Kerry Logistics Records Double-Digit Rise in Turnover, Core Operating and Net Profit Asia Remains Main Earnings Driver

March 28, 2019 - 08:39
Kerry Logistics Records Double-Digit Rise in Turnover, Core Operating and Net Profit Asia Remains Main Earnings Driver

HONG KONG, CHINA - MediaOutReach  - 28 March 2019 - Kerry Logistics NetworkLimited ('Kerry Logistics' or together with its subsidiaries, the'Group'; Stock Code 0636.HK) today announced the Group's annual results for2018.

Group's Financial Highlights

  • Turnover surged by 24% to HK$38,139 million(2017: HK$30,788 million)
  • Core operating profit rose by 11% to HK$2,364million (2017: HK$2,128 million)
  • Core net profit climbed by 12% to HK$1,326million (2017: HK$1,183 million)
  • Profit attributable to the Shareholders increasedby 15% to HK$2,440 million (2017: HK$2,116 million)
  • Integrated Logistics (IL) business recorded a 14%rise in segment profit to HK$2,111 million (2017: HK$1,846 million)
  • International Freight Forwarding (IFF) businessrecorded a 7% increase in segment profit to HK$549 million (2017: HK$511million)
  • Dividend Payout Ratio, excluding specialdividend, is 32% (2017: 32%)
  • Proposed final dividend of 16 HK cents per share,to be payable on Thursday, 20 June 2019
  • Potential gain ofapproximately HK$2 billion estimated from the disposal of two warehouses inHong Kong by the Group, subject to independent shareholders' approval and certainconditions for completion

William MA,Group Managing Director of Kerry Logistics, said, "Global economic growth moderated in 2018. The US-instigatedtrade tension, in particular with Mainland China, reverberated far and wide, casting uncertainties over the global tradelandscape. In contrast, the economic growth in emerging Asia, specifically inthe Southeast Asian countries, continued its strong momentum. With anunparalleled network in Asia, Kerry Logistics is well-positioned to capitaliseon the robust growth in the region. Increasing demand in intra-Asia trade ande-commerce business accelerated the Group's IL businesses. We recorded a double-digit increase in turnover,core operating profit, and core net profit in 2018, achieving positive growthfor the ninth consecutive year."

IL GrowthBoosted

Fuelled by theincreased earnings from the Hong Kong logistics operations and the outstandingperformances of Kerry Express Thailand as well as Kerry Siam Seaport inThailand, the IL division registered a 14% rise in segment profit in 2018,generating 79% of the Group's total segment profit. The IL business is set toremain the main earnings driver in 2019.

In Hong Kong, underpinned by the Group's leadingmarket position in addition to its strategy to strengthen its expertise intarget verticals and deepen its penetration therein, the segment profit of thelogistics operations climbed by 37% in 2018. Together with the moderate growthof the warehousing business, the Group's Hong Kong business accounted for 41%of segment profit for the IL division.

In Mainland China, the segment profit of the ILbusiness recorded a 12% drop in 2018. The China-US trade dispute hadsignificant impact on Chinese export trade in 2018 2H. Customers slowed downtheir investment and expansion plans which were set out in 2018 1H, resultingin lower-than-expected growth.

In Taiwan, as the impact of the labour law passedin 2016 has been cushioned by internal operation adjustments and improvedoperation efficiency, the Group's IL business stabilised with segment profitgrowth of 4% in 2018.

In Asia, supported by the strong performance ofthe Group's business in Thailand through Kerry Express Thailand and Kerry SiamSeaport, the IL segment profit experienced a 37% increase in 2018. Thestrategic partnership Kerry Express Thailand established in July 2018 with VGIGlobal Media Public Company Limited, the subsidiary of BTS PLC, enabled it touse BTS Skytrain exclusively to extend its express delivery services and boostsame-day delivery service in Bangkok.

IFF SteadilyAdvanced

The Group's IFF division attained steady volumegrowth in 2018 2H as customers have frontloaded their shipment in advance ofthe trade tariffs being enforced. The IFF division recorded a 7% profit growthand contributed 21% to the Group's total segment profit in 2018.

In October 2018, the Group consolidated its industrialproject logistics services under the Kerry Project Logistics brand tocapitalise on the growth potential in the global industrial project logisticsmarket unleashed by China's Belt and Road Initiative. In the same month, theGroup debuted its rail and road multimodal freight service from Lanzhou, Chinato Islamabad, Pakistan to expand its freight capability from China to SouthAsia. The new subsidiary of the Group, Kerry Freight Pakistan (Private) Limited,formed in July 2018 gave the Group a direct presence in one of the markets withthe highest growth potential in the region.

Asset PortfolioStrengthened

The Group currently manages 60 million squarefeet of land and logistics facilities worldwide. In Myanmar, Phase one of theinland port in Mandalay and the inland port in Yangon were completed in 2018.In Taiwan, due to a fire accident in February 2019, construction of the430,000-square-feet logistics centre in Guanyin is expected to complete in 2019Q4. In Mainland China, the logistics centre in Changsha was completed in 2018,while the one in Wuhan is expected to complete in 2019 Q2. In Thailand, a new fullyautomated parcel sorting system was installed in Phase two of the Kerry BangnaLogistics Centre in 2018, boosting Kerry Express Thailand's daily deliverycapacity to over 1 million parcels. Phase three of the centre beganconstruction in 2018 Q4.

DeepeningCapabilities in Local Markets

The sound performance of the Hong Kong, Taiwan,and Thailand businesses reinforces the Group's strategy in deepening itscapabilities in local markets across various verticals, in particular fashion,F&B, as well as pharmaceuticals and express.

CapturingEmerging Opportunities in Mainland China

The fast-changing logistics landscape in MainlandChina called for innovation and flexibility in order to capture and serve newand emerging business models and brands. The Group is making significantefforts in boosting performance through speeding up response time to customers'evolving needs and tapping into the expanding import sector.

MaintainingMomentum in Asia

Stronger growth is anticipated to persist inAsia, particularly in Southeast Asia and India, owing to increasing domesticconsumption and rising investment. Leveraging its established network in Asiato take advantage of the booming intra-Asia trade, the Group's business growthin Asia is expected to maintain in 2019.

MaximisingShareholder Value

As a part of its long-term strategy of unlockingthe value of its warehouse property portfolio to power its enduring expansionand maximise shareholder value, the Group will dispose of, subject to theapproval of the independent shareholders of the Company and certain conditionsfor completion, its warehouses in Chai Wan and Shatin to KPL through anindirect wholly-owned subsidiary of KPL. Upon completion, the total estimatedgain of the disposal will be approximately HK$2 billion in aggregate.

George YEO,Chairman of Kerry Logistics, said, "Despiteuncertainties, Kerry Logistics did well in 2018 achieving double-digit growth.Looking ahead, we see three major trends affecting global logistics: First,China's market will continue to grow and become the biggest in the world. KerryLogistics will broaden and deepen its reach in China selectively. Second,strategic rivalry between China and the US will continue for years to come anddisrupt existing global supply chains. In order to serve our customers well,Kerry Logistics must be able to offer a range of network solutions to them.Third, technology is steadily disrupting all aspects of the logistics industry.Kerry Logistics will give emphasis to the use of information technology,blockchain and AI wherever practical in warehouse, fleet, freight, contract,and e-commerce management. We will stay nimble and agile even as our networkgrows in response to changing threats and opportunities in Asia and the world."

About Kerry Logistics Network Limited (Stock Code 0636.HK)

Kerry Logistics is an Asia-based, global 3PLwith the strongest network in Asia. Its core competency is providing highlycustomised solutions to multinational corporations and international brands toenhance their supply chain efficiency, reduce overall costs, and improveresponse time to market. Kerry Logistics has a network covering 53 countriesand territories, and is managing 60 million sq ft of land and logisticsfacilities worldwide, providing customers with high reliability and flexibilityto support their expansion and long-term growth. Kerry Logistics NetworkLimited is listed on the Main Board of the Hong Kong Stock Exchange and is aselected Member of the Hang Seng Corporate Sustainability Index Series 2017-2018.