Original title: SF Express’s net profit fell by nearly 80% in the first half of the year, and the industry is in a price quagmire. Source: China Business News
SF Express recently released its first half of 2021 performance report. The performance report shows that SF Express’s revenue in the first half of the year was 88.34 billion yuan, an increase of 24.2% year-on-year. The net profit attributable to shareholders of listed companies was 760 million yuan, a drop of 79.8% from the 3.76 billion yuan net profit in the same period last year. In terms of expenditure, operating costs in the first half of the year were 79.42 billion yuan, a year-on-year increase of 37.26%.
SF Express said that the increase in operating costs was mainly due to the increase in costs caused by business growth and the combined impact of the company’s increased investment in capacity construction and new business development.
This performance is consistent with the previous forecast given by SF Express. On July 14, SF Express released its first half-year performance forecast. The performance forecast shows that in the first half of the year, SF Express’s net profit attributable to shareholders of listed companies was between 640 million yuan and 830 million yuan, a year-on-year decline of 78% to 83%.
Turnaround in the second quarter
Although net profit in the first half of the year plummeted by nearly 80% year-on-year, from the second quarter, SF Express has turned losses into profits.
SF Express’s net loss in the first quarter of this year was as high as 989 million yuan, a year-on-year decrease of 209.01%. This loss also made SF’s chairman Wang Wei apologize to shareholders at the shareholders’ meeting: “Apologize to shareholders, because I think the first quarter really did not manage well.” He said that he had negligence in management and similar problems. It won’t happen a second time.
Judging from previous performance forecasts, SF Express’s loss in the first quarter was mainly due to the accelerated market development of diversified business segments in the first half of the year and the investment in network resources (including transfer sites and automation equipment, trunk and branch line capacity, etc.), which led to the company’s phased cost commitments. At the same time, economic express delivery products have grown rapidly, because the pricing of these products is low, which affects the overall gross profit margin to a certain extent.In addition, due to the significant increase in the number of employees and salary costs during the Spring Festival in the first quarter of this year, it also has a temporary one-time impact on the company’s profitability.
Judging from the net profit of SF Express in the first half of the year, SF Express achieved a net profit of 1.749 billion yuan in the second quarter. SF Express stated in its financial report that the reason for the profit in the second quarter was that the company also continued to review the resource allocation of various business lines during the reporting period, strengthened the integration and optimization of resources such as the express network, express network, warehousing network and franchise network, and continued to develop The upgrade and transformation of automation equipment in the transit yard gradually eased capacity bottlenecks. Indicators such as resource utilization and operating efficiency rose steadily in the second quarter compared to the first quarter. At the same time, the company continued to strengthen the refined cost control, and the growth of business volume led to the dilution of fixed asset costs. The scale effect has been reflected. In addition, benefiting from the company’s continuous investment in digital, intelligent, and visualization technology, it has helped streamline the organization and efficient management, and the management and sales expense ratio has continued to decline.
In the first half of 2021, SF Express’s logistics business volume was 5.13 billion, a year-on-year increase of 40.4%.
In addition, according to the performance report, the growth rate of time-sensitive parts has slowed down, and the economic express delivery business has grown faster. In the first half of the year, SF Express Express business revenue increased by 6.50% year-on-year. The slowdown was mainly due to the strong demand for emergency delivery during the epidemic period last year, which resulted in a large increase in time-sensitive business. The economic express delivery business mainly served the main e-commerce market with a higher year-on-year base. , Revenue increased by 69.16% year-on-year.
Serious homogeneity competition in the industry
In addition to turning losses into profits, low-price competition in the industry is still a problem facing SF Express.
SF Express stated in its performance report that the e-commerce market is still the main driving force for the growth of the express delivery industry, but the homogeneity of e-commerce express competition is serious, and price competition has become the main means for e-commerce express to expand its share. At the same time, as capital helps new players enter the e-commerce express market, low-price strategies have become the main means for new players to quickly seize the market, impacting the original competitive landscape of the e-commerce express industry, and the price war has become more intense. As a result, the single ticket price of the overall express delivery industry has continued to decline in recent years. The average unit price of express delivery in the industry has dropped rapidly from 24.60 yuan/piece in 2010 to 10.55 yuan/piece in 2020.
This low-price competition is also reflected in SF Express’s performance report. The performance showed that the total profit of the Express segment in the first half of the year was 1.514 billion yuan, which was down from the same period last year. On the one hand, the overall network resources are concentrated on increasing investment this year, which has led to excessive cost growth. On the other hand, the proportion of economic express products with relatively low pricing has increased too quickly, which has caused gross profit to be under pressure.
Recently, express delivery companies such as SF Express issued a business briefing for July, showing that each company is still in low-price competition from the year-on-year growth of single-ticket revenue. SF Express’s single ticket revenue fell the most in July, with a year-on-year decline of 10.69%; followed by Shentong, with a year-on-year decline of 7.08%; and finally, YTO, with a year-on-year decline of 6.33%. Yunda’s July express service single ticket revenue increased by 1.49% year-on-year.
Vertically, the price war has been going on for some time. Take SF Express as an example. Since February this year, SF Express’s single ticket revenue has been at a low level and has been maintained below 16 yuan. The single ticket revenue in February, March, April, May, June, and July were 15.11 yuan, 15.74 yuan, 15.84 yuan, 15.59 yuan, 15.91 yuan and 15.96 yuan, respectively. The single ticket revenue in the same period last year was around 18 yuan. .
Regarding the issue of price wars, in the second-quarter financial report, Lai Meisong, Chairman and CEO of Zhongtong Express Group, said: “The slight decline in market share this quarter is due to our selection of profitable parts and unnecessary low-cost losses. It’s neither wise nor sustainable to trade profits in exchange for short-term market share growth.”
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