Chinese Logistics Giant SF Express Suffers Loss in Q1 2021

Competition in the express delivery industry is fierce, with a range of Internet giants having eyed the market for a long time. (Source: SF Express)

On Thursday, SF Express Holding announced that it suffered heavy financial losses in the first quarter of 2021. The financial report shows that its operating income reached 42.62 billion yuan, a year-on-year increase of 27.07%, while its net profit loss was 989 million yuan, down 209.01% year-on-year.

On April 9, SF Express predicted that the loss in the first quarter of 2021 would be 900 million to 1.1 billion yuan, which led to an apology from Wang Wei, the chairman and general manager of the company, at the annual shareholders’ meeting. “First of all, I need to make an apology to all the shareholders, because I think I have underachieved in my job for the past quarter,” he said.

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However, the 2020 financial report released by the company one month ago showed that it recorded more than 150 billion yuan in revenue and more than 7 billion yuan in net profit last year.

In the financial report, SF Express attributed the loss to five reasons. In order to expand new business, the company increased the investment in fast express, intra-city urgent delivery and warehouse network construction.

In response to the rapid growth of express delivery starting in the fourth quarter of last year, the company began to invest more in transfer station automation, express processing scale, sites and equipment, resulting in an increase in amortization and depreciation costs this year. At the same time, temporary resources the company invested to cope with the business peak before the Spring Festival led to an increase in costs.

SF Express exhausted overlapping resources in the initial stage of network convergence, which led to the soaring costs.

During last year’s Spring Festival holiday, the Chinese government encouraged people to stay put rather than travel across the country to meet family and friends. To meet the heightened demands of e-commerce platforms and customers during the festival, SF Express increased the number of on-the-job personnel such as dispatchers, warehouse keepers and transit operators, and also provided subsidies for them, resulting in massive bills.

Later, the growth rate in online orders that need to be finished in a specific time slowed down, while the order of economical express products grew rapidly.

In addition, SF Express announced that Wu Weiting resigned as the firm’s chief financial officer, deputy general manager and member of the board’s audit committee, citing personal reasons. Although she is still a member of the board, the company offered her another post — the capital operation consultant of the logistics industrial park.

Competition in the express delivery industry is fierce, with a range of Internet giants having eyed the market for a long time. Jack Ma made it clear three years ago that Cainiao, a community and campus-oriented logistics service platform, would reduce the cost of socialized logistics, which accounts for 15% of China’s GDP, to less than 5%.

J&T Express, a Southeast Asia-based express delivery company, argued earlier this year that it expends less than one yuan per order. On April 9, due to price dumping, J&T Express and Baishi Express were ordered by Yiwu Postal Administration to shut down a set of distribution centers.

In fact, the price war has never been far away from the express delivery industry. According to Sina Finance, the income per order of Shentong Express and Yunda Express began to decline from the beginning of 2020, while Yuantong Express’ profit from each order has been decreasing since 2017.

According to a report released by SF Express Holding on Tuesday, its income from every order in March was 15.74 yuan, down 12.12% year-on-year. The price decrease lasted for 22 months.

Facing a rough beginning to 2021 and harsh competition within the market, SF Express expects to improve its capacity utilization rate and network operation efficiency through network convergence, resource integration, automatic capacity upgrading and other measures in the second half of this year.