CJ Logistics posts W101.6b operating profit in Q2, down 11.9% on year

CJ Logistics said Tuesday its second-quarter sales reached 3.38 trillion won ($2.38 billion) and operating profit came in at 101.6 billion won, based on preliminary figures disclosed to the Korea Exchange. Sales rose 10.9 percent from a year earlier, while operating profit fell 11.9 percent as higher investment spending and a deteriorating external environment weighed on margins.

By business segment, the parcel delivery unit — branded O-NE — posted sales of 984.8 billion won, up 8.5 percent year on year. The company credited service enhancements, including its seamless daily delivery offering and a new consumer-to-consumer parcel service launched this year, along with flexible hub terminal operations that helped lift overall delivery volumes.

The company invested in upgrading hub terminal output capacity through flexible operations, driving strong volume growth in the second quarter. Total O-NE volume rose 12.1 percent year on year, outpacing the industry average. While standard parcel volumes held steady, same-day and dawn delivery volumes surged 65 percent, contributing to the overall volume increase.

Operating profit for the segment fell 10.7 percent year on year to 40.9 billion won. CJ Logistics said preemptive investment to strengthen delivery service competitiveness put some pressure on profitability. It added, however, that the benefits of that investment are beginning to show — the company cut per-unit operating costs by 2.2 percent in the first half of this year compared with the same period last year, reflecting economies of scale from higher volumes.

The contract logistics segment posted sales of 900.1 billion won, up 8 percent from a year earlier, as volume growth from strategic customers and newly won large contracts began to be recognized in revenue, sustaining growth in fulfillment center operations and middle-mile transport. Operating profit fell 11.4 percent year on year to 39.8 billion won, hurt by rising operating costs from external headwinds and infrastructure investment.

The contract logistics segment comprises the warehousing and distribution business, which handles logistics hub operations and product dispatch and delivery for clients, and a port and distribution business centered on port handling and middle-mile transport.

In the second quarter, the warehousing and distribution business grew sales 12 percent year on year on the back of higher volumes from key clients, with retail and pharmaceutical verticals posting gains of 17 percent and 19 percent, respectively. The port and distribution business grew 7 percent as previously secured contracts were recognized in revenue. Rising raw material costs driven by oil price increases linked to Middle East tensions, combined with upfront infrastructure investment to advance productivity innovation projects, kept overall contract logistics operating profit below year-earlier levels.

In the third quarter, the warehousing and distribution business plans to continue its fulfillment center productivity innovation project to cut operating costs and maximize logistics efficiency for clients. The port and distribution business intends to scale up integrated transport volumes by deepening its ties with the middle-mile logistics platform "The Unban."

The global business division recorded sales of 1.21 trillion won and operating profit of 20.4 billion won. Compared with the second quarter of last year, sales rose 9.4 percent while operating profit edged down 1.4 percent. Despite a slowdown in the forwarding market caused by the US-Iran war and related disruptions, solid growth in strategic markets including the United States and India, along with an expansion of cross-border e-commerce volumes, underpinned revenue growth.

Even as the forwarding business softened somewhat due to weaker project forwarding demand, contract logistics operations in strategic markets — the United States, India and Vietnam — continued to grow steadily, and cross-border e-commerce volumes expanded sharply.

Going forward, the global division plans to integrate its forwarding and strategic-market contract logistics operations to build out a global end-to-end logistics system spanning production, international transport, local warehousing and delivery, and final-mile distribution. The company said it aims to strengthen its position as a logistics partner capable of managing customers' entire global supply chains.