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(2nd LD) (Yonhap Interview) CJ Logistics to temporarily halt M&As to focus on profitability

Interviews 22:53 October 31, 2019

(ATTN: UPDATES with group's revised M&A strategy throughout)
By Choi Kyong-ae

SEOUL, Oct. 31 (Yonhap) -- South Korea's CJ Logistics Corp. will temporarily halt acquiring foreign companies in efforts to focus on enhancing its profitability, a company executive said Thursday.

"We have expanded our presence in global markets by taking over logistics firms mainly in China, Southeast Asia and the United States as we expect bigger mutual synergies in those regions going forward," CJ Logistics Senior Vice President Hong Sung-yong told Yonhap News Agency on Thursday.

But the company now plans to focus on completing the post-merger integration with acquired companies and strengthening the competitiveness of its mainstay services, he said.

In this photo taken Oct. 29, 2019, Senior Vice President Hong Sung-yong, in charge of overseas business operations except for China at CJ Logistics, speaks about the company's expansion strategy during an interview with Yonhap News Agency at the company's headquarters in central Seoul. (Yonhap)

In an earlier interview with Yonhap on Tuesday, Hong said CJ Logistics will explore more acquisitions in advanced markets, such as the U.S. and Europe, to grow further.

His comments were revised as parent CJ Group released its revised M&A strategy, hours after Yonhap reported the previous interview on Thursday afternoon.

The logistics unit of retail-to-entertainment conglomerate CJ Group has acquired eight foreign companies since 2013 in its bid to become one of the world's top-tier logistics players in terms of sales.

The acquired firms include Des Plaines, Illinois-based DSC Logistics, Shanghai-based logistics firms CJ Smart Cargo and CJ Rokin Logistics, Indian logistics and transport company CJ Darcl and Vietnamese logistics firm CJ Gemadept Corp.

The company didn't provide the value of the mergers and acquisitions deals.

CJ Logistics plans to enter the Commonwealth of Independent States, Latin America and Oceania and explore business opportunities in a move to catch up with bigger rivals such as U.S.-based DHL Supply Chain & Global Forwarding, Switzerland's Kuehne + Nagel International and Germany's DB Schenker.

Helped by years of M&As, CJ Logistics earned 42.3 percent of its overall sales from its overseas operations in the January-June period, exceeding the ratio of 39.7 percent for the whole of 2018.

The executive expected the overseas earnings' ratio will be higher than last year in 2019.

In the first half, CJ Logistics posted sales of 4.97 trillion won (US$4.3 billion), up 16 percent from 4.29 trillion won a year earlier. Operating profit rose 14 percent on-year to 117.14 billion won in the first six months from 102.42 billion won.

But net profit plunged 88 percent to 5.1 billion won from 43 billion won amid a slowing global economy and seasonal factors in the first quarter.

To revive profitability, CJ Logistics will focus on freight-forwarding services between countries and contract logistics business in overseas markets, while maintaining its leading status in door-to-door parcel delivery and port services, which include loading, unloading, storing and delivery services, the executive said.

In China, the company will focus on the "cold chain" business in which foods and medicines are delivered in vehicles that maintain a consistently cold temperature. It will promote its home delivery service in countries like Thailand and Malaysia, he said.

CJ Group acquired a controlling 40.16 percent stake in Korea Express Co. for 1.91 trillion won in December 2011 and changed the name to CJ Korea Express and then CJ Logistics.

This undated file photo provided by CJ Logistics shows the CJ Rokin Logistics headquarters in Shanghai. (PHOTO NOT FOR SALE) (Yonhap)


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