Kerry Logistics pins growth hopes on e-commerce in China

Kerry Logistics Network said net profit soared 71.5 per cent to HK$1.83 billion in its first announcement after listing on the exchange last year, with growth this year focused on the e-commerce business on the mainland.

Core net profit only increased 8.7 per cent year on year to HK$886.4 million after removing one-off revaluation gains from investment properties and disposal gains from its warehouse.

Turnover rose 3.5 per cent to HK$20 billion. Shares in the company dropped 6.6 per cent to end at HK$11.80 yesterday. The logistics company said cross-border e-retailing will be a key focus given the huge e-commerce market in China.

"Beijing wants to shore up the economy through domestic consumption and e-commerce could facilitate this goal," said Edwardo Erni, Kerry Logistics' managing director for mainland operations.

Talks with the General Administration of Customs of China began nine months ago to reduce tariffs on products ordered through its e-commerce platform, said Erni. The platform will be based in Hangzhou. The e-commerce business only accounts for 10 per cent of its revenue generated from the mainland now. Greater China accounted for 70 per cent of its total revenue last year.

"E-commerce is one of the growth factors for the company but not a dominating earnings contributor," said an analyst from a Chinese investment bank, who declined to be named. Its major growth engine would be the integrated logistics business in China and Southeast Asia, the analyst said.

The company said it will endeavour to increase its warehouse facilities in Thailand and Vietnam. It built a vehicle logistics centre in Rayong, Thailand, last year. A new distribution centre in Bangkok will be built on a site near the international airport. Kerry also added three logistic facilities in Chongqing, Wuxi and Xiamen last year.