Kerry Logistics Network Posts 30% Growth in Revenue　Core Net Profit Increased by 33%

HONG KONG
SAR – Media OutReach – 25
March 2021 – Kerry
Logistics Network Limited (‘KLN’, the ‘Company’ or together with its subsidiaries, the ‘Group’ or
‘KLN Group’; Stock Code 0636.HK) today announced the Group’s annual results for
2020.

 

Group’s Financial
Highlights

• Revenue increased by 30% to
  HK$53,361 million (2019: HK$41,139 million)
• Core operating profit increased by
  20% to HK$3,320 million (2019: HK$2,765 million)
• Core net profit increased by 33% to
  HK$1,828 million (2019: HK$1,374 million)
• Profit attributable to the
  Shareholders for 2020 was HK$2,896 million. Excluding the gain from disposal of
  two warehouses in Hong Kong in 2019, it represents a remarkable year-on-year
  growth of 58% (2019 normalised: HK$1,830 million)
• Integrated Logistics (IL) business
  recorded a segment profit of HK$2,583 million (2019: HK$2,435 million), which
  represents an increase of 6%. The growth in IL segment profit was affected by
  the reduced profit contributed by lesser number of warehouses in Hong Kong
  compared with 2019. Should this impact be normalised, segment profit of IL
  business should have increased by 8%
• International Freight Forwarding
  (IFF) business recorded a 64% increase in segment profit to HK$1,017 million
  (2019: HK$622 million)
• Proposed final dividend of 23.8 HK
  cents per share, to be payable on Friday, 11 June 2021

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

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.”