Domestic E-commerce Market Hits Earnings of Japan’s SG Holdings

January 30, 2024

By Ti Insight

Raised employee wages, a decline in the Japanese domestic e-commerce market and a bumpy east-west logistics market all contributed to a 22.2% y-o-y fall in operating income for SG Holdings (parent of Sagawa Express) in the third quarter.

Operating income fell to ¥33.0bn (€206m) in the quarter on a 3.4% revenue drop to ¥351.8bn (€2.2bn). This was led by a decline in parcel volumes in the Delivery business, where a 2.1% y-o-y fall in volumes in Hikayaku Express parcels was not offset by an average 1.2% unit price hike. The Delivery segment saw a 14.4% drop in operating income to ¥31.5bn (€196.9m) on a 1.9% revenue drop to ¥279.5bn (€1.75bn) in the quarter.

According to SG Holdings, the dip in US consumer spending, while showing signs of rallying at present, contributed to the ¥1.0bn loss (-€5.25m) in the quarter, down from a profit of ¥3.4bn in Q3, FY2022. A rebalancing of transpacific shipping capacity and an uptick in the US economy may well see a positive correction in Q4 of the financial year.

Freight forwarding subsidiary Expolanka felt the Logistics segment squeeze the most. It saw a loss of ¥2.2bn (€11.55m), down from a profit ¥1.6bn in Q3, 2022. This was on a revenue drop of 17.2% y-o-y to ¥30.3bn (€189.8m). Where air cargo volumes grew by just over 4% y-o-y to 25,000 tonnes in the quarter, profitability was hit by the over-availability of airline belly space. This was further compounded by a 21.6% drop in ocean container shipping volumes compared to Q3, 2022, to 29,000 TEU.

Adding to the issues of US and Japanese macroeconomic problems, SG Holdings has also committed to raising the wages of its employees and contractors to improve productivity. These measures, seen as short term pain for longer term gain, have helped to an overall stutter in the quarter for the company, though in the full financial year it projects very similar results to FY 2022.

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