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 2019.
Group’s Financial Highlights
- Revenue increased by 8% to HK$41,139 million (2018: HK$38,139 million)
- Core operating profit increased by 17% to HK$2,765 million (2018: HK$2,364 million)
- Core net profit increased by 4% to HK$1,374 million (2018: HK$1,326 million)
- Profit attributable to the Shareholders increased by 55% to HK$3,788 million (2018: HK$2,440 million)
- Integrated Logistics (IL) business recorded a 15% increase in segment profit to HK$2,435 million (2018: HK$2,111 million)
- International Freight Forwarding (IFF) business recorded a 13% increase in segment profit to HK$622 million (2018: HK$549 million)
- Proposed final dividend of 18 HK cents per share, to be payable on Thursday, 18 June 2020
- Dividend Payout Ratio, excluding special dividend, is 34% (2018: 32%)
KUOK Khoon Hua, Chairman of Kerry Logistics, said, “2019 was a challenging and turbulent year. Global economic growth weakened considerably as international trade disputes dragged on and Mainland China’s GDP growth slowed down. Social unrest in Hong Kong further impacted the local economy and affected consumer confidence. Despite the weak product demand and lower productivity worldwide, we registered growth in revenue, core operating profit and core net profit again in 2019. Supported by our diversified business portfolio, extensive geographical coverage and broad customer mix, we were able to achieve positive growth across all regions, with 55% increase in profit attributable to the Shareholders year-on-year.”
IL Profit Grew
Building on a wide-ranging customer mix across various industries, in addition to improved cost efficiency in Mainland China, the Group’s IL division recorded a 15% segment profit growth in 2019.
In Hong Kong, although the city was gripped by social events in 2019 2H that negatively affected in particular the retail section, the Group’s business reported a 6% growth. The segment profit of the Hong Kong logistics operations rose by 23% on the back of a resilient business model, rise in e-commerce business as well as new customer wins in the food and beverage, pharmaceutical and general services verticals.
In Mainland China, the repositioning and restructuring of the Group’s operations earlier has borne fruit as segment profit of its IL business recorded a rise of 22%. The recovery was driven by increased business in the cold chain logistics operation, addition of new customers in the electronics, fast-moving consumer goods, industrial and fashion industries as well as cost savings.
In Taiwan, the Group’s IL business registered a 19% growth in segment profit in 2019, benefitted from the repatriation of semiconductor manufacturers from Mainland China and new business contributed by Science Park Logistics Co., Ltd. which is one of the leading service providers in high-tech, bonded logistics in Taiwan.
In Asia, segment profit increased by 22% in 2019, supported by the strong performance of the Thailand operation. The extent of increase should have been larger if not for the Group’s ongoing financing of the Kerry Express operations in Malaysia, Vietnam and Indonesia amounting to HK$70 million.
IFF Growth Sustained
Riding on the booming intra-Asia trade, the Group’s IFF division recorded strong growth in the first ten months in 2019, resulting in a 13% increase in segment profit, contributing 20% to the total segment profit.
Majority of the regions recorded growth except Taiwan. The major contribution came from Mainland China which registered a 23% growth. The successful consolidation of its industrial project logistics services and overland rails worldwide allowed the Group to tap into new markets beyond its traditional customers in the consumer products industry. In August 2019, the Group acquired a majority interest in Turkey’s ASAV Logistics Services Inc. to further the expansion of its global network.
Logistics Facilities Expanded
In the United Arab Emirates, the 70,000-square-feet bonded logistics facility commenced operation in Dubai in 2019 Q4. In Mainland China, construction of the 827,000-square-feet logistics centre in Qingdao is expected to complete in 2021 Q2, and the 646,000-square-feet logistics centre in Guangzhou is projected for completion in 2021 Q4. In Taiwan, the 430,000-square-feet logistics centre in Guanyin is expected to resume operation in 2021 Q3 after restoration from the fire in February 2019 is completed.
Asset Optimisation as Planned
The Group completed the disposal of two Hong Kong warehouses in 2019 at a total gain of approximately HK$2 billion. Going forward, the Group will continue to review and adjust its plan according to changing economic conditions.
Spin-Off and Separate Listing of Kerry Express Thailand
The spin-off and separate listing of Kerry Express Thailand on the Stock Exchange of Thailand is currently in progress. On 28 February 2020, Kerry Express Thailand submitted the listing application to The Securities and Exchange Commission of Thailand. Given that in Thailand a state of emergency has taken effect and will remain in force until 30 April 2020, delay in the listing process is expected.
Apex Acquisition Completed
On 31 March 2020, the Group completed the acquisition of the remaining 49% in Apex, the third largest NVOCC in terms of volume from Asia to the US in 2019, at a consideration of approximately US$176 million, satisfied by 30% in cash and 70% in the newly issued Shares. The acquisition represents a continuation of the Group’s strategy to grow its business organically in the US.
William MA, Group Managing Director of Kerry Logistics, said, “The COVID-19 pandemic outbreak is creating a global business and financial turmoil. As of today, one-third of the world’s population is under varying degrees of lockdown. The world has been switching to a more domestic-based supply chain for daily essentials. Riding on Kerry Logistics’ extensive exposure in various markets, the Group is in a relatively secure position to accommodate the strong demand for domestic logistics services particularly in Hong Kong, Taiwan, Mainland China, Thailand and some Asian countries. Nonetheless, when the pandemic comes under control, the global supply chain will be in chaos and the recovery is expected to be slow and painful. We are reserving our strengths and getting prepared to play a more vital role in supporting our customers to move well ahead of the aftermath.”
