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Kerry Express (Thailand) Plc (KEX), the largest private sector courier service in Thailand, saw its profits dip by 96.7% year-on-year as intense competition in the delivery business took a toll on its business, according to its 2021 earnings report.
KEX said its revenues for the year remains stagnant at 18.82 billion baht against 18.92 billion in 2020 although its cost of sales rose by around 10 per cent denting its profits. The company reported a net profit of just 47 million baht against 1.4 billion baht of profits seen in 2020.
On the positive note, KEX reported that its delivery volumes saw a sharp increase of 30% year-on-year.
The rise in delivery volume was in line with a strategy that management implemented as KEX looked to squeeze out start-ups in the delivery segment to maintain and strengthen its market leadership position.
In its statement to the Stock Exchange of Thailand (SET), KEX said that continues to execute strategic moves against other players, in effect saying that there was intense competition in the market.
“KEX’s successfully penetrated across market segments nationwide through proactively aggressive pricing approach, resulting in unparallel growth in volume, number of active users and market share. This strategic move, though leads to short-term volatility in profit, was aimed at medium to long-term sustainable growth, which is our preeminent priority,” the company said in a filing to the SET.
KEX said that for 2021, their profit of 46.9 million (0.2% margin) was the result of KEX’s aggressive pricing strategy to gain market leadership as well as investment in margins to prepare extra resources to uphold service excellence and build up new capacity.
“We expect continuous growth in volume in response to our market leadership strategy and gradual decline in temporary expenses as COVID-19 situation improves,” KEX said in its filing to the SET.
The company added that in the medium term, ‘we expect market consolidation within the express industry’ and Thailand will be able to accommodate only a few players afterwards. Such segment integration is similarly found in similar-sized countries and other industries like telecom, convenience store, energy drink, etc.
Premium-to-good service at affordable price will eventually become the market norm and the best entry barrier, which aligns with KEX’s business direction and preparation expenses. KEX has maintained its sharp focus on express and will continue to do so to further widen the leadership in Thailand’s express industry.
KEX, which has lost nearly 59% of its share value in the past 12-months and 21% since the start of this year, is expected to see its shares slide further after the announcement of the yearly results.
“And it was very bad, I think the management made the wrong strategy call,” an analyst who had just issued a note yesterday as a preview to the results told Thai Enquirer this morning.
The broker which had a ‘Buy’ rating on the shares of KEX with a target price of 45 baht per share said that it would look to review its recommendation after the announcement of the results.