Rising competition and costs in China saw Kerry Logistics’ business on the mainland decline in 2017, with the Hong Kong-listed third-party logistics provider (3PL) planning to increase its focus on cross-border trade to capitalize on Asia’s rapidly growing e-commerce market.
More than 78 percent of the group profit is derived from its integrated logistics division, which covers e-commerce and the express business where the logistics operator is seeing considerable growth. The Asia segment within integrated logistics in 2017 grew by 56 percent from 2016.
Kerry Logistics’ year-over-year revenue for 2017 rose 28 percent to $3.9 billion, with operating profit increasing 13 percent to $271 million and net profit up 7 percent to $150 million. William Ma, group managing director of Kerry Logistics, said global economic growth was behind the recovery in investment, manufacturing, and trade activity, especially in Asian markets.
“The overall performance of Asia remained robust, driven by pronounced external demand and rising domestic consumption,” Ma said. “Kerry Logistics performed better in the second half of 2017 when compared to the first half, buoyed by the continued strength in global e-commerce, the sound performance of Apex in the Americas, and the accelerating growth of our express business in Thailand.”
The 3PL will be looking to build on the strong momentum that has developed in cross-border e-commerce, particularly between greater China and Association of Southeast Asian Nations (ASEAN). “In light of the outstanding performance of the express business in Thailand, the group plans to extend the success to other ASEAN markets such as Vietnam, Malaysia, and Singapore,” Kerry Logistics noted in its earnings release.
The international freight forwarding division in 2017 recorded a 41 percent increase in revenue and a 14 percent rise in segment profit, fueled by overall volume growth and a significant contribution from Apex Maritime, a trans-Pacific trade specialist in the United States that Kerry Logistics acquired in mid-2016.
Yet even with increasing cargo volume, rising freight rates in 2017 — caused by carrier consolidation, reshuffled alliances, and managed capacity — compressed the profit margin of the forwarding division.
George Yeo, chairman of Kerry Logistics, said the group was widening its network. “With the addition of Globalink Logistics and Lanzhou Pacific Logistics [both acquired in 2017], we now have the strongest road and rail freight network across Eurasia,” he said. Globalink Logistics extends the group’s reach into the Commonwealth of Independent States and Central Asia, while Lanzhou Pacific adds rail logistics to its portfolio.
“The deepening and widening of our capabilities positions us well for rapidly growing, cross-border e-commerce, which is facilitated by better physical connectivity and greater international cooperation,” Yeo said.