Regional tensions had limited impact, momentum to continue: SAL CEO

Omar Talal Hariri, CEO of SAL Saudi Logistics Services Co. (SAL)

Omar Talal Hariri, CEO of SAL Saudi Logistics Services Co. (SAL), said regional tensions had a limited and temporary impact on the company, attributing this to SAL's extensive operating network and the team's proactive crisis management, which enabled it to reroute cargo while ensuring service continuity and business operations.

In an interview with Argaam, Hariri said the tensions mainly affected cargo routing and capacity management, adding that airlines had to deal with regional airspace restrictions, leading to flight rescheduling and temporary suspensions.

He noted that regional supply chains were also affected by higher freight, insurance and fuel costs, as well as disruptions to some maritime shipping routes.

Hariri said cargo handling volumes reached about 239 million kilograms in the second quarter, broadly unchanged from the first quarter and up 9% year-on-year (YoY) while the increase reflects a recovery in activity after temporary geopolitical disruptions affected cargo routes and capacity, particularly in March.

He added that preliminary indicators for June and early July point to continued business momentum, supported by sustained import demand and ongoing customer inventory build-up amid uncertainty over renewed regional developments.

Hariri expects the cargo ground handling business to remain resilient, supported by solid demand, an improved cargo mix and stronger pricing, while the logistics segment is seen growing on higher warehouse occupancy and the expansion of contract logistics and land transportation connectivity services.

Here are the interview details:

How would you comment on SAL's second-quarter results? What were the key factors behind the company's performance in terms of cargo volumes, service mix, costs and operating margins?

The second quarter marked a key milestone for SAL, as we delivered the strongest quarterly revenue in the company's history. The performance was driven by broad-based growth across both our cargo ground handling and logistics businesses, alongside a strong operational recovery following the temporary regional disruptions seen in the first quarter.

Revenue rose 30% YoY to SAR 512 million, while operating profit increased 24% to SAR 213 million and net profit climbed 18% to SAR 191 million, reflecting the strength of our business model, our ability to improve operational performance and maintain strong profitability.

The results were supported by several factors, most notably the recovery in cargo handling volumes, particularly inbound shipments, alongside an improved cargo mix while our logistics business also continued to deliver double-digit growth and stronger operating performance.

Operating margin reached 41.6%, reflecting our more diversified business mix, higher variable costs associated with the expansion of logistics operations, and continued investment in capabilities that will support the next phase of growth.

Overall, the results demonstrate a clear improvement in both earnings and earnings quality, while maintaining cost discipline and making progress on strategic projects.

How did cargo handling volumes perform in the second quarter compared with the first quarter and the same period last year? Was revenue growth driven by higher handled volumes or improved yield per ton?

Cargo handling volumes reached about 239 million kilograms in the second quarter, broadly stable compared with the first quarter and up 9% YoY.

This confirms the recovery in activity that began in the second quarter following the temporary geopolitical disruptions that affected certain cargo routes and available capacity, particularly in March.

Revenue growth significantly outpaced volume growth, with quarterly revenue rising 30% versus a 9% increase in handled volumes, indicating that the improvement was driven not only by higher volumes but also by better revenue quality and a stronger cargo mix, resulting in higher average revenue per kilogram.

To what extent did regional tensions and supply chain disruptions affect SAL's cargo handling business in the second quarter? Was the impact greater on cargo volumes, flight routes, operating costs or margins?

Overall, regional tensions primarily affected cargo routing and capacity management, with airlines facing airspace restrictions, flight rescheduling and temporary suspensions, while regional supply chains were impacted by higher freight, insurance and fuel costs, as well as disruptions to some maritime routes.

or SAL, however, the impact was limited and temporary, as its extensive operating network and the flexibility of its teams enabled the company to proactively reroute cargo flows, ensuring uninterrupted services and supporting customers’ business continuity.

Cargo activity recovered strongly at the beginning of the quarter, while conditions gradually stabilized as airspace restrictions eased and airlines resumed normal operations.

SAL recently signed several agreements, including with Fly Khiva, Singapore Airlines for ground handling services and China's SF Airlines. What impact do you expect these contracts to have on cargo volumes and revenue? Do you expect additional agreements in the second half?

Yes, during the second quarter we signed several new agreements with Singapore's national carrier, China's SF Airlines, one of the country's leading cargo airlines, as well as Fly Khiva Group and Uzbekistan's Centrum Air.

These agreements support our strategy to strengthen and expand our market share while reflecting growing confidence in the quality of our services and our integrated operating platform.

The contracts are expected to gradually boost cargo volumes and revenue as operations ramp up and flight schedules expand, while diversifying the customer base and reducing concentration risk across cargo flows and routes, with financial returns depending on agreed pricing, handled volumes and cargo mix, and each contract expected to positively contribute to financial performance over its term.

Looking ahead, SAL will continue focusing on agreements that combine operational excellence with long-term strategic partnerships, while reinforcing its role as a national logistics leader supporting Saudi Arabia’s Vision 2030 objectives.

What is the latest update on SAL's acquisition of Aviapartner Liège? Have the necessary regulatory approvals been obtained, and when do you expect the transaction to close?

SAL recently signed a sale and purchase agreement to acquire Aviapartner’s cargo handling business at Liège Airport, Belgium’s largest cargo airport and the fifth largest in Europe, strengthening its presence at one of the continent’s leading air cargo hubs with a strong focus on dedicated freighter operations and international e-commerce.

The acquisition marks an important strategic step toward establishing SAL's first international operating platform at a major global air cargo gateway, strengthening relationships with international airlines.

During the quarter, we also established SAL International Ground Services BV, based in the Netherlands, to serve as the holding platform for the company's current and future international investments and operations, supporting our global growth strategy.

We remain optimistic and will announce any developments through official channels. The process is in its final stages and progressing well toward completion.

What are your expectations for the third quarter in terms of cargo volumes, revenue and operating margins? Do you expect further improvement?

Early indicators from June and the beginning of July point to continued business momentum, supported by sustained import demand and ongoing inventory building by customers amid uncertainty over renewed regional developments.

We expect the cargo ground handling business to remain resilient, supported by solid demand, a better cargo mix and stronger pricing.

We also expect continued growth in the logistics segment, driven by higher warehouse occupancy and the expansion of contract logistics and land transportation connectivity services.

Overall, we believe SAL is well positioned to capitalize on growth opportunities, supported by the resilience of its business model, improving segment performance and continued development of SAL Zones.