Kerry Logistics Network Announces 2023 Annual Results

Group's Financial Highlights

• Revenue* decreased by 42% to HK$47,408 million (2022: HK$82,330 million)
• Core operating profit* dropped by 61% to HK$2,207 million (2022: HK$5,645 million)
• Core net profit* decreased by 69% to HK$1,214 million (2022: HK$3,952 million)
• Profit attributable to the Shareholders was HK$791 million, which represents a drop of 78% (2022: HK$3,579 million)
• Integrated Logistics ('IL') business recorded a segment profit* of HK$1,295 million (2022: HK$1,385 million), which represents a decrease of 7%
• International Freight Forwarding ('IFF') business recorded a segment profit* of HK$1,394 million (2022: HK$4,721 million), which represents a drop of 70%
• Proposed final dividend of 13 HK cents per Share to be payable on or around Thursday, 6 June 2024

Vic Cheung, Group Managing Director of Kerry Logistics Network, said, "2023 was undoubtedly a challenging year globally. Nevertheless, the global economy was in a better shape than it was in 2022. For the global logistics industry, while growth stalled, both freight rates and volume saw a slight rebound as the market continued to normalise gradually. Despite a tough market, new opportunities emerged amid changing consumer demands and the reshuffle of global supply chains. KLN Group was able to turn challenges into opportunities and provided customers with viable and cost-effective alternatives to keep their cargoes moving and delivered. KLN Group's overall performance in 2023 was in line with expectations and on par with global peers."

Segmental Reporting

During the period, KLN Group took out the E-commerce and Express business from its segmental reporting following the transfer of companies engaging in express delivery services in the Asia Pacific and Europe to S.F. Holding in 2023 Q3 and the subsequent announcement in December 2023 to deconsolidate Kerry Express Thailand through dividend distribution.

The purpose of the restructuring was to reinforce KLN Group's strategy of focusing on its core business of integrated logistics and international freight forwarding, with an aim to enhancing its overall performance and prospects.

Integrated Logistics

The IL division overall reported a 7% decrease in segment profit, dragged down by the drop in the Hong Kong business as a result of the shrunken demand for pandemic-related services and a slower recovery of the retail market than anticipated. Nevertheless, despite the performance of the Hong Kong business, the IL division in other markets recorded growth.

In the Mainland of China, despite a delay in market recovery, the IL business recorded a 17% increase following the successful execution of a series of cost management measures. The IL business in other parts of Asia recorded an 11% increase mainly supported by the stable performance of Kerry Siam Seaport in Thailand.

International Freight Forwarding

The IFF division reported a 70% decline in segment profit in 2023 due to excess inventories, subdued purchasing power and stagnant export growth, in particular in Asia. The drop in air and ocean freight rates since 2022 Q3 from the all-time highs in 2021 as the global logistics market normalised has caused further contraction in profit margin in 2023, compared to that of 2022.

Nonetheless, riding on stabilised freight rates and a pick-up in consumer demand, KLN Group delivered sustainable results on the Asia-US trade routes and remained the leading player in the world's busiest trade lane in 2023.

In 2023, the Group continued to leverage the strengthened resources with S.F. Holding to capitalise on the cross-selling and collaborations in various verticals and businesses. A joint venture was formed to manage the international cargo terminal of the Ezhou Airport in Central China.

Various mega industrial projects were completed and records were broken by project logistics teams in the Mainland of China, Central Asia and Europe in 2023. The segment delivered satisfactory results and is expected to become one of the development drivers of the IFF division soon.

Vic Cheung concluded, "Global growth is likely to remain weak in 2024. The Red Sea crisis is bringing new variables to the Group's IFF business. Nevertheless, we are determined to provide customers with alternative solutions in the near-term and are optimistic that our IL business in Asia is likely to benefit from the shifts in the supply chain in the mid-term. KLN Group's agility, resilience and innovation in providing solutions powered by its global network, solid presence in Asia and the most diversified service offerings will again enable the Group to come out on top. Looking ahead, the Group will continue to create synergies with S.F. Holding through extensive collaborations, actively identify new opportunities to grow its business sustainably and deliver greater value for its shareholders."

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