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One challenge facing Kerry Logistics is weak global trade.

Kerry looks to spin off logistics operations

Unit hopes to ride growth of mainland consumption after increase in earnings

Charlotte So

Kerry Properties intends to spin off its logistics arm in a Hong Kong listing, the firm said in a filing with the stock exchange yesterday, at a time when global trade is showing few signs of a strong recovery.

Kerry Logistics Network, a wholly owned subsidiary, operated the largest distribution network and hub operations in greater China and Asean, Kerry Properties' annual report said.

It said it operated 30 million square feet of logistics space in more than 30 countries in five continents, of which nine million sqft were in mainland China.

Former Singapore foreign minister George Yeo Yong Boon has been chairman of Kerry Logistics since August last year.

Net profit at Kerry Logistics, excluding a one-off gain from property revaluations, rose 10 per cent last year to HK$815 million from 2011. Sales grew 20 per cent to HK$19.3 billion.

Kerry Logistics aimed to ride the growth of domestic consumption in China, leveraging its network in 2,600 cities and townships nationwide, the report said.

Net profit margin, which exceeded 4 per cent last year, was double the industry average of 2 per cent, RCM analyst Karen Chan said.

Third-party supply-chain management, with a margin of 7 per cent, was the key factor distinguishing Kerry Logistics from pure warehouse and freight-forwarding firms, she said.

Outlining the challenges facing the company, she said: "Weak global trade is overhanging the logistics industry at present."

Chan said Kerry Logistics had to compete with global market leaders such as DHL, UPS and FedEx in the supply-chain business, so it might be challenging for the company to increase its foothold in the market.

Of its 30 million sqft of logistics space, a third is taken up by warehouses and nearly 40 per cent by logistics centres. About 23 per cent is used for port facilities.

A third of the space is in Hong Kong, 27 per cent in mainland China and 40 per cent in other markets.

Shares in Kerry Properties closed 1.24 per cent lower at HK$31.90 yesterday.

Kerry Properties is part of the Kerry Group, which controls the firm that publishes the .

This article appeared in the South China Morning Post print edition as: Kerry looks to spin off logistics operations
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