A Jingdong employee sorts out deliveries in Beijing during the “Chinese Communist Party virus” outbreak.
On Thursday evening, Chinese logistics giant SF Holdings announced its quarterly report showing a quarterly loss of RMB989 million for the first quarter of this year, compared with a profit of RMB907 million for the same period last year, a 209 percent year-on-year plunge in first-quarter results.
According to the first-quarter data, Shunfeng’s operating costs rose sharply by 40.44% to 39.567 billion yuan, while the company’s net cash flow from operating activities turned from positive to negative.
SF Holdings previously expected a loss of 900 million yuan – 1.1 billion yuan in the first quarter, due to the company’s rapid growth in business volume led to “rapid transport capacity bottlenecks in multiple links”, the company from the fourth quarter of last year to increase temporary resources to undertake the increase, resulting in the fourth quarter of last year and the first quarter of this year cost pressure.
On April 9, at the subsequent 2020 annual general meeting of Shunfeng Holdings, Wang Wei, chairman and general manager of the company, apologized for the expected loss in the first quarter of this year.
In contrast to Wang’s apology, the popularity of the “80-cent-a-unit” Express has risen, and on April 9, the Express and Best Express were regulated by the Yiwu Postal Administration for “low price dumping”.
According to an April 23 report by the mainland media Sina Finance, a review of historical financial reports shows that among the “Tongda system”, the revenue per ticket of Shentong and Yunda has been sliding since the beginning of 2020, while the revenue per ticket of Yuantong has been declining since 2017, and that of Zhongtong has been declining since the third quarter of 2018. “downward price per ticket”, which means that price wars have never been far from the express industry.
The momentum of each price competition has continued unabated since the entry of Polar Rabbit Express in March 2020. Taking March 2021 data as an example, Yunda’s single-ticket revenue in that month was 2.19 yuan, down 13.44% year-on-year; Shentong’s single-ticket revenue was 2.25 yuan, down 27.65% year-on-year; and Yuantong’s single-ticket revenue was 2.25 yuan, down 11.03% year-on-year. For China Unicom, the revenue per ticket was 1.29 yuan in the second quarter of last year, down 20.9% year-on-year; the annual decline for last year was 20.1%.
According to the report, if the price war brought only a momentary “blood loss”, and supply chain logistics or is the key to determine the future of Shunfeng.
In October 2018, Shunfeng acquired 100% of the supply chain business of German logistics giant DeutschePost DHL Group (“DHL”) in China for RMB 5.5 billion, establishing “SF DHL Supply Chain China”, which became a symbol of its formal entry into the supply chain market.
In the same year, SF also acquired a 75% stake in cold chain provider Xiahui Hong Kong and established a joint venture with the latter; in addition, SF also established China Railway Shunfeng International Express Co.
In 2019, after receiving $100 million in financing from SF, international freight forwarder Flexport and SF announced the joint launch of an integrated logistics solution, claiming to “achieve efficient supply chain management”; in 2021, SF also announced that it would invest $17.555 billion to acquire 51.8% of Kerry Logistics. “to build global independent and controllable supply chain capability”. All this is to make Shunfeng become an “independent third-party industry solutions data technology services company”.
However, by combing through the last four months of Shunfeng’s business briefings, we can see that the monthly revenue scale of the express logistics business is above 10 billion, while the supply chain business has not yet broken through the billion-dollar barrier. Compared with the express logistics business, the supply chain business has a long way to go to support the company’s “half of the mountain”, and the future of SF is still “uncertain”.
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