Interesting article on www.joc.com regarding courier services in China.
Kerry logistics similar to e-cargo (HKG) yet much larger are finding it tough. Perhaps the good people at ecargo can give them some of their magic potion?
HONG KONG — Kerry Logistics plans to build a regional express delivery platform in China and across the Asean region to capitalise on a rapidly growing segment of the logistics business, but it will be a cautious entry into a difficult market.
“The situation in China in the courier market is chaotic, unregulated and in a cut throat price war,” Edwardo Erni, Kerry Logistics executive director and managing director of China and North Asia, told reporters at the company’s 2014 results announcement.
The Hong Kong-listed logistics company reported a solid performance for 2014, ending the year with net profit up 10 percent at $125 million. Revenue topped $2.7 billion as the integrated logistics segment posted 12 percent year-over-year growth and the international freight forwarding division grew 11 percent.
Erni said Kerry Logistics had late last year secured the first batch of courier licences in what he described as a “tedious process.” The company expects to have the final licences by the end of this year that will cover 14 provinces and 19 cities.
However, Erni said they would take a cautious approach to the China market, creating pilot projects within the next six months in the cities of Shanghai, Beijing, Shenzhen and Guangzhou.
“We are targeting the tier one cities that have the volumes to support a trial run. The first tier cities are where the consumers are spending more. This year will be the reshuffling year of the courier market in China, phasing out the weaker players and the market will further consolidate. When it does, we will be ready to move in a big way.”
China remains by far the largest generator of revenue for Kerry Logistics, with 67 percent of its turnover coming from mainland business in 2014, or $1.8 billion. South and Southeast Asia sales were $400 million, with Europe revenue reaching $379 million last year.
Kerry Logistics was in aggressive expansion mode during 2014, developing facilities and acquiring logistics companies or forming joint ventures in Indonesia, Vietnam, Thailand, Canada, Australia and the UAE. During the year the company spent $250 million of the $300 million net proceeds from its December 2013 listing and expects to use the balance this year.
Asked what impact China’s slowing economy would have on Kerry Logistics’ business, group managing director William Ma said even as the mainland slowed down during 2014, the company still managed to grow its core operating profit by 14 percent.
“China is expanding slower and the Chinese are buying less, but the market is big and we shifted our focus from slowing sectors to those that are growing faster, such as pharma logistics, health care, machinery and equipment, and food and beverage,” Ma said. “So we don’t need to look at GDP figures, because there are sectors out there that can give us better margins.”
A fair portion of Kerry Logistics’s expansion last year was in logistics property. By Dec. 31, the group managed a logistics facility portfolio of 45 million square feet, of which 23 million square feet were self-owned.
It completed the development of two new logistics centres in the China cities of Zhengzhou and Kunshan, and began the construction of two other facilities in Chengdu and Xi’an. Once complete, the logistics properties will add 1.6 million square feet to the group’s China portfolio.
A 1.1 million square feet flagship facility is being built in Fengxian District in Shanghai to replace the group’s current leased facilities in Shanghai and provide additional room to cope with the expansion of its integrated logistics operations in the city.
Kerry Logistics also added properties in Southeast Asia. Phase 2 of the new logistics centre in Rayong was completed during the year, bringing the total gross floor area of the centre to 374,000 square feet. A new warehouse and a new inland container depot were added at Siam Seaport that is becoming a key cargo gateway for growing Asean trade.
In Cambodia, the group is planning to construct a 160,000 square feet bonded warehouse on its newly acquired land at a Free Trade and Special Economic Zone this year. Located in Khan Dangkor of Phnom Penh, the site is near both Phnom Penh International Airport and Phnom Penh River.
