China’s SF Holding predicts surprise $140m Q1 loss

SF Airlines Boeing 767-304ER(BCF)
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SF Holding, one of China’s top express delivery companies, says it expects to post a loss for the first quarter this year as the rapid expansion of new businesses ramped up costs.

The courier expects to report a net loss of CNY 900 million (USD 137.3 million) to CNY 1.1 billion in the first quarter, compared with a net profit of 907 million yuan in the same period in 2020, according to a Shenzhen Stock Exchange filing.

SF Holding notes the pandemic delayed the company’s capital expenditure investment last year, while customer demand rose at the same time. In the first half of 2020, the total volume of express delivery in China amounted to approximately 33 billion pieces, amounting to roughly a 22 per cent increase from the same period the year before.

“The trend is obvious, and the company’s business volume is growing rapidly, leading to capacity bottlenecks in multiple links of express transportation,” SF Holdings says in its filing.

The company also incurred extra costs in preparing for surging volumes ahead of the lunar new year Spring Festival, including what it says were, “a record high in subsidies for first- and second-line employees.”

All told, the company says it has increased capital expenditures since the fourth quarter of last year. This includes investment to upgrade automated production capacity of its transit yard, and improve resource efficiency. Efficiency is expected to get a further boost in the second quarter of this year, it adds.

SF Holding says it will also be launching express and new standard express products in April this year, and this upgrade is expected to increase time-sensitive delivery speed.

Despite surging delivery demand on the back of ever-growing e-commerce demand, the company’s e-commerce product gross profit is “under pressure”, it says. A price war amongst China’s express delivery companies since roughly 2019 has put margins under severe pressure.

The 2020 annual report showed that SF Holding recorded 7.3 billion yuan of net profit, up 26.4 per cent year-on-year.

Headquartered in Shenzhen in southern China, SF Holding offers a range of express logistics services. This includes traditional express, heavy freight, cold chain service, international business, and intra-city express.

It also offers front-end processes, such as production, supply, marketing, and distribution of the value chain.

The company operates its logistics services through SF Express which has subsidiaries SF Airlines, SF Supply Chain and SF Technology. SF Airlines operates a fleet of 64 all-Boeing freighters including B737s, B757s, B767s and B747s (former Jade Cargo aircraft).

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