Kerry Logistics 2023 profit down 78% on weak IFF business

Kerry Logistics Network (KLN) reported a 78 percent decline in profit attributable to shareholders at HK$791 million ($95 million) for 2023 on 70 percent drop in the segment profit of international freight forwarding (IFF).

Revenue declined 72 percent to HK$47.4 billion ($5.7 billion) on 64 percent decline in Americas revenue at HK$9.7 billion ($1.2 billion), says an official release.

“2023 was undoubtedly a challenging year globally," says Vic Cheung, Group Managing Director, Kerry Logistics. "Nevertheless, the global economy was in better shape than it was in 2022. For the global logistics industry, while growth stalled, both freight rates and volume saw a slight rebound as the market continued to normalise gradually. Despite a tough market, new opportunities emerged amid changing consumer demands and the reshuffle of global supply chains. KLN Group was able to turn challenges into opportunities and provided customers with viable and cost-effective alternatives to keep their cargoes moving and delivered. KLN Group’s overall performance in 2023 was in line with expectations and on par with global peers.”

During the period under review, KLN Group took out the e-commerce and express business from its segmental reporting following the transfer of companies engaging in express delivery services in the Asia Pacific and Europe to S.F. Holding in Q32023, and the subsequent announcement in December 2023 to deconsolidate Kerry Express Thailand through dividend distribution, the release added.

"The integrated logistics division overall reported a seven percent decrease in segment profit, dragged down by the drop in the Hong Kong business as a result of the shrunken demand for pandemic-related services and a slower recovery of the retail market than anticipated. Nevertheless, despite the performance of the Hong Kong business, the IL division in other markets recorded growth."

The international freight forwarding (IFF) division reported a 70 percent decline in segment profit at HK$1.4 billion ($167 million) in 2023 due to excess inventories, subdued purchasing power and stagnant export growth, in particular in Asia, the release added. The drop in air and ocean freight rates since Q32022 from the all-time highs in 2021 as the global logistics market normalised has caused further contraction in profit margin in 2023, compared to that of 2022.

"Nonetheless, riding on stabilised freight rates and a pick-up in consumer demand, KLN Group delivered sustainable results on the Asia-U.S. trade routes and remained the leading player in the world’s busiest trade lane in 2023."

2024 outlook
Cheung says: “Global growth is likely to remain weak in 2024. The Red Sea crisis is bringing new variables to the Group’s IFF business. Nevertheless, we are determined to provide customers with alternative solutions in the near-term and are optimistic that our IL business in Asia is likely to benefit from the shifts in the supply chain in the mid-term. KLN Group’s agility, resilience and innovation in providing solutions powered by its global network, solid presence in Asia and the most diversified service offerings will again enable the Group to come out on top.

"Looking ahead, the Group will continue to create synergies with S.F. Holding through extensive collaborations, actively identify new opportunities to grow its business sustainably and deliver greater value for its shareholders.”