PRESS RELEASE AND MEDIA

Kerry Logistics Network Limited (‘Kerry Logistics‘ or together with its subsidiaries, the ‘Group’; Stock Code 636), Asia’s leading logistics service provider, today announced the Group’s interim results for the six months ended 30 June 2016.

Group’s Financial Highlights

• Turnover increased by 3% to HK$10,461 million (2015 1H: HK$10,135 million)
• Core operating profit maintained at HK$928 million (2015 1H: HK$925 million)
• Core net profit increased by 1% to HK$548 million (2015 1H: HK$542 million)
• Profit attributable to the Shareholders increased by 1% to HK$709 million (2015 1H: HK$701 million)
• Integrated Logistics (‘IL’) business recorded a segment profit of HK$799 million (2015 1H: HK$807 million), which represents a slight drop of 1%
• International Freight Forwarding (’IFF’) business achieved a 9% increase in segment profit to HK$208 million (2015 1H: HK$191 million)
• Interim dividend of 7 HK cents per share recommended

 
William MA, Group Managing Director of Kerry Logistics, said, “The operating environment remained tough in 2016 1H due to flat global demand and stagnated trade flow in the logistics industry. Negative currency effects caused by the strong US dollar also affected our overall performance. Nonetheless, we held on strong to our core competences and achieved sustainable results, in which performance from major markets recorded steady growth. Riding on the complete integration of APEX in the US in the next 18 months, the IFF division is expected to achieve higher growth than the IL division in 2016.”

In the IL division, flat global demand has led to decelerating trade activities and lower production volumes. Substantial amounts of key clients adjusted their production and sales target for 2016, resulting in decreasing volumes throughout the year. Kerry Logistics strived forward and managed to offset the declines with additions of new clients and contracts across various sectors in 2016 1H.

IL division in the Hong Kong market sustained growth as Kerry Logistics continues to leverage its leading position and diversified client portfolio to deepen market penetration. Both Mainland China and Taiwan markets maintained profit growth in spite of a slowing economy in the region. Although Thailand and Vietnam were affected by weak export demand, Asia’s growth as a whole was supported by India’s encouraging results as the Group continues to tap into the growing opportunities in the country.

The IFF division achieved a growth of 9% in segment profit despite a slight drop in the Mainland China market. The growth was mainly from South and Southeast Asia, in particular India, Singapore and the Philippines, through expanded network, strengthened capabilities and increased volumes.

Continued Progress on Key Developments
In Mainland China, the next 12 months will see the completion in phases of three developing facilities in Xi’an, Wuxi and Shanghai, supplementing over 1.5 million square feet of logistics facility to the Group’s portfolio in the country.

In Southeast Asia, all projects have progressed as planned. Construction of the 213,000 square feet warehouse in the Free Trade and Special Economic Zone in Phnom Penh, Cambodia will be completed by 2016 2H, focusing on import logistics services.

Phase four expansion of Kerry Siam Seaport in Thailand has commenced. Together with the inland ports in Yangon and Mandalay, Myanmar, the Group is well positioned to capture the increasing cross-border trade in the Greater Mekong Region (‘GMR’) and across ASEAN.

In addition, the Group plans to add Indonesia into its express network within this year to further strengthen its regional express capabilities for the increasing intra-ASEAN trade and booming e-commerce business.

Taking on an optimistic view of India’s economic prospects, the Group increased its stake from 30% to 50% in Indev Logistics. Rebranding and integration are expected to complete in 2016 2H.

In June 2016, as part of Kerry Logistics’ long-term IFF strategy, the Group completed the acquisition of a majority stake in APEX. Handling over 270,000 TEUs in 2015, APEX is among top three players in the Asia to US trade lanes. This partnership will enable Kerry Logistics to reach a more diversified group of US-based customers and benefit from new opportunities in trans-Pacific trades and across the globe.

George YEO, Chairman of Kerry Logistics, said, “Although the outlook remains challenging, we are confident of our strengths and will strive to deliver better performance in 2016 2H. We are getting new customers in China who more than make up for reduced business from existing customers. We continue to invest in new projects. The Belt and Road Initiative continues to guide our overall strategy. The Greater Mekong Region is becoming a new strategic focus for us. We are also developing an overland transportation network for road, rail and intermodal freight services covering Central and West Asia. South Asia is a growing bright spot. Our recent investment in APEX strengthens our IFF network significantly. IFF will become a more significant contributor to our overall performance in 2016. In addition, as global e-commerce grows, we will continue to strengthen our express capabilities to provide cost-effective last-mile deliveries to an expanding client base.”