Kerry Logistics’ FY2015 Core Net Profit up 9% to HK$1,061 million<br>Integration of Global Acquisitions Delivered Growth for 7th Consecutive Year

Kerry Logistics’ FY2015 Core Net Profit up 9% to HK$1,061 million
Integration of Global Acquisitions Delivered Growth for 7th Consecutive Year

2016-03-23 Hong Kong

Kerry Logistics Network Limited (‘Kerry Logistics’ or together with its subsidiaries, the ‘Group’; Stock Code 636), a leading logistics service provider in Asia, today announced the Group’s annual results for 2015.

Group’s Financial Highlights

  • Turnover maintained at HK$21,079 million (2014: HK$21,115 million)
  • Core operating profit increased by 12% to HK$1,805 million (2014: HK$1,612 million)
  • Core net profit increased by 9% to HK$1,061 million (2014: HK$976 million)
  • Profit attributable to the Company’s shareholders increased by 9% to HK$1,804 million (2014: HK$1,659 million)
  • Integrated Logistics (‘IL’) business achieved a 13% increase in segment profit to HK$1,636 million (2014: HK$1,450 million)
  • International Freight Forwarding (‘IFF’) business recorded a 7% increase in segment profit to HK$361 million (2014: HK$337 million)
  • Full-year dividend payout ratio increased to 26% (2014: 24%)
  • Final dividend of 10 HK cents per share recommended

William MA, Group Managing Director of Kerry Logistics, said, “In 2015, despite global macroeconomic volatilities and China’s slowing GDP growth, Kerry Logistics continued to implement its strategic plans and delivered sustainable growth for the seventh consecutive year. All segment profits attained healthy growth as the Group continued to apply its core competencies of providing highly customised solutions to a broad spectrum of industries. Successful integration of previous acquisitions, strong performances led by Hong Kong and Taiwan, and improved profitability demonstrated the underlying strengths of the Group’s unique business models and synergies achieved from global expansion.”

A Diversified Regional Facility Portfolio
As at 31 December 2015, the Group managed a logistics facility portfolio of 45 million square feet, of which 24 million square feet were self-owned.

The Group has continued to enrich its logistics facility portfolio during the year. In Mainland China, the 592,000 square feet logistics facility at Chengdu commenced operation in 2015 2H. Two facilities in Xi’an and Wuxi are to be completed in 2016 1H and 2017 2H respectively, contributing 480,000 square feet of logistics facilities. In Shanghai, construction is underway at the 1.1 million square feet logistics facility, and it will be the Group’s largest facility in Mainland China upon completion.

In Thailand, phase one of the Kerry Bangna Logistics Centre was completed and now serves as a new sorting centre for Kerry Express and a fulfillment centre for e-commerce customers. Phase four expansion of Kerry Siam Seaport has commenced with expected completion by 2019, as the Group continues to develop the facility into a key cargo gateway for the increasing trade in ASEAN. The expansion will cope with the rising business demands in countries within the Greater Mekong Region including Thailand, Cambodia, Myanmar and Laos. While in Cambodia, the Group held a groundbreaking ceremony in Phnom Penh for the construction of a 213,000 square feet warehouse in the bonded zone to provide customers with import and export logistics services.

Scale Expansion via Investments and Acquisitions
During the year, the Group further expanded its operating scale and strengthened its global network through a number of investments and acquisitions.

In Mainland China, the Group’s strategic cooperation agreement with China Railway Import and Export Company (‘China Railway’) will leverage the extensive railway network and experience of China Railway, and effectively integrate them with Kerry Logistics’ strong network in Southeast Asia and industry expertise. In Taiwan, Kerry Logistics acquired the majority shares in Speedy Group, a top 20 air freight company in Taiwan in 2016 1Q, which was subsequently renamed as Kerry Speedy Logistics Co., Ltd.. The acquisition will strengthen the Group’s IFF capabilities and tap into the active cross-strait trading activities.

The Group further extended its cross-border trucking services under KART in Mainland China, Vietnam, Thailand, Malaysia and Singapore, and three new scheduled weekly ‘shuttles’ were added to provide long-haul trucking and door-to-door delivery services in these countries. In 2015 Q4, the KART network was further expanded to East Malaysia, reaching Sabah and Sarawak adding to a total of eight routes. KART connects regional MNCs and freight forwarding customers in ASEAN to Mainland China and Hong Kong as an alternative to the traditional air and ocean freight services.

The Group will continue to ride on its established express service platform in Thailand and Vietnam, its up and coming businesses in Cambodia and Malaysia and add in planned entrances into Singapore, Indonesia, the Philippines and Laos in 2016 to further enhance its coverage and capabilities.

In Myanmar, the Group will seek accelerated growth by developing an integrated Greater Mekong Region platform through operating the inland ports in Yangon and Mandalay.

Kerry Logistics completed the restructuring of its IFF operation in Singapore by acquiring the majority stakes in Transpeed Cargo (S) Pte. Ltd. (‘Transpeed’), a leading air freight company in 2016 1Q. With the incumbent management of Transpeed and Kerry Logistics’ existing network, the acquisition will further enhance the Group’s IFF capabilities in Singapore as well as in Southeast Asia.

In the US, following the signing of definitive agreements with a top ten NVOCC in the US (in 2014), the Group has made further inroads and expects to complete the acquisition in 2016 1H. As a significant step in the Group’s long-term IFF strategy, the acquisition is expected to bring substantial increases in volume and profitability. In the Middle East, the Group’s investment of Able Logistics Group FZCO in Dubai expanded its capabilities and enabled it to offer global connections between Asia and the Middle East, Europe and Africa. The Group has also realised contributions from the successful integration of its acquisitions in Canada, Mexico and Oceania.

Hong Kong Warehouse – Continuous Stable Growth
The Group’s Hong Kong warehouse portfolio comprises nine warehouses with a combined GFA of 5.1 million square feet. It maintained nearly full occupancy and achieved double-digit growth in rentals for successful contract renewals during the year.

George YEO, Chairman of Kerry Logistics, said, “Kerry Logistics is becoming the major logistics provider for the Silk Road of the 21st Century, both overland and maritime. As Asia’s leading 3PL specialist, we are rapidly building a range of capabilities in Southeast Asia, taking advantage of ASEAN’s economic integration. Greater China remains at our core. We are also expanding our presence in South Asia especially in India, the Middle East, and Central Asia including to Russia. In the coming years, the biggest growth in global logistics is intra-Asian and between Asia and the rest of the world, Kerry Logistics is well-positioned to tap into the potentials of this growth. In difficult times, management attention is naturally focused on cutting cost and improving productivity. Good logistics can make a decisive difference. The strengths of Kerry Logistics are more obvious during challenging times. We have every intention to ride the waves and streak ahead.”

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