Kerry Logistics Records Double-Digit Rise in Turnover, Core Operating and Net Profit Asia Remains Main Earnings Driver

HONG KONG, CHINA -�Media
OutReach  - 28 March 2019 – 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
2018.

Group’s Financial Highlights

• Turnover surged by 24% to HK$38,139 million
  (2017: HK$30,788 million)
• Core operating profit rose by 11% to HK$2,364
  million (2017: HK$2,128 million)
• Core net profit climbed by 12% to HK$1,326
  million (2017: HK$1,183 million)
• Profit attributable to the Shareholders increased
  by 15% to HK$2,440 million (2017: HK$2,116 million)
• Integrated Logistics (IL) business recorded a 14%
  rise in segment profit to HK$2,111 million (2017: HK$1,846 million)
• International Freight Forwarding (IFF) business
  recorded a 7% increase in segment profit to HK$549 million (2017: HK$511
  million)
• Dividend Payout Ratio, excluding special
  dividend, is 32% (2017: 32%)
• Proposed final dividend of 16 HK cents per share,
  to be payable on Thursday, 20 June 2019
• Potential gain of
  approximately HK$2 billion estimated from the disposal of two warehouses in
  Hong Kong by the Group, subject to independent shareholders’ approval and certain
  conditions for completion

William MA,
Group Managing Director of Kerry Logistics, said, “Global economic growth moderated in 2018. The US-instigated
trade tension, in particular with Mainland China, reverberated far and wide, casting uncertainties over the global trade
landscape. In contrast, the economic growth in emerging Asia, specifically in
the Southeast Asian countries, continued its strong momentum. With an
unparalleled network in Asia, Kerry Logistics is well-positioned to capitalise
on the robust growth in the region. Increasing demand in intra-Asia trade and
e-commerce business accelerated the Group’s IL businesses. We recorded a double-digit increase in turnover,
core operating profit, and core net profit in 2018, achieving positive growth
for the ninth consecutive year.”

IL Growth
Boosted

Fuelled by the
increased earnings from the Hong Kong logistics operations and the outstanding
performances of Kerry Express Thailand as well as Kerry Siam Seaport in
Thailand, the IL division registered a 14% rise in segment profit in 2018,
generating 79% of the Group’s total segment profit. The IL business is set to
remain the main earnings driver in 2019.

In Hong Kong, underpinned by the Group’s leading
market position in addition to its strategy to strengthen its expertise in
target verticals and deepen its penetration therein, the segment profit of the
logistics operations climbed by 37% in 2018. Together with the moderate growth
of the warehousing business, the Group’s Hong Kong business accounted for 41%
of segment profit for the IL division.

In Mainland China, the segment profit of the IL
business recorded a 12% drop in 2018. The China-US trade dispute had
significant impact on Chinese export trade in 2018 2H. Customers slowed down
their investment and expansion plans which were set out in 2018 1H, resulting
in lower-than-expected growth.

In Taiwan, as the impact of the labour law passed
in 2016 has been cushioned by internal operation adjustments and improved
operation efficiency, the Group’s IL business stabilised with segment profit
growth of 4% in 2018.

In Asia, supported by the strong performance of
the Group’s business in Thailand through Kerry Express Thailand and Kerry Siam
Seaport, the IL segment profit experienced a 37% increase in 2018. The
strategic partnership Kerry Express Thailand established in July 2018 with VGI
Global Media Public Company Limited, the subsidiary of BTS PLC, enabled it to
use BTS Skytrain exclusively to extend its express delivery services and boost
same-day delivery service in Bangkok.

IFF Steadily
Advanced

The Group’s IFF division attained steady volume
growth in 2018 2H as customers have frontloaded their shipment in advance of
the trade tariffs being enforced. The IFF division recorded a 7% profit growth
and contributed 21% to the Group’s total segment profit in 2018.

In October 2018, the Group consolidated its industrial
project logistics services under the Kerry Project Logistics brand to
capitalise on the growth potential in the global industrial project logistics
market unleashed by China’s Belt and Road Initiative. In the same month, the
Group debuted its rail and road multimodal freight service from Lanzhou, China
to Islamabad, Pakistan to expand its freight capability from China to South
Asia. The new subsidiary of the Group, Kerry Freight Pakistan (Private) Limited,
formed in July 2018 gave the Group a direct presence in one of the markets with
the highest growth potential in the region.

Asset Portfolio
Strengthened

The Group currently manages 60 million square
feet of land and logistics facilities worldwide. In Myanmar, Phase one of the
inland port in Mandalay and the inland port in Yangon were completed in 2018.
In Taiwan, due to a fire accident in February 2019, construction of the
430,000-square-feet logistics centre in Guanyin is expected to complete in 2019
Q4. In Mainland China, the logistics centre in Changsha was completed in 2018,
while the one in Wuhan is expected to complete in 2019 Q2. In Thailand, a new fully
automated parcel sorting system was installed in Phase two of the Kerry Bangna
Logistics Centre in 2018, boosting Kerry Express Thailand’s daily delivery
capacity to over 1 million parcels. Phase three of the centre began
construction in 2018 Q4.

Deepening
Capabilities in Local Markets

The sound performance of the Hong Kong, Taiwan,
and Thailand businesses reinforces the Group’s strategy in deepening its
capabilities in local markets across various verticals, in particular fashion,
F&B, as well as pharmaceuticals and express.

Capturing
Emerging Opportunities in Mainland China

The fast-changing logistics landscape in Mainland
China called for innovation and flexibility in order to capture and serve new
and emerging business models and brands. The Group is making significant
efforts in boosting performance through speeding up response time to customers’
evolving needs and tapping into the expanding import sector.

Maintaining
Momentum in Asia

Stronger growth is anticipated to persist in
Asia, particularly in Southeast Asia and India, owing to increasing domestic
consumption and rising investment. Leveraging its established network in Asia
to take advantage of the booming intra-Asia trade, the Group’s business growth
in Asia is expected to maintain in 2019.

Maximising
Shareholder Value

As a part of its long-term strategy of unlocking
the value of its warehouse property portfolio to power its enduring expansion
and maximise shareholder value, the Group will dispose of, subject to the
approval of the independent shareholders of the Company and certain conditions
for completion, its warehouses in Chai Wan and Shatin to KPL through an
indirect wholly-owned subsidiary of KPL. Upon completion, the total estimated
gain of the disposal will be approximately HK$2 billion in aggregate.

George YEO,
Chairman of Kerry Logistics, said, “Despite
uncertainties, Kerry Logistics did well in 2018 achieving double-digit growth.
Looking ahead, we see three major trends affecting global logistics: First,
China’s market will continue to grow and become the biggest in the world. Kerry
Logistics will broaden and deepen its reach in China selectively. Second,
strategic rivalry between China and the US will continue for years to come and
disrupt existing global supply chains. In order to serve our customers well,
Kerry Logistics must be able to offer a range of network solutions to them.
Third, technology is steadily disrupting all aspects of the logistics industry.
Kerry Logistics will give emphasis to the use of information technology,
blockchain and AI wherever practical in warehouse, fleet, freight, contract,
and e-commerce management. We will stay nimble and agile even as our network
grows in response to changing threats and opportunities in Asia and the world.”

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 53 countries
and territories, and is managing 60 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 2017-2018.