Asia Remains Bright Spot with 56% Surge in IL Segment Profit
2018-03-27 Hong Kong
Kerry Logistics Network Limited (‘Kerry Logistics’ or together with its subsidiaries, the ‘Group’; Stock Code 0636.HK) today announced the Group’s annual results for 2017.
Group’s Financial Highlights
- Turnover increased by 28% to HK$30,788 million (2016: HK$24,036 million)
- Core operating profit rose by 13% to HK$2,128 million (2016: HK$1,878 million)
- Core net profit increased by 7% to HK1,183 million (2016: HK$1,104 million)
- Profit attributable to the Shareholders grew by 13% to HK$2,116 million (2016: HK$1,877 million)
- Integrated Logistics (‘IL’) business achieved a 12% growth in segment profit and reached HK$1,846 million (2016: HK$1,653 million)
- International Freight Forwarding (‘IFF’) business recorded a 14% increase in segment profit to HK$511 million (2016: HK$448 million)
- Final dividend of 14 HK cents per share recommended
- Full-year dividend payout ratio increased to 32% (2016: 29%)
William MA, Group Managing Director of Kerry Logistics, said, “The global economic growth has been on an upswing, riding on the recovery in investment, manufacturing, and trade activities. The overall performance of Asia remained robust, driven by pronounced external demand and rising domestic consumption. Kerry Logistics performed better in 2017 2H when compared to 1H, buoyed by the continued strength in global e-commerce, the sound performance of APEX in the Americas, and the accelerating growth of our express business in Thailand. The Group achieved a 28% growth in turnover and a 13% increase in core operating profit in 2017.”
IL Sustained Steady Growth
Generating 78% of the Group’s total segment profit, the IL division achieved a 12% growth in segment profit in 2017. The increase was supported by synchronised global business growth and the lucrative performance of the Group’s business in Thailand.
In Hong Kong, new business and customer wins in various verticals brought continued growth to the logistics business, which posted an 18% growth. The warehousing business reported stable growth, supported by healthy rental income streams. As a result, the Hong Kong business contributed 42% of segment profit for the IL division. The Group’s business in Mainland China, which accounted for 13% of the IL segment profit, dropped due to rising competition and cost. In Taiwan, Kerry Logistics regained positive growth in 2H and generated 21% of segment profit of the IL division as the impact of the new labour law lessened in 2017 2H, coupled by the Group’s effort to improve operational efficiency through optimised route planning and cost management. In Asia, the IL division remains a bright spot, in particular the express business in Thailand. Together with the improved performance of Kerry Siam Seaport driven by a pickup in volume growth, the IL segment profit of Asia rose 56% in 2017 and accounted for 23% contribution to the IL segment profit.
IFF Powered Growth
The IFF division delivered solid performance in 2017, with a 41% upsurge in turnover and a 14% rise in segment profit, fuelled by significant contributions from APEX in the US and overall volume growth. The IFF division generated 22% of the total segment profit and has become the growth driver of the Group.
Despite a stable increase in cargo volume, the rising freight rates in 2017 due to carrier consolidation, alliance shuffle and capacity reduction compressed the profit margin of the IFF division. The Group’s IFF coverage was extended to Commonwealth of Independent States (‘CIS’) countries and Central Asia with the joining of Globalink Logistics in 2017. The addition of another new member, Lanzhou Pacific Logistics Corporation Limited, also allowed Kerry Logistics to provide new options to its customers.
Expanding Asset Portfolio
To date, the Group is managing a logistics facility portfolio of 52 million square feet, of which 26 million square feet are self-owned. Three logistics facilities in Shanghai and Wuxi, Mainland China and Phnom Penh, Cambodia were completed in 2017 1H, supplementing a total area of 1.6 million square feet of logistics facilities to the Group’s portfolio.
Unlocking Asset Potential
In Australia, the Group disposed of the rail terminal business in Adelaide in January 2018. In Hong Kong, the disposal of its entire 15% interest in Asia Airfreight Terminal Company Limited to Holistic Capital Investment Limited, a subsidiary of Hong Kong Airlines Limited, is expected to complete shortly.
Deepening in Belt and Road
The acquisitions in Mainland China and CIS countries completed in 2017 propel the Group’s entry into new markets along the Belt and Road trade routes. Kerry Logistics is well-positioned to further grow its business and volume through increased trade activities across Eurasia.
Capitalising on E-Commerce Boom
Kerry Logistics has set its sights on the strong demand momentum driven by cross-border e-commerce, particularly between Greater China and ASEAN to boost growth. In light of the outstanding performance of the express business in Thailand, the Group plans to extend the success to other ASEAN markets such as Vietnam, Malaysia and Singapore.
Keeping Momentum in IFF
Riding on the extended coverage and strengthened capabilities in key markets and major gateways, the Group offers customers in both origin and destination countries complete end-to-end solutions on a global scale. Kerry Logistics was ranked No. 7, in terms of ocean freight volumes, on the Top 25 Global Freight Forwarders List published by Armstrong & Associates, Inc. in June 2017.
George YEO, Chairman of Kerry Logistics, said, “Responding to the needs of our customers and the global economy, we continuously improve our speed of response, turning it into a competitive advantage. We are also widening our network in order to serve and provide our customers with flexible total solutions. With the addition of Globalink Logistics and Lanzhou Pacific Logistics, we now have the strongest road and rail freight network across Eurasia. The deepening and widening of our capabilities position us well for rapidly-growing cross-border e-commerce which is facilitated by better physical connectivity and greater international cooperation. As we continue to bring in catalysts to drive the scale, volume and efficiency of our global IFF network, the Group is optimistic to deliver sustainable results.”