Q&A Opportunity Day Q2/2021
What is/are KEX's competitive advantage(s)?
Kerry Express is Thailand's pioneer in parcel express delivery. We provide integrated delivery solutions to our customers in C2C,B2C and B2B segments with service coverage of 99.99% nationwide. We have strong network and strategic partnerships. We are Thailand's forefront parcel delivery with uncompromising service standard, as guaranteed a 4-year winner of Thailand's No.1 Brand. We uphold our service excellence and carefully monitor & maintain the return ratio of less than 1.5%. We are also the innovator and a pioneer in delivery techonology and payment solutions to serve customers with convenience & satisfaction, leaving KEX second to none in the industry.
How will KEX's Q3/21 operating results be, compared QoQ and YoY?
We have spotted the growth in demand for parcel delivery services during the first two months of the third quarter, in response to the stay-at-home lifestyles & online purchasing behaviors. Normally, during the third and fourth quarters are high-season for parcel delivery services. And we will continue to deepen our pricing approach to further serve the economy segment. The overall growth outlook is expected to be in line with our expectations.
In what ways does the pandemic possitively and negatively affect KEX?
On our business contingency and operational plan, we prioritise our employees and customers safety and have imposed several hygienge measures. In our Distribution Centres (DCs), we operate under 'small bubble' protocol where the working shifts are arranged to be smaller in numbers of working staffs per shift, and with greater number of working shifts. Onto our last-mile resource planning, we have observed the relocation of last-mile concentration, shifting from the metro-urban area towards suburban areas where it's relatively more residential. We hence adjust our last-mile route planning accordingly, together with contactless delivery procedures. KEX has resiliently maintained our operational procecures and service excellence and remained a sole service provider in response to greater demand in parcel delivery services during the pandemic.
Despite an upward trends of parcel delivery services during the pandemic, KEX expects the pandemic situation to ease up and the whole economy to recover soonest.
Please update the status of Kerry Express' cold chain business development.
Our cold chain business is currently undergoing the feasibility study and we expect to disclose the deal within this year. Besides the collaborating partner with potential demand, our cold chain delivery platform is designed to address existing pain points of Thai businesses and consumers and aim at becoming Thailand’s forefront cold delivery platform driven by worldclass technology, process engineering and ultimate user-experiences.
Which segment yields the better profits for our company? C2C or B2C? And does the loss of C2C profit account for the drop in net profit margin? If so, is the loss of C2C margin expected to continue throughout 2H21?
We see similar trend for the contribution from B2C and C2C and expect that this trend will continue. There are canibalisation between these two segments where they share mutual pool of e-commerce and social-commerce sellers. We never allocate profit & loss by segment. Once the parcels are accepted into our network, they will undergo the same process.
In Q2/21, our net profit margin was at 7.3%, increasing (not dropping) both QoQ and YoY. We will continue to acquire volume with increasing economies of scale to further widen our market leadership as prescribed in our main strategies.
Our rivals are approaching a Door-to-Door delivery. Will we see Kerry Express expand to such approach within 2H21 either by our own policy or via any possible M&A deal?
We were among the first to offer D2D services to our clients and had continuously expanded our D2D service coverage to nationwide. In addition, we will continue to develop this service model to be efficient in terms of cost and resource management. Our service in this respect is by no means less covered or inferior to those of our competitors.
What is Kerry Express view of Gulf Holdings investment in our company? How will this benefit our company in management’s view? Any synergy we could expect?
We believe the entrance of Gulf Holdings will strengthen KEX's network, and the strategic value of investing in the digital economy sector.
What is the expected range of gross profit margin for the year 2021?
With respect to the company's management objectives, we prioritise volume growth, maintaining market leadership and generating decent returns in medium to long-term. In consideration of profit margin, we highly focus on the net profit margin whereby we earned a net profit margin of 7.3% in the second quarter, which is in our expected range. We will continue to acquire volume grwoth with increasing economies of scale to further widen our market leadership, including the economy segment, as prescribed in our main strategies and management objectives.
Is/Are there any potential M&A(s) in 2021?
With respect to the company's business diversification strategies to diversify into express-related business areas, the company has considered business initiatives and investment opportunities in a variety of industries, through partnerships, in-house initiatives, and existing businesses. Some of which will be initiated in the fourth quarter of this year.
How much is the company planning to invest this year? and more or less compared to last year?
The company has allocated THB 1,000 million for business & network expansion and platform efficiency enhancement, especially during the 3rd and 4th quarter of this year.
How does the company perceive the consumers purchasing power, worse or better compared to last year?
The company expects the purchasing power of consumers in the second half to improve post lock-down. However, certain measures are still on close watch, including mass vaccination roll-outs, and government-led initiatives to stimulate domestic spending and economic activities.
Will the revenue of 2021 grow as planned? And what are the key drivers? How is the parcel volume trend during Q3/21 and is Q3 considerably high-season for parcel services?
During the 3rd and 4th quarters is high-season for parcel delivery services. And the company will continue with aggressive pricing strategies to attract customers base in the economy segment. The overall trend is expected to grow in line with the industry and the company's expectation. The company will maintain the standard of delivery service as the leading express parcels service provider in Thailand.
Will the revenue from Kerry Cool / Kerry LTL and Kerry Wallet start reflecting in Q4/21 and by how much? And what's the expected revenue contribution from these businesses for the year 2022?
We expect to see relatively small fraction of revenue contribution from cold chain business and Kerry Wallet by the end of this year, and expect more significant contribution in 2022.
This industry is in the price war where e-commerce and social sellers prefer cheaper alternatives. Will KEX continue to offer similar pricing with better services?
Kerry Express will continue to offer attractive pricing with great-quality services and uphold our standard of Thailand's leading parcel express delivery service provider. Additionally, Kerry Club, our customer loyalty programme, provides members with access to sales offers and several customers priviledges, including sales discount through Kerry Point & Kerry Cash.