Why SingPost’s logistics segment is a drag to its growth
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Intense pricing competition resulted in losses. Singapore Post’s (SingPost) logistics segment went into the red as operating profits turned into a loss of $4.2m in Q2.
According to Maybank Kim Eng, even excluding provisions, the operating profit would have been $1m, which is much lower than the operating profit of $5m for 1Q2017.
The segment was in bad debt for a key customer, Quantium Solutions HK.
Intense pricing competition has also resulted in the loss of business.
Further weakening of logistics segment could offset the turnaround of mail and logistics segments.
Whilst the logistics business turned into a weight for the company’s earnings, the drag should still be manageable, the bank said. SingPost’s mail, e-commerce, and associate earnings could still gain momentum, Maybank Kim Eng said.
Questions & Answers
Q.What caused the Singapore Post logistics segment to report a loss in Q2?
What caused the Singapore Post logistics segment to report a loss in Q2?
The logistics segment faced intense pricing competition, which led to losses. It also incurred bad debt from a key customer, Quantium Solutions HK, and lost some business due to the competitive environment.
Q.How significant was the operating profit change for the logistics segment?
How significant was the operating profit change for the logistics segment?
The logistics segment’s operating profits turned into a loss of $4.2m in Q2. Even without provisions, the operating profit was only $1m, which is significantly lower than the $5m profit reported in 1Q2017.
Q.Will the logistics segment's performance affect other parts of SingPost's business?
Will the logistics segment's performance affect other parts of SingPost's business?
A continued weakening of the logistics segment could offset improvements in the mail and other logistics segments. However, Maybank Kim Eng believes the overall drag on earnings should still be manageable, with other segments potentially gaining momentum.
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