Kerry Logistics restrained by slowing exports out of Asia

Kerry Logistics half yearly results gave an interesting insight into the state of the Chinese and South East Asian export sector. Kerry is one of the leading private sector contract logistics and forwarding businesses in Hong Kong, with a network spanning China, South and South East Asia, Taiwan and the Philippines. In particular, it serves light manufacturing consumer product exporters from these regions.

Discussing the numbers William Ma, Kerry Logistics Managing Director, noted, “flat global demand has led to decelerating trade activities and lower production volumes. Substantial amounts of key clients adjusted their production and sales target for 2016. Thailand and Vietnam were affected by weak export demand.” This hit Kerry’s contract logistics business, with a fall of 1% in operating profits to HK$799m. The company is having to expand its market-share and acquire new business at a faster rate in order to compensate for the lack of growth amongst its existing customers.

The group’s freight forwarding business did better with a 9% increase in operational profits to HK$208m, with India in particular driving-up volumes whilst mainland China saw softer demand.

These numbers would suggest that much of the Chinese and South East Asian manufacturing base is suffering from a slowdown in global demand. Rather it is India that is driving whatever growth there is in the wider Asian region.

This is not deterring Kerry from investing, with the company about to open three new warehouses in China and expecting to complete 213,000 sq ft of warehousing in Phnom Penh, Cambodia, by the end of 2016. The company is also investing in Burma, Thailand and Indonesia but it is in India that Kerry sees the best prospects for growth, with the company increasing its equity stake in Indev Logistics.

The group as a whole saw turnover rise by 3% to HK$10,461m for H1 2016, whilst underlying operational profit was flat and net profit edge-up by 1%.

Source: Transport Intelligence, August 25th, 2016

Author: Thomas Cullen