Kuwait-based logistics provider Agility was a beneficiary of the pick-up in international trade in 2013, with the company announcing in March that its annual profit had risen by 37 per cent.

Like many global businesses, Agility suffered during the worldwide financial crisis that began in late 2008, with many of its customers scaling back spending and development plans.

“The global growth situation has been somewhat challenged over the past few years and that has clear implications for the number of containers passing through the system,” says Tarek Abdulaziz Sultan al-Essa, the firm’s CEO.

The global slowdown, combined with the cancellation of a highly lucrative food-supply contract with the US military, resulted in Agility’s net income plummeting 82 per cent year-on-year in 2010. However, the third-party logistics provider has been able to realign its business to recover profits, which reached KD46.2m ($164m) in 2013.

Changing relationship

Al-Essa says the nature of the logistics sector is changing, and that it is now better-equipped to deal with future fluctuations in the global economy. “In the past, there used to be a very direct relationship between the numbers of containers that were flowing through the system and global growth rates, but that is no longer the case,” he says. “It doesn’t appear to be the one-to-one relationship that we are seeing.”

A key reason for the decoupling of growth rates and the performance of the logistics sector is the increasing demand for logistics services in emerging markets, which is where Agility has made its name.

“Having a big presence in emerging markets has made a big difference to us and our customers,” says Al-Essa. “Because those markets are still growing and within them there are certain segments, including the project logistics business, which continue to be very healthy and keep growing. There are very interesting projects happening in the Middle East, but also in other emerging markets including Africa and Asia, such as Indonesia, for example. Project logistics continues to be an interesting and growing part of our business, and should be relevant to the Gulf.”

Having a big presence in emerging markets has made a big difference to us and our customers

Tarek Abdulaziz Sultan al-Essa, Agility

Agility was set up in Kuwait in 1979, starting out as a local warehousing provider. Since then, the firm has acquired more than 40 logistics brands around the world. In 2004, it became the biggest logistics provider in the Middle East. Several acquisitions between 2004 and 2008 increased the company’s global presence and it currently employs more than 22,000 people in 100 countries. Agility recorded total revenues of KD1.4bn in 2013.

The group has two core business lines: Global Integrated Logistics (GIL) and Agility Infrastructure. GIL provides supply chain services such as air, sea and freight forwarding, warehousing and distribution, along with specialised services such as fuel and chemical logistics. Agility Infrastructure oversees a number of companies that manage industrial property and offer logistics-related services.

Even throughout Agility’s aggressive global expansion, the Middle East, and the Gulf in particular, has remained a key part of its core business.

“The governments in the GCC are very generous with citizens, which is helpful when it comes to consumer spending – that’s one aspect,” says Al-Essa. “The other aspect is that governments are investing heavily in infrastructure to keep up with the demands being placed upon societies by growing and ageing populations.”

In Agility’s Emerging Markets Logistics Index 2014, which is a ranking of the world’s major logistics markets, Saudi Arabia and the UAE feature among the top 10 most attractive expanding logistics markets, in third and sixth place respectively.

“Saudi Arabia is doing a great job and getting the private sector involved, and the UAE remains an attractive and exciting proposition,” says Al-Essa.

Iraq opportunities

Along with those two territories, he says, Qatar and Iraq offer the most growth potential for the logistics sector. While Qatar was ranked 12th in Agility’s 2014 index, Iraq did not feature in the list of the top 45 emerging markets. However, Agility is confident the country will become one of the most lucrative logistics markets in the region.

“It is still a little early for Iraq, but there will be a lot of opportunities in the long run,” says Al-Essa.

Agility has been active in Iraq since 2003, and has a presence in six strategic locations across the northern, central and southern regions of the country. In May 2013, it was awarded a $80m three-year contract with UK/Dutch oil major Shell to provide logistics services at the Majnoon oil field in Basra. Al-Essa says his company is well-positioned to take advantage of the growing need for logistics services in the Gulf state.

“We are continuing to invest in Iraq and we have extensive infrastructure throughout the country,” he says. “The infrastructure will come in handy for firms looking at growing their business, whether it’s oil and gas, projects or consumer goods. If they have the supply chain requirements, then we have solutions for it.”

Agility’s other significant contract wins last year included a $320m deal to support peacekeeping operations in Darfur in Western Sudan and a $200m contract to manage three airports in Afghanistan.

Al-Essa maintains that, due to its proximity, Kuwait stands to gain significantly from the growth in demand for logistics services in Iraq, but only if it completes the development of its ambitious infrastructure programme.

“The projects [in Kuwait], such as the expansion of the airports and ports, are important,” he says. “Dubai is a fantastic example of a multi-modal logistics hub, but at the same time it’s not that close to Iraq. I think in the future, particularly in oil and gas, there is going to be a lot of investment taking place in Iraq. Kuwait, if it plays its cards right, could leverage [its location] to offer a valuable proposition.”

Iran potential

He is also excited about the untapped potential of Iran for the region’s logistics sector, but believes it will be some time before the Islamic Republic opens up to the international market.

“There is definite appetite for Iran, but we need the international community to sort out the situation so that we can freely do business [in the country] and do it on behalf of our customers,” says Al-Essa. “For the time being, it’s very difficult, and it’s not currently suitable for our customers to do business in Iran.”

As trade between the eastern and western halves of the globe continues to expand and China consolidates its position as the world’s biggest export market, Al-Essa believes Agility’s base in the Middle East and its strong presence in Asia will enable it to take advantage of the increased flow of goods and services.

“We have strong infrastructure in the Middle Eastern economies, and we also have a very strong presence in Asia, particularly in China, where we are in about 30 cities,” he says. “We are also present in a similar number [of cities] in India. We are able to service the requirements of the Middle Eastern market, and we also have customers in countries such as China. They are now looking to grow business in the Middle East and North Africa region; that’s where we can help.”

Agility has also been careful to position itself in Africa, with the developing continent set to offer numerous opportunities for logistics firms as its economies expand.

“There is going to be a lot of opportunity in Africa; it suits our business model well,” says Al-Essa.

According to the CEO, the undeveloped nature of the African continent fits well with the company’s history in emerging markets. “We like to invest in infrastructure,” he says. “We take risks on behalf of our customers in terms of building capacity and capabilities, so that they don’t have to do it themselves. I think those sorts of risks will pay off for shareholders, especially in Africa.”

Al-Essa says Agility’s rise to prominence in emerging markets has resulted in an aggressive policy towards risk.

“The whole thing has its roots in the emerging markets,” he says. “We started as a small company in the emerging markets, and, for us, developing our business in emerging markets was a way to diversify risk. So we have a fundamentally different view of doing business in emerging markets from a lot of our competitors.”

He says this growth model has positioned the company well to compete for contracts in the developing world.

“Because of this goal, from early on we invested heavily in infrastructure in emerging markets,” he says. “If you ask our customers today, most of them will say their future profitability will be driven by how successful they are in emerging markets. Our customers are now demanding services and infrastructure in these markets.”

Technological progress

Agility is expecting advancements in technology to play a central role in the regional and international logistics markets in the future.

“One of the main reasons for the move away from a linear relationship between growth and container volume is technology, and the effects of technology on productivity,” says Al-Essa.

“More broadly, technology will continue to transform the supply chain industry. It’s going to allow companies to be more efficient and more accurate, and our customers will have different needs. So, because of this, we are rebuilding many parts of our business around technology, and ideas that are rooted in technology.”

Due to Agility’s presence in more than 100 countries, its future growth targets will be based on investing in existing businesses and areas such as technology, rather than geographical expansion.

“Our focus has been on organic growth in the past few years and that is where the focus needs to be,” says Al-Essa. “But we will remain opportunistic and very agile. So we will continue to look at new opportunities within these geographies and also outside if there is opportunity.”

After a difficult period, the company has been able to realign its business and recover profitability in 2012 and 2013. Agility’s regional roots and exposure to growth in emerging markets should mean it is well-placed to take advantage of the rebound in international trade and the Middle East’s growing position as a global logistics hub.