Kerry Logistics maps expansion after profit rise

Delivery company targets fast-growing markets in Southeast Asia and mainland China after core earnings jump 8 per cent jump in first half

PUBLISHED : Tuesday, 19 August, 2014, 1:27am
UPDATED : Wednesday, 20 August, 2014, 10:06pm

Kerry Logistics Network is looking to expand in mainland China and Southeast Asia after reporting an 8 per cent rise in core net profit to HK$490 million for the first half. 

Managing director William Ma Wing-kai said the logistics services provider had been active in Thailand and Vietnam and planned to fast-track expansion in Cambodia, Indonesia, Singapore and Malaysia.

“As production shifts from China to the Asean countries, we find businesses in these countries are growing faster than in Hong Kong and other areas,” said Ma, adding the trend was expected to continue.

The mainland and Hong Kong accounted for the bulk of the company’s core profit. While Hong Kong contributed 34 per cent, the mainland accounted for 27 per cent. The core profit from the mainland rose 9 per cent and that from Hong Kong increased 7 per cent.

The fastest growing segment was Europe, at 75 per cent, but it only accounted for 4 per cent of core profit.

“We are halfway through restructuring the European business. It will continue until next year and is expected to be completed in the first quarter,” Ma said.

He also expects more gains from restructuring the European international freight forwarding business.

The rapid development of e-commerce on the mainland has become a driving force for the entire logistics industry, including Kerry.

The company’s China managing director, Edwardo Erni, said it had been involved in e-commerce through business-to-customer  platforms and warehousing.

But the company would not focus on the “last mile” delivery business, such as courier services, where the competition was cut-throat and plagued by licensing barriers, Erni said. “Foreign investors or  logistics companies are restricted from operating pan-China courier services. So companies like DHL, FedEx or UPS are running courier services only on a regional basis.”

Erni said the company  would move into this segment when it became more mature and better regulated.

Turnover rose 5 per cent to HK$9.9 billion in the first half. But net profit fell nearly 30 per cent to HK$634 million as it suffered lower revaluation gains on investment properties. Revaluation gains amounted to HK$149.7 million,  compared with HK$458 million in the same period last year.

Ma said the change in fair value mainly came from the revaluation of warehouses in Hong Kong as a result of the government’s property curbs that also affected industrial and commercial properties, leading to a decline in the growth rate of warehouses’ value from last year.

“We are not a property firm. We concentrate on managing our core businesses,” Ma said.

He said the fair value adjustment was not a priority for the company.

A dividend of 6 HK cents per share was declared. The company’s  shares fell 1.99  per cent to close at HK$12.80.

Kerry Logistics is part of the Kerry Group, which also controls the SCMP Group, publisher of the South China Morning Post.