LBC Express Holdings, Inc. (LBC) reported a net income of P563.821 million in the first quarter of 2018, which is 147% higher than the P227.926 million earned in the same period last year.
Service revenues likewise increased 12% to P2.751 billion for the first three months of the year from P2.458 billion for the same period in 2017, LBC disclosed to the Philippine Stock Exchange (PSE). The positive performance, LBC said, was primarily due to strong sales for both retail and corporate logistics, which registered 14% and 18% growth, respectively.
Revenues from the logistics segment improved 16% to P2.523 billion for the first quarter of 2018 from P2.181 billion for the same period in 2017. This rise is mostly ascribed to a 34% volume growth, due largely to the horizontal expansion of LBC; and substantiated by the net addition of 72 retail branches in the Philippines and the continuous growth of volumes from small and medium enterprise (SME) clients.
Moreover, LBC branches in the Middle East introduced domestic courier services (similar to LBC services offered in the Philippines), which gained positive customer response and increased sales volumes.
Gross profit, primarily volume-driven, grew 10% to P932 million from P846 million.
Cost of services for the first quarter of 2018, however, is higher by 13% to P1.818 billion from P1.612 billion for the same period in 2017.
Operating expenses, on the other hand, slid by 9% to P477 million from P522 million.
Purchases and acquisitions
In March 2018, LBC’s Board of Directors approved the purchase of shares of some international affiliates, and this is expected to benefit the company by contributing to its global revenue streams.
The share purchase agreements were executed by LBC and LBC Mabuhay Saipan, Inc., LBC Mabuhay Hawaii Corporation, LBC Mundial Corporation, and LBC Mabuhay North America Corporation, with a total share purchase price amounting to US$8.55 million.
These international affiliates own and operate LBC’s cargo and remittance operations in the United States and Saipan.
Also in March 2018, LBC invested in Orient Freight International, Inc. (OFII), acquiring a 30% equity interest in the firm for P218.830 million, in order to diversify the company’s businesses and to realize returns on investments.
“This is a strategic investment for LBC as we continue to move toward expanding our business and maintaining our number one position in the industry,” LBC chief executive officer Mike Camahort said in a statement.
“Having a stake in OFII will yield LBC better economies of scale, while also achieving improved cost efficiency in certain subsectors of our business where we see a great deal of growth prospects. In particular, OFII is well-entrenched in brokerage, cold chain, automotive logistics, warehousing and distribution centers, and project logistics—we look forward to working together and growing these sectors for both companies,” Camahort added.
Established 44 years ago, OFII provides air freight, sea freight, land transport, container yard, customs clearance, container freight station, logistics management, warehousing, and domestic distribution services. It operates domestic offices and facilities in Manila, Clark, Cavite, Bataan, Laguna, Batangas, Subic, Cebu, Cagayan de Oro, Davao, and Zamboanga. Globally, the company partners with Hellmann Worldwide Logistics, providing an international network of 437 branches in 162 countries.
Likewise, in March 2018, LBC acquired more than 80% of QuadX, Inc., a digital logistics company established in 2013, as part of its plan to consolidate affiliate businesses both within the Philippines and across the globe.
“Our vision for the next few years is to pave the way for digital logistics in the Philippines, and continue to lead the industry,” Camahort said.
“It’s a very exciting time in logistics, and there’s much to do quickly in order to be constantly, globally competitive—everything is now in ‘real time’; getting into digital is definitely a must,” he added.
Consequently, LBC has also embarked on an enterprise-wide system upgrade—the brain child and key project of Camahort, aptly called “Project Synergy”—as part of its digital transformation process.
The company is utilizing Ramco System’s “Logistics Suite,” an efficient, high-performance logistics solution slated to increase efficiencies across the enterprise. The suite covers the needs of all aspects of business operations, from transportation to warehousing, to order management for parcel/courier service, and to forwarding.
The project scope spans LBC group’s subsidiaries and affiliates in countries across Asia-Pacific, U.S., Canada, Europe, the Middle East, and Australia, covering its corporate and retail businesses and replacing and enhancing existing systems.
The system upgrade will also allow LBC to centralize information on one technology and application platform, eliminating redundancy in operations and achieving absolute data integrity and scope, for planning and optimization.
LBC intends to drive digital transformation across the organization not only to benefit its customers but also to create a more effective and digitally minded work force.
Last April 12, LBC’s Board resolved to approve the re-filing with the Securities and Exchange Commission (SEC) of the company’s Registration Statement in relation to the public offering of up to 69.101 million common shares consisting of 10 million new common shares to be issued and offered by the parent company by way of a primary offer, and of 59.101 million existing common shares to be offered by selling shareholders pursuant to a secondary offer.
Net proceeds from the offering are expected to be used for the company’s general corporate purposes and working capital, including for the expansion of retail and corporate business and information technology development. The follow-on offering is subject to the approvals of the SEC and PSE.
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