global research group Transport Intelligence as part of the 2020 Agility Emerging Markets Logistics Index, which will be released Feb. 10, 2020.

As emergencies around the world displaces populations, the work of international organizations like UNHCR are even more critical. In Malaysia, over 70,000 of the 163,000+ refugees in the country are Rohingya, fleeing persecution. Public-private partnerships are an essential part of improving global governance, and this partnership between UNHCR and Agility creates opportunities for both organizations to collaborate and help solve many difficult challenges faced by refugees in Malaysia.

MoU signed with the aim of providing ADNEC customers with world leading logistics solutions

Abu Dhabi-UAE: 07 January 2020: Abu Dhabi National Exhibitions Company (ADNEC) has renewed a five-year strategic partnership agreement with Agility’s Fairs and Events, a division of Agility Global Integrated Logistics. This MoU will continue to enhance ADNEC’s service offering to exhibitors and event organisers with a full range of logistics and freight forwarding services.

Agility is one of the largest integrated logistics providers in the world with more than 26,000 employees and operations in 100 countries. Under the MoU, ADNEC and Agility will continue the success of their established, mutually beneficial cooperation with the aim of providing ADNEC customers with world-leading logistics solutions.

Commenting on the agreement, H.E. Humaid Matar Al Dhaheri, MD and Group CEO of ADNEC at ADNEC said: “ADNEC is committed to providing our clients and customers with the highest quality services across our facilities. To further show our commitment on this, we have partnered with Agility again to ensure the seamless provision of highly efficient and cost-effective logistics solutions to exhibitors and organisers.”

H.E. added: “The collaboration with Agility will continue the significant improvements we’ve put in place with them over the last five years with operational and cost efficiencies, while further showcasing a competitive edge. Additionally, this partnership will continue to boost the leading status of Abu Dhabi as a key destination for business tourism.”

Elias Monem, Agility GIL, CEO – Middle East, said, “This strategic partnership with ADNEC further strengthens Agility’s position as a market leader within the fairs and events sector, allowing us to provide highly sophisticated logistics solutions to ADNEC customers. Agility offers a wide range of supply chain solutions to meet both traditional and complex customer needs. In addition to air, ocean and road freight forwarding, warehousing, distribution, Agility Abu Dhabi also offers specialised services for fairs and events that mirrors the specific needs of ADNEC and its exhibitors.”

Company helps small businesses in MENA build online stores in minutes

KUWAIT – DEC. 28, 2019 Agility Ventures, the venture capital arm of global logistics company Agility, announced that it has invested in ExpandCart, a Cairo-based e-commerce enabler that allows entrepreneurs and small businesses to build online stores quickly and without any technical expertise.

The investment is part of a funding round closed this year by Agility, Graphene Venture Capital, Betatron, and other angel investors.

ExpandCart provides merchants with mobile-responsive online templates available in Arabic and English, as well as offering marketing, support, and hosting services. Additionally, it allows store owners to integrate with more than 20 payment and shipping options, streamlining the store-building process from start to finish.

Henadi Al-Saleh, Agility Chairperson and leader of Agility’s logistics venture strategy, announced the investment, saying it was part of Agility’s drive to expand its leadership in digital logistics and e-commerce.

“We think the potential of both digital logistics and e-commerce logistics is enormous. But to realize this potential, we also need to support the larger eco-system for digital trade. In other words, we need to go upstream,” Al Saleh said. “Agility is investing more than $100 million in Shipa.com, a digital logistics platform that allows businesses and consumers to manage freight, e-commerce and urban deliveries online. The ExpandCart partnership helps get more businesses trading across borders in the first place.”

More than 10,000 sellers have launched their stores on ExpandCart, allowing the merchants to receive more than 190,000 orders.  In addition to store-building tools, ExpandCart offers sellers support for digital marketing, handling and fulfilment, a point-of-sale system, branded native mobile apps, and after-sale service.

Amr Shawqy, ExpandCart CEO and co-founder, said Agility’s investment and logistics expertise will help accelerate the company’s growth.

“The e-commerce sector is booming in the Middle East, and thousands of businesses are in position to expand their sales online. With help from Agility, our goal is to scale and support Middle East merchants throughout the entire e-commerce process,” Shawqy said. “Our engineers are continually working to provide innovative e-commerce solutions, and we have a substantial product roadmap for the coming period. With Agility behind us, we can unlock the incredible potential of the region, especially for its small businesses and entrepreneurs.”

According to a 2019 Bain & Company study, the Middle East and North Africa (MENA) e-commerce market is worth $8.3 billion and has grown by 25% annually since 2014. It is expected to reach $28.5 billion by 2022 and could grow even larger, given that e-commerce penetration in MENA remains low compared with other regions.

“The Middle East retail market is worth more than $231 billion. And although e-commerce is just a small percentage today, the more that we create conditions that allow businesses to trade online, the more we will see e-commerce’s market share grow,” Al-Saleh said.

“Agility Ventures will work closely with ExpandCart to help it grow and reach more customers,” Al-Saleh said. “In addition to funding, Agility will partner with ExpandCart’s team and offer the last-mile logistics and e-fulfillment expertise that is critical to successful online businesses.”

Geoffrey White, CEO at Agility Africa, speaks to CNN at the World Economic Forum in Cape Town in September 2019: “[Agility is building] a network that lets you move goods from one country to another. Africa isn’t a quick-win investment scenario for Agility. It’s a 10, 20 year sustainable rollout of significant funds, building real infrastructure that’s aligned with the growth of the continent.”

Watch his interview with CNN to learn more:

Meets strict requirements for handling of essential medicines and health products

MILAN – November 25, 2019 – Agility, a leading global logistics provider, said that Agility Italy has earned Good Distribution Practice (GDP) certification, demonstrating its ability to meet stringent guidelines for proper storage, transport and distribution of medicinal products for human use.

GDP certification of Agility Italy, based in Milan, expands Agility’s continuously growing life sciences footprint, which includes 15 certified stations across Europe, Asia, Latin America and North America.

GDP practices are developed and maintained by the World Health Organization and European Union regulatory authorities to regulate the handling of essential medicines and health products.

“Pharma and life sciences logistics are highly specialized and complex. GDP certification means Agility Italy has proven its ability to maintain the safety, quality and integrity of the vital products in the pharmaceutical supply chain,” said Eric ten Kate, Agility Vice President of Life Sciences. “Agility’s life sciences specialists around the world are incredibly dedicated, and they have to be. Our practices, processes and policies ensure that consumers and their families get only the highest-quality medicines.”

Successful implementation could see 80m jobs transferred from Asia

African leaders after agreeing to establish the African Continental Free Trade Agreement at an African Union summit in Kigali, Rwanda in March 2018 © AFP/Getty Images

May 2019 saw the launch of the African Continental Free Trade Agreement, creating a single market of 1.3bn people that will grow to an estimated 2.5bn by 2050. A market where 60 per cent of the population is under 25, and where there’s an appetite for high levels of consumption of fast- moving consumer goods. The challenge is: how do we make it work?

The AfCFTA has been signed by 54 of the 55 countries in Africa (only Eritrea has not signed it) and ratified by over half of the signatories. It creates a real opportunity for Africa to liberalise over 90 per cent of intra-Africa tariffs and deliver significant growth on the continent.

Successful implementation of the agreement has the potential to establish Africa as a global manufacturing centre and could, ultimately, result in an estimated 80m jobs in Asia being transferred to Africa.

CEOs of African businesses have their fingers crossed that this is, finally, tangible progress towards a homogenous single market. But they remain sceptical that such an ambitious agreement can be successfully implemented, given the limited success of previous African regional free trade zones and initiatives.

The first step to a successful AfCFTA was a high level of participation which, against all odds, has been achieved. The second step, due to commence in July 2020, is the implementation and practical adoption of the trade practices, processes and infrastructure required to establish a working free zone across 54 countries. Precedent for such a Herculean task exists: the Asean free trade zone has been a notable success, creating a platform for manufacturing, regional trade and a stimulus for jobs and prosperity.

2040

By this year Africa will have a larger working population than China and India combined

Much of the momentum to date has been driven by the African Union and the continent’s development finance institutions, which have ushered the process forward, often having to use all the leverage and persuasion they have available. Encouragingly, they are now fully committed to implementation, resourcing and supporting a meaningful launch and delivering achievable steps by July 2020. The agreement will take until 2030 to be fully operational.

South African President Cyril Ramaphosa takes on the presidency of the AU in 2020 and understands the benefits of the AfCFTA and the need to drive the process forward. There is concern, however, that he will be preoccupied with the domestic issues boiling in South Africa. It remains to be seen how important the AfCFTA is on his agenda and how much time he is able to allocate to advancing the process.

Africa currently has the lowest intraregional trade in the world. Only 15 per cent of African trade is cross border between neighbouring countries, whereas cross-border trade represents around 65 per cent of the trade in developed markets. The free movement of goods has the potential to trigger a manufacturing boom and establish Africa as a world centre for manufacturing.

Asia’s transformation into a global economic engine began with the production of cheap goods in countries where wages were low and workers abundant. What followed was the development of sophisticated regional value chains, knowledge transfer and upskilling, and the transition from export-led economies to more balanced ones with rising domestic consumption.

Africa has yet to experience anything like that. The lack of cross-border trade today stifles manufacturing across the continent, constraining production to local markets that are difficult to scale. The elimination of tariffs will stimulate trade, enabling companies to expand and develop as they address larger regional markets.

The manufacturing sector will also begin to draw foreign direct investment. This, in turn, will lead to larger production volumes and bring about new efficiencies, enabling African manufacturing to finally have the ability to compete not only in domestic and regional markets but to be more competitive with global manufacturing.

For Africa, successful implementation of the AfCFTA is a game changer with the potential to move millions from a rural subsistence agriculture- based society to an early stage industrial society

By 2040 Africa will have a larger working population than China and India combined. Low wages on the continent are attracting manufacturers from high employment industries, such as the apparel sector, which can manufacturer at a lower cost in Africa than in traditional Asian production centres. The current slowdown in developed markets means that increasing numbers of multinational companies are becoming interested in the African opportunity as a market and as a global manufacturing base.

For Africa, successful implementation of the AfCFTA

is a game changer with the potential to move millions from a rural subsistence agriculture-based society to an early stage industrial society.

Manufacturing wages are five times more productive for GDP growth than agriculture.

Many of the criteria needed for Africa to prosper finally appear to be aligning. These include a highly competitive young workforce that is willing and able to adopt new technology and embrace the fourth industrial revolution, combined with increasing political stability across the continent and vast, untapped energy resource discoveries that are attracting billions of dollars of foreign investment.

The latter is generating dividend payments for governments in countries such as Mozambique, Tanzania, Senegal, Ivory Coast, Ghana and Mauritania that are sufficient for them to develop as they become net energy exporters.

The AfCFTA has the ability to bind all these prospects together and deliver real growth.

China is first out of the blocks. It is interacting with the private and public sectors in Africa to realise the benefits anticipated from the AfCFTA. Already at the forefront of infrastructure projects in Africa, Chinese manufacturing initiatives are now spreading across the continent.

Chinese companies are relocating their manufacturing hubs from China to Africa in the expectation of tariff-free regional trade and competitive export markets. The alignment of Africa with the Chinese Belt and Road Initiative is now at the forefront of all Sino-African intergovernmental discussions.

If Africa can implement the agreements in practice, and other countries and trading blocs follow China’s lead, the AfCFTA has a good chance of living up to its promise, propelling Africa to the forefront of global manufacturing.

Geoffrey White is chief executive of Agility Africa, a logistics company.

beyondbrics is a forum on emerging markets for contributors from the worlds of business, finance, politics, academia and the third sector. All views expressed are those of the author(s) and should not be taken as reflecting the views of the Financial Times.

Copyright The Financial Times Limited 2019. All rights reserved.

Reported Q3 2019
(Million KD)
Q3 2018
(Million KD)
Variance
(%)
YTD 2019
(Million KD)
YTD 2018
(Million KD)
Variance
(%)
Revenue 400.7 394.4 1.6% 1,175.8 1,150.4 2.2%
Net Revenue 133.3 125.2 6.5% 386.4 374.1 3.3%
EBITDA 47.4 39.2 20.9% 142.4 114 24.9%
Net Profit 21.7 20.0 8.4% 63.6 58.9 7.9%
EPS (fils) 13 12 8.4% 38.2 35.4 7.9%

 

Excluding IFRS16
Q3 2019
(Million KD)
Q3 2018
(Million KD)
Variance
(%)
YTD 2019
(Million KD)
YTD 2018
(Million KD)
Variance
(%)
Revenue 400.7 394.4 1.6% 1,175.8 1,150.4 2.2%
Net Revenue 132.5 125.2 5.9% 383.9 374.1 2.6%
EBITDA 40.4 39.2 2.8% 121.4 114 6.4%
Net Profit 22.4 20.0 12.1% 65.6 58.9 11.3%

Numbers above are rounded

 

KUWAIT – November 14, 2019 – Agility, a leading global logistics provider, today reported third-quarter earnings of 13 fils per share on net profit of KD 21.7 million, an increase of 8.4% (or 12.1% excluding IFRS16 impact) over the same period in 2018. Q3 EBITDA grew 20.9% (or 2.8% excluding IFRS16 impact) to KD 47.4 million, and revenue increased 1.6% to KD 400.7 million.

Year to date, earnings were 38.2 fils per share and net profit was KD 63.6 million, up 7.9% (or 11.3% excluding IFRS 16 impact). Year-to-date EBITDA was KD 142.4 million, an increase of 24.9% (or 6.4% excluding IFRS 16 impact). Revenue for the first three quarters was KD 1,175.8 million, an increase of 2.2%.

“Our Infrastructure portfolio of companies drove our results in the third quarter, with all major entities seeing growth. Our Global Integrated Logistics (GIL) business, on the other hand, was affected by challenging market conditions and trade-war headwinds that have affected the industry as a whole,” Tarek Sultan, Agility Vice Chairman and CEO, said. “Even so, GIL is moving forward aggressively with its digitization agenda to improve operational efficiency and drive a better customer experience.”

Sultan said: “We continue to invest in technology-driven change and seek to be the digital leaders in our industry. Our Agility Ventures team is partnering with innovative start-ups that are re-shaping the supply chain in areas ranging from green technologies to e-commerce. We are also accelerating in-house development, acquisitions, and partnerships to grow our digital logistics platform, Shipa. We believe this is the key to differentiating Agility and positioning us for future growth.”

 

Agility Global Integrated Logistics (GIL)

GIL EBITDA was KD 7.8 million (excluding IFRS 16 impact), a 1% decline from same period in 2018. The decrease was due to higher operating expenses related to new facilities, as well as investments in digital transformation.

GIL gross revenue was KD 285 million, a 2.4% decline (or 0.7% decline on a constant currency basis) from same period in 2018 due to challenges within the freight forwarding industry. GIL’s Q3 net revenue was KD 67.3 million, a 4% increase (or 5.3% increase on a constant currency basis) vs. Q3 2018.  The net revenue increase was driven mainly by growth in Ocean Freight, Project Logistics and Contract Logistics. The overall net revenue margin was 23.6% in Q3 vs. 22.2% in Q3 2018.

Q3 Air Freight volume fell 15.8% (in tonnage) as a result of trade concerns and lower demand from customers across industries and geographies.  This decline in volume was partially offset by higher yields – expressed as net revenue/ton – which increased 15.5%. As a result, Air Freight net revenue decreased 2.8% vs. Q3 2018.

Ocean Freight TEUs fell 9.3%, but Q3 yields improved 13.7% vs. the same period in 2018. GIL Ocean Freight yields were strongest in the Americas and Europe. Ocean Freight net revenue improved 3.2% as compared with Q3 2018.

Contract Logistics posted healthy growth, mainly in the US, Australasia, India and Singapore, with the MEA region continuing to perform well.  Project Logistics also showed solid and increased growth.

Excluding IFRS 16 impact, year-to-date GIL EBITDA was KD 24.5 million, flat vs. the same period in 2018. Year-to-date net revenue improved 2.7%, and revenue fell 2.1%.

To strengthen performance and its market differentiation, GIL is implementing its digital strategy. By accelerating its digital transformation, GIL intends to enhance customer and supplier connectivity, create innovative complex customer solutions, increase the efficiency of its business processes, and enable comprehensive business insight.

 

Agility’s Infrastructure Companies

Agility’s Infrastructure group EBITDA rose 3.8% to KD 32.6 million in the third quarter. Revenue reached KD 119.7 million, an increase of 13.4%. For the nine months, EBITDA grew 8.3%; and revenue increased 14.5% (all numbers exclude IFRS 16 impact).

Agility Logistics Parks (ALP) reported a 14.2% increase in third-quarter revenue as compared with the same quarter in 2018. Revenue from facilities completed in late 2018 contributed to strong results, as did yield improvement at existing facilities. Near-term growth will be driven by development of new logistics parks and warehouses in Saudi Arabia and Africa, along with optimization of the company’s land bank in Kuwait.

Tristar, a fully integrated liquid logistics company, posted 9.6% revenue growth in the third quarter, driven by increases in road transport, warehousing operations and the shipping business, in addition to business wins from new and existing customers. Tristar continues to execute and to look for opportunities to unlock additional value for its shareholders.

National Aviation Services (NAS) revenue rebounded, growing 8.5% in Q3 after a difficult start to the year. NAS’s first-half performance was hurt by unforeseen regulatory and operational expenses in Kuwait, price reduction in Cote d’Ivoire, and a temporary reduction of flights in and out of Afghanistan. NAS expects improvement in results to continue into Q4 and 2020. Operations in Mozambique, Tanzania and Morocco remain in launch phases and are hindering group performance, but Uganda, Jordan and Egypt continue to outperform.

United Projects for Aviation Services Company (UPAC) posted Q3 revenue growth of 1.4%. UPAC operations are still being affected by the shift in passenger traffic to dedicated airline terminals at Kuwait International Airport.  UPAC has been able to offset the impact by generating new revenue from car park management operations in (T4) and through the strong performance of its real estate management operations in Kuwait.  In Abu Dhabi, construction continues to progress on Reem Mall, a $1.2 billion project.

GCS, Agility’s customs modernization company, posted revenue growth of 8.2% in Q3. Gains were driven by implementation of new services in customs operations, digital services for the trade community, and port operations. GCS continues implementing digital initiatives to drive efficiency and improve profitability.

 

Recap of Agility third quarter 2019 Financial Performance (reported)

  • Agility’s net profit increased 8.4% to KD 21.7 million in the 3rd quarter of 2019. EPS was 13 fils vs. 12 fils a year earlier.
  • Agility’s 3rd quarter reported EBITDA increased 20.9% to KD 47.4 million.
  • Agility’s 3rd quarter revenue rose 1.6%, to KD 400.7 million and net revenue increased 6.5%.
  • GIL 3rd quarter revenue declined 2.4% to KD 285 million (a decline of 0.7% on a constant currency basis).
  • Infrastructure’s 3rd quarter revenue grew 13.4% to KD 119.7 million.
  • Agility enjoys a healthy balance sheet with KD 2 billion in assets. Net debt on a reported basis was KD 295.1 million as of September 30, 2019 (excluding IFRS 16 Net debt is KD 196 million). Reported operating cash flow was KD 98.1 million for the nine months of 2019, an increase of 77.2%.