2023-08-28 Hong Kong
Kerry Logistics Network Limited (‘Kerry Logistics Network’ or together with its subsidiaries, the ‘Group’ or ‘KLN Group’; Stock Code 0636.HK) today announced the Group’s interim results for the six months ended 30 June 2023.
Group’s Financial Highlights
- Revenue dropped by 47% year-on-year to HK$25,315 million (2022 1H: HK$48,034 million)
- Core operating profit decreased by 84% to HK$568 million (2022 1H: HK$3,461 million)
- Core net profit also dropped by 85% year-on-year to HK$368 million (2022 1H: HK$2,372 million)
- Profit attributable to the Shareholders for 2023 1H was HK$368 million, which represents a year-on-year decrease of 85% (2022 1H: HK$2,377 million)
- Integrated Logistics (‘IL’) business remained stable and recorded a segment profit of HK$718 million (2022 1H: HK$717 million)
- E-commerce and Express (‘E&E’) business recorded a segment loss of HK$505 million (2022 1H: HK$393 million)
- International Freight Forwarding (‘IFF’) business recorded a segment profit of HK$621 million (2022 1H: HK$3,398 million), which represents a drop of 82%
- Interim dividend of 9 HK cents per Share to be payable on or around Friday, 22 September 2023
Vic Cheung, Managing Director of Kerry Logistics Network, said, “In 2023 1H, global trade volume and growth remained subdued. Freight rates and volume stayed depressed while supply chain demand remained stagnant. During the three years ended 31 December 2022, KLN Group’s flexible and innovative supply chain solutions enabled it to benefit from the supply and demand mismatch during the pandemic and achieved exceptionally good results. However, the extraordinary circumstances in 2021 and 2022 proved an anomaly that distorted year-on-year comparisons for logistics companies including KLN Group. After the particularly difficult 2023 Q1, the Group’s overall performance has bottomed out. Although the Group’s core net profit reported a decrease of 85% in year-on-year terms, the performance in 2023 Q2 recorded more than 30% quarter-on-quarter growth. The Group’s resilience, agility and unique position in Asia are expected to carry it through the storm in 2023.”
The overall IL businesses remained stable in 2023 1H. The economic activities in Asia have gradually picked up, with the Group’s IL business in the Mainland of China and the Kerry Siam Seaport in Thailand recording satisfactory results. Yet, the Group’s IL business in Hong Kong did not grow proportionally due to a sharp decline in the demand for pandemic-related services. Nevertheless, the Hong Kong business is expected to improve riding on the economic reopening, further rebound in retail sales and new customer wins.
E-commerce and Express
While the E&E division continued to register a segment loss, Kerry Express Thailand, the major contributor of the E&E business, is expected to stabilise in 2024 Q4. On 25 July 2023, KLN Group announced the transfer of certain companies engaging in express delivery services in the Asia Pacific and Europe to an indirect wholly-owned subsidiary of S.F. Holding as a move to reorient gradually its focus towards expanding the Group’s core IL and IFF businesses, as well as creating greater synergies with S.F. Holding.
International Freight Forwarding
The IFF division reported an 82% decline in segment profit in 2023 1H mainly caused by weak global demand, slower-than-expected recovery in Asia exports and plunged freight rates. As the global logistics market continues to normalise and returns to pre-pandemic levels, both air and ocean freight rates have been going down since 2022 Q3 from the historical highs in 2021, causing further contraction in profit margin compared to that of the corresponding period in 2022.
The Trans-Pacific trade lane remains the major contributor of the Group’s IFF division, which accounted for more than 80% of the business. Although the volume of this trade lane has declined by 22%, the drop in the Group’s IFF business was comparatively smaller, riding on the Group’s scale in this trade lane and its determination to maintain volume and retain customers within the bounds of its profit margin. Therefore, it is expected that when the market turns around, the IFF division is likely to outperform the market.
Vic Cheung concluded, “2023 is shaping up to be a tough year for the global logistics industry. Yet, the extreme circumstances under the pandemic are gradually fading in global logistics activities and there are signs of improvement in both freight rates and volumes in KLN Group’s key markets. Using the pre-pandemic FY 2019 as the base, we are confident to deliver healthy and sustainable Compound Annual Growth Rate (CAGR) growth in segment profits in our IL and IFF divisions. We are also optimistic that the stable performance of the IL business is likely to keep up the momentum in 2023 2H. Within the E&E segment, Kerry Express Thailand is expected to stabilise in 2024 Q4. Throughout the pandemic, KLN Group has supported our customers continually and consistently with flexible alternatives and ad-hoc solutions. The Group’s unwavering commitment to serving customers well under unprecedented market conditions has deepened customers’ trust in the Group which will enable us to capture opportunities when the market recovers.”