Kerry Logistics Posts 4% Growth in Core Net Profit to HK$1,104 Million<br>Turnover Rises 14% on Strong IFF Business Performance

Kerry Logistics Posts 4% Growth in Core Net Profit to HK$1,104 Million
Turnover Rises 14% on Strong IFF Business Performance

2017-03-23 Hong Kong

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 annual results for 2016.

Group’s Financial Highlights

  • Turnover increased by 14% to HK$24,036 million (2015: HK$21,079 million)
  • Core operating profit increased by 4% to HK$1,878 million (2015: HK$1,805 million)
  • Core net profit increased by 4% to HK$1,104 million (2015: HK$1,061 million)
  • Profit attributable to the Shareholders increased by 4% to HK$1,877 million (2015: HK$1,804 million)
  • Integrated Logistics (‘IL’) business maintained segment profit at HK$1,653 million (2015: HK$1,636 million)
  • International Freight Forwarding (‘IFF’) business recorded a 24% increase in segment profit to HK$448 million (2015: HK$361 million)
  • Final dividend of 12 HK cents per share recommended
  • Full-year dividend payout ratio increased to 29% (2015: 26%)

William MA, Group Managing Director of Kerry Logistics, said, “Kerry Logistics has managed to weather market headwinds in 2016 and minimised the adverse macro-economic impact on its business with quick response to market changes. Despite the tough operating environment, the Group managed to achieve a 14% growth in turnover, while core net profit grew by 4% in 2016. The sustainable increase in earnings was attributable to strong growth of our IFF business, solid growth in South and Southeast Asia, as well as synergies generated from recent acquisitions.”

IL Business Remains Stable
The bearish market view in January 2016 resulted in a decline in cargo volume. Nonetheless, the IL division managed to record stable performance and contributed 79% of the Group’s total segment profit.

Greater China remained a major contributor to the IL business. The Group’s Hong Kong warehousing business reported slight growth despite the softening of rental growth. The logistics operations business in both Hong Kong and Mainland China recorded healthy segment profit growth from new business and customer wins in various sectors. Taiwan’s growth was flat.

The IL business in other parts of ex-Greater China reported healthy performance. Kerry Logistics’ express business which covered Thailand, Vietnam, Malaysia and Cambodia continued to capture growth opportunities arising from increased intra-ASEAN e-commerce volume and cross-border logistics activities. Demand and growth were particularly strong in Thailand. In Vietnam, restructuring of the express business was completed with new e-commerce customers won.

Substantial Increase in IFF Division
The IFF division achieved a 24% increase in segment profit during the year, mainly propelled by contributions from APEX in the US and robust growth in Asia. Overall, the growth of the IFF division outpaced that of the IL division in 2016.

In the US, business integration following the acquisition of a majority stake in APEX in June 2016 progressed as planned. The IFF business in Asia registered robust growth, which was mainly from South and Southeast Asia, in particular in India, Singapore and the Philippines, through expanded coverage, enhanced capabilities and increased volumes. Rebranding and integration of Kerry Indev Logistics Private Limited in India were completed in 2017 Q1.

E-commerce Continues to Drive Growth
E-commerce will continue to be a key growth driver for the Group. Demand momentum driven by cross-border e-commerce is particularly strong between Greater China and ASEAN. Leveraging its strong regional network and capabilities, Kerry Logistics is well positioned to capture the growth opportunities arising from the increasing e-commerce trade and volumes.

Development along Belt and Road
During the year, the Group took further steps to enhance its service capabilities and coverage along the Belt and Road.

Internally, business restructuring in Mainland China and the Greater Mekong Region is ongoing. New business divisions were set up to focus on project, rail and multimodal logistics development across Asia and Europe.

Externally, an acquisition is underway to establish the Group’s presence in the Commonwealth of Independent States (‘CIS’) countries. The Group entered into definitive agreements in 2016 to acquire a controlling stake of a freight forwarding group based in the region. The target group, with its headquarters in Dubai, is engaged in rail, road and air freight businesses in nine CIS countries. The acquisition scheduled for completion by May 2017 will open the door to potential markets with growth prospects.

Continual Expansion of Facility Portfolio
In Mainland China, a new logistics centre of 277,000 square feet in Xi’an commenced operation in 2016 Q4. Facilities in Shanghai and Wuxi, which are expected to be completed in 2017 Q2 and Q3 respectively, will supplement over 1.3 million square feet of logistics facilities in the Group’s portfolio in the country. Two other facilities in Wuhan and Changsha with an estimated aggregate GFA of 0.9 million square feet are under the planning process.

In Taiwan, the Group plans to build a multifunctional logistics centre of over 400,000 square feet in Guanyin, the coastal district of Taoyuan City, in order to consolidate various sorting hubs in the region. Construction is expected to start in September 2017 with target completion in 2019. In Cambodia, construction of the new 213,000 square feet Kerry Worldbridge Logistics Centre in the Free Trade Zone in Phnom Penh, focusing on import logistics services, was completed in January 2017.

Unlock Asset Values to Optimise Growth and Return
On 17 March 2017, the Group entered into a definitive agreement to divest its entire 15% interest in Asia Airfreight Terminal Company Limited. The transaction shall be completed upon satisfaction of certain conditions precedent under the definitive agreement. The disposal represents a continuation of the Group’s strategy to streamline its businesses and increase its overall performance and prospects. The enhanced cash and working capital position after the deal shall enable the Group to restructure its strategic business position and focus on pursuing development opportunities on its core businesses and/or other potential acquisitions in the future.

George YEO, Chairman of Kerry Logistics, said, “Aligning ourselves with China's game-changing One Belt, One Road Initiative, we are systematically expanding our network by sea, air, road and rail. The acquisition of the freight forwarding group in CIS countries will significantly expand our coverage in Central Asia. The opening of new road and rail freight routes from China to Europe and Pakistan will enable us to offer different options to our customers. Step by step, we are becoming the premier logistics service provider in Asia. Whatever changes may result from policy changes in the US and other countries, Kerry Logistics stands ready to help our customers adjust to them quickly and optimally. ”

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