Kerry Logistics Profit Attributable to Shareholders Up 55%, Dividend Payout Ratio Increased to 34%

HONG KONG, CHINA – Media OutReach – 31 March 2020 – Kerry
Logistics Network Limited (‘Kerry
Logistics’ or together with its subsidiaries, the ‘Group’; Stock Code 0636.HK) today
announced the Group’s annual results for 2019.

 

Group’s
Financial Highlights

• Revenue
  increased by 8% to HK$41,139 million (2018: HK$38,139 million)
• Core operating
  profit increased by 17% to HK$2,765 million (2018: HK$2,364 million)
• Core net profit
  increased by 4% to HK$1,374 million (2018: HK$1,326 million)
• Profit
  attributable to the Shareholders increased by 55% to HK$3,788 million (2018: HK$2,440
  million)
• Integrated
  Logistics (IL) business recorded a 15% increase in segment profit to HK$2,435
  million (2018: HK$2,111 million)
• International
  Freight Forwarding (IFF) business recorded a 13% increase in segment profit to
  HK$622 million (2018: HK$549 million)
• Proposed final
  dividend of 18 HK cents per share, to be payable on Thursday, 18 June 2020
• Dividend Payout
  Ratio, excluding special dividend, is 34% (2018: 32%)

KUOK Khoon Hua, Chairman of Kerry
Logistics,
said, “2019 was a challenging and turbulent year. Global economic growth weakened
considerably as international trade disputes dragged on and Mainland China’s
GDP growth slowed down. Social unrest in Hong Kong further impacted the local
economy and affected consumer confidence. Despite the weak product demand and
lower productivity worldwide, we registered growth in revenue, core operating
profit and core net profit again in 2019. Supported by our diversified business
portfolio, extensive geographical coverage and broad customer mix, we were able
to achieve positive growth across all regions, with 55% increase in profit
attributable to the Shareholders year-on-year.”

 

IL Profit Grew

Building
on a wide-ranging customer mix across various industries, in addition to
improved cost efficiency in Mainland China, the Group’s IL division recorded a
15% segment profit growth in 2019.

 

In Hong Kong, although the city was gripped by social events in 2019 2H
that negatively affected in particular the retail section, the Group’s business
reported a 6% growth. The segment profit of the Hong Kong logistics operations
rose by 23% on the back of a resilient business model, rise in e-commerce
business as well as new customer wins in the food and beverage, pharmaceutical
and general services verticals.

In Mainland China, the repositioning and restructuring of the Group’s
operations earlier has borne fruit as segment profit of its IL business
recorded a rise of 22%. The recovery was driven by increased business in the
cold chain logistics operation, addition of new customers in the electronics,
fast-moving consumer goods, industrial and fashion industries as well as cost
savings.

 

In Taiwan, the Group’s IL business registered a 19% growth in segment
profit in 2019, benefitted from the repatriation of semiconductor manufacturers
from Mainland China and new business contributed by Science Park Logistics Co.,
Ltd. which is one of the leading service providers in high-tech, bonded
logistics in Taiwan.

 

In Asia, segment profit increased by 22% in 2019, supported
by the strong performance of the Thailand operation. The extent of increase should have been larger if not for the Group’s
ongoing financing of the Kerry Express operations in Malaysia, Vietnam and
Indonesia amounting to HK$70 million.

 

IFF Growth Sustained

Riding on the booming intra-Asia trade, the Group’s IFF division
recorded strong growth in the first ten months in 2019, resulting in a 13%
increase in segment profit, contributing 20% to the total segment profit.

 

Majority of the regions recorded growth except Taiwan. The major
contribution came from Mainland China which registered a 23% growth. The
successful consolidation of its industrial project logistics services and
overland rails worldwide allowed the Group to tap into new markets beyond its
traditional customers in the consumer products industry. In August 2019, the
Group acquired a majority interest in Turkey’s ASAV Logistics Services Inc. to
further the expansion of its global network.

 

Logistics Facilities Expanded

In the United Arab Emirates, the 70,000-square-feet bonded logistics
facility commenced operation in Dubai in 2019 Q4. In Mainland China,
construction of the 827,000-square-feet logistics centre in Qingdao is expected
to complete in 2021 Q2, and the 646,000-square-feet logistics centre in
Guangzhou is projected for completion in 2021 Q4. In Taiwan, the
430,000-square-feet logistics centre in Guanyin is expected to resume operation
in 2021 Q3 after restoration from the fire in February 2019 is completed.

 

Asset Optimisation as Planned

The Group completed the disposal of two Hong Kong warehouses in 2019 at
a total gain of approximately HK$2 billion. Going forward, the Group will
continue to review and adjust its plan according to changing economic
conditions.

 

Spin-Off and Separate Listing of Kerry
Express Thailand

The
spin-off and separate listing of Kerry Express Thailand on the Stock Exchange
of Thailand is currently in progress. On 28 February 2020, Kerry Express
Thailand submitted the listing application to The Securities and Exchange
Commission of Thailand. Given that in Thailand a state of emergency has taken
effect and will remain in force until 30 April 2020, delay in the listing process
is expected.

 

Apex Acquisition Completed

On 31 March 2020, the Group completed the acquisition of the remaining
49% in Apex, the third largest NVOCC in terms of volume from Asia to the US in
2019, at a consideration of approximately US$176 million, satisfied by 30% in
cash and 70% in the newly issued Shares. The acquisition represents a
continuation of the Group’s strategy to grow its business organically in the
US.

 

William MA, Group Managing Director of Kerry Logistics, said, “The COVID-19 pandemic outbreak is creating a global business
and financial turmoil. As of today, one-third of the world’s population is
under varying degrees of lockdown. The world has been switching to a more
domestic-based supply chain for daily essentials. Riding on Kerry Logistics’
extensive exposure in various markets, the Group is in a relatively secure
position to accommodate the strong demand for domestic logistics services
particularly in Hong Kong, Taiwan, Mainland China, Thailand and some Asian
countries. Nonetheless, when the pandemic comes under control, the global supply
chain will be in chaos and the recovery is expected to be slow and painful. We
are reserving our strengths and getting prepared to play a more vital role in supporting
our customers to move well ahead of the aftermath.”

About Kerry Logistics Network Limited (Stock Code 0636.HK)

Kerry
Logistics is an Asia-based, global 3PL with the strongest network in Asia. Its
core competency is providing highly customised solutions to multinational
corporations and international brands to enhance their supply chain efficiency,
reduce overall costs and improve response time to market. Kerry Logistics has a
network covering 55 countries and territories, and is managing 75 million sq ft
of land and logistics facilities worldwide, providing customers with high
reliability and flexibility to support their expansion and long-term growth.
Kerry Logistics Network Limited is listed on the Main Board of the Hong Kong
Stock Exchange and is a selected Member of the Hang Seng Corporate
Sustainability Index Series 2019-2020.