Kerry Logistics warns of ongoing supply chain disruption caused by China-US rivalry

On announcing its 2018 results, Hong Kong-headquartered freight forwarder Kerry Logistics  warned it is expecting supply chains to continue to be affected by the ongoing trade rivalry between China and the US.

The company said it saw revenues increase by 24% year on year to HK$38.1bn in 2018 on the back of growth in Southeast Asia and customers exporting ahead of the China-US trade war. Core operating profit increased 11% to HK$2.4bn and core net profit was up 12% to HK$1.3bn.

Kerry Logistics chairman George Yeo identified several key trends that would affect the business in the future, including the China-US dispute.

“Despite uncertainties, Kerry Logistics did well in 2018 achieving double-digit growth,” he said. “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.”

The company’s Integrated Logistics (IL) business recorded a 14% rise in segment profit to HK$2.1bn, fuelled by the increased earnings from its Hong Kong logistics operations and the performances of Kerry Express Thailand as well as Kerry Siam Seaport in Thailand.

Meanwhile, the International Freight Forwarding (IFF) business recorded a 7% increase in segment profit to HK$549m. The Group’s IFF division attained steady volume growth in the second half as customers front loaded their shipment in advance of the trade tariffs being enforced. 

Kerry Logistics managing director William Ma 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.”