Kerry Logistics’ performance in the first half of this year may have already seen the company ‘bottom out’ after the sharp drop from the extreme highs during the pandemic, as the Hong Kong-based logistics player saw 30 percent quarter-on-quarter growth for Q2.
The abnormal highs seen in 2021 and 2022 have made an impact on year-on-year comparisons with rates slowly going back to the levels seen pre-pandemic. In its interim results, the company recorded a net profit of HK$368 million for the first half, down 85 percent versus the same period last year, with revenue dropping 47 percent year-on-year to HK$25,315 million.
Vic Cheung, Managing Director of Kerry Logistics Network, said: “In 2023 1H, global trade volume and growth remained subdued. Freight rates and volume stayed depressed while supply chain demand remained stagnant. During the three years ended 31 December 2022, KLN Group’s flexible and innovative supply chain solutions enabled it to benefit from the supply and demand mismatch during the pandemic and achieved exceptionally good results. However, the extraordinary circumstances in 2021 and 2022 proved an anomaly that distorted year-on-year comparisons for logistics companies including KLN Group. After the particularly difficult 2023 Q1, the Group’s overall performance has bottomed out. Although the Group’s core net profit reported a decrease of 85% in year-on-year terms, the performance in 2023 Q2 recorded more than 30% quarter-on-quarter growth. The Group’s resilience, agility and unique position in Asia are expected to carry it through the storm in 2023.”
Across the business, Kerry Logistics’ integrated logistics remained stable in H1 with a segment profit of HK$718 million compared to the HK$717 million seen in the same period last year. Contributing to the positive performance were its business in China and Thailand-based Kerry Siam Seaport’s satisfactory results with Hong Kong not growing proportionally due to a sharp drop in demand for pandemic-related services.
The freight forwarding business meanwhile recorded an 82 percent year-on-year contraction in segment profit in the first half at HK$621 million. The company attributed the decline to weak global demand, slower-than-expected recovery in Asian exports and plunged freight rates. Kerry Logistics said the trans-pacific trade lane accounted for more than 80 percent of the business, despite volumes sliding 22 percent year on year. The company said this decline is comparatively smaller and it expects the division to outperform the market when it turns around.
Recording the only segment loss for the first half is the company’s e-commerce and express business. The company said it expects Kerry Express Thailand, the major contributor for the express division, to stabilise in the fourth quarter of next year. On 25 July 2023, the group announced the transfer of certain companies engaging in express delivery services in Asia Pacific and Europe to an indirect subsidiary of S.F. Holding as a move to reorient its focus towards integrated logistics and freight forwarding.
Vic Cheung concluded that 2023 is shaping up to be a tough year for the global logistics industry: “the extreme circumstances under the pandemic are gradually fading in global logistics activities and there are signs of improvement in both freight rates and volumes in KLN Group’s key markets.
“Using the pre-pandemic FY 2019 as the base, we are confident to deliver healthy and sustainable Compound Annual Growth Rate (CAGR) growth in segment profits in our IL and IFF divisions. We are also optimistic that the stable performance of the IL business is likely to keep up the momentum in 2023 2H.”
Kerry Logistics announced interim dividend of 9 HK cents per share payable on 22 September 2023.