Kerry Logistics Network posts 30% growth in revenue core net profit increased by 33%
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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
“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.”
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 340,000-sq-ft chemical logistics centre in Cangzhou commenced operation in 2021 Q1. Construction of the 827,000-sq-ft logistics centre in Qingdao is expected to complete in 2021 Q2. The 1,043,000-sq-ft logistics centre in Guangzhou, the 305,000-sq-ft chemical logistics facility in Zhangjiagang, the
644,000-sq-ft hub and logistics centre in Zhuhai and the 545,000-sq-ft bonded logistics centre in Hainan are expected to complete construction in 2022.
Proposed Strategic Investment from S.F. Holding
On 10 February 2021, a Joint Announcement was made amongst S.F. 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.
William 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.”
Questions & Answers
Q.Which division was the primary contributor to KLN Group's segment profit in 2020?
Which division was the primary contributor to KLN Group's segment profit in 2020?
The IFF (International Freight Forwarding) division was the powerhouse in 2020. It accounted for 28% of the total segment profit and saw its segment profit increase by 64% year-on-year, driven by global demand for pandemic-related goods.
Q.What led to the growth in the IL division's segment profit in Hong Kong and Taiwan?
What led to the growth in the IL division's segment profit in Hong Kong and Taiwan?
In Hong Kong, growth was due to increased demand for home-delivered necessities, electronics, and pharmaceutical logistics. Taiwan's expansion benefited from growth in semi-conductors, electronics manufacturing, pharmaceutical logistics, and e-commerce business.
Q.What is the expected completion timeline for the new logistics centres in Mainland China?
What is the expected completion timeline for the new logistics centres in Mainland China?
The Qingdao logistics centre is expected to finish in 2021 Q2. Centres in Guangzhou, Zhangjiagang, Zhuhai, and Hainan are all expected to complete construction in 2022.
Q.What specific business disposals are part of the pre-conditions for the S.F. Holding strategic investment?
What specific business disposals are part of the pre-conditions for the S.F. Holding strategic investment?
The proposed transaction requires certain inter-conditional special deals, including the disposals of some Hong Kong warehouses and the Company’s Taiwan businesses. These disposals will not proceed if the main transaction fails.
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