Cost optimisation sees Cainiao Smart Logistics into profitability

A combination of triple digit volume growth in its global fulfilment network and a variety of cost optimisation measures enabled Alibaba Group’s Cainiao Smart Logistics Network to generate a profit in the three months to December 2023.

From a loss of RMB12m in the final quarter of 2022, the Chinese logistics giant generated an adjusted EBITDA of RMB961m (US $135m) in the final quarter of 2023. The profit was on revenues of RM 28,476m ($4.0bn), around 12.5% of its parent company’s overall revenues that quarter.

Speaking of Alibaba Group as a whole, CEO Eddie Wu said, “We delivered a solid quarter as we are executing our focused strategies across the organisation.” For the logistics arm of Alibaba, this meant achieving triple digit international premium fulfilment service volume growth that led in a large part to the increase in profitability.

At the same time, the leadership of Alibaba Group put the growth in earnings down to “Economies of scale that leads to cost optimisation as well as optimised expenditure spending.”

The logistics company expanded its five-day premium delivery service to two more countries in the quarter. At the same time, the company says that it achieved ‘cost optimisation in line-haul transportation and last mile delivery.’

As China’s answer to Amazon, Alibaba Group has similar interests from logistics to online stores and cloud computing as well as its international fulfilment and logistics network. The revenue and profit structure is similar too, with the cloud computing arm generating a significant proportion of the parent company’s $7.4bn EBITDA in the quarter. As with Amazon, its logistics business lags behind in significant profitability, but Cainiao’s leadership seem to have turned the ship around.

Author: Richard Shrubb