IFF Segment Profit Increased by 40%
2020-08-27 Hong Kong
Kerry Logistics Network Limited (‘Kerry Logistics’ or together with its subsidiaries, the ‘Group’; Stock Code 0636.HK) today announced the Group’s interim results for the six months ended 30 June 2020.
Group’s Financial Highlights
- Revenue increased by 10% year-on-year to HK$21,885 million (2019 1H: HK$19,810 million)
- Core operating profit increased by 12% to HK$1,489 million (2019 1H: HK$1,330 million)
- Core net profit jumped by 26% year-on-year to HK$845 million (2019 1H: HK$669 million)
- Profit attributable to the Shareholders for 2020 1H was HK$1,073 million. Excluding the gain from disposal of two warehouses in Hong Kong in 2019, it represents a remarkable year-on-year growth of 29% (2019 1H normalised: HK$832 million)
- Integrated Logistics (‘IL’) business recorded a segment profit of HK$1,139 million (2019 1H: HK$1,162 million) and International Freight Forwarding (‘IFF’) business recorded HK$403 million (2019 1H: HK$288 million), which represent a slight drop of 2% and an increase of 40%, respectively. The drop in IL segment profit is mainly due to the reduced profit contributed by lesser number of warehouses in Hong Kong year-on-year. Should this impact be normalised, segment profit of IL business should have increased by 2%, including a 6% year-on-year growth of Hong Kong warehouse business
- Interim dividend of 11 HK cents per Share, to be payable on Friday, 25 September 2020
William MA, Group Managing Director of Kerry Logistics Network, said, “The COVID-19 outbreak has brought a monumental change to the fundamentals of life, from how we live and work to how we produce and consume. For now, there is no end to the pandemic in sight, nor hint of what the ‘new normal’ will look like. In such highly volatile and uncertain environments, logistics has maintained its unrivalled importance. Kerry Logistics Network’s 2020 1H results clearly demonstrated our business diversity, adaptability and agility. The Group has not only adapted through the pandemic but achieved promising growth amidst heightened volatility and widespread downturn across industries.”
IL Remained Solid
Taking away the impact of having fewer warehouses in Hong Kong during the period, Kerry Logistics’ IL division recorded a 2% segment profit growth in 2020 1H. The pandemic and its resultant widespread lockdowns have caused a drastic drop in the demand in a large number of non-essential products and thus affected the global manufacturing market. As a result, warehouse operations in Asia has been severely impacted, but a strong growth in the last-mile fulfilment and e-commerce logistics resulted in a positive growth for the IL division.
In Hong Kong, the IL division recorded a 13% growth in its logistics operations. The division switched its business strategy from serving general consumption and regional distribution centres to fulfilling pandemic-related institutional demands and quickly expanding the essential supply sectors.
In Mainland China, the IL division reported a 37% decrease in the segment profit in 2020 1H, due to lockdowns and the Group’s active participation in a wide range of relief work. Business activities have started to pick up since April 2020 as work gradually resumed in late March. Kerry Logistics remains optimistic that its full year results will improve.
In Taiwan, the Group’s IL business registered an 11% year-on-year rise in segment profit, driven by its strong last-mile capabilities and the strong performance of Science Park Logistics’ bonded operations as well as leveraging its leading position in pharmaceutical logistics in Taiwan.
In Asia, the Group was able to record a 6% growth in the IL segment profit, riding on the substantial growth of its e-commerce and last-mile operations. The performance of Kerry Express Thailand was particularly vigorous, with 36% growth in its bottom line during 2020 1H.
To further extend the Group’s last-mile and e-commerce capabilities, the Group has invested in a 42% effective interest in one of the biggest private express companies in Vietnam, which is handling approximately 800,000 parcels a day. The investment was completed in May 2020.
IFF Showed Its Strength
The Group’s IFF division achieved an outstanding performance in 2020 1H. Segment profit of the IFF division registered a 40% increase. Contribution of the IFF business to the Group’s total segment profit has grown from 20% previously to 26% in 2020 1H.
The global freight forwarding market was among the hardest hit sectors, made more severe due to travel bans. However, Kerry Logistics leveraged its unique market position as one of the very few Asia-based global freight forwarders, with broad exposure in key gateways across continents and ability to capture new business opportunities as the pandemic spread.
Backed by its excellent track record in the industry, the support of carriers, its customs clearance capacity and extensive coverage of major air transit hubs across different regions, the Group’s air freight business, from Asia to the world, surged from March to May 2020. The Group’s ocean freight business caught up in mid-May and June 2020 as customers replenished their dwindling inventories. In response to reduced capacity in air and ocean freight, the Group utilised its unique Eurasian road and rail freight network to devise alternative solutions for customers to cope with the new situation.
The Group completed the acquisition of the remaining 49% in Apex in March 2020. Apex’s business recorded a 6% growth in volume against the market trend of 7% contraction between January and July 2020, becoming the number one NVOCC from Asia to the US.
Asset Optimisation Continued
In July 2020, the Group completed the disposal of its warehousing operation in Adelaide, Australia. Currently, the Group has entered into a definitive agreement to divest its entire interest in the Singapore-headquartered Kerry-ITS Group, which is expected to complete by the end of this year. The Group will continue to review and optimise the composition of its asset portfolio.
Spin-off of Kerry Express Thailand in Progress
On 25 August 2020, Kerry Express Thailand received the notice of acceptance of the listing application in respect of the Proposed Spin-off from the Securities and Exchange Commission of Thailand. The spin-off remains in progress.
William Ma concluded, “The Group’s 26% growth in core net profit under tremendous difficulties is a testament to our flat corporate structure and the skills and talents of our frontline staff. Their dedication has made it possible for us to maintain a 24/7 service in our 150 international gateways despite global lockdowns and restrictions. Since the beginning of the pandemic, the Group has been enforcing strict social distancing measures in all our workplaces. Nonetheless, we still registered 59 confirmed cases among our staff members as of today, with 3 still undergoing treatment: two in Indonesia and another in Brazil. I am extremely proud of our colleagues’ courage and commitment to continuing to provide professional services to our customers during these trying and disruptive times. As the world continues to claw its way to recovery from the COVID-19 pandemic, I am confident that Kerry Logistics Network, together with our customers, colleagues and shareholders, will emerge as a better and stronger company.”