CJ Century rides n logistics boom
COMPETITION in the domestic logistics industry is expected to intensify against the backdrop of supply chain disruptions, the Russia-Ukraine war and renewed lockdowns in China. In the past, the logistics industry had gone through various challenges. In the last-mile delivery segment for example, which initially boomed due to eCommerce, intense competition later compressed the margins of all players.
Acknowledging that the stiff competition is here to stay, CJ Century took the plunge to exit its last-mile delivery business. This was done after the segment incurred massive losses for the group. That said, it is interesting that the company’s major shareholder, CJ Korea Express Asia, is the largest parcel delivery player in South Korea.
CJ Century provides total logistics solutions for domestic and international clients. Its executive director Edwin Yap shares with StarBizWeek the company’s efforts to strengthen its position as a top logistics provider in the country. “Over the years, we have built a resilient supply chain through the development of robust logistics strategies to manage the full spectrum of services and to respond to customer needs.
“We continue to identify other opportunities in expanding our logistics and warehousing footprint,” he says. Yap says that the company is planning to increase its warehousing space to approximately 5.5 million sq ft over the next three years. Plans also include the construction of a new warehouse equipped with an automated storage and retrieval system.
“Our owned and operated assets, including a fleet of vehicles and warehouses, enable greater control and customisation of logistics services at competitive rates. “This gives us a strong foothold in securing new customers. “We are expanding the customer base to Korean conglomerates and regional multi-national corporations, while retaining our longstanding key customers,” he adds.
CJ Century is one of the top three warehouse operators in Malaysia with a total storage capacity of 4.5 million sq ft. Many businesses had to adapt to travel restrictions and economic lockdowns, moving their businesses to online platforms and providing services that reduce physical contact. This has bode well with the direction that CJ Century took in 2021, to focus on total logistics solutions after disposing of its loss-making courier company.
Last November, CJ Century signed an agreement with Astro Malaysia Bhd to provide warehousing, fulfillment and logistics services for three years. For the financial year ended Dec 31, 2021 (FY21), CJ Century’s net profit surged more than six times to RM6.72mil from RM0.92mil a year earlier. This was on the back of a 43% jump in revenue to RM843.02mil from RM589.85mil previously.
TA Research estimates CJ Century to record an earnings growth of 49%, 18% and 25% respectively for financial year 2022 (FY22), FY23 and FY24, respectively. “We believe the growth would be driven mainly by favourable freight rates and increasing freight volume, along with additional warehousing space that more than offset the rise in freight costs and wages,” it said in a recent report. The research house added that CJ Century made a decisive move in hiving off the last-mile courier service operation in 2021 after accumulating close to RM70mil in losses from FY18 to FY21.
“This painful exercise would allow the group to refocus on the growth strategy, where CJ Century has outlined its expansion plan to increase the warehousing space by an additional one million sq ft by 2024,” it said. CJ Century was also listed as one of RHB Research’s top 20 jewels for 2022. RHB says that CJ Century has carved its niche as a logistics solutions provider.
This was done by designing, implementing and managing its clients logistics requirements to help build a resilient supply chain. “The group has access to an extensive global network and aspires to help its clients get connected to the world through its innovative logistics solutions and best supply chain management capabilities,” it says. Yap of CJ Century says the company’s acquisition CJ Korean Express Malaysia Sdn Bhd (CJKX) in 2020 has been the key differentiator for the company to carve its niche in the logistics industry.
“It has enabled us to build up our size and take advantage of the increased customer demographic, as well as geographical access in all the logistics hubs in Malaysia. “The strengthened alliance has also empowered us to provide scalable logistics offerings with better cost efficiency to a diverse customer base. “Backed by expertise support from CJ Logistics, we are able to further enhance competitive advantage of offering scalable, comprehensive and cost-effective supply chain solutions through our South Korean headquarter’s extensive ground network and comprehensive distribution channels,” he adds.
CJ Century is also involved in contract manufacturing. According to Yap, the group has an original equipment manufacturer or OEM manufacturing plant for TV and air conditioning sets. He says the group has been in the business for more than a decade and makes up about 20% of current revenues.
“Our production capacity is under-utilised this year due to the continued restriction measures on Covid-19 in China resulting in supply disruptions.
“Additionally, we will re-approach the export customers which we had to turn away at end-2021, as we were unable to support them due to the pandemic,” Yap says.
While it is too early to tell if the growth momentum can be sustained especially with the continuous competition in the logistics industry, the company’s rapid transformation to adapt to the market needs has put CJ Century in a different league.
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