Kerry Logistics Network posts 30% growth in revenue

March 25, 2021

Kerry Logistics Network Limited (KLN)’today announced the Group’s annual results for 2020.

Group’s Financial Highlights

Revenue increased by 30% to HK$53,361 million (2019: HK$41,139 million)
Core operating profit increased by 20% to HK$3,320 million (2019: HK$2,765 million)
Core net profit increased by 33% to HK$1,828 million (2019: HK$1,374 million)
Profit attributable to the Shareholders for 2020 was HK$2,896 million. Excluding the gain from disposal of two warehouses in Hong Kong in 2019, it represents a remarkable year-on-year growth of 58% (2019 normalised: HK$1,830 million)
Integrated Logistics (IL) business recorded a segment profit of HK$2,583 million (2019: HK$2,435 million), which represents an increase of 6%. The growth in IL segment profit was affected by the reduced profit contributed by lesser number of warehouses in Hong Kong compared with 2019. Should this impact be normalised, segment profit of IL business should have increased by 8%
International Freight Forwarding (IFF) business recorded a 64% increase in segment profit to HK$1,017 million (2019: HK$622 million)
Proposed final dividend of 23.8 HK cents per share, to be payable on Friday, June 11 2021

William Ma, Group Managing Director of KLN Group, said, “The COVID-19 pandemic has brought unprecedented challenges to everything from global public health to people’s livelihoods. The stop-and-go momentum of the global economy has caused severe disruption to the global supply chain. With human mobility severely curtailed, the role of logistics has become ever more paramount. Every link in the supply chain from sourcing and manufacturing to the distribution of finished products must still be maintained. Even as the pandemic forced millions of corporate employees around the world to work from home, our teams have been working tirelessly on the frontline, maintaining 24/7 services across some 150 international hubs to support various industries and sustain people’s daily lives. In 2020, thanks to the collective efforts of our colleagues and business partners, KLN Group achieved record growth in both revenue and core net profit, clearly demonstrating the Group’s resilience and capability to evolve through the pandemic.”

IL Growth Sustained

KLN Group’s IL division recorded a normalised segment profit growth of 8% in 2020, mainly driven by the strong performance in Hong Kong and Taiwan.

In Hong Kong, the IL division grew by 10% in 2020, benefitting from the rise in demand for home-delivered daily necessities, electronic goods and pharmaceutical logistics. The Hong Kong warehouse business contracted in 2020 compared with 2019 mainly due to the disposal of two warehouses in 2019 1H.

In Mainland China, the segment profit for the IL division bounced back in 2020 2H, offsetting the 37% drop in 2020 1H. This was due to the resumption of manufacturing activities, recovery of local consumption and the rapid growth of the e-commerce market in Mainland China.

In Taiwan, the IL business expanded by 19% year-on-year in segment profit, capitalising on the growth of semi-conductors and electronics manufacturing, the increasing demand in pharmaceutical logistics as well as the rise in e-commerce business. The robust performance of Science Park Logistics’ bonded operations was another driver for its growth.

In Asia, the IL business sustained despite severe lockdowns across the region, driven by the switch from consumer goods business to the essential supply sectors. The Group expanded its express business to the Philippines through the establishment of a joint venture company in 2021 Q1 in which the Group has a 51% interest.

IFF Thrived

The IFF division was the powerhouse of KLN Group’s business in 2020, accounting for 28% of the total segment profit, with its segment profit for the full year increasing by 64% year-on-year compared to a 40% growth in 2020 1H. The growth was mainly driven by a high global demand for pandemic-related goods as well as production and exports from Mainland China. It created the favourable conditions for the Group to capture opportunities from the unprecedented volatile global freight market, in terms of rates, capacity and equipment availability.

Kerry Apex recorded an increase in volume of 17%, strengthening its Trans-Pacific market position. It was the number one NVOCC from Thailand, Vietnam, Indonesia and Malaysia to the US, the number two NVOCC from Asia to the US for 2020.

Facility Portfolio Updates

In Mainland China, the 34,000 sq m chemical logistics centre in Cangzhou commenced operation in 2021 Q1. Construction of the 82,700 sq m logistics centre in Qingdao is expected to complete in 2021 Q2. The 104,300 sq m logistics centre in Guangzhou, the 305,000-sq-ft chemical logistics facility in Zhangjiagang, the

64,400 sq mt hub and logistics centre in Zhuhai and the 54,500 sq m bonded logistics centre in Hainan are expected to complete construction in 2022.

Proposed Strategic Investment from SF Holding

On February 10 2021, a Joint Announcement was made amongst SF Holding (acting through its wholly-owned subsidiary), the Company and Kerry Properties Limited, a Controlling Shareholder and substantial shareholder of the Company. Pursuant to the Joint Announcement, S.F. Holding will make a voluntary conditional cash offer to shareholders to acquire a controlling stake in the equity interest of the Company. The proposed transaction is subject to satisfaction of certain pre-conditions. These pre-conditions include certain inter-conditional special deals, including the disposals of certain Hong Kong warehouses and the Company’s Taiwan businesses, being entered by the Company with Kerry Holdings Limited, the substantial shareholder of the Company. If the proposed transaction does not proceed, these special deals also will not proceed.

Ma concluded, “Scale and technological advances are crucial for any company in this industry to retain its competitiveness over its peers and drive changes in the global logistics arena. To this end, the proposed strategic cooperation with S.F. Holding will scale up KLN Group, extending its reach and enhancing its R&D capabilities. The Group’s performance in 2020 stands as testament to the capability in devising creative and efficient logistics solutions, which were in high demand when the global supply and logistics infrastructure suffered damage. KLN Group is prepared to seize any opportunity that may arise, as well as to enhance its value for stakeholders.”

James Graham

James Graham is an award-winning transport media journalist with a long background in the commercial freight sector, including commercial aviation and the aviation supply chain. He was the initial Air Cargo Week journalist and retuned later for a stint as editor. He continues his association as editor of the monthly supplements. He has reported for the newspaper from global locations as well as the UK.