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Transport and logistics

SF Holding buys DHL’s China supply chain unit to diversify its business from parcel delivery

  • SF will pay DHL an upfront payment of 5.5 billion yuan, with a revenue-based fee over 10 years
  • The deal doesn’t affect DHL’s existing business in global express, freight transport and e-commerce logistics
PUBLISHED : Friday, 26 October, 2018, 10:27pm
UPDATED : Monday, 29 October, 2018, 11:38am

Deutsche Post DHL Group, the world’s largest postal and courier company, has sold its China supply chain business to the company that owns the biggest express delivery service on the mainland to create a 10-year venture.

DHL will incorporate its supply chain business on the mainland, in Hong Kong and Macau into SF Holdings, allowing the venture to operate as a co-branded organisation, according to a press statement.

As part of this venture, SF will have access to DHL’s supply chain services, management expertise, transport and warehousing technology, the statement said. The venture has no bearing on DHL’s business in global express, freight transport and e-commerce logistics solutions in China, the statement said.

DHL will receive an upfront payment of 5.5 billion yuan (US$792 million) and a revenue-based fee over the next 10 years. DHL’s head of supply chain Yin Zou will lead the joint operation along with his existing team.

Higher shipping costs will lead to shakeout of China e-commerce firms

The venture “will create a unique platform to meet the need for a high quality end-to-end supply chain provider in China,” said Frank Appel, the chief executive of Deutsche Post DHL Group.

For SF, the venture gives it a leg up the value chain to better serve its customers, helping the company “grow further internationally” and “provide supply chain services to a diverse realm of industries,” SF’s chairman Wang Wei said in a statement. The additional service would help SF diversify into a new income source, where its core express delivery business is coming under intense competition.

SF is the biggest deliverer in China’s e-commerce market, estimated at US$1 trillion in value. The parcel delivery market was valued at 976 billion yuan (US$141 billion) last year, according to official data.

The industry has become more competitive, as online shopping platforms like JD.com are now getting into the business of delivery parcels themselves.

China e-commerce site Vip.com appeals to women with US fashions

China’s second-largest online retailer JD opened its logistics network, competing with Alibaba Group Holding’s Cainiao unit, STO Express, YTO Express, ZTO Express and Shanghai Yunda Express. Alibaba owns the South China Morning Post.

SF’s profit for the first three quarters dropped 16.9 per cent to 3.03 billion yuan, while revenue rose 31.2 per cent to 65.4 billion yuan.

SF received a go-ahead to build the first freight airport in Asia in February. The airport, to be based in Ezhou City in central China’s Hubei province, can handle 2.45 million tonnes of cargo and 1 million passengers by 2025, SF said.

The total investment would be valued at 37.26 billion yuan, with SF and the Hubei provincial government responsible for the fundraising.

(Corrects October 26 story that erroneously said DHL was selling its express delivery business to SF Express, and corrects photograph showing DHL’s courier business.)

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