Watch Now

Huge rise in revenues but a massive slump in profits for LBC Express

Pictured: Makati City, the Philippines; Photo: Christian Paul and Pexels

Logistics provider LBC Express (PSE: LBC) of Manila, the Philippines, has reported a massive rise in revenues in the second quarter of 2019 but a big slump in net profit after tax.

LBC’s revenues rose 36 percent in the six months to the end of June 2019 to stand at 7.85 billion pesos (US$149.9 million; one Philippine peso is 0.019 U.S. dollars at the time of writing). That’s an increase of 2.07 billion pesos.

“Growth was principally due to the increase in revenues from both the logistics and remittance segments,” the company said.

LBC provides retail and corporate courier and cargo, money remittance and logistics services. Its retail logistics services include couriers, air cargo and balikbayan boxes. In 2018, the company forwarded 899,115 “balikbayan boxes”, which are cardboard boxes full of various items sent by expatriate Filipinos (known in Filipino as “balikbayan”). Its corporate logistics services include freight forwarding and supply chain management.

“The total retail segment of the business grew by 43 percent, with retail logistics alone increasing by 50 percent. Corporate logistics and money remittance grew by 22 percent in total, with the corporate segment accounting for a staggering 231 percent increase,” the company noted.

However, net income after tax tanked. In the six months to the end of June 30, 2019, net income after tax stood at 548.95 million pesos, down by 646.89 million pesos from the 1.2 billion pesos recorded in the six months to the end of June 2018. That’s a 54.1 percent fall.

Cost of services, operating expenses

Cost of services rose by 39 percent to 5.3 billion pesos for the first half of 2019, up from 3.8 million pesos in the prior corresponding period of the first six months of 2018. Costs increased due to a 51 percent rise in salaries and wages driven by an increase in headcount and “business combination.” Costs for utilities and supplies increased by 41 percent because of the start of operations at new warehouses and branches.

Operating expenses were up 70 percent for the reporting period and stood at just under 1.7 billion pesos, owing to additional office, property and equipment expenses along with amortization of right-of-use assets. Other increases in major operating expenses included a rise in advertising and promotion expenses for TV, radio and digital campaigns.

Commenting on operations, the company said, “Operational systems continue to be improved to support growing volumes. This includes ongoing re-fleeting, warehouse expansions, branch expansions, the enterprise-wide digital transformation. The company’s move toward digital will improve not only its internal capacities, but likewise all customer-facing platforms for an overall enhanced total customer experience.”

Net income after taxation

For the six months ending June 30, 2019, net income after tax slumped to 549.0 million pesos, a fall of 54.1 percent. The company attributed that to lower gains on derivatives; a net loss on an acquired entity in 2018 that amounted to 206.6 million pesos; and a lower foreign exchange gain of 125.8 million pesos.

LBC was founded in 1945 as a broker and air cargo agent. Today it works in 30 countries, has 74 branches overseas, 32 warehouses overseas and 981 agents overseas. In 2018, it handled 33.95 million metric tonnes of air freight. It has 1,397 branches in the Philippines, 14 distribution centers, 199 local hubs and 3,187 delivery vehicles.